THE MARKETING-LOGISTICS INTERFACE: A WAY TO SUSTAINABLE COMPETITIVE ADVANTAGE

IN THE PASSENGER CAR INDUSTRY IN SOUTH AFRICA

by

S.E. RAMASODI

SHORT DISSERTATION

Submitted in partial fulfilment of the requirements for the degree

MAGISTER COMMERCII

in

BUSINESS MANAGEMENT

in the

FUCULTY OF MANAGEMENT

at the

UNIVERSITY OF JOHANNESBURG

Supervisor: PROF A. BERNDT

OCTOBER 2007

ACKNOWLEDGEMENTS

Undertaking a research project is a challenging and exciting opportunity that requires both the intellectual and emotional support from others. I am immensely indebted to: My supervisor, Prof Adele Berndt, for the guidance and encouragement The passenger car organisations that participated in the survey My sisters and the only brother, for the patience and understanding as I walk through this path. My parents, for continuous encouragement in all aspects of life Nthabiseng, for volunteering to proof read the work-in-progress. Tshepo and Pam, for making this a truly enriching experience. The Almighty God, for bestowing the gift of life upon me.

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TABLE OF CONTENTS SYNOPSIS ..................................................................................................................................................... 1 CHAPTER 1: GOAL AND APPROACH TO THE RESEARCH ...................................................................... 3

1.1 Introduction ................................................................................................................................... 3 1.2 Problem definition ......................................................................................................................... 4

1.2.1 Research questions for this study ............................................................................... 4 1.2.2 Problem Statement for this research ........................................................................... 5

1.3 Research objectives ...................................................................................................................... 5 1.3.1 Primary objective ......................................................................................................... 5 1.3.2 Secondary objectives ................................................................................................. 5

1.4 The purpose and importance of the study ..................................................................................... 5 1.5 Research Proposition .................................................................................................................... 6 1.6 Demarcation and the scope of the study ....................................................................................... 7 1.7 Clarification of key concepts ......................................................................................................... 7 1.8 Research Design .......................................................................................................................... 9

1.8.1 Exploratory research ................................................................................................... 9 1.8.2 Defining the population ............................................................................................. 10 1.8.3 Questionnaire design ................................................................................................ 10 1.8.4 Pre-testing the questionnaire .................................................................................... 11 1.8.5 Data Analysis techniques .......................................................................................... 11

1.9 Chapter Outline ........................................................................................................................... 12 1.10 Limitations of the study ............................................................................................................... 13 1.11 Conclusion .................................................................................................................................. 14

CHAPTER 2: THE MARKETING-LOGISTICS INTERFACE ........................................................................ 15

2.1 Introduction ................................................................................................................................. 15 2.2 The Marketing and Logistics components in the interface .......................................................... 15

2.2.1 Marketing components in the interface ..................................................................... 16 2.2.2 Logistics elements in the interface ............................................................................ 21

2.3 Linking marketing and logistics activities (the interface) ............................................................. 26 2.3.1 Customer service as a link between logistics and marketing .................................... 26

2.4 Creating a sustainable competitive advantage through the Interface ......................................... 29 2.4.1 The process of achieving sustainable competitive advantage .................................. 29 2.4.2 The effect of marketing-logistics interface on sustainable competitive advantage .... 31

2.5 Conclusion .................................................................................................................................. 32 CHAPTER 3: THE MARKETING-LOGISTICS INTERFACE COORDINATION TECHNIQUES .................. 33

3.1 Introduction ................................................................................................................................. 33 3.2 Discussion of the study by Murphy and Poist ............................................................................. 33 3.3 Defining the fourteen coordination techniques and their effect on marketing-logistics interface

and sustainable competitive advantage ...................................................................................... 35 3.3.1 Top management support ......................................................................................... 35 3.3.2 Information sharing ................................................................................................... 36 3.3.3 Philosophy of cooperation ......................................................................................... 37 3.3.4 Education and training .............................................................................................. 37 3.3.5 Mutual goals .............................................................................................................. 38 3.3.6 Joint projects ............................................................................................................. 39 3.3.7 Co-ordinating Committee .......................................................................................... 40

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3.3.8 Situational bargaining ................................................................................................ 40 3.3.9 Joint outings .............................................................................................................. 41 3.3.10 Distribution specialist ................................................................................................ 42 3.3.11 System of incentives ................................................................................................. 42 3.3.12 Unified department .................................................................................................... 43 3.3.13 Job rotation/switching ................................................................................................ 44 3.3.14 Third party intervention ............................................................................................. 44

3.4 Conclusion .................................................................................................................................. 45 CHAPTER 4: ANALYSIS OF THE PASSENGER CAR INDUSTRY IN SOUTH AFRICA ........................... 46

4.1 Introduction ................................................................................................................................. 46 4.2 Defining and explaining the importance of Porter’s Five Forces model ...................................... 46 4.3 Porter’s Five Forces model in the South African motor vehicle industry ..................................... 48

4.3.1 Potential entrants ...................................................................................................... 48 4.3.2 Bargaining power of suppliers ................................................................................... 49 4.3.3 Bargaining power of buyers....................................................................................... 50 4.3.4 Availability of substitutes ........................................................................................... 51 4.3.5 Competitive rivalry ..................................................................................................... 52

4.4 The impact of industry forces on the marketing-logistics interface and customer service levels 53 4.5 Creating a sustainable competitive advantage in the passenger car industry ............................. 56 4.6 Current situation in the vehicle market ........................................................................................ 57

4.6.1 Sales ......................................................................................................................... 57 4.6.2 Economic trends that impact on vehicle industry sales performance ........................ 58 4.6.3 Motor Industry Development Programme (MIDP) .................................................... 58

4.7 Conclusion .................................................................................................................................. 60 CHAPTER 5: RESEARCH METHODOLOGY .............................................................................................. 61

5.1 Introduction ................................................................................................................................. 61 5.2 The research design ................................................................................................................... 61

5.2.1 The research method ................................................................................................ 61 5.2.2 The research format .................................................................................................. 63 5.2.3 Research techniques to gather the data ................................................................... 65

5.3 Types of data being collected ..................................................................................................... 67 5.3.1 Defining the secondary data and its application ........................................................ 67 5.3.2 Defining the primary data and its application ............................................................ 68

5.4 Defining the population ............................................................................................................... 69 5.5 Data collection instruments, sources and procedures ................................................................. 70

5.5.1 The survey instrument ............................................................................................... 70 5.6 Pre-testing the questionnaire ...................................................................................................... 75 5.7 Data collection ............................................................................................................................ 76 5.8 Data analysis .............................................................................................................................. 76

5.8.1 Analysis to be conducted .......................................................................................... 76 5.8.2 Assistance with the analysis...................................................................................... 78

5.9 Conclusion .................................................................................................................................. 78 CHAPTER 6: ANALYSIS AND INTERPRETATION OF THE RESULTS .................................................... 79

6.1 Introduction ................................................................................................................................. 79 6.2 Analysis of closed-ended questions ............................................................................................ 79 6.3 Open-ended questions ................................................................................................................ 96 6.4 Summary of findings ................................................................................................................. 103 6.5 Conclusion ................................................................................................................................ 105

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CHAPTER 7: RECOMMENDATIONS AND CONCLUSION ...................................................................... 107

7.1 Introduction ............................................................................................................................... 107 7.2 Propositions .............................................................................................................................. 107 7.3 Managerial implications ............................................................................................................ 114 7.4 Recommendations based on the literature, industry analysis and empirical findings ............... 116

7.4.1 Recommendations based on the literature review ................................................. 116 7.4.2 Recommendations based on the industry analysis ................................................. 117 7.4.3 Recommendations from empirical findings ............................................................. 118 7.4.4 Suggestions for further research ............................................................................ 118

7.5 Limitations of the study ............................................................................................................. 119 7.6 Conclusion ................................................................................................................................ 119

Reference List ........................................................................................................................................... 121 Appendix A: Questionnaire (in word format) ......................................................................................... 126 Appendix B: Marketing response sheets ................................................................................................ 134 Appendix C: Logistics response sheets ................................................................................................ 139

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LIST OF FIGURE Figure 2.1: The marketing-logistics interface ........................................................................................... 16 Figure 4.1 Porters Five Forces Model ....................................................................................................... 47 Figure 5.1 Flow of qualitative and quantitative research ........................................................................ 63 Figure 5.2 Classification of marketing research format .......................................................................... 64

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LIST OF TABLES Table 2.1: Summary of pricing objectives ..................................................................................................... 17 Table 2.2: Summary of factors that influence transportation cost ................................................................. 22 Table 3.1: The Marketing-Logistics interface coordination techniques ranking ............................................. 34 Table 3.2: Level of cooperation between marketing and logistics functions ................................................. 35 Table 4.1: New vehicle industry sales by segment 2005-2006 ..................................................................... 57 Table 4.2: Comparative new vehicle sales for the first and second quarter of 2006 and 2007 ..................... 58 Table 5.1: Differences between qualitative and quantitative research methods ........................................... 62 Table 5.2: Differences between exploratory and conclusive research .......................................................... 65 Table 5.3: Defining and contrasting open and closed-ended questions ........................................................ 72 Table 6.1: The country in which the parent organisation of the enterprise is located ................................... 80 Table 6.2: Number of passenger car brands assembled by your organisation in SA ................................... 80 Table 6.3: Number of passenger car brands marketed by your organisation in SA ...................................... 81 Table 6.4: Logistics job titles and common title names in the passenger car industry .................................. 81 Table 6.5: Marketing job titles and common title names in the passenger car industry ................................ 82 Table 6.6: Number of years that you have been with the organisation ......................................................... 82 Table 6.7: Number of years that you have been employed in the motor vehicle industry ............................. 83 Table 6.8: The level of cooperation in your organisation between marketing and logistics functions ........... 84 Table 6.9: Techniques currently used; plan to use, do not use or do not know ............................................ 84 Table 6.10: Techniques that organisations currently use .............................................................................. 85 Table 6.11: Techniques that organisations plan to use within the next two years ........................................ 86 Table 6.12: Techniques that are not being used and there is no plan to use them ....................................... 86 Table 6.13: Techniques that respondents do not know whether they are used or not .................................. 87 Table 6.14: Other techniques being used by organisations .......................................................................... 87 Table 6.15: The impact of marketing-logistics interface coordination techniques ......................................... 88 Table 6.16: Techniques with very high impact on the marketing-logistics interface ...................................... 89 Table 6.17: Techniques with high impact on the marketing-logistics interface ............................................. 89 Table 6.18: Techniques with moderate impact on the marketing-logistics interface ..................................... 89 Table 6.19: Techniques with low impact on the marketing-logistics cooperation .......................................... 90 Table 6.20: Techniques with no or very low impact on the marketing-logistics interface .............................. 90 Table 6.21: Not applicable selection of the techniques that have impact or no impact on the marketing-

logistics interface ................................................................................................................................. 91 Table 6.22: The most important and the least important techniques ............................................................ 92 Table 6.23: The most important techniques .................................................................................................. 92 Table 6.24: The least important techniques .................................................................................................. 93

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Table 6.25: Advantages resulting from co-operation between marketing and logistics functions in your organisation ......................................................................................................................................... 94

Table 6.26: The extent to which dealers consult with the manufacturer for additional services to customers ............................................................................................................................................................ 95

Table 6.27: Passenger vehicles are priced higher in SA than in Europe and the US ................................... 96 Table 6.28: Key words and phrases from the response sheets that are relevant to each category .............. 97 Table 6.29: Ways in which cooperation between marketing and logistics creates a sustainable competitive

advantage .......................................................................................................................................... 101 Table 6.30: Factors that influence responses to Question B.9 regarding the price element ....................... 103 Table 7.1: Level of cooperation between marketing and logistics functions ............................................... 108 Table 7.2: Summary of comparison between the study of Murphy and Poist and the current study ........... 108 Table 7.3: Techniques mostly used in the study by Murphy and Poist ....................................................... 109 Table 7.4: Similarities in the responses between the study by Murphy and Posit and the current study .... 112 Table 7.5: Differences in the responses between the study by Murphy and Posit and the current study ... 112

SYNOPSIS The subject of the study is the way in which the coordinated marketing-logistics interface through the fourteen coordination techniques creates a sustainable competitive advantage. The investigation is limited to the passenger car manufactures in South Africa (SA). The literature has acknowledged that marketing and logistics are inseparable and managers from these functions have been working on the relationship in order to use it as a competitive advantage strategy. The fourteen marketing-logistics interface coordination techniques were identified in order to assist these managers to improve the interface and increase the level of cooperation with the intention of achieving a sustainable competitive through the interface. The use of fourteen marketing-logistics interface was not tested during the identification process of such techniques and it is important to find out if they are used in the passenger car industry in SA. Each of the fourteen coordination techniques differs on the basis of the level of use in the passenger car manufacturing organisations. Some techniques are mostly used in organisations than others. For example, top management support and information sharing are mostly used in these organisations while unified department and third-party intervention are not used and there is no plan to use them. There are techniques that have very high- to-high impact on the interface. It is important for the organisations to focus on those techniques that have very high and high impact on the interface since this can assist in improving cooperation between marketing and logistics and create the interface that can serve as a way to a sustainable competitive advantage. The level of cooperation between marketing and logistics functions in the manufacturing organisations in the passenger car industry was measured followed by questions relating to the use, the impact and the importance of the fourteen marketing-logistics interface coordination techniques in order to build and improve the cooperation and create a sustainable competitive advantage through the interface. Other techniques, except the predetermined fourteen techniques were identified however most respondents stated that organisations use the fourteen existing techniques. Some techniques such as a top management support, joint outings and information sharing were mostly used by organisations. It is interesting to note that mostly used does not imply that the technique has a high to very high impact on the interface. Although joint outing is mostly used it was found to have a moderate impact on the marketing-logistics interface. Recommendations provided should be applied in order to identify the difference in cooperation between marketing and logistics before and after the study. The marketing-logistics interface coordination can be a

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strategic tool for creating a sustainable competitive advantage if there is high level of cooperation between marketing and logistics through the use of coordination techniques.

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CHAPTER 1: GOAL AND APPROACH TO THE RESEARCH

1.1 Introduction In the 1990’s, more and more organisations began to view their businesses as a collection of processes, rather than as a collection of functions and departments. As processes cut across functional boundaries, greater attention needs to be devoted to interface activities (Murphy and Poist, 1996: 15). In order to build a cohesive organisation, it is important that points of commonalities between functions are identified and emphasised. The literature has emphasised that logistics and marketing are inseparable in that, logistics is the other half of marketing (Coyle, Bardi and Langley, 2003:93). Unfortunately, there has been limited empirical research on the way in which the marketing-logistics interface can be used as a way to a sustainable competitive advantage in practice. The purpose of this research is to analyse how the link between marketing and logistics can be co-ordinated in order to use this link as a way to a sustainable competitive advantage. This will be done through gathering views from logistics and marketing managers on how coordination techniques can assist in achieving a harmonious relationship between marketing and logistics and to use this coordinated relationship as a way to a sustainable competitive advantage. As a result of interaction between organisational functions, it is important that organisations develop approaches or mechanisms for effective management of interfunctional activities (Murphy and Poist, 1996:15). The purpose of this study is to specifically focus on the marketing-logistics interface coordination and its impact on competitive advantage. In a competitive industry where differentiation from competitors is gained mainly by providing superior service, logistics and marketing integration strategy is important (Remmel, 1991:27). Kahn and Mentzer (1996:6) believe that, in order for an integration to succeed, it is important to establish techniques for building a harmonious interaction. According to Murphy and Poist (1996:18) there are various techniques that the organisation can apply in coordinating the interaction between logistics and marketing and have also pointed out that, these techniques can be relevant to other interfaces. This study will focus on those techniques and also endeavours to identify other techniques.

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1.2 Problem definition Problem definition refers to the crucial first stage in the research process, determining the problem to be solved and the objective of the research. This is the indication of a specific business decision area that will be clarified by answering some research questions (Zikmund, 2003: 740). Of all the tasks in a research project, none is more vital than the accurate and adequate definition of the problem (Malhotra, 1996: 36). An inadequate problem statement is a call for disaster since all the time, money and effort will be wasted if the problem is not clearly defined. The research problem for this study relates to the views of marketing and logistics managers on the use of the marketing-logistics interface coordination techniques, and the extent to which a coordinated interface is the way to a sustainable competitive advantage. A successful interface or integration will require commitment, cooperation and understanding from both logistics and marketing practitioners. The marketing-logistics interface has been regarded as a business strategy that can be used in building the organisation’s competitive advantage but it was found that there is still an evident conflict between marketing and logistics practitioners (Stank, Daugherty and Ellinger, 1999:2). The research will take place in the passenger car industry in SA. A population of marketing and logistics managers from passenger car manufacturers who are direct members of the National Association of Automobile Manufacturers in South Africa (NAAMSA) will be asked to respond to a structured questionnaire in the presence of the researcher. The reason for this approach is that the population is small and the error elimination is very important. 1.2.1 Research questions for this study Three questions that form part of this study:

i. What are the views of marketing and logistics managers on marketing-logistics interface co-ordination techniques?

ii. Do marketing and logistics managers believe that high levels of customer service are important for the interface to serve as a way to a sustainable competitive advantage?

iii. To what extend do marketing and logistics managers use co-ordination techniques?

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1.2.2 Problem Statement for this research According to Murphy and Poist (1996:17) the empirical research to date on the application of the techniques that can be used in the interface co-ordination is very limited. The research problem is to determine the views of marketing and logistics managers regarding coordination techniques, extend of use of these techniques and whether they believe that a coordinated marketing-logistics interface can contribute to a sustainable competitive advantage. 1.3 Research objectives Research objective refers to the purpose of the research expressed in measurable terms; the definition of what the research should accomplish. There are two types of research objectives, the primary and secondary objective (Zikmund, 2003:99). 1.3.1 Primary objective The primary objective of this study is to establish the significance of various interface co-ordination techniques in the marketing-logistics interface, and the extent and the manner in which a co-ordinated interface serves as a way to a sustainable competitive advantage. 1.3.2 Secondary objectives The specific secondary objectives for this research are:

i. To identify specific interface coordination techniques used in the passenger car industry. ii. To establish the manner in which the marketing-logistics interface serves a way to a sustainable

competitive advantage in the organisation. iii. To identify other techniques that marketing and logistics managers consider as important in their

interaction except for the pre-identified ones that will be taken from the literature.

1.4 The purpose and importance of the study The purpose of this research is to establish the significance of the interface co-ordination techniques and how a coordinated marketing-logistics interface can be a way to a sustainable competitive advantage. The literature study will be expanded by empirical research to test the applicability of the identified interface co-ordination techniques; this will be done by collecting views of marketing and logistics managers from organisations that manufacture passenger cars in SA.

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The current study is unique in that it looks at the importance of co-ordination techniques in the interface in order to use the interface as a way to a sustainable competitive advantage in the passenger car industry. This study builds on the research conducted by Murphy and Poist, where marketing and logistics practitioners were asked to provide co-ordination techniques for the success of the interface between marketing and logistics. This is the first time that study of this nature is being conducted in SA. 1.5 Research Proposition A research proposition can be defined as a statement concerned with relationships among concepts, an assertion of universal connection between events that have certain properties (Zikmund, 2003:43). The reason for using propositions and not hypothesis is as a result of the small population that does not justify hypothesis testing. The difference between proposition and hypothesis is that; proposition is based on the abstract or theoretical aspect that attempts to understand the facts of the science while hypothesis is empirical aspect concerned with the facts of the science as revealed by observation or experiment (Zikmund, 2003: 44). Based on the definition, propositions are not empirically testable however hypothesis, which are empirically testable are deducted from propositions. Propositions for this research can be stated as follows: P1: Responses from the study by Murphy and Poist are similar to those in the passenger car market in SA. The current research builds on the previous study by Murphy and Poist regarding coordination techniques, as a result it is important to establish a relationship between the current research and the study by Murphy and Poist. P2: The marketing-logistics interface that uses the fourteen coordination techniques creates a sustainable competitive advantage through high levels of customer service It has been acknowledged that marketing and logistics interface impact on the customer service aspect of the organisation. P3: Logistics costs have a negative impact on selling price of passenger cars in SA. It has been acknowledged in the literature that logistics costs are the most important components when determining the price. It is important to establish whether they have a positive or negative impact on passenger car prices in SA.

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1.6 Demarcation and the scope of the study This is an exploratory study aimed at establishing the importance of marketing-logistics interface co-ordination techniques and how this co-ordination contributes to the interface as a way to a sustainable competitive advantage in the South African based passenger car manufacturing organisations. The literature will cover the importance of marketing-logistics interface as a way to a sustainable competitive advantage based on the components of the marketing mix and logistics activities. It will further explore the importance of the interface as a way to a sustainable competitive advantage. The industry analysis will also form part of the literature. The empirical research will test the marketing-logistics interface coordination techniques by gathering the views of managers in the two functional areas of the business on the interface co-ordination. It will further attempt to find out if there are any other techniques that are applied in the organisations that manufacture passenger cars in SA. 1.7 Clarification of key concepts Marketing Kotler (2003:9) defines marketing as a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. From the analysis of the definition, marketing consists of two separate but interconnected principal parts, namely the stimulation of demand (creation) and the satisfaction of demands (offering and exchange). Organisations achieve this creation and satisfaction of demand through the application of the marketing mix. Marketing concept The Marketing concept is the marketing management philosophy that holds that the key to achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do (Armstrong and Kotler, 2005:13). According to Kotler (2003:13) the marketing concept as a philosophy takes an outside-in perspective where the needs of the customer comes first before the seller’s need to convert the product into cash. Marketing Mix The Marketing mix refers to a set of marketing tools, namely: product; place; price and promotion that the organisation uses to pursue its marketing objectives in the target market (Kotler, 2003:15). According to

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Remmel (1991:28) these different components of the marketing mix determine the potential interface of marketing and logistics. According to Helberg and Krishnan (1995:52) the decision on the marketing mix components or the four P’s of marketing will directly influence logistics ability to add value in terms of time, place and possession. The organisation will decide on how to use the marketing mix in order to meet the demand while creating value. Any marketing effort must integrate the ideas of having the right product, at the right price, combined with the right promotion, and available in the right place at the right time (Stock and Lambert, 2001:7). The logistics concept According to Svensson (2002:427) logistics is usually concerned with satisfying the supply of the customer’s needs and wants in a marketing channel (or a place channel or a supply chain). Fawcett, Mcleish and Ogden (1992: 2) define logistics as a concept that deals with all movement and storage activities that facilitate product flow, from the point of raw material acquisition to the point of final consumption, as well as the information flow that set the product in motion for the purpose of providing adequate levels of customer service at reasonable costs. Logistics management is concerned with planning, implementing and controlling the efficient and effective flow of goods and services from point of origin to the point of final consumption for the purpose of satisfying customer demands in the marketing channel (Coyle et al., 2003:43). It is through logistics systems capability that the marketing concept rights are delivered, quality relationship in the channel is maintained, good customer service is achieved and long-term profitability is realised (Van der Laan, 2004:3). Logistics activities Remmel (1991:28) points out the following logistics activities as the primary interface of logistics and marketing: transportation; warehousing and storage; inventory control; order processing; customer service; packaging; and demand forecasting. Marketing-logistics interface This refers to the interaction or link between marketing and logistics as functional areas in the organisation (Stock and Lambert, 2001:7). The interface between the two functions shows how activities of one cut across the other function activities. Other words used in the text for interface are interaction or link. The order cycle example is a good reflection of the marketing-logistics interface, there are marketing and logistics activities in the order cycle, order transmittal (marketing activity), order processing (logistics information system, order picking (warehousing activity) and order delivery (transportation activity).

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Logistics is important in adding value to a product until it reaches the final consumer while marketing is concerned with stimulating the demand and providing something of value to the end-customer (Coyle et al., 2003:44). As a result of logistics and marketing processes cutting across each other’s functional boundaries, greater attention needs to be devoted to the marketing-logistics interface (Stock and Lambert, 2001:29). Sustainable competitive advantage This refers to sustainable strategies that set the organisation apart from competitors, for example strategy-structure fit, price strategy, communication strategy or cooperation between functional areas (Pearce and Robinson, 2005:326). To survive and win, the organisation has to gain a sustainable competitive advantage over competitors. Sustainable competitive advantage can be gained by; adopting management approaches that satisfy customers through cost competitiveness, high quality products and services, speed and innovation (Bateman and Snell, 1999:19). A coordinated marketing-logistics interface is also regarded as a way to a sustainable competitive advantage because it results in improved customer service levels. It is also believed that cooperation between marketing and logistics can result in lower logistics costs, which translate into competitive pricing (Stank et al., 1999:3). Co-ordination techniques This refers to factors that are important in building the relationship between marketing and logistics. These techniques are to be tested in this study in order to establish whether they result in the marketing-logistics interface that creates a sustainable competitive advantage (Murphy and Poist, 1996: 17).

1.8 Research Design A research design is a framework or blueprint for conducting a research project, which details the procedures necessary for obtaining the information needed to structure or solve a research problem (Malhotra, 1996:86). The research design will assist the researcher on how to obtain the data, where to gather the data, who to ask questions, what questions to ask and how to analyse the data gathered. 1.8.1 Exploratory research “When a researcher has a limited amount of experience with or knowledge about a research issue, exploratory research is a useful preliminary step that helps ensure that a more rigorous, more conclusive future study will not begin with an inadequate understanding of the nature of the management problem” (Zikmund, 2003:110). Malhotra (1996:88) identified the following qualities of exploratory research:

• It provides insight and understanding.

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• Information needed is defined only loosely.

• The research process is flexible and unstructured.

• It has a small and non-representative sample

• The analysis of primary data is qualitative

• Tentative results

• It is generally followed by further exploratory or conclusive research. Exploratory research is important in a situation where research is necessary but with limited prior scientific research been done on the particular study. It also serves as a starting point for research especially where the problem might not appear to be clear or the researcher wants to gain insight prior to embarking on hypothesis testing, examining relationships or making conclusions (Malhotra, 1996:88). 1.8.2 Defining the population Malhotra (1996:359) defines the population as the aggregate of all the elements, sharing some common set of characteristics; that comprise the universe for the purpose of the marketing research problem. The population in this regard will be all logistics and marketing managers of the member organisation of the (NAAMSA), that assemble passenger cars in SA. Since the population is small a complete enumeration of the population will be utilised. The population is drawn from the list provided by NAAMSA, which is an organisation that represents the interests of the new vehicles manufacturing industry and organisations involved in the importation and distribution of new vehicles in SA. NAAMSA compiles statistical information on sales and economic trends that affect the vehicle industry in SA. Currently there are twenty-eight member organisations, with eighteen of these members holding full membership as they have some of their cars, Light commercial vehicles (LCV), Medium commercial vehicles (MCV) and heavy commercial vehicles (HCV) assembled in SA. Of these eighteen, only eight assemble passenger cars both diesel and petrol in SA, these are organisations to be used in the current study. The remaining ten organisations are associate members, as they do not have their manufacturing plants in SA (NAAMSA annual report, 2006:5). 1.8.3 Questionnaire design According to Dillon, Madden and Firtle (1993:303) questionnaire design is a process that comprises of the following four activities: preliminary consideration, asking questions, constructing questionnaire and pre-testing the questionnaire. A questionnaire based mainly on the fourteen coordination techniques will be designed, as there is no existing questionnaire to utilise.

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1.8.4 Pre-testing the questionnaire Pre-testing refers to testing the questionnaire on a small sample of respondents to identify and eliminate potential problems (Malhotra, 1996:341). It is important to pre-test the questionnaire prior to sending it out or administering it for the final survey. Benefits of pre-testing the questionnaire:

• The researcher is able to identify respondents’ problems in answering questions

• Tabulating the results of the pre-test helps determine whether the questionnaire will meet the objectives of the research

• Interviewers can ask for comments from respondents on how easy and precise questions are

• Thus it provides an opportunity to correct mistakes and improve the validity and reliability of the questionnaire (Zikmund, 2003:359).

The questionnaire was pre-tested by conducting personal interviews in order to increase the level of feedback and receive comments. Convenience sampling was done, however only marketing and logistics practitioners from other industries were selected. The reason for using other marketing and logistics practitioners and not using the ultimate population is because the population size is small.

The questionnaire was administered on four marketing and logistics practitioners in order to rectify errors and test the validity and reliability of the questionnaire. Results of the pre-test were used to determine whether questions asked are in line with the research objectives, problem and questions. 1.8.5 Data Analysis techniques Data analysis or statistical analysis is a process of interpreting the data collected in order to formulate answers to the hypothesis. There are various methods of statistical analysis that the researcher can choose from. The method to use is influenced by the type of questions to be answered, number of variables and the scale of measurement (Zikmund, 2003:504). In the study conducted by Murphy and Poist (1996:20), the univariate and multivariate analysis were used for data analysis. Zikmund (2003:505) defines the univariate analysis as a type of analysis that assesses the statistical significance of a hypothesis about a single variable. According to Malhotra (1996:489) multivariate analysis is a type of statistical technique suitable for analysing data when there are two or more measurements on each element and the variables are analysed simultaneously hence multivariate techniques are concerned with the simultaneous relationship among two or more phenomena. Based on the population size, the analysis approaches used by Murphy and Poist will not be significant since they require a large sample. The current research will apply simple statistical analysis such as mean

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and frequency analysis. Data analysis will be carried-out by Statkon, the Statistical unit at the University of Johannesburg.

1.9 Chapter Outline The purpose of this part of the research is to outline chapters’ flow. Chapter 1: Introduction This chapter focused on outlining the basic research objectives. It served as an opening to the main body, defining and briefly describing the importance of the interface and techniques that can be used in developing the strategy that enhances the integration and cooperation between logistics and marketing as business functions. The purpose of the research was elaborated on, with reference to the measures that were utilised. The research question and propositions were stated as well as the outline of the methodology used. Finally, limitations of the research were mentioned. This chapter concluded with a concise outline of the research report, reviewing the major content in each of the chapters. Chapter 2: Significant prior research This chapter was dedicated to reviewing prior literature related to the topic of interest. Although there is a lack of empirical research on the topic, this chapter attempted to focus on summarising the major findings of previous studies that are related to the research and it assisted in the formulation of the research problem. This chapter elaborated on marketing and logistics components in the interface, the link between marketing and logistics, customer service issues, sustainable competitive advantage and the effect of marketing and logistics cooperation on organisation performance. Chapter 3: Exploring the interface coordination techniques This chapter focused on the research done by Murphy and Poist (1996) in which the marketing-logistics interface fourteen co-ordination techniques were identified through interviews with both logistics and marketing practitioners. Chapter 4: Analysis of the vehicle industry in South Africa Since the interface coordination techniques were tested in the passenger car industry, a brief analysis of the industry was important. The analysis identified marketing-logistics interface activities in the industry.

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Chapter 5: Research problem and Research methodology The research problem was formulated in Chapter 1 and was elaborated on in Chapter 5. The process of the problem formulation was clearly specified; propositions were presented, with a brief description of the objective and purpose underlying each proposition. The methodology of the research was laid out in detail in this chapter with particular focus on techniques and methods of analysis. Chapter 6: Discussion of the research results The major findings were encapsulated in this chapter. The relationship found and the insight gained was discussed, as well as the limitations or assumptions, which may have led to biases. Outcomes of the research were described and interpreted. The results were discussed with reference to prior findings including the underlying theory, which formed part of the research. Chapter 7: Recommendations and Conclusion Major findings and understanding gained through the research were summarised in this chapter. The discussion critically assessed the findings and the potential for further research was considered. 1.10 Limitations of the study A number of limitations that can be associated with this study include:

• There is limited literature and related research on the topic of the marketing-logistics interface as a way to a sustainable competitive advantage

• The marketing-logistics interface topic is fairly new in the field of marketing and logistics

• Due to the limited time and financial resource, the population excluded any manufacturer of passenger cars who manufactures all models of passenger cars outside SA, because the marketing and logistics covers import and export issues that are outside the scope of the study

• Due to the structure of the industry in SA the population size for this dissertation is very small

• The marketing-logistics interface in the literature turns to discuss the interface along the four P’s of marketing however, marketing today refers to the seven P’s of marketing.

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1.11 Conclusion This chapter has provided an outline or the road map for this study. All relevant and important key concepts were defined in this chapter and will be applied through out the study with no definition provided in the subsequent chapters. The aim was to ensure that the reader understands what is to be achieved in this research. Subsequent chapters will clarify the study through the literature review, discussions with marketing and logistics practitioners; providing analysis of the findings, recommendations and suggestion for further research.

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CHAPTER 2: THE MARKETING-LOGISTICS INTERFACE 2.1 Introduction The aim of this part of the study is to explore the literature on the Marketing-logistics interface as a way to a sustainable competitive advantage. Literature review is important to the study since it can assist in broadening the understanding of the topic, clarifying the formulated problem statement and propositions (Zikmund, 2003:63). Broad topics to be covered in this section:

• Marketing and logistics components in the interface

• Linking marketing and logistics activities (the interface)

• Customer service from logistics and marketing point of view

• Creating a sustainable competitive advantage through a coordinated interface

• The effect of marketing and logistics on organisation performance 2.2 The Marketing and Logistics components in the interface In Figure 2.1; the main aspects that are the gist of the study are identified namely; marketing mix components; logistics components and the marketing-logistics interface. This interaction is where the place component of the marketing mix and customer service intersects. This figure is a model that proposes the relationship between the marketing and logistics functions (Stock and Lambert, 2001:8).

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Figure 2.1: The marketing-logistics interface

Product

Source: Stock and Lambert (2001:8) The discussion that follows is a close examination of Figure 2.1, illustrated above. The top half of Figure 2.1 consists of the marketing components while the bottom half consists of the logistics components. Having explored each component it is necessary to then move to the marketing-logistics interface. 2.2.1 Marketing components in the interface Marketing components in the interface refers to the four P’s of the marketing mix as defined in Chapter One. These tools are classified into four broad groups called the four P’s of marketing: Product, Price, Place/Customer service levels and Promotion (Kotler, 2003: 11). As can be seen in Figure 2.1, these marketing mix components are interdependent. Product At the core of the marketing effort of the manufacturing organisation is a product that the organisation is able to offer to the customers. Armstrong and Kotler (2005:223) define a product as anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Therefore, a product is not only made of its physical attributes but also, of other benefits that come with it, such as after-sales service, transportation or allowance for returns.

Place/Customer

Service levels

Price

Inventory

Carrying Costs

Transportation

Costs

Order Processing

and Information

Lot Quantity

Costs

Warehousing

Costs

Promotion

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According to Armstrong and Kotler (2005:223) a product is a key element in the market offering. In Figure 2.1 one can see that at the top the diagram is the product, which reflects that organisation’s activities begins with its product. There are various types of products that the organisation can sell depending on who buys the product and the purpose of buying the product. Depending on who will use the product, the product can be classified as industrial or consumer product (Ballou, 1987:76). For this study, the product refers to the actual product being offered to the final consumer, for instance the passenger car and its intangibles, thus a consumer product. Jooste, Berndt, Herbst and Klopper (2005:2) refer to total product, which means the broad spectrum of tangible and intangible benefits that the customer might gain from a product once it has been purchased. When buying a passenger car, the consumer is not only buying the physical product but also the auxiliary dimensions, which include aspects such as warranty, instruction for use, maintenance service, brand and reputation. When paying for the product the consumer is paying for the primary product and all its auxiliary dimensions. Price Price is defined as the amount of money charged for a product or service, which the customer has to pay (Armstrong and Kotler, 2005:57). Price is what the organisation receives in monetary terms for its product and what the customer is willing to offer in order to can acquire the product. Traditionally, pricing has been the “poor relation” of the marketing mix, but price represents the generation of revenue while the other three P’s create costs. All costs that are incurred in the process of production to the delivery of the product are factored in the price. The importance of price can be summarised under the following objectives: financial and marketing objectives as discussed below, and can be seen in Table 2.1. (Drummond and Ensor, 2005:137). Table 2.1: Summary of pricing objectives

Financial Objectives

ROI Profit optimisation Generating cash-flows

Marketing Objectives

Maximising market share Product quality leadership Market stability

Source: Drummond and Ensor (2005:134)

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• Return on Investment (ROI): ROI measures the effectiveness of the organisation in generating profits with its available assets (Gitman, 1991:274). The organisation makes a profit if it is able to generate more than the cost incurred and what remains is the return on investing in the business activity of producing and selling the product.

• Profit Optimisation: Profit optimisation refers to the ability to generate an optimum level of profit but it differs from maximisation in that, maximisation is the absolute maximum price achievable in the short term while optimisation takes a long-term view of retaining customers (Drummond and Ensor, 2005: 137). This means that the organisation is willing to negotiate the price as long as it does not end up loosing its profits in order to meet the customer expectations.

• Generating cash flows: “Cash is the ‘life blood’ of any business and as such, it may be a pricing objective simply to generate sufficient cash” (Drummond and Ensor, 2005:137). In order for the business to survive and continue to grow it needs, cash generated should be higher than the costs incurred in generating the cash. This means that the price of the product is the sum of the cost and the profit that makes up the cash generated.

Marketing objectives through pricing include: maximising market share, product quality leadership and market stability (Kotler, 2003:245), as seen in Table 2.1.

• Maximising market share: Organisations choosing the objective of maximum market share believe that higher sales volume will lead to lower unit costs and higher long-term profits (Kotler, 2003:246). Organisations may accept lower financial returns in order to develop their position within a market place. Gaining market share at any cost is questionable and may damage long-term viability of the organisation, hence it is important to ensure that using price as a tool for gaining market share is done wisely and result in profit optimisation (Drummond and Ensor, 2005:138).

• Product quality leadership: Organisations that aim to be product-quality leaders will offer

premium products at premium prices (Kotler, 2003:247). BMW offers premium products at premium prices, and the organisation’s service and responsiveness to customer queries and requests is rated one of the best in the industry. BMW offers quality product and service and is able to charge premium prices (Kemink, 2005:17).

• Market Stability: A pricing objective could be to maintain the status quo within the industry by accepting a going rate rather than challenging competitors through the price. This not only results in market stability but also has an effect on price stability in the industry (Drummond and Ensor, 2005:138).

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The importance of pricing should not be undermined among the four P’s of marketing. All costs of operating the business are factored into the price including logistics, manufacturing and other costs. The other three P’s result in the cost to the organisation and price is used to recover the costs incurred from activities in the other three P’s. Promotion Promotion is defined as activities that communicate the merits of the product and persuade target consumers to buy the product (Armstrong and Kotler, 2005:57). Promotion is the manner in which organisations communicate products to the target consumer in order to inform, influence or remind the consumer regarding the product or service benefits and availability (Armstrong and Kotler, 2005:399). There are various ways in which organisations communicate their products and services. Koekemoer (2004:11) identifies the following elements of promotion:

• Advertising: This involves the use of media channels such as television, which normally targets the mass and not specific groups of people

• Personal selling: This is a direct person-to-person interaction and communication

• Direct response marketing-An interactive system of marketing that uses one or more advertising media to effect measurable response or transaction at any location. The key to direct response marketing is to generate measurable response to the advertisement.

• Public relations: The management through communication, of perceptions and strategic relationships between an organisation and its internal and external stakeholders. Public relations aims to make the organisation more visible and gain a lot of publicity.

• Sales promotion: A blend of marketing communications activities and materials designed to intensify the efforts of the marketer’s and sales force, induce intermediaries to stock and sell the organisation product offering, and/or persuade consumers to buy the product offering within a specified, limited time period.

• Sponsorship: This is the marketing communication activity whereby a sponsor contractually provides a financial and/or other support to an organisation or individual in return for rights to use the sponsor’s name (company, product or brand) and logo in connection with sponsored event or activity.

• 21st century media: The 21st century media developed as the world technology evolve, it include communication through the Internet, World Wide Web, email and mobile technology.

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When a product is promoted to the end-user, it is important to inform the users about the place where the product can be purchased or how it can be purchased. Promotion should provide information about the product and its availability in terms of where to access it. Place Place in the four P’s of marketing refers to where the customer will be able to go and acquire the product or receive the service. This is the point where the customer physically interacts with the organisation, its product and service; it is the point of actual experience Kotler (2003:511). Place is defined as all activities that make the product available to target consumers that includes:

• Channel selection

• Selection of channel members

• Location

• Transportation and

• Order processing and storage (Kotler, 2003: 57) For instance, Ford carefully selects dealerships who are expected to keep or store an inventory of Ford passenger cars, demonstrate the models, negotiate the price, process the order and offer after-sale service while Ford as a manufacturer is expected to transport passenger cars to dealerships (Kotler, 2003: 57). In this example, after the product is with the dealership, it is the responsibility of the dealership to work out the right price in order to optimise profits. Although there will be set prices from the manufacturer, dealers are allowed to negotiate in the process of offering the product or service with a view of remaining competitive while driving profits. Place is the point where the other elements of the four P’s of marketing and logistics activities come together in the interface, as can be seen in Figure 2.1. Place is the core of the marketing-logistics interface, as it brings the decision from marketing and logistics together and offers customers the opportunity to fully evaluate the ability of the organisation in delivering its product or service, it’s a defining moment. Integrating the four P’s of marketing As can be seen in Figure 2.1, the four P’s are not independent of each other but are interdependent. In order to can make the consumer aware of the product, there are various means of promotion available. Through promotion, price can be communicated and the place where the product can be purchased. It is important not to look at the four P’s as separate entities but as interdependent activities.

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As can be seen in Figure 2.1, the arrows point in both directions, from product to price and back to product from price and so forth. This shows that the interface begins with the individual components of a functional area, for example marketing and the interdependence of those components in the functional area. . 2.2.2 Logistics elements in the interface There are five core elements of logistics in the interface, which are: transportation costs, inventory carrying costs, warehousing costs, lot quantity costs and order processing and information costs (Stock and Lambert, 2001:8), as identified in Figure 2.1. As per logistics definition by (Fawcett et al., 1992:2) in chapter one, logistics aim is to maintain costs of product movement and storage, information flow while providing adequate levels of customer service. The focus of logistics is on maintaining costs as these costs are factored in the product price and impact on the customer ability to acquire the product and on price objectives as discussed above (Stock and Lambert, 2001:7). As can been seen in Figure 2.1 logistics elements are expressed on the basis of costs; what is important in the interface is to ensure that the product is delivered at the right place, in the right time and at the lowest possible cost. Transportation Cost In order to ensure that the lowest possible costs of getting the product to the consumer are maintained, transportation costs should be the first element to assess (Stock and Lambert, 2001:8). Transportation is the most important single logistics cost for most organisations as it accounts for approximately one-third to two thirds of the total logistics costs (Ballou, 1987:97). It is important that efficient means of transport is selected in order to curb or prevent high transportation costs due to inefficiencies as this could result in loss of profits or unnecessarily high prices. Modes or means of transportation the organisation can choose from include; rail, road, air, waterway or pipeline (Kotler, 2003:557). Kotler (2003:557) identified the following factors important in choosing the right mode of transportation:

• Transportation as a major logistics cost affect pricing

• On-time delivery performance and

• The condition of the goods when they arrive. Stock and Lambert (2001:314) broadly discuss factors that can influence the transportation cost and pricing of a product, which must be considered carefully in making transportation decisions, namely; product and market related factors as discussed below and can be seen in Table 2.2.

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Table 2.2: Summary of factors that influence transportation cost

Product factors

Density of the product Stowability Ease or difficulty in handling Liability or risk

Market related factors

Location of the market Government transport regulations

Source: Stock and Lambert (2001:314) The product related factors: Transportation choices are affected by the characteristics of the product, as stated in Table 2.2, which are:

• Density: This refers to a product’s weight-to-volume ratio.

• Stowability: It is the degree to which a product can fill the available space in a transporting vehicle.

• Ease or difficulty in handling the product: Related to stowability is how easy or difficult it is to handle the product. The easier the product is to handle the lesser the costs.

• Liability: Liability refers to risks such as damage to the product during the handling and while in transit, pilferage and theft.

Market related factors: Important market-related factors that affect transportation include: location of the market and government transport regulations:

• Location of the market: This refers to where the market is situated in relations to the place from which goods are transported; that is the accessibility of the market and proximity thereof (Coyle et

al., 2003:511). Location of the market is important when making delivery time decisions which refers to the average time it takes for a shipment to move from its point of origin to its destination as poor scheduling could result in customer dissatisfaction (Ballou, 1987:116).

Customers are promised the time that the product will arrive as a result, it is important to ensure that such sales promises are in line with the scheduling times in order to avoid customer dissatisfaction.

• Government transport regulations: Transport regulation refers to the legal environment in which the transportation industry operates (Ballou, 1987:134). For instance BMW transports its vehicles from Rosslyn to other parts of the country using the trucking system and can only transport from the early hours of the morning to late afternoon and not in the evening when the traffic congestion has eased due to safety reasons (Kemink, 2005:17). If the government decides to make a regulation that no trucks are allowed at certain times of the morning then the organisation might be negatively affected and delivery times will have to change.

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All other logistics costs have a major impact on transportation, lot sizes been transported based on the type of the product determines the cost of transport. The amount of orders processed and handled turn to influence transport cost and time of delivery (Ballou, 1987:141). Although Figure 2.1 does not reflect the flow of logistics components it has been confirmed in the literature that transportation cost is the starting point of logistics elements (Vogt, Pienaar and de Wit, 2003: 28). Inventory carrying costs Inventory cost is defined as cost of holding goods, usually expressed as a percentage of the inventory value. This includes the cost of capital, storage space cost, inventory service cost and risk cost (Coyle et al., 1996: 614). When calculating the cost of holding inventory, one has to consider all these costs or elements mentioned. Elements of inventory carrying costs include:

• Capital cost: Capital cost is the interest on the money used to acquire inventory, which is also referred to as opportunity cost, a term indicating that an investment opportunity has been lost in order to make investment in inventory (Vogt et al., 2003:78). It is important to ensure that the cost of investing in the inventory is not higher than the return that can be generated from the investment.

• Storage Space cost: Storage space cost refers to the cost of the space needed to keep the inventory. The storage space cost include things such as moving of goods in and out of inventory and rent, heating and lighting (Vogt et al., 2003:26).

• Inventory service costs: Stock and Lambert (2001:372) define inventory service costs as costs such as taxes, fire and theft insurance paid as a result of inventory holding. These costs will normally depend on the level of inventory however insurance costs are not strictly proportional to the level. According to Murphy and Wood (2004:274) taxes are normally calculated on the basis of the inventory on hand on a particular date. It can be postulated that taxes will be proportional to the level of inventory on hand on a particular date.

• Risk costs: Risk costs are costs of inventory becoming unsaleable due to deterioration or obsolescence, damage, and pilferage (Ballou; 1987:250). Provision for risk costs is made in case such risk occurs.

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Carrying inventory potentially has many risks, yet inventory serves a number of purposes for the organisation, this includes:

• Improving customer service

• Encouraging production economy

• Permitting purchase and transportation economies

• Acting as a hedge against price changes and

• Protecting against uncertainties in demand and lead-time (Ballou, 1987:243). It is important to realise that the level of inventory kept has an impact on the Return on Assets (ROA) since inventory is an asset in the balance sheet (Stock and Lambert, 2001:33). The optimum levels should be determined and be kept for arising demand. A company like Toyota has been successful with its Just-in-time supply chain concept. Dealers do not keep inventory on hand but order as and when the demand arises. For the brand new cars dealers keep demos only, (Anon (a), 2006:2). Droppa (2006:3) points out that although Toyota does not keep inventory when it comes to finished products it however, does keep some level of inventory when it comes to after sale service parts. It discovered that its rating by customers on the issue of parts availability is low. This demonstrates the purpose of inventory in improving customer service. In order to reduce logistics costs and efficiency of inventory as an asset, the levels of inventory kept should be in line with the demand for the product, not too much and not too little. Warehousing costs Warehousing is defined as the storage of goods, which include a wide spectrum of facilities and locations where finished goods and raw material are kept (Coyle et al., 2003:285). It can be deduced from the definition that warehousing costs are not inventory carrying cost but that it has a relationship with the level of inventory. Warehousing costs looks at the warehousing facilities costs and can reduce or increase with the number of warehousing facilities (Stock and Lambert, 2001:47). In order to understand the relationship between warehousing costs and inventory it is important to learn how warehousing costs are determined. Stock and Lambert (2001:47) identified two distinct categories of warehousing costs: throughput costs and inventory storage costs.

• Throughput costs refers to the cost of putting and taking out a certain amount of products from the warehousing facility in a given time period (Murphy and Wood, 2004:299). The charge for warehouse in this case, depends on the movement of goods in and out of the warehousing facility.

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• Inventory storage costs refers to the costs of warehousing facility based on the level of inventory in the warehouse, these costs can be included in the inventory carrying costs (Stock and Lambert, 2001:47).

These categories clarify the misconception regarding warehousing costs. It is important to distinguish between inventory and warehousing in order to avoid under statement of logistics costs. In order to further understand the difference one can look at the basic warehousing decisions, which include:

• Ownership of warehousing facilities

• Number of warehouses

• What inventory and in what amount must be stocked

• Size and location (Ballou, 1987:194). All these decisions regarding warehousing are made in a trade-off framework. For instance, for marketing consideration, the location of the warehouse should be as closer to the customer as possible but on the other hand this will depend on the spread of the market. If customers are spread widely this can be costly because of a large number of warehouses (Stock and Lambert, 2001:48). Lot quantity costs Lot quantity costs arise as a result of production and procurement activities and vary with changes in production lot size or order size frequency (Stock and Lambert, 2001:48). Lot quantity costs have an effect on customer service since the amount of products that can be produced at any time affects the organisation’s ability to meet customer demands, and transportation costs can also rise due to inconsistent production runs or orders not delivered complete as per orders placed. Lot quantity costs are mainly a product of production-logistics issues however it affects marketing in a sense that the quantity produced should meet the demand. Problems such as untimely deliveries and incomplete orders increase the order processing and communication costs because customers will have to be kept informed about problems until resolved and some orders will have to be rescheduled (Stock and Lambert, 2001:48), refer to Figure 2.1. Order processing and information costs Order processing and information costs include the cost of order transmittal, order entry, order processing, related handling costs and associated internal and external communication costs (Stock and Lambert, 2001:48). Order processing costs tend to be minor compared to transportation and inventory maintenance costs, however they are important. Their importance is due to the critical time element built in the costs; namely, the time between receiving, processing and transporting the product (Ballou, 1987:8).

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The time promised to the customer that the order will be concluded affects the transportation time. It is important to consider transportation time with the time it takes to have the order processed. In Figure 2.1, order processing and information costs are the last components of the logistics components in the interface however, their importance should not be underestimated. Although each logistics element in the interface was discussed as a separate component, it is important to view them as a total cost of the logistics system. Total cost analysis is the key to managing the logistics function and management should rather strive to minimise the total cost rather than the individual costs (Stock and Lambert, 2001:46). The total cost concept allows improved efficiency as all costs are taken into consideration when making decisions. The interaction between the logistics elements has an influence on the marketing-logistics interface. There has to be co-operation between the logistics elements in order for the logistics to interact with marketing. Having discussed individual elements of both marketing and logistics in the interface, it is important to now link the elements in order to understand how they influence each other and the benefits of linking marketing and logistics.

2.3 Linking marketing and logistics activities (the interface) In Figure 2.1 the interface between marketing and logistics takes place where the place element and customer service levels interacts. High levels of customer service are important to the success and sustainability of the organisation. It is important to understand what customer service and customer service levels means from marketing and logistics point of view since these are critical elements of the interface. 2.3.1 Customer service as a link between logistics and marketing In Figure 2.1 customer service levels are where the collaboration or the interface between marketing and logistics takes effect, i.e. they are in the middle of the figure. High customer service levels are achieved if all components from marketing and logistics have been able to deliver in line with the promises that the organisation makes during its communication or promotion to clients (Stock and Lambert, 2001:9). It is believed that customer service is a difficult concept and a broad concept to define but yet a very important aspect of the organisation (Van der Laan, 2004: 3). “Customer service can be defined as the ability of knowledgeable, capable and enthusiastic employees to deliver products and service to their internal and external customers in manner that satisfies identified and unidentified needs and ultimately result in the positive word of mouth and return business” (Jooste et al., 2005:6). The manner in which the

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organisation personnel deliver product and service to both internal and external customers have an impact on customer service levels. Customer service is measured where the interface takes place, which is at the place element (Vogt et al., 2003:23). Place is also where the customer comes into contact with the service personnel. It is important to understand what customer service and customer service levels means in order to can clearly understand its relationship to the place component. The interface between marketing and logistics is critical to achieving high levels of customer service and if customer service is approached from the perspective of marketing-logistics interface, it will result in the interface being a sustainable competitive advantage tool (Emmerson and Grimm, 1996: 29). In order to provide the correct and exceptional levels of customer service the organisation has to realise the strong interdependence between logistics and marketing (Svensson, 2002:427). An example of this interaction: In order to get the product at the right place and time, at BMW the distribution process is the responsibility of both marketing and logistics, marketing and logistics are responsible for local distribution of the product to the dealers whilst logistics is also responsible for exporting the product (Kemink, 2005:17). Previous research has often examined customer service in the context of only one functional area, such as logistics or marketing, but without the successful link of marketing and logistics customer service, the organisation may be unable to meet customer expectations, resulting in dissatisfied customer or lost sales (Emerson and Grimm: 1996:29). Customer service should be seen as a responsibility of both logistics and marketing and in order to provide the level that will result in customer service as a competitive advantage tool, it is important to have the two functions working together (Mentzer, Rutner and Matsuno, 1997:1). Stock and Lambert (2001:8) link logistics and marketing through customer service by discussing the interface based on the concept of utility creation or creation of value to the customer through the marketing and logistics components:

• Place utility

• Time utility and

• Possession utility. Place and time utility According to (Murphy and Wood, 2004:5) place utility refers to having products available to customers where they are needed, products are moved from the warehouse to the dealer or the supermarket where the customer can access them easily. The place element as in Figure 2.1 is where the customer expects to

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find the product according to the promotion/marketing communication promises. This is the point where customer service levels are measured. Place and time utilities focus on the marketing concept of having the product at the right place at the right time for the benefit of the customer and that of the organisation (Fawcett et al., 1992: 2). This maximises sale opportunities and contributes to the organisation’s ability to maximise profits. Logistics creates place utility since it is responsible for the movement of raw materials, in-process inventory and finished goods from point of origin to point of consumption and getting such products at that place at the right time (Stock and Lambert, 2001: 9). Physical handling and place of goods create time and place utilities and the cost of creating these utilities is approximately one-half of the total cost of logistics and marketing (Svensson, 2002:133). Both marketing and logistics are responsible for getting the product at the right place, at the right time, in the right quantity and at the right price. It will be difficult to meet customer’s expectations and demand if marketing and logistics are separated and have no communication flowing between the two functions. Figure 2.1 shows that the place element is the point where the two functions combined effort results show, customers evaluate the organisation’s ability to deliver on its promises at the place element. Marketing and logistics should communicate so that the promises that marketing make regarding product availability are supported by prompt delivery of the product. While having the product at the right place and at the right time is important, it is also essential to ensure that the customer is able to acquire the product as promised at the right price. Possession utility Possession utility refers to the value or usefulness that comes from a customer being able to take possession of a product, it is normally influenced by issues such as; payment terms and quantity discounts (Murphy and Wood, 2004:5). Possession utility is created through marketing activities related to promotion/communication and pricing; while logistics supports and enhances possession utility through transportation and carrying of inventory (Vogt et al., 2003:21). Promotion or marketing communication as another marketing mix component creates the possession utility by creating and stimulating the demand (Stock and Lambert, 2001:10). It is important to create and stimulate demands that can be met with the existing logistics system and to inform the logistics manager so that sufficient inventory quantities are made available to customers. While it is important to make the product available to customers it is also important to ensure that the customer is able to afford the price of the product, as this will influence the ability to acquire the product.

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Bearing in mind that price is influenced by the logistics and the other marketing mix components costs, marketing and logistics should culminate in the possession utility in order to meet customer demands while optimising the organisation profits. Price is critical to the issue of possession utility. If costs of getting the product at the right place and quantity are high from the customer perspective then the customer might still not be able to purchase the product (Stock and Lambert, 2001:10). Transportation and inventory carrying costs are considered to be the first two main costs that influence the product price (Stock and Lambert, 2001:11). As already discussed, transportation is the first logistics cost that has to be considered followed by inventory carrying costs, if these two costs are not minimised, then they will have a negative impact on customer’s ability to acquire the product. Place, time and possession utility reflect how the organisation can utilise the marketing-logistics interface in creating a sustainable competitive advantage. The discussion shows how the marketing-logistics interface through all elements as stated in Figure 2.1 play a role in meeting customer demands while providing high levels of customer service.

2.4 Creating a sustainable competitive advantage through the Interface An organisation strives very hard to stay in business but in order to achieve this; organisations have to gain and sustain competitive advantage (Pearce and Robinson, 2005:326). Competitive advantage means that an organisation is well placed to achieve better results compared to its competitors in the same environment. Gaining competitive advantage is not enough if rivals soon learn and imitate the organisation’s competitive advantage, it is important to gain and sustain competitive advantage (Rijamampianina, Abratt and February, 2003:362). A sustainable competitive advantage refers to the strategy that set the company apart from its competitors over a long period of time (Czinkota, Kotabe and Mercer, 1997:93). When an organisation has achieved a competitive advantage and successfully raises barriers preventing imitations by competitors it thereby resist erosion by competitor behaviour and achieves sustainable competitive advantage (Porter, 1985:2). Since sustainable competitive advantage is an achievement, it is important to understand the process by which it is achieved. 2.4.1 The process of achieving a sustainable competitive advantage Sustainable competitive advantage is achieved through various strategies (Rijamampianina et al., 2003:362). There are three generic strategies of cost, differentiation and focus, which are considered as starting points for creating a sustainable competitive advantage:

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• Cost: Under this strategy, the organisation works hard to achieve lower production and place costs in order to price lower than its competitors. The organisation that successfully utilises cost strategy will experience cost advantage.

• Differentiation: The organisation concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market, for example, quality leadership. The organisation that utilises this strategy successfully is said to have differentiation advantage.

• Focus: The organisation focuses on one or more narrow market segment and know the segment intimately and pursues either cost or differentiation strategy within the target segment (Porter, 1985:1).

Cost and differentiation strategies are considered as basic strategies because they can be utilised separately or together by an organisation that chooses to focus on various market segments (Porter, 1985:2). Organisations that are able to create a sustainable competitive advantage by using one or more of these generic strategies depending on the target market; turn to experience above-average profitability and better organisation performance (Rijamampianina et al., 2003:363). In order to achieve a sustainable competitive advantage; the organisation must perform one or more primary value creating activities in a way that creates value than competitors. Primary value creating activities refers to activities in the value chain, which are: logistics, marketing and sales, operations and service (Pearce and Robinson, 2005:159). The above generic strategies should be successfully applied to one or more of these primary value-creating activities in order for the organisation to consider having an advantage over its rivals (Porter, 1985:3). The Value chain analysis holds it that, marketing and logistics are primary activities in the value chain, as a result if the two fail to connect and work together then the chain will fail (Pearce and Robinson, 2005:159). There is a need to coordinate all activities in the value-chain in order to utilise these activities in creating a sustainable competitive advantage. Value-chain is defined as a way of looking at the organisation as a chain of activities that supports each other in transforming inputs into outputs that customer value (Pearce and Robinson, 2005:159). The current study does not aim to explore the value chain as this is outside the scope but by looking at the value-chain, it can be deduced that the relationship between marketing and logistics plays a major role in the organisation’s ability to deliver expected levels of customer service.

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2.4.2 The effect of marketing-logistics interface on sustainable competitive advantage A sustainable competitive advantage comes from the way organisation functions and the manner in which activities fit and reinforce each other (Sharkie, 2003:24). Marketing and logistics collaboration results in the strategy that combines competencies of two functional areas that reinforce and fit each other in order to meet customer needs and expectations (Svensson, 2002:735). It is important to coordinate those activities that fit and reinforce each other since a lack of coordination results in reduced performance and competitive advantage (Rijamampianina et al, 2003:4). Emmerson and Grimm (1996: 29) purport that the interface between marketing and logistics is critical to achieving customer value and building sustainable competitive advantage. It is important to coordinate the link between marketing and logistics for the benefit of the organisation and the customer (Murphy and Posit, 1996:17). Effective logistics management has been recognised as a key element in improving both profitability and the competitive performance of the organisation. Coupled with operational efficiencies, effectiveness and marketing orientation, this will provide the organisation with a sustainable competitive advantage (Stock and Lambert, 2001:6). The following are ways in which sustainable competitive advantage can be achieved through the marketing-logistics interface:

• Investigate what the customer wants: It is important that the customer’s viewpoint determines the framework for a competitive strategy integrating marketing and logistics

• Assess the organisation logistics and marketing performance: It is crucial to measure the organisation’s marketing and logistics strategy against customer expectations since this will support the organisation in identifying strengths and weaknesses in marketing and logistics performance in the interface.

• Develop an integrated strategy: An integrated strategy between marketing and logistics is necessary to achieving a sustainable competitive advantage through the interface. Marketing and logistics should be viewed as equally important in the organisation in order to utilise the synergies which marketing and logistics provides (Remmel, 1991:30).

The above are some guidelines on how the marketing-logistics interface can be utilised in order to create a sustainable competitive advantage. It is important to realise that it all starts with the understanding of what the customer wants by both marketing and logistics functions in order to provide the right product, at the right time, right place, at the right price and in the right quantity.

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2.5 Conclusion The focus of this chapter was the discussion of Figure 2.1, which is the marketing-logistics interface model. In this model, it is clear that the interaction between marketing and logistics components takes place at the centre of Figure 2.1 at the place element of the marketing mix and where customer service levels are measured. The marketing-logistics interface is important to the organisation that is concerned with providing high levels of customer service and wants to create a sustainable competitive advantage through various capabilities. Although other interfaces are important to the organisation, such as marketing and manufacturing, the interface between logistics and marketing plays a major role to customer services issues. It is important to understand marketing and logistics components separately and then link the two functions, however this does not imply that these components are separate from each other. There is a link all the time between marketing and logistics components through customer service and place components. The aim is to utilise the marketing-logistics interface in order to create a sustainable competitive advantage. As already stated, the marketing-logistics interface result in the organisation that combines capabilities of two different functions.

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CHAPTER 3: THE MARKETING-LOGISTICS INTERFACE COORDINATION TECHNIQUES 3.1 Introduction This chapter aims is to explore the fourteen marketing-logistics interface coordination techniques, which were identified in the study conducted by Murphy and Poist (1996:8). These techniques contribute to the objectives of this dissertation and are utilised in the designing of the questionnaire. The structure of this section will be as follows:

• Discussing the study by Murphy and Poist (1996:15)

• Defining each of the fourteen coordination techniques and their effect on marketing-logistics interface and sustainable competitive advantage

This section forms part of the literature review and only examples from the passenger car industry where these techniques are evident are provided. 3.2 Discussion of the study by Murphy and Poist The aim of the study by Murphy and Poist (1996) was to identify, determine the level of importance of techniques that could assist in coordinating the link between marketing and logistics and to establish the level of cooperation in the respondents’ organisations between marketing and logistics. Three hundred members of the Council of Logistics Management (CLM) and four hundred members of the American Marketing Association (AMA) were randomly selected to take part in the study and the fourteen techniques identified, refer to Table 3.1. Based on the findings of the study, fourteen techniques were identified and a ranking was done based on responses in order to determine techniques that are more important, mostly used and those that are least important (Murphy and Poist, 1996:26). Table 3.1 shows the ranking of the fourteen coordination techniques according to the use and importance.

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Table 3.1: The Marketing-Logistics interface coordination techniques ranking

List of Techniques Ranking-Marketing Ranking-Logistics

Top management support 74.6 (1) 74.7 (1)

Information sharing 65.7 (2) 73.5 (2)

Instilling philosophy of cooperation 64.2 (3) 70.4 (3)

Education and training 62.7 (4) 61.4 (5)

Establishment of mutual goals 55.2 (5) 57.8 (7)

Joint Projects 43.9 (6) 43.4 (9)

Coordinating Committees 41.8 (7) 67.5 (4)

Distribution specialist 37.3 (8) 59.7 (6)

Situational bargaining 25.4 (9) 55.5 (8)

Third party intervention 19.4 (10) 15.9 (11)

Joint Outings 16.4 (11) 20.5 (10)

System of incentives 13.4 (12) 13.3 (13)

Job rotation 10.4 (13) 7.2 (14)

Unified departments 7.5 (14) 14.5 (12)

Source: Murphy and Poist (1996:22) The level of cooperation between marketing and logistics was also determined in order to determine how much improvement is required in the organisations. None of the respondents stated that there was no cooperation while (7.6%) of marketing and (7.4%) of logistics respondents stated that there was slight cooperation. Maximum level of cooperation was not significant, however the difference between marketing and logistics respondents that stated maximum level of cooperation is significant with (9.1%) of marketing respondents and (3.7%) of logistics respondents stating maximum level of cooperation. It can be concluded based on the findings that the cooperation is moderate to high. The findings by Murphy and Poist regarding the level of cooperation are presented in Table 3.2.

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Table 3.2: Level of cooperation between marketing and logistics functions

Level of cooperation Marketing respondents Logistics respondents

No cooperation 0% 0%

Slight co-operation 7.6% 7.4% Moderate co-operation 40.9% 45.7%

High co-operation 42.4% 43.2%

Maximum co-operation 9.1% 3.7%

Source: Murphy and Poist (1996:20)

3.3 Defining the fourteen coordination techniques and their effect on the marketing-logistics

interface and sustainable competitive advantage The discussion on the fourteen coordination techniques flows according to the marketing ranking as it has a linear pattern. 3.3.1 Top management support Top management support refers to seeking and gaining top management commitment for greater co-operation between marketing and logistics functions (Murphy and Poist, 1998:26). By gaining clear signal from top management regarding the importance of the link between marketing and logistics result in people involved in those functions directing their efforts towards efficient and effective operation (Mollenkopf, Gibson and Ozanne, 2000:3). Top management support results in the interface that serves as a strategy for creating sustainable competitive advantage since it instils cooperation between marketing and logistics and this result in high customer service levels (Fawcett and Cooper, 2001:400). It can be argued that top management support as a coordination technique for marketing-logistics interface can result in a win/win position of the interface.

The marketing-logistics interface is directly related to the organisation competitiveness and profitability (Stank et al., 1999:1). The interface between marketing and logistics has strategic importance as it affects the organisation’s ability to deliver value to customers. The interface allows the organisation to pull resources together resulting in better quality at lower costs, it creates an organisation that contains costs while providing high quality service, this is an example of strategic importance of the interface (Emmerson and Grimm, 1996:32).

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BMW provides an example of the importance of having marketing and logistics working together and the effect that top management support has on marketing-logistics interface as a way to the organisation sustainable competitive advantage. At BMW, the marketing-logistics collaboration is emphasised from the chairman to the bottom part of the organisation. The support of top management for the marketing-logistics collaboration at BMW results in the right parts arriving at the right time, at the right line of production, and the product is made available at the dealer at the right time at reasonable logistics costs (Benko and McFarlan, 2003:5). Murphy and Poist (1996:21) find that top-management support is ranked as the first aspect to look at as the marketing-logistics interface coordination technique by both marketing and logistics practitioners, (refer to Table 3.1). It was found that organisations characterised by high levels of top management support on collaboration between marketing and logistics are able to utilise the marketing-logistics interface as a way to a sustainable competitive advantage through high levels of customer service (Mollenkopf et al., 2000:3). 3.3.2 Information sharing Information sharing means establishing systems and procedures that allow sharing of information between marketing and logistics (Mollenkopf et al., 2000:4). When marketing and logistics share information the cost of order processing, warehousing and transportation comes down since the correct orders are processed, warehoused and transported (Murphy and Poist, 1996:18). It can be argued that, the effect of information sharing on the marketing-logistics interface is that it improves communication of customer wants resulting in efficient order processing and place of the product (refer to Figure 2.1). Information sharing in this regard refers to sharing of information through electronic system such as Electronic Data Interchange (EDI) and Enterprise Resource Planning Systems (Murphy and Poist, 1996:18). It is important to have information systems that link marketing and logistics especially if the two functions are situated in different locations. These information systems allow the interface to result in high levels of customer service, as marketing communicates to customers based on logistics ability to deliver on said promises (Fawcett and Cooper, 2001:399). BMW has a well-linked information system that offers a sustainable competitive advantage since it allows quick flow of information from the dealer to marketing to logistics and this allows the organisation to deliver its product speedily and in line with customer requirements and expectations (Benko and McFarlan, 2002:5).

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Poor information system links was found to be a barrier to high levels of customer service, which result in marketing and logistics failing to deliver the product at the right time in the right quantity. This was found to lead to high logistics costs as a result of delays and rework of incorrect orders (Fawcett and Cooper, 2001:299). BMW prides itself with its information system that allows standardisation of the supply chain process, which results in the same logistics processes wherever it operates. Standardised processes assist BMW in offering high quality product and service while containing logistics costs. The organisation is able to offer customers the right prices through lower in-house interest finance while optimising profits (Benko and McFarlan, 2003:5). It can be argued that information sharing as discussed above, leads to marketing and logistics efficiency through improved customer service. 3.3.3 Philosophy of cooperation Philosophy of cooperation refers to instilling or providing a spirit of cooperation towards marketing and logistics departments personnel (Murphy and Poist, 1996:19). Philosophy of cooperation is a behavioural issue between individual departments that can be shaped by making it part of day-to-day values of the organisation. Since cooperation should form part of the organisation’s values, it has to be supported from the top management of the organisation (Mollenkopf et al., 2000:4). Cooperation between marketing and logistics results in positive effect on the effectiveness of place and customer service levels. This effectiveness is the result of increased speed of product delivery and efficient processing of orders (Gimenez and Ventura, 2005: 5). Cooperation in the marketing-logistics interface increases customer satisfaction, levels of customer service, reduces faults at the place element, which results in optimum prices (Sezen, 2005:351). It can be argued that cooperation between marketing and logistics result in the interface that creates a sustainable competitive advantage through positive benefits to the customer and the organisation. BMW is an example of the company that gained sustainable competitive advantage through the marketing-logistics interface as already demonstrated above. Based on the above discussion, it can be argued that philosophy of cooperation result in the marketing-logistics interface that creates a sustainable competitive because it result in positive impact at the place element and customer service levels, (refer Figure 2.1). 3.3.4 Education and training Education and training as a coordination technique refers to providing opportunities for logistics/marketing personnel to get additional education and training regarding marketing/logistics functions (Murphy and Poist, 1996:19). Education and training of marketing/logistics in the principles of the other creates greater

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awareness for working together, particularly as related to understanding customers and service levels (Mollenkopf et al., 2000:4). Training across functional areas is important as it puts the organisation in a position to be responsive to customers’ needs (Christopher and Peck, 2003:109). There are various effects of education and training on the marketing-logistics interface, which are:

• Marketing/Logistics managers making decisions that support each other’s initiative and overall organisation strategy

• Increased customer service levels are achieved through efficient performance of marketing and logistics elements, (refer to Figure 2.1.).

• Ease of information sharing and resolving conflict since marketing/logistics personnel have clear understanding of each other’s role in the organisation (Mollenkopf et al., 2000:8).

Education and training in each other’s discipline assist marketing/logistics in understanding marketing/logistics issues since marketing/logistics is able to understand decisions taken by marketing/logistics (Murphy and Poist, 1996:26). 3.3.5 Mutual goals Mutual goals refer to establishing joint/collective goals and performance measures between marketing and logistics (Murphy and Poist, 1996:19). Marketing and logistics set goals to be achieved through the interface, which are in line with the organisation strategy and overall goals. Performance measures are set to monitor the success of set goals between marketing and logistics in order to identify need for improvement when marketing and logistics work together (Mukhopadhyay and Gupta, 1998:7). Goals that marketing and logistics share include, maximisation of customer satisfaction, increasing customer service levels and profit optimisation (Mollenkopf et al., 2000:3). In order to measure performance of the link between marketing and logistics, the following areas are important:

• Percentage of order corrections

• Percentage of timely product delivery

• Response time to customer requests (Mukhopadhyay and Gupta, 1998:7). It can be argued that mutual goals are important in improving the manner in which marketing and logistics work together. Mutual goals as the marketing-logistics interface coordination technique result in the following:

• Marketing and logistics having the same view on the issue of customer service (Emmerson and Grimm, 1996:2)

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• Working towards increasing customer service levels through understanding of customer requirements and expectations (Stock and Lambert, 2001:8)

• High levels of customer service as a result of timely delivery of products and service (Mollenkopf et

al., 2000:4)

• Optimisation of profits through efficient processing of orders and well-planned transportation (Mollenkopf et al., 2000:4).

Since the aim of linking marketing and logistics is to create a sustainable competitive advantage through improved customer service levels, it is important that these goals are linked to the overall goals of the organisation in order to can instil commitment. 3.3.6 Joint projects Joint projects refer to establishing joint work-related projects or studies, between marketing and logistics (Murphy and Poist, 1996:18). A project is defined as an activity with the following characteristics:

• Project involves change: This could be integration of various parts of the organisation in order to create value for the organisation

• Projects have an objective or end point: Unlike day-to-day activities, which are repeated as required, once a project reaches its objective, it finishes

• Projects tackle mostly the unknown: They create their own processes; hence they are more risky than day-to-day business processes (Nokes, Major, Greenwood, Allen and Goodman, 2003:13).

This definition and its characteristics shows that in the case where marketing and logistics embark on joint projects, the initiative will have life span and does not apply to the two functions day-to-day processes. Projects should be embarked on provided they create value for the organisation (Nokes et al., 2003:13). It is important that the marketing-logistics projects have the objective of creating a sustainable competitive advantage by improving on customer service levels.

The effects of joint projects on the marketing-logistics interface and sustainable competitive advantage have not been identified in the literature. The literature on joint projects as a marketing-logistics interface coordination technique is limited. In the study, the findings on joint projects were that, is mainly used by marketers rather than logisticians. The reason for this is not provided (Murphy and Poist, 1996: 22).

A practical example available on the effect of joint projects on sustainable competitive advantage comes from BMW. At BMW, marketing and logistics are expected to work together on projects that result in improved customer service levels and transportation system. This results in optimised long-term profits through savings in logistics costs, which can translate to reasonable prices (Benko and McFarlan, 2003:2).

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3.3.7 Co-ordinating Committee Co-ordinating committee refers to the establishment of joint a committee that assist in communicating matters of interest to both marketing and logistics, which are not captured by information systems (Murphy and Poist, 1996: 18). Having a co-ordinating committee allows the flow of communication through communication activities such as: having meetings together and working as a team. These communication aspects of integration provide the structure for marketing and logistics departments to interrelate (Kahn and Mentzer, 1996:6).

Frequent formal exchange of information helps reduce misconception and misunderstandings between marketing and logistics functions. Co-ordinating committee assists in formalising communication between marketing and logistics (Stank et al., 1999:2). A co-ordinating committee as an interface coordination technique is not strongly supported by marketing practitioners, (refer to Table 3.1). A co-ordinating committee can only succeed if liaison activities are instilled as part of everyday values of the organisation since they are important in marketing and logistics understanding of each other’s needs (Mollenkopf et al., 2000:4).

The effect of co-ordinating committee on the marketing-logistics interface and sustainable competitive advantage:

• Marketing and logistics work towards the same goal of achieving high customers service levels (Kahn and Mentzer, 1996:7)

• Transportation, inventory and order processing costs reduce as a result of marketing communication that is in line with the ability of the logistics system in meeting customer demands

• Sustainable competitive advantage is achieved through marketing and logistics elements (Mollenkopf, et al., 2000:4)

Although marketing practitioners did not show support of the co-ordinating committee, they have agreed to use this coordinating technique in future. The study did not show the percentage of marketers willing to use this technique but specified that most of them agree to its use (Murphy and Poist, 1996:26).

3.3.8 Situational bargaining Bargaining or negotiation is defined as a give-and-take process between conflicting interdependent parties (Kreitner and Kinicki, 2001:466). Robbins (1998:450) points out that there are two approaches to negotiations:

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• Distributive bargaining: The negotiation that seeks to divide up a fixed amount of resources, a win-lose situation. Distributive bargaining operates under zero-sum gain.

• Integrative bargaining: Refers to negotiation process that seeks one or more settlements that can create a win-win situation.

Situational bargaining refers to negotiations as the need arises to resolve issues between marketing and logistics. As the need to negotiate arises, the two functional areas should seek a win/win situation for the success of the organisation’s marketing-logistics interface (Murphy and Poist, 1996:19). It can be argued that integrative bargaining results in the marketing-logistics interface that improves the place element and customer service levels.

Through the application of integrative negotiation both marketing and logistics could be able to perform towards the integrated effort that can result in maximised customer satisfaction, long-term profitability and lowest total cost given an acceptable level of customer service. Findings in Murphy and Poist (1996:22) suggest that 55.5% of the logistics practitioners believe in situational bargaining as a coordination technique for the interface as compared to 25.4% of marketing practitioners.

Situational bargaining as a marketing-logistics coordination technique can result in:

• Higher satisfaction between marketing and logistics on issues of marketing and logistics performance

• High level of organisation performance based on customer service levels (Sezen, 2005:3) It can be argued that situational bargaining is important for the marketing-logistics interface as it result in the interface that create a sustainable competitive advantage through improved overall organisation performance. 3.3.9 Joint outings Joint outings refers to providing opportunities for employees of marketing and logistics to interact outside normal business hours, for example, have picnics and sports events together (Murphy and Poist, 1996:19). It can be argued that joint outings are informal ways of building cooperation between logistics and marketing. Organisations that do not always emphasise formal interaction between marketing and logistics encounter better marketing and logistics activities coordination (Mollenkopf et al., 2000:5).

Informal interaction is as important as formal interaction since it can have major impact on individuals’ performance and behaviour in their work activities (Robbins, 1998:241). A formal group that creates an informal group is advantageous as opposed to a pure informal group since it fulfils both organisational and individual functions (Kreitner and Kinicki (2001:380). Marketing and logistics departments as formal groups

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in the organisation can interact informally in order to improve the interaction that impact on customer service levels. Murphy and Poist (1996:22) found that joint outings as a coordination technique; is least supported and is considered to have low impact on the interface by both marketers and logistician, (refer to Table 3.1) 3.3.10 Distribution specialist Distribution specialist refers to designating an employee or manager within logistics (marketing) department to act as a special liaison or contact to marketing/logistics. A Distribution specialist should ensure that information that cannot be shared through electronic means is relayed between the marketing and logistics functions (Murphy and Poist, 1996:18). The person must be in a position to speak language of both groups and understand their problems. This means that the person must have both marketing and logistics background in order to be able to relay correct issues (Robbins, 1998:461).

The use of a distribution specialist as the marketing-logistics interface coordination technique is supported mainly by logistics practitioners rather than marketing practitioners, (refer to Table 3.1). The study by Murphy and Poist (1996:18) does not elaborate on the difference and whether marketing practitioners will use distribution specialist in the future. Although distribution specialist as a co-ordinating technique, is supported mainly by logisticians; it has the following positive results on the marketing-logistics interface and sustainable competitive advantage:

• It results in new product success through speed of availability in line with the promised time

• Increased customer service levels since marketing/logistics is always aware of each others activities as presented in Figure 2.1

• Logistics is kept aware of market changes and customer preferences, this result in the right product made available, at the right place and at the right time (Stank et al., 1999:3).

Based on the above advantages it can be argued that distribution specialist is still important as the marketing-logistics interface coordinating technique. 3.3.11 System of incentives System of incentives refers to the manner in which employees are rewarded for achieving set goals (Bateman and Snell, 1999:351). A system of incentives refers to establishing an incentive system, which involves determination of benefits between marketing and logistics for any cooperative effort (Murphy and Poist, 1996:19).

There are various ways in which the organisation can provide incentives or pay for performance:

• Profit sharing: This is when individual employees or work groups are granted a specific portion of any economic profits earned by the organisation as a whole

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• Gain-sharing: Bonuses tide to measurable productivity increases

• Team-based pay: This is when the organisation links pay to teamwork behaviour or team results (Kreitner and Kinicki, 2001:292).

A system of incentives did not receive support as an important marketing-logistics coordinating technique (Murphy and Poist, 1996:22). A system of incentives was further tested in another study where five of the coordinating techniques identified in Murphy and Poist (1996:15) were used. It was found that a system of incentives was not relevant to creating the marketing-logistics interface that result in a sustainable competitive advantage; it bears no significance on customer service delivery and efficient marketing-logistics interface activities (Mollenkopf et al., 2000:10).

System of incentives will not be discarded based on the above findings but will further be tested in the current study as a technique to utilise in order to have a coordinated marketing-logistics interface that serves as a way to a sustainable competitive advantage. 3.3.12 Unified department A Unified department refers to establishing a single department that combines both marketing and logistics functions (Murphy and Poist, 1996:19). A unified department means that the organisation has no separate marketing or logistics department; rather there is one department that performs all elements as stated in Figure 2.1.

It is not feasible to have one single department called marketing/logistics department since the two functional areas still have certain specialised activities to perform (Mollenkopf et al., 2000:2). The following factors should be considered prior to forming a single department

• The name of such a department is important as this could create hostility between the two functions if one name is used

• Marketing creates demand and identify customers for a product while logistics focuses on demand satisfaction

• The aim of the marketing-logistics interface should be considered because the interface does not aim to turn marketing into logistics or vice-versa (Mollenkopf et al., 2000:2).

From the above considerations, it can be argued that a unified department is not a coordination technique that could create the marketing-logistics interface that serves as a way to sustainable competitive advantage.

Passenger cars manufacturers encourage marketing and logistic interaction but still have marketing and logistics department as separate functional areas (Benko and McFarlan, 2003:6). Despite the fact that in

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studies by Murphy and Poist (1996:15) and Mollenkopf et al., 2000:2), a unified department does not result in marketing-logistics interface that creates a sustainable competitive advantage, it still forms part of the current study in order to see if the same results on this technique are found. 3.3.13 Job rotation/switching Job switching or rotation calls for moving employees from one specialised job to another, rather than having only one job, workers are trained and given the opportunity to perform two or more separate jobs on a rotating basis (Kreitner and Kinicki, 2001:216). With regards to logistics and marketing interface, job rotation refers to the situation where employees are provided with the opportunity to switch between marketing and logistics function as part of learning each other’s area of specialisation (Murphy and Poist, 1996:19).

Daimler-Chrysler supports job rotation at the start of new graduates career. Marketing/logistics graduates spend time in each of these departments for the purpose of learning about marketing/logistics but for a specified period (Benko and McFarlan, 2003:7). Job rotation supports the issue of education and training as it provides the opportunity for marketing/logistics to learn from each other, however, it does not have to form part of day-to-day way of operating (Kahn and Mentzer, 1996:11).

Job rotation can have a positive effect on marketing-logistics interface provided it is viewed as part of education and training and not necessarily as a separate coordination technique. If job rotation forms part of education and training it could result in providing marketing/logistics with the necessary knowledge in order for the two functions to work together (Kahn and Mentzer, 1996:11). It can be argued that job rotation is still important to the marketing-logistics interface but should not result in personnel just switching between the two functions at all times.

Job rotation should be used up to the point that it result in marketing/logistics practitioners understanding of the decisions of marketing/logistics on the marketing-logistics interface elements. This will result in marketing and logistics ability to support and work together at the place element and could increase customer service levels while creating a sustainable competitive advantage (Mollenkopf et al (2000:2). Job rotation is a technique less sighted by both marketing and logistics practitioners; refer to Table 3.1 (Murphy and Poist, 1996:26). 3.3.14 Third party intervention Third party intervention is a form of bargaining where a neutral person is involved in resolving issues between two parties that must work together (Robbins, 1998:455). In the case of marketing and logistics, third party intervention refers to using a neutral party outside marketing and logistics departments to resolve issues between marketing and logistics (Murphy and Poist, 1996:19).

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Third party intervention should be applied in situations where conflict between marketing and logistics is due to power/dominance by one function over another. A third party should be someone preferably from top management who will indicate the impact that such conflict has on the organisation ability to deliver quality service and products (Mollenkopf et al, 2000:4). It can be argued that third party intervention is necessary when marketing/logistics fail to resolve issues due to the need for power from either marketing or logistics.

Third party intervention is least supported by both marketing and logistics practitioners as the marketing-logistics interface coordination technique (refer to Table 3.1) Although third party intervention has least support of marketing and logistics practitioners as a coordination technique, it can assist in resolving conflict that affects the marketing-logistics interface ability to deliver quality customer service and increase service levels. 3.4 Conclusion

The importance and the meaning of the fourteen coordination techniques have been elaborated upon. From the discussion it is clear that the level of support of each coordination technique by marketing and logistics differs in some areas and have similarities in other areas. This shows that in the current research within the passenger car industry some techniques will be favoured as a means to create the interface that results in a sustainable competitive advantage whilst others will not be as favourable.

For the purpose of this research, all techniques will be included when developing the questionnaire. Other alternatives to the techniques already identified will also be considered in the open-ended question. This will assist in determining whether organisations in the passenger car industry utilise mainly the predetermined techniques from the study of Murphy and Poist or other techniques.

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CHAPTER 4: ANALYSIS OF THE PASSENGER CAR INDUSTRY IN SOUTH AFRICA 4.1 Introduction

Designing viable strategies for the organisation requires a thorough understanding of the organisation industry. The aim of this chapter is to analyse the motor industry in order to understand how the marketing-logistics interface can create a sustainable competitive advantage in the industry. Porter’s five forces model will be adopted for the industry analysis. The main focus of the discussion will be on one segment of the industry, the passenger car. The following issues will be covered in this section:

• Defining and explaining the nature and importance of Porter’s five forces model

• Application of the model to the passenger car industry

• The impact of industry forces on the marketing-logistics interface

• Creating a sustainable competitive advantage in the passenger car industry

• Current situation in the vehicle industry

4.2 Defining and explaining the importance of Porter’s Five Forces model In order to understand the model application to the industry, it is important to define the word industry. An industry is defined as a collection of organisations that offer a product or service that, are similar and are close substitutes for one another (Kotler, 2003:245). It can be argued that an industry is formed by organisations that compete for the same customer, income and preferences. The presence of one organisation can be a threat to other organisations in the industry since they both look to offer product or service that can fulfil similar customer needs. Since in an industry organisations offer substitutable products or services, it is important that the organisation have an understanding of the industry. Industry analysis refers to the organisation’s process of understanding the nature of the relationship within its industry in order to allow the organisation to develop strategies to gain advantage of the current relationships. A useful framework that can be utilised when undertaking this analysis is Porter’s Five Forces model of establishing industry attractiveness (Kotler, 2005:35).

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Figure 4.1: Porters Five Forces Model

Competitive Rivalry

Potential Entrants (Threat of mobility)

Bargaining Power of Buyers

Substitute Products

Bargaining Power of Suppliers

Source: Kotler (2003:242) Porter’s Five Forces model as presented in Figure 4.1 shows factors that the organisation considers when analysing its potential to make and sustain profits and when formulating strategies in order to succeed in the industry. The Five forces can be defined as follows:

• Potential entrants: Refers to the threat of potential entrants as determined by a number of barriers to entry into the industry such as capital investment, well-entrenched competitors, government legislations and gaining access to appropriate place channels

• Bargaining power of suppliers: The power that suppliers can exert on participants in the industry where control over suppliers is concentrated into the hands of few players, cost of switching to a new source is higher and where the supplier has a strong brand

• Bargaining power of buyers: The ability of buyers to play competitors off against each other and their power to force prices down and demand for higher quality

• Substitute Products: Availability of other products that can fulfil similar needs.

• Competitive rivalry: The intensity of rivalry in the industry, this is determined by the number and size of competitors, fixed costs requirements and barriers to withdraw from the industry (Drummond and Ensor, 2005:37).

The above forces will be applied to the South African vehicle industry in order to understand the nature of the industry.

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4.3 Porter’s Five Forces model in the South African motor vehicle industry

4.3.1 Potential entrants The arena in which the vehicle manufacturer in (SA) competes has changed. In the past the industry was dominated by seven manufacturers and about a dozen brands. Today there are more than thirty brands and over one thousand model variations (Furlonger, 2006:9). This reflects that there are potential entrants into the industry. The Japanese and Chinese manufactured models, which were not in SA in the past, are entering the industry in large quantity (Cokayne, 2006:4).

Despite the fact that there were seven strong manufacturers in the vehicle industry of SA in the past and the production and logistics costs are still high as a result of most parts being imported, it is not difficult to enter the market (Robertson, 2006:3). The ease of entry into the South African vehicle industry is due to the following factors:

• Easy access to distribution channels, for instance, the Imperial Holdings Vehicle import division offers place or place element for fully built imported cars such as Kia, Tata and Proton (Furlonger, 2006:52)

• High production and logistics costs are a concern for local manufacturers; since most parts are imported and labour costs in SA are high (Cokayne, 2006:3)

• The industry is not strict on quality of product and service. As a result, foreign manufacturers take advantage of this and bring in low quality product into the market (Droppa, 2006:7).

The above factors show that it is not difficult to enter the industry especially for foreign manufacturers. High logistics and production costs are a major concern as they result in high prices of locally manufactured cars. This results in importers of fully built passenger cars taking advantage of the situation on prices and pricing their vehicle higher despite lower manufacturing and logistics costs in the countries where they manufacture (Robertson, 2006:3).

Local manufacturers are not able to bargain for better prices on parts because they are controlled by their parent organisations abroad. Local manufacturers in SA are not originally from SA and are still controlled in the country of origin when it comes to parts purchases; they work on contracts as agreed by parent organisations (Cokayne, 2006:3).

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4.3.2 Bargaining power of suppliers In terms of the bargaining power of suppliers, the focus will be on genuine new parts supply and the place element for the final passenger car to the final customer. Focusing on suppliers of components has an impact of the logistics performance at the place/ customer service levels element; it determines the ability to meet customer needs at the right price and time. Genuine new parts supplies Genuine new parts are parts that are sourced from a component supplier who supplies specialised parts, for example, BMW supplier (Pretorius, 2006:8). The reason for focusing on genuine new parts and not substitute availability is that substitute’s effect will be covered as a separate force. As already mentioned above, parts supply in SA has a negative influence on the price of finished locally produced passenger cars.

Manufacturers in SA are locked in agreements that parent organisation abroad have concluded. For instance, BMW (SA) finds most of its parts from subsidiaries of multinational organisations serving BMW internationally (Furlonger, 2006:33). Toyota (SA) also provides an example of the bargaining power of suppliers since it can only import its components from Hino Motors Tokyo as per an agreement with Toyota Motor Corporation in Japan (Holton, 2006:31).

This shows that when it comes to acquiring new parts suppliers have more powers because of contractual agreements and local manufacturers find it hard to work around price reduction of the finished product. There is an argument that local manufacturers are in a position of reducing logistics costs despite the above issues, based on the availability of support received through the Motor Industry Development Programme (MIDP). Components importers enjoy rebates and that should translate into lower prices of components, which can benefit the final consumer (Furlonger, 2006:6).

Manufacturer/dealership relationships In SA, manufacturers are found to have more power over dealerships. Dealers are directly controlled by manufacturers, this result in a less reciprocal relationships (Watson, 2006:40). As suppliers of the final product, manufacturers determine issues such as the show room appearance, signage, training and after-sale service arrangements. Dealers are expected to spend on all these aspects with no say regarding how their businesses should operate (Watson, 2006:40). It can be argued that dealers are being coerced into spending but have no control over their businesses.

In order to deal with the issue of less reciprocal relationship, National Automotive Dealers Association (NADA) conducted a survey on dealer-manufacturer relationships in order to identify organisations in the

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vehicle industry that have improved on the dealer/manufacturer relationship. It was found that, BMW and Hyundai, are the top two organisations with good and favourable dealer/manufacturer relationship. The survey focuses on the impact that the relationship between the dealer and manufacturer have on customer satisfaction and brand value. Improved relationship between dealers and manufactures has a major impact on the brand and customer satisfaction and is important to the brand profitability (Pretorius, 2006:5). It is important to have a relationship that is based on win/win situation. This means that manufacturers should negotiate and reach agreements with the dealers in terms of how dealers run their businesses. If this result in high levels of customer satisfaction then it is necessary to have a new approach on how dealers and manufacturers work together. 4.3.3 Bargaining power of buyers For the purpose of this research, buyers refer to final customers when considering and acquiring a new passenger car. The two main aspects that will be covered when discussing the bargaining power of customers in the SA passenger car market are, pricing and customer service. Vehicles in SA are regarded as being expensive and that improved affordability is the key to unlocking sales and profits potential. Compared to twenty-six weeks that it takes an average US citizens to acquire a passenger car, an average SA citizen takes one hundred and sixty four weeks earnings to have enough money to buy and finance an average priced new car, (Cokayne, 2006:6). Despite imports coming into the market, prices are still not allowing people to possess vehicles easily, possession utility is still not easily realised.

Buyers are not able to put pressure on vehicle prices due to the fact that SA’s regulatory bodies are not strict on issues of prices however the competition board is looking into this matter (Pretorius, 2006:14). Although prices are higher the quality of passenger cars available on the South African market has declined. Locally produced passenger cars with one hundred and sixty nine problems per hundred passenger cars, fared worse than imported cars, which had one hundred and forty problems per hundred vehicles (Cokayne, 2006:3). In order to increase customer satisfaction with the product, it is important to address product quality issues.

Quality of service, price of passenger cars and the price paid for maintenance of passenger cars, are major issues to customers and manufacturers. Service refers to customer experience while purchasing the passenger car and the after-sale service when bringing the car in for interval checks and maintenance (Pretorius, 2006:14). According to the Synovate survey, there has been an improvement in the overall

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aspect of service among local and foreign manufacturers, however local manufacturers are leaders while foreign manufacturers are lacking behind (Droppa, 2006:1).

It can be argued that imported vehicles are lacking on the service aspect due to:

• Difficulties in acquiring replacement parts when a car comes in for interval service

• Distribution is through contractual agreements with local organisations such as Imperial Motors (Pretorius, 2006:8).

It can be concluded that buyers do not have bargaining power in the vehicle industry as a result of non-competitive prices and not much strict regulations on the issue of prices and quality.

4.3.4 Availability of substitutes In terms of availability of substitute, the focus will be on customer substituting one manufacturer’ brand for the other and substituting same manufacturer’s individual products. Substitution can also be considered from the point of customers choosing to purchase second hand passenger cars instead of a new passenger car or customer substituting the use of public transport for a new passenger car or vice versa. For the purpose of this research, the focus is on substituting between new passenger car brands. Substituting between brands and individual products is as a result of factors such as interest rates, availability of discounts and exchange rate, which have an impact on the price. For the past three years vehicle prices have barely moved up resulting in customers’ ability to upgrade. For instance, switching from economy passenger car to the expensive sports car, however with interest rates movements towards the end of 2006 and the weak Rand/Dollar exchange this seem to be something of the past (Robertson, 2006:3). It shows that price has a major influence when it comes to model and brand switching. Other factors that influence the switching between brands and individual products are, the level of income growth, economic growth and employment. As the level of income grows, customers move from other manufacturers believed to offer economy passenger cars to those focusing on luxurious cars such as Mercedes Benz. Some manufacturers enjoy high levels of loyalty than others in the passenger car industry. Toyota customers appear to be most loyal to the brand and as a result switch between Toyota models (Naudi, 2006:5). Toyota continues to enjoy best sales in all categories as a result of repeat buying of Toyota brand by customers. On the other hand Volkswagen (VW) finds that someone who drove VW Chicco upgrades to other manufacturer’s model than to purchase another VW brand (Naudi, 2006:5). Although customers

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switch between manufacturers, they seem to later go back to the previous manufacturer’s brand, so customers do not permanently move away from the manufacturer brand (Mokopanele, 2006:2). 4.3.5 Competitive rivalry As already stated, the nature of competition in the vehicle industry has changed. In the past only seven local manufacturers dominated the industry, today there is an increase in the imported vehicles whose manufacturers do not have any assembling plants in SA. To counter the competition, manufacturers such as Toyota are importing models that are not manufactured in SA. For instance Toyota manufactures only Corolla models such as Run X and Corolla sedan in SA while models such as Avanza and Prius are imported from the parent organisation in Japan (Cokayne, 2006:4). The number of rivals has increased and local manufacturers are also increasing their models in order to continue to have a higher market share.

Local manufacturers are taking advantage of the MIDP and are also importing as much of their fully built vehicles. The MIDP offers rebates on imports and such rebates are converted into points and used for the exporting of vehicles manufactured in SA. These points allow reduction in export duties that assist local manufacturers to afford to export (Furlonger, 2006:10). The export market is important if local manufacturers want to maintain increased sales and maximise profits.

As a result of this intensifying competition, customers have a wider variety to choose from, however passenger car prices are an issue and turns to limit those choices. It is not easy to gain market share in the industry as competition intensify, as a result, manufacturers and dealers are utilising aggressive marketing strategies which focus on price reduction through lower in-house financing costs, cash-back options, road side assistance, free service plans, additional extras and reduced instalments (Robertson, 2007:3). Both local and foreign manufacturers as well as dealers are competing around the price, however they do not necessarily reduce prices directly but add benefits that will make customers realise that there is value for money.

Other factors that should be considered in terms of competitive rivalry in the industry:

• High logistics costs that local manufacturers are faced with. Transportation and security in SA especially while goods are in transit result in high logistics costs. Although MIDP benefits local manufacturers when shipping their fully-build models abroad, inland transportation costs are fuelled by security issues (Robertson, 2006:3)

• Quality of some models such as VW City Golf and Mercedes-Benz SLK 360, which are produced in SA fall behind in product quality as compared to imported passenger cars (Cokayne, 2006:3)

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• In terms of fixed costs, SA is still lagging behind its foreign counterparts, for instance (SA) has high labour costs. The emergence of new, low-cost manufacturing bases like China and India are a long-term threat to SA (Furlonger, 2006:10).

The passenger car industry in SA is continuing to change; competition is rife while prices are high. Aggressive marketing communication is used to attract customers who appear price conscious, however there is still a need to improve the product quality and service offered with the product. 4.4 The impact of industry forces on the marketing-logistics interface and customer service

levels

Having examined Porter’s Five Forces model, it is important to understand how these forces impact on marketing-logistics interface and customer service levels as discussed earlier. This will be done in order to understand based on the analysis of the industry how the marketing-logistics interface can creates a sustainable competitive advantage (refer to Figure 2.1).

Product Product is regarded as the core of marketing efforts of the manufacturing organisation. In the vehicle industry, a product is the complete manufactured passenger car as well as passenger car components. The focus of this research is on the final product and excludes detailed discussion on parts/components.

Based on the above discussion it is clear that the SA vehicle industry has increased its offering as imports increases. This creates the place and time utility since it allows customers easy access when trying to purchase a passenger car. Although competition has enhanced availability and provided the customer with the advantage to acquire the passenger car where it is most accessible. Vehicle prices in SA are still considered higher than what they are in US and Europe resulting in the difficulty in acquiring a vehicle (Cokayne, 2006:3).

Price It is important that the product is made accessible not only in terms of variety but also at the price that customers can afford. Although the competition board argues that passenger car prices are too high in SA, manufacturers argue that other factors such as logistics costs, interest rates and Rand/Dollar exchange have a negative influence on prices. The competition board disagree on the matter stating that even in times when the Rand is stronger to the dollar with decreasing interests rates coupled with MIDP initiative passenger car prices in SA are still far much higher than in Europe and the US (Anon (b), 2006:1).

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With these arguments over the issue of pricing, organisations such as Toyota and Renault finds that increasing warehousing capacity result in better service to customers and this offset the warehouse cost as it boosts customer satisfaction and loyalty (Campling, 2006:17). Increase in lot quantity of parts and vehicles result in transportation costs reductions, which is a major cost component of logistics in the industry (Campling, 2006:17).

This shows that by improving on logistics performance, manufacturers can be in a possession to offer affordable prices to customers. According to Cokayne (2006:6) the vehicle industry needs to have a strong customer orientation in order to improve affordability of all vehicles. It can be argued that creating possession utility through pricing in the vehicle industry is still an issue. As a result, manufacturers and dealers will have to depend on aggressive marketing approach in order to attract customers (Robertson, 2007:3).

Promotion Price is not only influenced by logistics costs but by economic factors that manufacturers have no control over. As a result, manufacturers and dealers communicate various offers that can improve customers’ affordability of the passenger car. Aggressive promotion of additional extras that customers can add to the passenger cars features at low cost, discounts and special services are used to attract the customer (Robertson, 2007:3).

Although dealers and manufacturers promise through promotions that there is value for money customer experiences when purchasing and after-sale service are still not in line with the promises. The SA vehicle industry falls behind when it comes to customer focus. This is as a result of poor customer service performance, which affects customer service levels (Pretorius, 2006:4). It is important that promises are delivered in order to keep customers satisfied.

Place As discussed earlier, the place element is where all components of marketing and logistics come together. It is the point that reveals the efficiency of marketing and logistics. Marketing promotes models that are coming and the time that they will be made available for purchase and also promote available products and where they are made available. With new models, the manufacturer announces the time that the model will be available on the SA market (Robertson, 2007:3). Dealers should be kept informed of the new models and the time that customers can expect the product in order for them to take orders and provide the correct information with regards to the time it will take to have the product available.

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Place, time and possession utility will not be realised without dealer/manufacturer effective communication. It is important to ensure that the product is available at the right place and time as per promotions. BMW has announced that the new 3-Series will be available in 2012, and customers can expect to find the new 3-Series at the dealerships in 2012 (Stadler, 2006:32). With increased number of franchised dealerships selling new BMWs, customers will easily find the new model provided the manufacturer keeps to the promised time that the model will be made available. To achieve this, BMW has a distribution system that is constantly monitoring production, vehicle availability and dealer invoicing to ensure optimal delivery (Kemink, 2004:17). This system results in high levels of customer service since the dealership and the manufacturer communicate efficiently and effectively. Customer service levels Customer service is a major debate in the SA passenger car industry. Various surveys such as Synovate and NADA show that customer service levels are still an issue. Customers measure the service based on the number of problems they experience after purchasing a new vehicle and how after-sale service support as promised in the marketing communication is delivered (Cokayne, 2006:3). These experiences determine the customer service levels and customer satisfaction.

Toyota has realised the importance of maintaining good relationships with dealers since customer service levels are measured based on customer experience during the encounter with the dealer. The organisation now allows their dealership to make decisions on issues such as product modification and price provided the product changes are in line with the quality standards of Toyota (Campling, 2006:7). As the relationship between the manufacturer and dealers improves, customer experience during the purchase and after-sale service improves. Factors that should be considered by manufacturers and dealers when improving customer service levels in the industry include:

• Improved manufacturer/dealership relationship since this has a major impact on customer first time experience of acquiring a passenger car (Campling, 2006:17)

• Availability of parts through expansion in warehouse and stock since this can lower transportation costs and lot size quantity costs resulting in better response to received orders (Robertson, 2007:3)

• Improving product quality during the production process and during interval services of the passenger car (Cokayne, 2006:3).

Improved customer service through the marketing-logistics interface is important to the industry since it can result in brand loyalty and continuous increase in long-term profitability.

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4.5 Creating a sustainable competitive advantage in the passenger car industry As already discussed there are various factors that local manufacturers should consider in order to remain competitive especially with the current level of competition by importers. Individual local manufacturers initiatives will be assessed in order to identify how sustainable competitive advantage can be created in the industry. Two organisations were chosen based on the information presented in the literature regarding their capabilities to deliver high level of customer service through marketing and logistics cooperation.

Toyota

• High product quality of both imported and local manufactured Toyota passenger car models. Customer experiences with Toyota models show that customers are satisfied with Toyota product quality (Cokayne, 2006:3).

• Dealer/manufacturer relationship is key to Toyota’s service quality. Dealerships are left to independently make decisions while maintaining basic guidelines and best practices. This allows dealers and customers to negotiate prices and upgrades to the interior and exterior features at prices profitable to the dealer while meeting customer requests (Campling, 2006:17).

• The organisation logistics planning result in transportation and stock carrying costs saving, this has resulted in on-time delivery of passenger car and parts orders to the dealers (Holton, 2006:32)

BMW

• The organisation prides itself on good manufacturer/dealer relationship, which result in dealerships providing high levels of customer service. Communication and support throughout the place element between the manufacturer and the dealer result in dealers being able to keep to their promises with customers (Pretorius, 2006:4)

• Logistics and marketing work together in getting the product to dealerships. The time that marketing communicates in terms of product delivery and quality are in line with logistics capabilities (Kemink, 2005:17).

• The organisation utilises a logistics system that allows efficient stock carrying which result in reduction in stock carrying costs and efficient and effective processing of orders. This has resulted in overall reduction in order processing and communication and inventory carrying costs (Holton, 2006:19).

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4.6 Current situation in the vehicle market The discussion on current situation in the market will focus on the following issues: sales and economic conditions. The information summarised in this section is based on NAAMSA 2006 annual report. 4.6.1 Sales Projected passenger car sales showed an expected increase of 14.1% in passenger car sales for 2006 however a decline is expected for 2007 as a result of the National Credit Act (NCA), increasing interest rates and not released the actual total sales figure and the breakdown but it is anticipated that the actual figure is below the projection (NAAMSA annual report, 2006:6). Comparative presentation of breakdown of sales performance in units in the industry is presented in Table 4.1. NAAMSA breakdown sales figures according to the four segments, as stated in chapter one of this research. Table 4.1: New vehicle industry sales by segment 2005-2006

Segments 2005 2006-Projections

Cars 376 845 430000

LCV 160 723 184000

MCV 12 243 14500

HCV 15 207 18500

Total 565 018 647000

Source: NAAMSA annual report (2006:6) Despite rising interest rate, NAAMSA projects an increase in demand for commercial vehicles due to the increase in economic activities as a result of preparation for 2010 and the promise that the government made in spending R372billion now till 2014 on the infrastructure (Furlonger, 2006:10). The first and second quarter sales figures for passenger cars in 2007 showed a substantial decline while commercial vehicle sales in the same period showed an increase. There is no breakdown in terms of commercial vehicles, however figures confirm NAAMSA’s projections that there will be a decline in the demand for cars and an increase in the demand for commercial vehicles in 2007. Table 4.2 is the comparative presentation of sales figures for the first and second quarter of 2006 and 2007 respectively.

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Table 4.2: Comparative new vehicle sales for the first and second quarter of 2006 and 2007

Segments First quarter 2006

First Quarter 2007

Second quarter 2006

Second quarter 2007

Cars 104174 103997 103987 88235

Commercial vehicles 58622 50990 51104 56976

Total 162796 154987 155091 145211

Source: NAAMSA quarterly bulletin (2007:2) 4.6.2 Economic trends that impact on vehicle industry sales performance There are various economic trends that impact on vehicle sales in SA. These include factors such as interest rates, taxes, individual level of income and economic development (Mokopanele, 2006:2). Increasing interest rates are set to put breaks on vehicle sales increase in 2007. Strict monitoring of car allowances can be expected to exacerbate affordability problem of passenger cars (Van Zyl, 2006:2). The full effect of changes to the car allowance taxation provisions; announced in 2006, would be felt by taxpayers in the current year of assessment. The increase in the deemed fringe benefit on a company car from 1,8 percent of the determined value to 2,5 percent in 2006 as well as the increase in the proportion of the car allowance subject to PAYE from fifty to sixty percent were cause for concern to the automotive industry as this will have a major impact on sales. Vehicle industry depends heavily on car allowances since it makes it easier for customers to purchase passenger cars (Van Zyl, 2006:2). Although manufacturers and dealers are using aggressive marketing strategies to boost affordability and make it easier for customers to purchase passenger cars, the above economic factors still hamper possession utility. In order to assist manufacturers improve affordability whilst reducing costs and encouraging investment, the government has introduced the Motor Industry Development Programme (MIDP). 4.6.3 Motor Industry Development Programme (MIDP) MIDP was designed by the government in collaboration with local vehicle manufacturers in order to encourage investment in local vehicle manufacturing (Furlonger, 2007:59). The government is the driver of MIDP, which serves as a support vehicle to local manufacturers in the motor industry. MIDP has governed the motor industry since its announcement by the Department of Trade and Industry (DTI) in 1995 (Furlonger, 2006:7).

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Aims of MIDP can be outlined as follows:

• To encourage investment in vehicle manufacturing processes in SA

• To reduce logistics costs through import duties rebates gained through export initiatives in order to have competitive prices of locally manufactured cars

• To encourage local vehicle manufacturers investment in training and development of the industry required skills (Socia, 2007:58).

During its first announcement of MIDP the DTI succinctly outlined the above aims. Despite the aims of the MIDP, industry experts believe that the MIDP falls short of the World Trade Organisation (WTO) requirements since it encourages importation of components used in the manufacturing process. Import rebates are based on export volumes whereby manufacturers export and earn points, which can only be used to reduce import duties (Cokayne, 2006:2). Other criticisms of MIDP are:

• Since its introduction importation of components have increased resulting in trade deficit

• It does not provide incentives required for investment such as tax and production incentives

• There is no clear plan of the duration of the programme, which result in other manufacturers reducing levels of investments in manufacturing and training (Socia, 2007:59).

The industry expects the DTI to announce its plan regarding the duration and to amend the import duty rebates in order to curtail import impetus (Cokayne, 2006:2). Trade deficit is when imports exceed export for both components and finished products. Manufacturers utilise the points earned through exporting to import more and this result in trade deficit (Socia, 2007:59). Although manufacturers argue that the MIDP has not benefited the industry, some critics of the MIDP as a support vehicle for the motor industry believe that manufacturers have benefited without sharing such benefits with the consumers. It is believed that manufacturers have the opportunity to save on logistics costs through MIDP but such savings are not transferred to the customer (Furlonger, 2006:6). Amongst the aim of the MIDP one was to assist local manufacturers in having competitive and affordable prices of finished products. There are still hanging issues surrounding the MIDP:

• Changing the programme from being an import incentive to tax and total production incentive

• Extending the programme to 2020 and not cease it in 2012

• Introducing an alternative programme to MIDP (Socia, 2007:58). Until the above issues are resolved consumers and manufacturers may not enjoy the benefits of the MIDP.

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4.7 Conclusion This part of the study focused on exploring the vehicle industry through the application of Porter’s Five Forces model. It also outlined the impact that the five forces have on the marketing-logistics interface and customer service. Through the application of the Porter’s model, it was clear how organisations in the industry create a sustainable competitive advantage through the interface. Two organisations were chosen in the discussion of creating a sustainable competitive advantage based on their ability to achieve high levels of customer service. Summary of the current situation in the vehicle industry was also presented by analysing sales trends, economic factors that have influence on sales performance and the MIDP. The economic factors such as interest rate and personal tax structure could have a negative impact on possession utility. Despite aggressive marketing strategies that manufacturers and dealers are applying and the introduction of the MIDP, prices of locally manufactured passenger cars are still regarded as non-competitive.

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CHAPTER 5: RESEARCH METHODOLOGY

5.1 Introduction The aim of this part of the study is to detail procedures necessary for obtaining information needed in order to understand the phenomenon. Research methodology is important since it provides a guide to everyone involved in the study on how the required information is to be obtained and the type of research being conducted. A research design indicates activities the investigator and respondents should perform and the order in which they should occur (Thomas: 1990:60). A research design or methodology encompasses all mechanisms employed in planning for the research such as, procedures and techniques used to reach findings about the research (De Vos, 2001:77).

This section will cover the following topics:

• The research design

• Research data collection methods

• Defining the population

• Data collection instruments, sources and procedures

• Data analysis Some of these aspects were covered briefly in chapter one and will now be discussed in detail. 5.2 The research design The research design was defined in chapter 1, in this chapter a detailed discussion of its practical application is presented. The research design is discussed under the following headings:

• The research method: This section clarifies whether the research is qualitative and/or quantitative in nature and the suitability of the method selected

• The research format: This section outlines whether the format is exploratory, descriptive or causal in nature

• The research technique to gather the data: This section outlines whether the data is collected through personal interviews or focus group.

5.2.1 The research method Research methodology can be classified under two broad generic categories: qualitative and quantitative. A hybrid approach is obtained when qualitative and quantitative approaches are used because this allows for greater depth of understanding and insight than when one approach is used (Roberts, 2004: 113).

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Differences between qualitative and quantitative research are presented in Table 5.1 while the flow of qualitative and quantitative research application is presented in Figure 5.1. Table 5.1: Differences between qualitative and quantitative research methods

Qualitative research Quantitative research Objectives To gain a qualitative understanding of the

underlying reasons and motivations To quantify the data and generalise the results from the sample of the population of interest

Sample Small number of non-representative cases Large number of representative cases

Data collection Unstructured Structured Data analysis Non-statistical Statistical Outcome Develop an initial understanding Recommend a final course of

action Source (Malhotra, 1996:164) The current research has both qualities of the qualitative and quantitative research. The objective is to gain insight, however the data was quantified but not generalised since the population was small. Sampling is not used but the entire population is taken into consideration. A structured data collection was applied because a structured questionnaire was used and statistical analysis performed. Results were used to develop initial understanding without recommending final course of action. Qualitative and quantitative methods were applied to this research since they complement each other and make analysis of the results easier to understand. Qualitative research was used when exploring the literature and in the questionnaire for open-ended questions. Quantitative research was applied in the questionnaire for closed-ended questions where statistical analysis can be made. The study was largely quantitative as there was statistical analysis of the data. Figure 5.1 shows when the qualitative and quantitative research, are applicable in the research process. Qualitative research is applicable to both the secondary and the primary data while quantitative research is applicable to the primary data only. This flow is important to understand because it reflects how the research method and the data collected relate.

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Figure 5.1: Flow of qualitative and quantitative research

Marketing research data

Secondary Data Primary data

Qualitative research

Qualitative research

Quantitative research

Source: Malhotra (1996:164)

5.2.2 The research format Deciding on research objectives first requires understanding of the type of research being done. The most common categorisation ranges from exploratory to causal. A useful categorisation is exploratory, descriptive or causal research (Lehmann, 1985:56). Descriptive and causal research formats are used where the research takes characteristics of the quantitative research method (Malhotra, 1996:165). Descriptive and causal research formats are considered as conclusive research where the outcome of the research is to recommend a final course of action (Lehmann, 1985: 56). The flow of the conclusive and descriptive research is presented in Figure 5.2.

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Figure 5.2: Classification of marketing research format

Research Format

Exploratory Research Conclusive Research

Descriptive Research Causal Research

Source: Malhotra (1996:87) Exploratory research is defined as a study designed to find out enough about a problem to usefully formulate propositions or hypothesis. It assists in gaining insight and understanding of the problem confronting the researcher (Lehmann, 1985:57). Exploratory research is the starting point of the research where the problem requires clarification. Analysis of secondary data, which were discussed separately, is an example of the exploratory research since it is normally the starting point of the research for the purpose of gaining insight (Malhotra, 1996:165). Based on the discussion of exploratory research, the relationship between Figure 5.1 and 5.2 was established since the secondary data is a qualitative research method and also an exploratory format of the research. While exploratory research is the starting point where the researcher wants to gain insight and understanding, it cannot be used where statistical analysis and recommendations are to be made, conclusive research should also be applied (Zikmund, 2003:55). Unlike the exploratory research that can take several subjects that are related to the problem, conclusive research is based on some previous understanding of the nature of the problem and focuses on the research at hand (Zikmund, 2003:55). As already stated, conclusive research can be descriptive or causal, refer to Figure 5.2:

• Descriptive research: Research designed to describe characteristics of a population or a phenomenon. Descriptive research is based on some previous understanding of the nature of the research problem. Descriptive research is part way along the continuum from exploratory to causal. Descriptive research assumes that relevant variables are known (for example, in Figure 2.1 it can be assumed that all marketing elements are known and have an effect on customer service levels) (Lehmann, 1985:57).

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• Causal Research: Research conducted to identify cause-and-effect relationships among variables when the research problem has already been narrowly defined. The research attempts to establish that when we do one thing, another thing will follow (Zikmund, 2003:56). Causal research on the other hand, assumes that not only do we know what the relevant variables are, but that we know how they affect each other. In Figure 2.1 causality can be made that logistics and marketing elements affect each other based on how they interlink (Lehmann, 1985:57).

Exploratory and descriptive research normally precedes causal research (Lehmann, 1985:57). The differences between exploratory and conclusive research are summarised in Table 5.2. Table 5.2: Differences between exploratory and conclusive research

Factors Exploratory Conclusive 1.Objectives To provide insight and understanding. To test specific hypotheses and

examine relationships. 2.Characteristics Information needed is defined only

loosely. Research process is flexible and unstructured. Sample is small and non-representative. Analysis of primary data is qualitative.

Information needed is clearly defined. Research process is formal and structured. Sample is large and representative. Data analysis is quantitative.

3.Findings/Results Tentative Conclusive 4.Outcome Generally followed by further exploratory

or conclusive research. Findings used as input into decision-making.

Source: Malhotra (1996:87). Although the research is exploratory based on the population size and that it is applied to the SA passenger car manufacturer for the first time, it applies exploratory and conclusive research. The current study aims to describe the phenomenon that a coordinated marketing-logistics interface is a way to a sustainable competitive advantage. It follows some characteristics and objective of a conclusive research however it is not conclusive, refer to table 5.1 and the definition of descriptive research. As already stated the research is both qualitative and quantitative in nature, this is clarified further when discussing the data collection methods and instruments. 5.2.3 Research techniques to gather the data Techniques used to gather data refers to the approach used to communicate with respondents (Zikmund, 2003:198). The researcher can either use focus group or personal interviews. The technique selected depends on the format and method of the research (Lehmann, 1985:144). It is important to ensure that the

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technique used provides relevant information that is in line with the research objective and problem. In order to achieve this; the technique should be suitable to the format and method of the research. Various techniques that can be used to gather the data A Survey A survey is a technique in which information is gathered from a sample of people by use of a structured questionnaire or interview, a method of data collection based on communication, with a representative sample of individuals (Zikmund, 2003:742). Based on the definition of the survey, it can be stated that the survey is a technique suitable when conducting a quantitative and conclusive research since it is structured and requires that the sample be representative. Data can be collected in the following ways:

• Telephone: This involves phoning a sample of respondents and asking them a series of questions

• Mail: Mailing the questionnaire together with cover letter and return envelope to pre-selected potential respondents

• Person: Personal interview where information is gathered through face-to-face contact with an individual (Lehmann, 1985:145).

When using survey technique the researcher can select from the three collection methods above. The current research utilised the person method of survey since a questionnaire was designed and personal interviews conducted. Although the research is exploratory, results were quantified and questions were structured. Although the research used the survey method where personal interviews were conducted, other techniques were also discussed. Experiment This is a research method in which conditions are controlled so that one or more variable can be manipulated in order to test hypothesis. Business experiments hold the greatest potential for establishing cause-and-effect relationships (Zikmund, 2003:737). The experiment is normally used for quantitative research and causal research however this method is expensive and requires a very large sample size (Lehmann, 1985:92).

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Observation Observation refers to the recording of behavioural patterns of people, objects and events in a systematic manner to obtain information about the phenomenon of interest. Observation can be structured in this case the behaviour to be observed is defined or can be unstructured where the behaviour is not defined in advance (Malhotra, 1996:213). The main advantage of observation is that it records behaviour without relying on reports from respondents, however the technique is more complex and difficult to administer (Zikmund, 2003:69). Focus group A focus group refers to an interview conducted among a small group of respondents in an unstructured and natural manner. Focus group is the most important qualitative research technique (Malhotra, 1996:166). This means results from focus group should not be considered conclusive but exploratory. Having identified various techniques that can be used to gather the data it is important to understand the collection of different data. It is important to understand the type of data collected in order to evaluate the relevance of a selected collection technique. 5.3 Types of data being collected There are two broad types of data that the researcher collects, the secondary and the primary data (Zikmund, 2003:63). Figure 5.1 shows the link between the market research data and the method of the research. As already discussed in section 5.2.2 and 5.2.3 secondary data is part of the exploratory and qualitative research methods while primary data is part of both qualitative and quantitative research methods. This means that primary data is important to the exploratory and conclusive research. This does not imply that secondary data is not used in conclusive research however if the researcher has a thorough knowledge of the phenomenon, secondary data may not be collected. 5.3.1 Defining the secondary data and its application Secondary data is defined as data that has been previously collected for some project other than the one at hand (Zikmund, 2003:63). This means secondary data can be any data available that could add value to the research and not necessarily a data that is specifically for the research at hand. For this research Chapters 2, 3 and 4 are based on the secondary data available. Chapter 2 was a literature review that clarified the interface between marketing and logistics. Chapter 3 discussed techniques that were identified in the previous study by Murphy and Poist, which formed the basis for the research problem. These two chapters put together the information needed in order to formulate the

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problem and gain insight and understanding of the phenomenon. The data was gathered from the library and via the Internet. Chapter 4 was the analysis of secondary data relating to the industry that forms the population of the study, which was collected from NAAMSA annual report, the Internet and periodicals. Aims of gathering the secondary data, which is exploratory and qualitative as discussed in section 5.1 and 5.2:

• To gain insight and understanding of the phenomenon

• To guide the researcher on variables to consider when gathering and analysing the primary data

• To assist in the formulation of an appropriate research design

• To assist in the formulation of hypothesis or proposition (Malhotra, 1996:117) Since secondary data is collected for purpose other than the research at hand, it is important to ensure that it is accurate, relevant and useful to the study at hand. During the analysis, interpretation and recommendations chapters the relevance and the appropriateness of the secondary data is tested. The secondary data in chapter 2, 3 and 4 should serve as a guide to these chapters. 5.3.2 Defining the primary data and its application Primary data is defined as data gathered specifically for the research project at hand (Zikmund, 2003:63). Figure 5.1 shows that primary data can be either qualitative or quantitative or both. The nature of the primary data collected depends on the method and the format of the research. Both qualitative and quantitative primary data was used in the current study since the study combines both qualitative and quantitative research methods. This is elaborated when discussing the data collection instrument used. The reason for combining the qualitative and quantitative was that the research is exploratory; the sample size was small, a structured questionnaire was used and results were quantified. Aims of gathering the primary data, that is exploratory, conclusive, qualitative and quantitative as discussed in section 5.1 and 5.2:

• To conduct survey research

• To gather information specific to the research at hand

• To determine the current situation of the phenomenon (Zikmund, 2003:175). When the researcher begins to gather the primary data it is important to ensure that the phenomenon is clear and understood or unnecessary information is gathered. The secondary data should have been fully analysed at this stage. In order to gather the data it is important to identify the research population from which the primary data can be collected.

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5.4 Defining the population The population is drawn from the member list provided by NAAMSA. The population refers to all organisations that have some or all of their passenger car models manufactured in SA. According to the NAAMSA list, the following organisations manufacture passenger car models in SA:

• Toyota

• Nissan

• BMW

• Daimler Chrysler SA

• Ford Motor Corporation of SA (FMCSA)

• Volkswagen (VW)

• General Motors South Africa (GMSA)

• Fiat Auto SA Although there are sixteen member organisations, the above-mentioned organisations are the only ones manufacturing passenger car models in SA. The reason for using only those organisations manufacturing passenger cars in SA while excluding those that import and manufacture commercial vehicles only is that, their logistics and marketing decisions could be different resulting in various population groups to deal with.

The number of respondents interviewed was determined based on the organisations willingness to provide time for interviews. Telephonic requests were made and organisations were willing to assist. It was agreed that marketing and one logistics personnel should be available for the interview. The following organisations agreed to take part in the study:

• Toyota

• Nissan

• BMW

• Daimler Chrysler SA

• Ford Motor Corporation of SA (FMCSA)

• Volkswagen (VW)

• General Motors South Africa (GMSA)

• Fiat Auto SA

Sixteen respondents were interviewed, two respondents from each organisation representing marketing and logistics respectively. Since the population was small, all components were included hence no sampling was done in the actual survey. The fact that the total population was used means that this research is a census. A census is defined as an investigation of all individual elements making up a population (Zikmund, 2003:369). A Census is normally used when collecting information regarding communities in order for policy

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makers to make decisions. The importance of using a census is to ensure that information regarding all members of the community is known since the community is usually not homogenous based on factors such as income, education and race. Census is not only used where the population is small but also in cases where the elements of the population cannot be generalised under a single category (Dillon et al., 1993: 300). Research design and definition of the population serve as guides in determining the data collection instrument, sources and procedures for collecting the data. In order to collect the data, it is important to establish the purpose of the research, its objectives, propositions or hypothesis, research design and define the population. All these aspects have been covered in chapter 1 and the previous section of chapter 5, it is at this stage that data collection instruments can be designed and administered. 5.5 Data collection instruments, sources and procedures This section is discussed under the following broad headings:

• The survey instrument

• The method of data collection

• Procedure for collection

•

5.5.1 The survey instrument Techniques for collecting the data were discussed under the research design section and it was mentioned that personal interviews through a structured questionnaire is utilised. A questionnaire is a data collection instrument that formally sets out the way in which the research questions of interest should be asked (Dillon et al., 1993:301). Advantage of using the questionnaire:

• It translates the information needed into a set of specific questions that the respondents can answer

• It uplifts, motivates and encourages respondents to become involved in the interview

• It minimises response error

• It is relatively economical

• It can involve a large group

• Information can usually be interpreted easily

• Confidentiality can be assured because questionnaire can be completed anonymously (Strauss and Myburgh in Baloyi, 2005: 45).

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Since there was no questionnaire to adopt a questionnaire was developed for this study. The questionnaire developed; is mainly based on the study by Murphy and Poist. Previous research from the literature and information about the industry were used to identify important issues relevant to the research problem. In order to design a questionnaire the following aspects need to be considered:

• The nature of the questionnaire

• Phrasing of questions

• Scaling used in the questionnaire

• Flow of questions The nature of the questionnaire As already discussed, the questionnaire was used to collect the primary data that can either be qualitative or quantitative or both. This depends on the type and the aim of the research. The current research is exploratory however it aims to quantify results and describe a phenomenon. The questionnaire was both qualitative and quantitative. Phrasing of questions This stage determines how questions should be phrased since if only qualitative, the questionnaire will normally have open-ended questions or if quantitative closed–ended questions will be asked (Zikmund, 2003:331). Questions can be open or closed-ended depending on the type of the research and the amount of prior knowledge of the problem (Zikmund, 2003:331). Open-ended questions refer to questions that allow respondents to provide responses in their own words. These are considered free-answer questions (Zikmund, 2003:332). Closed-ended or fixed alternative questions are questions in which respondents are given specific limited alternative responses and asked to choose the one closest to their viewpoint. The manner in which the response is provided is determined by the way in which questions are phrased. Table 5.1 provides comparison between open and closed-ended questions.

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Table 5.3: Defining and contrasting open and closed-ended questions

Open-ended Closed-ended It poses some problem and asks respondents to respond in their own way.

Respondents are given specific limited- alternatives and asked to choose the one closes to their viewpoint

Beneficial for exploratory research when the response range is unknown

Beneficial in descriptive or conclusive research

Some individual will provide lengthy responses while others less articulate will be at an advantage

Individuals can only select from provided list resulting in the same response range

High cost of coding, editing and analysing the data Low cost and less time spent on coding, tabulating analysing the data

High interviewer bias since responses can be easily manipulated

Standardising alternatives reduces interviewer bias on responses

(Zikmund, 2003:333) The current study blends both qualitative and quantitative research approaches hence both open and closed ended questions were asked. Open-ended questions were asked in order to clarify answers to some of the close-ended questions, refer to Appendix A, the questionnaire. Since closed-ended questions were included in the questionnaire, the scaling used in each question should be discussed. Scaling in the questionnaire design Scaling may be defined as any series of items that are arranged progressively according to value or magnitude, into which an item can be placed according to its quantification (Zikmund, 2003:296). In order to can construct a questionnaire it is important to consider how objects or characteristics can be measured. Measurement involves rules for assigning numbers to objects to represent quantities or attributes. We measure not the object but its characteristics (Malhotra, 1996:271). There are various ways in which we can measure characteristics (Zikmund, 2003,296). For the purpose of this research, only scales applied in the study are explained. When discussing individual questions, the scale applied to the question is indicated. Scales applied in this research:

• Ordinal-Ranking scale: A scale in which, numbers are assigned to objects to indicate the relative extent to which the objects possess some characteristics.

• Ratio scale: The highest scale that allows the researcher to identify or classify objects; rank order the objects and compare interval and differences. (Malhotra, 1996:275).

• Category scale: An attitude scale consisting of several response categories to provide the respondent with alternative ratings (Zikmund, 2003:311)

• Likert scale: It is defined as a measurement of attitude designed to allow respondents to indicate how strongly they agree or disagree with carefully constructed statements that range from very positive to very negative toward an attitudinal object (Dillon et al., 1993:292).

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• Interval scale: A scale in which the numbers are used to rank objects such that numerically equal distances on the scale represent equal distances in the characteristic being measured (Malhotra, 1996:274)

• Rank order: A comparative scaling technique in which respondents are presented with several objects simultaneously and asked to order or rank them according to some criterion (Malhotra, 1996:279)

• Rating scale: A measurement task that requires the respondent to estimate the magnitude of a characteristic or quality that an object possesses (Malhotra, 1996:280).

The use of any of the scaling depends on the research type, problem and objectives however, a mixing measuring-scales is acceptable if it is in line with the research being conducted (Dillon et al., 1993:290). The aim is to have questions that support the objectives and provide responses to the research questions and propositions as stated in Chapter 1. Having identified the nature of the questionnaire, the type of questions and the scaling applied, it is important to assess each question in order to ensure that the flow is easy to follow and understand. Flow of questions The questionnaire was divided into two parts; section A and B. Section A of the questionnaire was designed in such a way that it gathers personal, organisation and industry background. The aim of this section was to gather some background on issues such as the number of brands that are available in SA, the number of brands manufactured in SA and the work experience that the individual respondent have in the industry, refer to Appendix A. Section B aimed at providing responses to the research questions. Each individual question was assessed in order to identify its relevance to the current study based on the data from which the questionnaire was designed. As already stated the data used to design the questionnaire was the secondary data collected in chapters 2-4 of the research. Assessing individual questions in section B Individual questions in Section B of the questionnaire were assessed in order to ensure that they provide responses to the research questions and propositions:

• Question B.1 asked respondents to rate the degree or level of cooperation between marketing and logistics in the organisation. It is valid and reliable to the current study, as its responses showed whether there is cooperation between the marketing and logistics functions. Question B.1 applied a

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four point ordinal scale; refer to Appendix A. This question was formulated based on the responses from the study by Murphy and Poist.

• Question B.2 required respondents to identify the marketing-logistics interface co-ordination techniques that are currently used, not used or planned to be use. It also allowed respondents who are not sure to provide an honest answer. The aim of this question was to provide responses that identify specific interface coordination techniques used in the passenger car industry from the predetermined ones in the study by Murphy and Poist. A four point category scale was applied to this question where techniques were categorised as being used, plan to use, do not use or do not know if they are used or not, refer to Appendix A.

• Question B.3 flows from question B.2 since it allowed respondents to provide other techniques not mentioned in question B.2, which are used in a particular organisation. There was no scaling applied to this question since it is an open-ended question, however this question can be replaced with a no or yes answer or a checklist (Zikmund, 2003:331), refer to Appendix A.

• Question B.4 required respondents to rate the impact that the marketing-logistics coordination techniques have on the marketing-logistics interface. A six-point ordinal scale was used in order to determine the impact based on techniques identified in question B.2, refer to Appendix A. In the study by Murphy and Poist respondents were also asked to rate the impact that each technique has on the interface.

• Question B.5 asked respondents to identify the most and the least important technique from the predetermined techniques. Rank order was applied where a number of the technique was placed as either the most or least important technique.

• Question B.6 asked respondents to agree or disagree with statements regarding the advantages resulting from cooperation between marketing and logistics functions in the organisation. A five-point Likert-scale was used in Question B.6. The literature review found that there were several advantages such as high levels of customer service, quality service and achieving a sustainable competitive advantage that result from cooperation between marketing and logistics in the organisation.

• Question B.7 intended to find out how co-operation between marketing and logistics creates a sustainable competitive advantage. This was an open-ended question and no scaling was applied. The aim was to identify what respondents consider as ways in which the marketing-logistics interface creates a sustainable competitive advantage.

• Question B.8 was important to the research as it addressed the impact that the relationship between manufacturers and dealers has on customer service levels and addressed the issue of the place element of the marketing components. It applied the rating scale, where respondents were asked to rate the extent to which their organisations consult with the manufacturer on certain issues.

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• Question B.9 aimed to address the issue of possession utility, which is mainly affected by the price element of marketing. A five-point Likert scale was used where respondents were asked to agree or disagree with two statements on pricing, refer to Appendix A.

• B.10 flows from question B.9 where respondents were asked to provide reasons for their choices in question B.9. This was an open-ended question aiming to understand reasons that result in respondents perceiving passenger car prices as high or not agreeing with statements as stated in B.9, refer to Appendix A.

Based on the assessment of each question, it is clear that questions formulated relates to the research problem and support the research objectives. After satisfying the researcher that questions formulated are in line with the research problem, research questions and objectives, the questionnaire is constructed and pre-tested prior to the actual survey being conducted. 5.6 Pre-testing the questionnaire Pre-testing refers to testing the questionnaire on a small sample of respondents to identify and eliminate potential problems (Malhotra, 1996:341). It is important to pre-test the questionnaire prior to sending it out or administering it for the final survey. Benefits of pre-testing the questionnaire:

• The researcher is able to identify respondents’ problems in answering questions

• Tabulating the results of the pre-test helps determine whether the questionnaire will meet the objectives of the research

• Interviewers can ask for comments from respondents on how easy and precise questions are

• Thus it provides an opportunity to correct mistakes and improve the validity and reliability of the questionnaire (Zikmund, 2003:359).

The current study pre-tested the questionnaire by conducting personal interviews, in order to allow interaction with respondents with an aim of increasing the level of feedback and ask for comments. Convenience sampling was used, however only marketing and logistics practitioners from other industries were selected. The reason for using other marketing and logistics practitioners and not using the ultimate population was due to the small population size.

The questionnaire was pre-tested on two marketing and two logistics practitioners in order to rectify errors and test the validity and reliability of questions. Results of the pre-test managed to show that questions asked were in line with the research objectives, problem and questions. Question B.2 was refined as its previous wording appeared confusing to the respondents.

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5.7 Data collection Once the stages of the research design, research data collection methods, definition of the population, development of the research instrument and pre-testing of the instrument are accomplished, the process of gathering information from the target population begins. Data collection is the step where the questionnaire is tested on the targeted population in order to can answer specific research questions (Zikmund, 2003:72). Various methods of collecting the data and the techniques that can be used to collect the data were discussed. For the current study the researcher collected the secondary data through literature review sourced from the library, periodicals, NAAMSA and the Internet. Personal interviews were conducted for the primary data collection with the aid of the structured questionnaire. This technique of gathering the primary data was selected based on the population size. This has reduced errors such as question skipping and incorrect interpretation. Data was collected in two parts, by pre-testing the questionnaire and conducting the final survey. The final survey was conducted through the month of April and May. Respondents took long to offer interviewing opportunities to the researcher hence the collection took six weeks to conclude. Interviewing opportunities were requested via emails and telephonically. After collecting the data it is important to consider how the data will be transformed into useful information. 5.8 Data analysis The goal of most research is to provide information, however responses from the questionnaire in their raw form will not assist in providing the information, hence it is important to make such responses usable as information. Data and information differs but information is generated from the data. Data refers to recorded measures of certain phenomena (Zikmund, 2003:453). Information refers to a transformed data that is presented in a format suitable for decision-making (Zikmund, 2003:453). Data analysis is the process of transforming the data collected into useful information. The data analysis for this research focused on the data collected through the questionnaire and not on secondary data presented in chapter 2,3 and 4. The questionnaire was used in order to incorporate closed-ended quantitative questions in the exploratory research. Scaling was applied to these questions in order to be able to quantify the results and describe the phenomenon. Open-ended questions were analysed through the appropriate methods for open-ended questions. 5.8.1 Analysis to be conducted Open and closed-ended questions were used in the questionnaire, as a result of having both close and open-ended questions two groups of analysis were conducted. The aim of the phenomenon was to describe

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views of marketing and logistics practitioners employed by the passenger car manufacturers in SA on the marketing-logistics interface as a way to a sustainable competitive advantage in their organisations. Closed-ended questions were analysed using the descriptive statistics methods. Descriptive statistical analysis refers to the transformation of raw data into a form that will make them easy to understand and interpret, rearranging, ordering and manipulating data to provide descriptive information (Zikmund, 2003:473). Although descriptive statistical analysis was applied, the research was not considered conclusive since the population size was small. There are various methods of descriptive analysis; however for the purpose of this research only the ones applied to the data are defined. Descriptive statistical analysis There are four statistical methods that were applied when analysing closed-ended questions.

• Mean: A measure of central tendency, the arithmetic average (Zikmund, 2003:404)

• Frequency distribution: A mathematical distribution whose objective is to obtain a count of the number of responses associated with different values of one variable and to express these counts in percentages (Malhotra, 1996:506)

• Standard deviation: Quantitative index of a distribution spread or variability or the square root of the variance (Zikmund, 2003:405).

• Range: The difference between the smallest and the largest values of a distribution (Malhotra, 1996:506).

The above statistical methods were applied to various questions that were closed-ended with scale of measurements as already discussed under questionnaire design. As a result of the population size, it was difficult to apply the univariate analysis as applied in the study by Murphy and Poist. Univariate technique refers to the descriptive statistical method that can be applied when there is one large sample size (Malhotra, 1996:489). Analysing open-ended questions Open-ended questions were analysed using the content analysis, which refers to classifying many words, sentences, paragraphs and themes of the text into much fewer content categories (Tesch, 1990:79). The basic procedure of content analysis involves:

• Transcribing and editing: Transferring data from the questionnaire or coding sheets onto disks or magnetic tapes or directly into computers by keypunching. For the purpose of this research a response sheet will be on the computer and responses will be punched onto the response sheet.

• Designing categories that are relevant to the research purpose

• Sort all occurrences of relevant words or other units into these categories

• Count the frequency of occurrences in each category

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• Make inferences based on the frequency of occurrences (Tesch, 1990:80). 5.8.2 Assistance with the analysis Open-ended questions were analysed manually by the researcher. Content analysis requires the manual keypunching of the data into computers, deciding on the categories, manual sorting and counting of occurrences in each category. There is no computer package that can provide categories required, the researcher should manually determine using a chart designed on the computer in MS word or hand write the categories to use. Closed-ended questions were analysed using the descriptive statistical analysis procedures, which were carried out by Statkon, Statistical unit at the University of Johannesburg. The results were presented in the tables by Statkon and interpreted by the researcher. 5.9 Conclusion Research methodology outlines the process by which the research is conducted. It is the gist of the research as it shows the road map through which the research problem is answered and the research objectives achieved. It is important to start with the research methodology as soon as the research problem, objectives and hypothesis or proposition have been stated. This allows the identification of the link between the method and what the research aims to achieve. Although the research methodology is presented towards the final part of the research paper, it is important to work on it in the early stage of the research. Formulating the methodology at an early stage, allows the researcher to tie the introduction and all other parts of the research. The methodology reveals if the literature covered and the purpose of the research based on objectives of the research, research problem and hypothesis or propositions supports each other.

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CHAPTER 6: ANALYSIS AND INTERPRETATION OF THE RESULTS 6.1 Introduction The purpose of this Chapter is to present the research findings and the interpretation of the results. As already stated, closed and open-ended questions were used and presented separately in the interpretation. Propositions rather than hypothesis were used in this study. Reasons for using propositions and not hypothesis were; the size of the population was small and the research was exploratory in nature (Zikmund, 2003: 44). This chapter will cover the following topics:

• Analysis of closed-ended questions

• Analysis of open-ended questions

• Interpretation of the results

6.2 Analysis of closed-ended questions Since the questionnaire was divided into two parts, section A and section B; analysis followed the same sequence. 6.2.1 Analysis of section A The focus of Section A of the questionnaire was on the demographic information. Each question was presented and a profile of respondents was formulated at the end of analysis of section A. The profile provided a complete picture of who respondents were, what they do and where they work, how long they have been with the organisation and the industry and the number of brands that their organisation manufacture and market in SA. Sixteen questionnaires were completed where eight respondents were from marketing and the other eight from logistics. Two representatives from marketing and logistics were interviewed from each organisation and a 100% response rate was achieved. This means that all respondents returned the questionnaire and all questionnaires were usable. This was achieved due to personal collection of the data. As already stated in the discussion regarding the research techniques to gather the data, personal interviews were used to collect the data.

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Question A.1: In which country is the parent organisation of your enterprise located? Question A.1 aimed to establish the organisation country of origin in order to determine the country that has the most passenger vehicle manufacturers in SA. (Refer to Appendix A). Based on the population size and the fact that there were only sixteen respondents, 50% of respondents work for German car manufacturers, followed by Japan with 25%. Germany is the country that has most of its assembling plants in SA. US and Italy are the least, with 12.5% of the two countries passenger car manufacturers or assemblers in SA. Refer to Table 6.1 for findings. Table 6.1: The country in which the parent organisation of the enterprise is located

Country Frequency Percentage to the total number of responses

1. Germany 8 50%

2. Japan 4 25%

3. Italy 2 12.5% 4. US 2 12.5%

Question A.2: How many passenger car brands are assembled by your organisation in SA? Question A.2 asked about the number of passenger cars brands assembled in SA by each organisation that took part in the study. The mean value showed that on average, each organisation assembles 1.75 passenger vehicles in SA; this can be rounded off to 2 brands per organisation. Refer to Table 6.2 for findings. Table 6.2: Number of passenger car brands assembled by your organisation in SA

Number of participants Mean

16 1.75 Question A.3: How many passenger car brands are marketed by your organisation in SA? The mean value showed that on average organisations market 7.75 brands in SA. This is higher than the average number of passenger vehicles assembled in SA. This could mean that the SA market is attractive for sales, however the environment is not favourable for assembling due to some factors (managerial implications). Question A.2 and A.3 showed that organisations tend to market more brands than what they produce in SA. Refer to Table 6.3 for findings.

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Table 6.3: Number of passenger car brands marketed by your organisation in SA

Number of participants Mean 16 7.75

Question A.4: What is your job title in the organisation? Question A.4 attempted to establish different job titles that respondents held in the logistics and marketing departments in the organisation. This is important because it provides information regarding the level of knowledge the respondent have about the logistics or marketing function in the organisation. Based on the discussion with the respondents on what responsibilities are for each title, some titles have the same responsibilities. A title grouping was done based on what respondents regard as common titles based on responsibilities of the job. Job titles were divided into logistics and marketing titles. Logistics titles With respect to logistics, it would appear that there are seven different titles, which can be grouped into three common names. In terms of the job title common names, (25%) are logistics coordinators. Logistics managers account for a large percentage of respondents (62.5%). Refer to Table 6.4 for a summary of these titles and percentages of the total number of logistics respondents (8). Table 6.4: Logistics job titles and common title names in the passenger car industry

Job title Common names Percentage of respondents to the job titles

Logistics coordinator Logistics coordinator 25% Logistics consultant Logistics coordinator Senior Buyer-Mechanical parts Buyer-Mechanical parts 12.5% Logistics and quality manager Logistics manager 62.5% Logistics manager Logistics manager Manager- Logistics services Logistics manager Logistics and distribution specialist Logistics manager

Marketing titles With respect to marketing, it would appear that there were eight different titles, which can be grouped into five common names. In terms of the job title common names, a significant percentage (50%) of respondents stated that they can be referred to as Customer service managers. Refer to Table 6.5 for a summary of titles and percentages of the total marketing respondents (8).

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Table 6.5: Marketing job titles and common title names in the passenger car industry

Job title Common names Percentage of respondents to the job titles

Key accounts manager Key accounts manager 12.5% Marketing communication specialist Marketing communication manager 12.5% Manager-Dealer relations Manager-Dealer relations 12.5% Product specialist Product manager 12.5% Customer affairs manager Customer service manager 50% Customer relations manager Customer service manager Customer service manager Customer service manager Customer support manager Customer service manager

None of the respondents could provide an explanation as to the reason same responsibilities carry different job titles. This is not within the scope of this research as it has Human Resources implications. Question A.5: Indicate the number of years that you have been with the organisation. The focus of the question was to establish the respondents’ knowledge of the organisation based on the years that the respondent has been with the organisation. Most of the respondents (81.3%) have been with the organisation for a period of 2-4 years. There were no respondents who had been with the organisation for longer than seven years. Refer to Table 6.6 for findings. Table 6.6: Number of years that you have been with the organisation

Number of responses

Number of years with the organisation

Frequency Percentage to the total number of responses

16

Less than two years 1 6.3% 2-4 years 13 81.3% 5-7 years 2 12.5% More than 7 years 0 0%

Question A.6: Indicate the number of years you have been employed in the vehicle industry. The aim of this question was to establish the industry knowledge of the respondent. In terms of the industry experience, the maximum number of years that a respondent has been in the industry is 8-10 years with a minimum of less than two years. Most of the respondents (43.8%) have been in the industry 5-7 years. This is followed by 2-4 years, which is (31.3%) of respondents. Most respondents worked for the organisation for 2-4years. Refer to Table 6.6 and 5-7years in the industry. Refer to Table 6.7 for findings. This shows that there is high movement between organisations in the industry.

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Table 6.7: Number of years that you have been employed in the motor vehicle industry

Number of respondents

Number of years in the industry

Frequency Percentage to the total number of responses

16 Less than two years 1 6.3 2-4 years 5 31.3 5-7 years 7 43.8 8-10 3 18.8

6.2.2 Profile of the typical respondent The typical respondent works for a German motor company (50%) of respondents. Their organisation assembles an average of 1.75 passenger cars in SA but markets an average of 7.75 passenger cars in SA. They hold Logistics (62.5%) or Customer service manager (50%) positions within the logistics and marketing departments respectively. They have worked for the organisation for 2-4years (81.3) and for the industry, 5-7years (43.8%). 6.2.3 Analysis of Section B Section B focused on the marketing-logistics interface coordination techniques. Section B was analysed in two parts, closed-ended and open-ended questions were analysed as separate sections. Closed-ended questions were analysed using the statistical methods as defined in Chapter 5 and content analysis was applied to open-ended questions. Question B.1: On a scale of 1-4 with 1 being no cooperation and 4 being a maximum cooperation; please rate the degree of cooperation in your organisation between marketing and logistics functions. Question B.1 focused on the level of cooperation between marketing and logistics in the organisation, it applied a four point ordinal scale, (refer to Appendix A). Most respondents (43.8%) believed that there is a maximum level of cooperation in their organisations. This is followed by (31.3%) of respondents saying there is moderate cooperation. A considerable number (25%) specified that there is minimum cooperation. No respondents (0%) chose the option that there is no cooperation; this means that there is some level of cooperation in all organisations that took part in the study, however there is still a room for improvement. This has managerial implications, which is covered in chapter 7.

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Table 6.8: The level of cooperation in your organisation between marketing and logistics functions

Number of responses

Cooperation Level Frequency Percentage to the total number of participants

16

Minimum cooperation 4 25% Moderate cooperation 5 31.3% Maximum cooperation 7 43.8% No cooperation 0 0%

Question B.2: Please indicate whether your organisation currently use each of the following techniques to establish cooperation between the marketing and logistics functions. If your organisation does NOT CURRENTLY USE a specific technique, please indicate whether your organisation PLANS to use this technique within the next two years. If you are unsure or do not know, please tick DO NOT USE or DO NOT KNOW. Responses were presented as a summary of all categories in terms of currently use, plan to use, do not use and do not know in Table 6.9. Refer to Appendix A for definitions of techniques. Table 6.9: Techniques currently used; plan to use, do not use or do not know

In order to establish cooperation between the marketing and logistics functions, my organisation uses/ plans to use the following techniques

1=Currently using

2=Plan to use within the next two years

3=Do not use

4= Do not know

1.Top management support 87.5% 12.5% 2. Mutual goals 56.3% 37.5% 6.3% 3. Joint projects 62.5% 37.5% 4. Distribution specialist 6.3% 93.8% 5. Information sharing 81.3% 18.8% 6. Co-ordinating committees 12.5% 25% 50% 12.5% 7. Cross-functional training and education 62.5% 37.5% 8. Situational bargaining 62.5% 6.3% 12.5% 18.8% 9. System of incentives 37.5% 31.3% 31.3% 10. Unified department 100%

11. Job switching or rotation 6.3% 93.8% 12. Joint outings 87.5% 12.5%

13. Third-party intervention 100% 14. Philosophy of co-operation

68.8% 31.3%

Note: Respondents could indicate more than one response

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Currently used techniques The following techniques are mostly used; top management support (87.5%), Joint outings (87.5%) and information sharing (81.3%). This is followed by philosophy of cooperation (68.8%). Refer to Table 6.10 for findings. The findings differ from the study by Murphy and Poist where information sharing, philosophy of cooperation and top management support were mostly used. Top management support is still ranked first in the same way as in the study by Murphy and Poist however in the study by Murphy and Poist, Joint outings was considered the least used technique. Table 6.10: Techniques that organisations currently use

Techniques

Currently using-Frequency

Currently Using-Percentage of total responses

Top Management support 14 87.5% Joint outings 14 87.5% Information sharing 13 81.3% Philosophy of cooperation 11 68.8% Cross-functional training and education 10 62.5% Situational bargaining 10 62.5% Joint projects 10 62.5% Mutual goals 9 56.3% System of incentives 6 37.5% Coordinating committees 2 12.5%

Techniques planned to be used in the next two years Techniques that organisations mostly plan to use within the next two years included mutual goals, joint projects and cross-functional training and education with (37.5%) of respondents specified that their organisations plan to use these techniques. Techniques that organisations indicated they are least likely to use included distribution specialist, situational bargaining and job switching or rotation with equal percentage of (6.3%) for all these techniques. Mutual goals, philosophy of cooperation and cross-functional training and education were amongst the top five goals that organisations would mostly use. Refer to Table 6.11 for the findings on techniques organisations plan to use.

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Table 6.11: Techniques that organisations plan to use within the next two years

Techniques Frequency Percentage of total responses Mutual goals 6 37.5% Joint projects 6 37.5% Cross-functional training and education 6 37.5% Philosophy of cooperation 5 31.3% Co-ordinating committees 4 25% Information sharing 3 18.8% Top management support 2 12.5% Joint outings 2 12.5% Distribution specialist 1 6.3% Situational bargaining 1 6.3% Job switching or rotation

1 6.3%

Techniques that organisations do not use According to the study finding, the following techniques were the most significant in terms of not being used by most of the organisations: unified department (100%), third-party intervention (100%), distribution specialist (93.8%) and job switching or rotation (93.8%). The study by Murphy and Poist shows that unified department, third party intervention and job switching as the least preferred techniques for coordinating the marketing-logistics interface, thus SA findings are consistent with the study by Murphy and Poist. Refer to Table 6.12 for findings. Table 6.12: Techniques that are not being used and there is no plan to use them

Techniques Frequency Percentage of total responses Unified department 16 100% Third-party intervention 16 100% Distribution specialist 15 93.8% Job switching or rotation 15 93.8% Coordinating committees 8 50% System of incentives 5 31.3% Situational bargaining 2 12.5%

Techniques that respondents do not know whether they are used Nearly a third of respondents (31.3%) did not know whether their organisation used the system of incentives as a technique. The percentage of respondents who identified techniques that they are not aware of their use was very low ranging between (6.3%) and (31.3%). This could indicate that respondents are aware of the techniques that their organisations use. Refer to Table 6.13 for the findings.

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Table 6.13: Techniques that respondents do not know whether they are used or not

Techniques Frequency Percentage of total responses

System of incentives 5 31.3%

Situational bargaining 3 18.8%

Co-ordinating committees 2 12.5%

Mutual goals 1 6.3%

Question B.3: What other techniques not mentioned above does your organisation use or intends to use in order to establish cooperation between the marketing and logistics functions? The main objective of this question was to determine if there were other co-ordination techniques that the organisation utilises except for the ones specified. Although question B.3 is an open-ended question it can be quantified without the use of content analysis. Question B.3 was analysed under close-ended questions. A significant percentage of respondents (69%) specified that there were no other techniques except for the pre-determined techniques. A small percentage (31%) of respondents specified other techniques being used in their organisations. Techniques that were mentioned by respondents:

• Maintaining dealer-manufacturer relationship

• Centralisation of decisions that affect marketing and logistics

• Informal interaction during office hours

• Value chain coordination- Bringing marketing and logistics together as part of customer value creation.

Refer to Table 6.14 for the findings. Table 6.14: Other techniques being used by organisations

Frequency Percentage to the total number of respondents

Other techniques 11 69% No other techniques 5 31%

Question B.4-On a scale of 0-5 with 0 being N/A, 1 being a very low impact and 5 being a very high impact, please rate the impact of each of the following coordination techniques on the extent to which the marketing and logistics functions work together in your organisation. If your organisation does not use the techniques at present, please tick N/A (not applicable) The objective of Question B.4 was to identify the impact that each of the predetermined techniques has on the cooperation between marketing and logistics. This question builds on question B.2, since it further

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wanted to determine, based on the techniques being used and plan to use; what impact do they have on the cooperation between marketing and logistics. A six-point ordinal scale was used in order to determine the impact based on techniques identified in question B.2, refer to Appendix A. Responses were presented as a summary of all categories in terms of not applicable, no or very low impact, low impact, moderate impact, high impact and very high impact in Table 6.15 and were then divided according to these categories in separate tables in order to make the findings easy to follow. Please note that Table 6.15 follows the exact format as the questionnaire, no rearranging of results is done at this stage. Table 6.15: The impact of marketing-logistics interface coordination techniques

Cooperation techniques 0=N/

A 1=No or very low impact

2=Low impact

3=Moderate impact

4=High impact

5=Very high impact

1.Top management support 12.5%

87.5%

2. Mutual goals 37.5%

6.3% 31.3%

3. Joint projects 37.5% 50% 12.5

4. Distribution specialist 93.8%

6.3%

5. Information sharing 6.3% 31.3% 50% 6. Co-ordinating committees 81.3

% 6.3% 12.5%

7. Cross-functional training and education

25% 37.5%

8. Situational bargaining 6.3% 25% 31.3% 9. System of incentives 62.5

% 12.5% 25%

10. Unified department 100% 11. Job switching or rotation 100% 12. Joint outings 6.3% 68.8% 12.5%

13. Third-party intervention 100% 14. Philosophy of co-operation 31.3% 37.5%

Note: Respondents could indicate more than one response Findings for question B.4 showed that top management support has a very high impact (87.5%) on marketing and logistics interface as a coordinating technique, it is important to the success of the interface. Although there was a difference in terms of percentages between the current study and the study by Murphy and Poist on techniques with very high impact, the four techniques in Table 6.16 were the mostly used and the mostly planned to be used techniques in the study by Murphy and Poist. Refer to Table 6.16 for findings.

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Table 6.16: Techniques with very high impact on the marketing-logistics interface

Techniques

Frequency Percentage of total responses

Top Management support 14 87.5% Information sharing 8 50% Philosophy of cooperation 6 37.5% Mutual goals 5 31.3% Joint projects 2 12.5%

Joint projects as a technique, also had a high impact (50%) on marketing-logistics interface. In the study by Murphy and Poist there was no elaboration on the impact that joint projects had on the marketing-logistics interface, however (43.9%) of marketing respondents and (43.4%) of logistics respondents indicated that the technique is important. Refer to Table 6.17 for findings for all other techniques in this category. Table 6.17: Techniques with high impact on the marketing-logistics interface

Techniques Frequency Percentage of total responses Joint projects 8 50% Cross-functional training and education 6 37.5% Information sharing 5 31.3% Philosophy of cooperation 5 31.3% System of incentives 4 25% Joint outings 2 12.5%

Although joint outings was significant (87.5%) in terms of the techniques that are currently used it had a moderate impact (68.8%), which is significant in the category. The study by Murphy and Poist found joint outings to have the least impact on the interface and was regarded as the least important. Refer to Table 6.18 for other techniques with moderate impact. Table 6.18: Techniques with moderate impact on the marketing-logistics interface

Techniques Frequency Percentage of total responses Joint outings 11 68.8% Situational bargaining 5 31.3% Cross-functional training and education 4 25% Co-ordinating committees 2 12.5% System of incentives 2 12.5%

The significant technique with low impact (25%) is situational bargaining. Although 62.5% of respondents specified that is currently being used, it does not have a high impact on the marketing-logistics interface. The study by Murphy and Poist indicates that there is a significant difference in terms of how marketing and logistics practitioners view situational bargaining. Logisticians considered situational bargaining as a

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technique with high impact (55.5%) while marketing respondents (25.4%) considered it to have low impact on the interface. As a result of the population size for the current study comparison as done in the study by Murphy and Poist was not possible. As a result of this factor, it was concluded based on the current findings that situational bargaining is a technique with low impact on the marketing-logistics interface. Refer to Table 6.19 for finding. Table 6.19: Techniques with low impact on the marketing-logistics cooperation

Techniques Frequency Percentage of total responses Situational bargaining 4 25% Joint outings 1 6.3%

There was no technique that showed significant frequency in terms of the no or very low impact. All techniques had the same impact of 6.3% in terms of no or very low impact. Refer to Table 6.20 for the techniques with no or very low impact on the marketing and logistics interface. Table 6.20: Techniques with no or very low impact on the marketing-logistics interface

Techniques Frequency Percentage of total responses Mutual goals 1 6.3% Distribution specialist 1 6.3% Information sharing 1 6.3% Co-ordinating committees 1 6.3% Situational bargaining 1 6.3%

Some techniques were identified as Not Applicable. Techniques that were significant in this category were unified department, job switching or rotation and third-party intervention (100%) of respondents. Although their level of impact cannot be identified, those that are most significant in this category were also considered to have no impact and were also the techniques with the lowest impact in the study by Murphy and Poist. Refer to Table 6.21 for findings

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Table 6.21: Not applicable selection of the techniques that have impact or no impact on the marketing-logistics interface

Techniques Frequency Percentage of total responses Unified department 16 100% Job switching or rotation 16 100% Third-party intervention 16 100% Distribution specialist 15 93.8% Co-ordinating committees 13 81.3% System of incentives 10 62.5% Mutual goals 6 37.5% Joint Projects 6 37.5% Cross-functional training and education 6 37.5% Situational bargaining 6 37.5% Philosophy of cooperation 5 31.3% Top management support 2 12.5% Information sharing 2 12.5% Joint Outings 2 12.5%

Question B.5: In your organisation, which ONE of the above mentioned techniques (technique 1 to 14), do you consider being the MOST important, and which ONE do you consider the LEAST important. The objective of Question B.5 was to determine, based on the predetermined marketing-logistics interface co-ordination techniques, which ones’ are the most important and least important, refer to Table 6.22 for a summary of all important and least important techniques. A summary of findings for the most and the least important techniques is presented in Table 6.22. Those techniques that showed zero value were not ranked as either most important or least important. After a combined summary of findings, the findings were then presented in two parts, a table for the most important and another table for the least important techniques. For this question there was a missing value of one respondent on both the most important and least important techniques. One missing value is 6.3% of respondents. The percentages are worked out on the total of sixteen responses including the missing value.

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Table 6.22: The most important and the least important techniques

Techniques Most important techniques Least important techniques Top management support 68.8% Mutual goals Joint projects Distribution specialist 25% Information sharing 12.5% Coordinating committees Cross-functional training and education

Situational bargaining 6.3% System of incentives Unified department 18.8% Job switching or rotation 6.3% Joint outings Third-party intervention 37.5% Philosophy of cooperation 12.5%

Top management support was the most significant (68.8%) important technique among the three selected. Both information sharing and philosophy of cooperation were considered equally important with (12.5%) of respondents choosing the two techniques. Refer to Table 6.23 for the most important techniques in order of their sequence. It is important to note that the three techniques were also considered amongst the ones that have a very high impact on marketing-logistics interface, refer to Table 6.16. According to the study by Murphy and Poist these three techniques as listed in Table 6.23 were ranked as the first three most important techniques and the mostly used in various respondents organisations. In the study by Murphy and Poist both marketing and logistics practitioners identified the three as the mostly used and most important techniques with a major impact on the interface. Thus findings in SA passenger car industry are similar to the study by Murphy and Poist. Table 6.23: The most important techniques

Techniques Frequency Percentage to the total number of

responses Top management support 11 68.8%

Information sharing 2 12.5% Philosophy of cooperation 2 12.5%

The least important technique is third-party intervention, these techniques were cited as the least important by (37.5%) and distribution specialist (25%) of respondents. Refer to Table 6.24 for findings. In the study by

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Murphy and Poist third-party intervention was considered the least important and was not currently used technique by both marketing and logistics practitioners. The use of distribution specialist was considered important by logisticians and least important by marketing practitioners. As already stated, for the current study, comparison was difficult due to the small population size. Refer to Table 6.24 for findings. Table 6.24: The least important techniques

Techniques Frequency Percentage to the total number of responses

Third-party intervention 6 37.5% Distribution specialist 4 25%

Unified department 3 18.8%

Situational bargaining 1 6.3%

Job switching or rotation 1 6.3%

Question B.6: On a scale of 1-5 with 1 being strongly disagree and 5 being strongly agree please indicate to what extent you agree with the following statements regarding the advantages resulting from co-operation between marketing and logistics functions in your organisation The aim of Question B.6 was to determine advantages resulting from cooperation between logistics and marketing functions in an organisation. A five-point Likert-scale was used from strongly disagree to strongly agree. Three statements were stated and respondents were required to choose their responses using the five-point Likert-scale. Respondents equally agree (50%) and strongly agree (50%) with the statement that cooperation between marketing and logistics results in high levels of customer service. Most respondents (62.5%) strongly agree with the statement that cooperation between marketing and logistics is critical to achieving a sustainable competitive advantage. This shows that the marketing-logistics interface is perceived as important to achieving a sustainable competitive advantage. Most of the respondents (75%) chose agree on the statement that co-operation between marketing and logistics result in the product that is available at the right price, time and place. Overall, respondents agreed with the statements supplied. Refer to Table 6.25 for findings.

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Table 6.25: Advantages resulting from co-operation between marketing and logistics functions in your organisation

Advantages 1=Strongly

disagree 2= disagree 3=Neither

agree nor disagree

4=Agree 5=Strongly agree

Co-operation between marketing and logistics result in high levels of customer service

50% 50%

Co-operation between marketing and logistics is critical to achieving a sustainable competitive advantage

6.3% 31.3% 62.5%

Co-operation between marketing and logistics result in the product availability at the right price, time and place

75% 25%

Question B.8: On a scale of 1-4 with 1 being to no extent and 4 to a large extent, please indicate to what extent can dealerships in your organisation offer each of the following to customers without consulting the manufacturer The aim of this question was to determine the ability of dealerships to provide additional services and products to customers as another way of providing high levels of customer service, without consulting the manufacturer. A four-point scale was used in this question. Respondents had to rate the extent to which dealerships consult with the manufacturer prior to providing certain services. It appeared that to a large extent dealerships have to consult the manufacturer prior to offering extra service features as 93.8% of respondents agreed that this is the situation. Since giving discount on a customer’s request depends on the profit margins of the dealer, most dealers (81.3%) do not consult with the manufacturer when giving discounts. Dealers have to consult with the manufacturer to a moderate extent (62.5%) prior to offering extra interior features. In order to provide extra exterior features, respondents stated that this is done largely to a moderate extent (56.3%). Refer to Table 6.26 for findings. Consulting the manufacturer to a large extent could have a positive or negative effect on the dealers’ customer service levels and customer satisfaction depending on the responsiveness of the manufacturer. It can also have a negative effect on the dealer and the manufacturer if dealers provide poor workmanship

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when making changes to the standard features without consulting the manufacturer. As stated in Chapter 4, Toyota dealers have a high level of autonomy, however extra product features and service offered by the dealer have to be in line with the manufacturer standards. Consultation is important especially on factors that can result in poor performance of the product and additional service such as road assistance. Most manufacturers of exclusive passenger cars such as BMW provide road assistance at the manufacturer level and not the dealer. When advising customers on service such as road assistance, dealers should make customers aware that the manufacturer does it centrally for all the dealers. Table 6.26: The extent to which dealers consult with the manufacturer for additional services to customers

Services and products To no

extent To a small extent

To a moderate extent

To a large extent

Extra service features e.g. road assistance or service plans

6.3% 93.8%

Extra interior features, e.g. hands free devices

25% 62.5% 12.5%

Exterior features, e.g. spoilers

6.3% 25% 56.3% 12.5%

Discounts on customer request

81.3% 18.8%

Question B.9: On a scale of 1-5 with 1 being strongly disagree and 5 being strongly agree, please rate your level of agreement or disagreement with following statements:

• Passenger cars are priced higher in SA than what they are priced in Europe

• Passenger cars are priced higher in SA than what they are priced in the US The aim of Question B.9 was to establish how easy or difficult it is to possess a passenger car in SA based on affordability. A five-point Likert-scale ranging from, strongly disagree to strongly agree was used. Respondents used only neither agree nor disagree and agree options in their responses. Most of the respondents agreed with both statements (66.7%) and the balance of respondents were neutral. Refer to Table 6.27 for findings. This means that the majority of respondents believe that passenger cars are priced higher in SA than in the US and Europe. This is in line with the industry analysis that passenger car prices are 25%-30% higher in SA than in most developed countries like US and Europe.

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Table 6.27: Passenger vehicles are priced higher in SA than in Europe and the US

Statements Strongly disagree Disagree Neither

agree nor disagree

Agree Strongly agree

Passenger vehicles are priced higher than what they are priced in Europe

33.3% 66.7%

Passenger vehicles are priced higher in SA than what they are priced in the US

33.3% 66.7%

In order to interpret and make a summary of findings open-ended questions were analysed. 6.3 Open-ended questions

As stated in Chapter Five of the research, personal interview was the method used to collect the primary data. Reason for including open-ended questions was to uncover underlying motivations and feelings on a topic. All open-ended questions in Section B were generated based on the closed-ended questions. The process of analysing has already been stated, content analysis method is to be followed. In order to transcribe the data, a response sheet was developed for each respondent and responses were recorded. Names of respondents were specified at the top of the response sheet. Since respondents were from marketing and logistics, transcribing was grouped into marketing and logistics responses. 6.3.1 Designing response sheets A response sheet per questionnaire was developed in order to record the responses in an easier format. Response sheets are used for transcribing and for recording edited responses (Miles and Huberman, 1994:85). Response sheets were grouped into marketing and logistics responses, refer to Appendix B for marketing responses and Appendix C for logistics responses. 6.3.2 Designing categories relevant to the study In order to make categorisation, relevant words and phrases were bolded for ease of reference. To come up with relevant categories for the study, responses and the relevant literature should be read several times (Tesch: 1990, 80). Categories were designed based the on the literature relevant to the study and were aligned with the responses. Based on the previous research, responses and the literature the following categories were identified as relevant to the study:

• High levels of customer service

• Price

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• Promotion

• Product

• Place Having determined categories under which responses were analysed, responses were discussed under each category and these are used in Table 6.28. It is important to note that categories were summarised in Table 6.28 and were then divided into two groups in order to address Question B.7 and B.10. 6.3.3 Discussing responses under each category Marketing and logistics responses were stated in a table according to the categories identified. A summary of responses was presented in a table format and was then applied to questions. Both marketing and logistics responses were discussed together and not as separate entities in response to the relevant questions. This allowed a holistic and easy understanding of responses in relation to questions. Key words and phrases, which were identified and underlined, in the response sheets were recorded under various categories in the table. Refer to Appendix B for marketing response sheets and Appendix C for logistics response sheets. For identified key words and phrases under each category refer to Table 6.28, which is a reflection of all responses received. Table 6.28: Key words and phrases from the response sheets that are relevant to each category

High levels of Customer service (A)

Price (B) Promotion C Product (E) Place (F)

High levels of customer service and customer satisfaction (Marketing)

High production costs which negatively affect selling prices

None None None

Cooperation results in high levels of customer service (Marketing)

High transportation cost of components and finished products affects prices

None None None

Quality customer service and customer satisfaction are achieved through cooperation (Marketing)

Rebates through MIDP result in discounts offered to customers. Price issue depends on the market segment

Marketing communication that is based on the organisation capabilities

Marketing communication that emphasises the product features, uniqueness and quality without over-promising

Availability of the product at the right place as per marketing communication

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High and sustainable levels of customer service and customer satisfaction (Marketing)

Competitive prices despite costs disadvantage

None None None

None (Marketing)

Affordability is a problem in SA due to high logistics costs. An average SA citizen takes 2-3 years of working to can afford a car

Marketing communication that is aligned with logistics capabilities

Cooperation creates a sustainable competitive advantage because it allows the organisation to deliver the right product

None

Quality customer service while maximising profits (Marketing)

High prices due to increasing logistics and production costs negatively affect selling prices

None None None

Customer value creation and high levels of customer service (Marketing)

It takes approx hundred and sixty four weeks for an average SA citizen to afford a car due to high prices.

None None None

Capitalising on customer service as a competitive strength (Marketing)

Affordability problem is due to high transportation costs. It takes an average SA citizen 3-4 years to acquire an economy passenger car

None None None

None (Logistics)

Locally manufactured cars are normally priced higher due to logistics costs

None None Efficient distribution is achieved through cooperation between marketing and logistics

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Creating a sustainable competitive advantage through customer service (Logistics)

Prices in SA are not as high as in the US and Europe and SA cannot be compared to the two countries because of different economic positions

None Availability of the product at the right place, time and place as a result of cooperation

Efficient distribution process

Delivering sustainable quality customer service during and after sale (Logistics)

High logistics and production costs influence selling prices

None None None

High and sustainable levels of customer service (Logistics)

Prices in SA are 25% higher than in the US and Europe due to high logistics costs

None

None None

Meeting customer expectations and achieving high levels of customer service while maximising profits (Logistics)

High production and logistics costs have negatively influenced prices

None Cooperation has an influence on the product cost and availability

Product availability at the right place and time

Customer satisfaction due to the product being available at the right time and place (Logistics)

High logistics costs such as import duties and transportation costs influence prices

None Cooperation has an influence on the product availability

Customer satisfaction as a result of the product availability at the right place and time

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High levels of customer service and customer satisfaction while increasing long-term profits (Logistics)

High logistics costs such as transportation negatively influence selling prices

None Delivering the product at the right time, quantity, quality, price and place

Delivering the product at the right place

Delivering on the promised product at the right time, quality, quantity, price and place has an influence on customer service (Logistics)

Car prices are approx 25-30%in SA and logistics costs are high

None Cooperation has an influence on the product availability and price.

Availability of the product at the right place

Question B.7- In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Initially identified Categories as stated in Table 6.28 that provided responses to this question were found to be:

• High levels of customer service

• Price

• Promotion

• Product

• Place The above categories responses were quantified in order to express them in percentages to the total respondents that specified a response that fall within that category. Refer to Table 6.29 for findings. Refer to Appendix B and C for complete responses.

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Table 6.29: Ways in which cooperation between marketing and logistics creates a sustainable competitive advantage

Categories Percentage of responses to the categories

1. High levels of customer service (A) 87.5%

2. Price (B) 19%

3. Promotion C 6.25%

4. Product (E) 43.8%

5. Place (F) 43.8%

High levels of Customer service High levels of customer service was cited as a way in which marketing-logistics interface creates a sustainable competitive advantage by a significant number of respondents (87.5%). This shows that respondents agree that; cooperation between marketing and logistics has an effect on customer service levels. Refer to Figure 2.1 for the interface. Refer to Table 6.29 for findings. Price Price was cited by (19%) of respondents as a way in which cooperation between marketing and logistics creates a sustainable competitive advantage. It can be argued that it is difficult to create a sustainable competitive advantage in the industry through the price element. This supports the argument in Chapter four that SA prices of passenger cars are not competitive and are much higher than the selling prices in the US and Europe. This shows that competing on prices in the industry is not achievable. This also supports the selection in B.9; where the majority of respondents agreed with the two statements, refer to Appendix A for the statements and Table 6.27 for the findings on the issue of price element. Promotion Promotion as a way in which the marketing-logistics interface creates a sustainable competitive advantage did not receive much support (6.25%). It can be concluded that promotion as one element of marketing cannot be regarded as a way in which marketing and logistics cooperation creates a sustainable competitive advantage. Refer to Table 6.29 for the results. It was stated that all marketing elements should work together before collaborating with other functions such as logistics in order to have an interface that serve as a way to a sustainable competitive advantage. Product Factors that affect the product can have an influence on the marketing-logistics interface as a way to a sustainable competitive advantage. Product as a marketing element was cited as a way in which cooperation creates a sustainable competitive advantage by a large percentage of respondents (43.8%).

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Refer to Table 6.29 for the results. Product is the core or the starting point of the organisation. If the organisation fails to deliver quality product whether tangible or intangible it will be difficult to realise a sustainable competitive advantage. Place A large percentage of respondents (43.8%) believed that the place element is important in realising the cooperation between marketing and logistics as a way to a sustainable competitive advantage. It is important that the product is available at the right time and place, time and place utility as discussed in Chapter 2 are important for the interface as a way to a sustainable competitive advantage. Refer to Table 6.29 for the results. Based on the responses, it can be concluded that marketing and logistics cooperation creates a sustainable competitive advantage to a large extent through customer service element and to a moderate extent through place and product elements of marketing. The result for product and place are neutral since they have all been supported equally (43.8%) by respondents. Question B.10-Provide not more than three reasons on which you base your response in B.9. The aim of Question B.10 was to gain insight regarding the responses provided in B.9. Question B.9 aimed at addressing the passenger car prices comparison between SA, US and Europe. Price as a marketing element was used as a category. Refer to Table 6.28. Price Obviously the question related to the issue of price and as a result respondents knew exactly what was being assessed. In order to analyse question B.9 under this category, factors that influenced the respondents to consider a certain choice of response in B.9 were stated and quantified. Based on the responses, the price category can be broken into the following factors:

• High logistics costs: In terms of high logistics costs, a large percentage of respondents (68.8%) believed that logistics costs have negatively influenced passenger car prices in SA. Transportation was cited as the main logistics cost that disadvantages the manufacturers in SA. According to respondents transportation infrastructure in SA is not as developed as in the US and Europe and this has had a negative impact on logistics costs. Since SA is considered to be located far from other markets where it export finished products and import components, transportation becomes a major cost disadvantage.

• High production costs: High production cost was cited by (25%) of respondents as a reason for high prices. Respondents do not consider the impact of production costs as significant however high production and logistics costs were stated together in the responses.

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• MIDP rebates: MIDP was not supported as a means to boost affordability of passenger cars. MIDP as a benefit to customers was stated by (6.25%) of respondents. This confirms that MIDP has not benefited final customers in the opinion of the respondent. Refer to Appendix B and C for complete responses.

• Market segment analysis: An argument that the issue of whether prices are higher in SA or not should be looked from the market segment point of view was not supported, (6.25%) of respondents believe that it cannot be generalised across market segments that affordability and high prices are a problem, refer to Appendix B and C for complete responses.

• Price competitiveness: SA prices were considered competitive when compared to US and Europe however this factor was not significant, (12.5%) of respondents believes that prices are competitive. Refer to Appendix B and C for complete responses.

• Affordability statistics: This factor was considered important and a separate issue for the analysis in order to show that respondents are aware of the statistical information regarding affordability (31.25%) of respondents stated responses that provide statistical information. Refer to Appendix B and C for complete responses.

It can be concluded that high logistics costs results in high selling prices of passenger cars. Refer to Table 6.30 for the results. Table 6.30: Factors that influence responses to Question B.9 regarding the price element

Category Factors Percentage of responses to factors Price High logistics costs 68.8%

High production costs 25% MIDP rebates 6.25% Market segment analysis 6.25% Price competitiveness 12.5% Affordability statistics 31.25%

6.4 Summary of findings Findings will be summarised in the same format as the analysis of findings. A summary of section A based on the profile of respondents was presented followed by Section B that is based on the marketing-logistics interface coordination techniques. 6.4.1 The respondents Sixteen respondents were interviewed from the passenger car industry. The majority of respondents have been in the industry for long, 43.8% of respondents have been in the industry for 5-7 years followed by 31.3% who have been in the industry for 2-4. However majority of respondents have been with the current organisation for 2-4 years accounting for 81.3% of respondents. Based on this information, it can be concluded that respondents have the necessary knowledge to can respond to the questions. This has

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managerial implications that there could be high employee mobility in the industry considering that respondents have been in the industry for 5-7 years and only 2-4 years with current organisations. Response to Question A.1 shows that 50% of manufacturers of passenger cars in SA are from Germany. This means German manufacturers have a large production investment in SA. The least investors are Italy and US manufacturers accounting for 12.5% each of the total number of manufacturers. The average number of passenger car brands manufactured in SA is less than the average number of brand marketed by these manufactures. 6.4.2 The Marketing-Logistics interface The reason for low investment in assembling processes is due to the fact that SA does not offer good investment incentives and is located far from major markets. This result in high logistics costs of operating in SA (Furlonger, 2006:10). Logistics costs as a reason for higher selling prices accounted for (68.8%) of responses. Low investment translates to high prices as a result of narrow selection of locally assembled passenger cars. Despite the flood of imports into SA, prices are high due to minimal range of brand choices available. Possession utility in SA has to improve by making passenger cars affordable. This has the managerial implications because it could mean that management has no confidence in SA for investment and the possibility of withdrawing the existing investment even exists. Response to B.1 shows that there is co-operation between marketing and logistics, (43.8%) of responses agree that a maximum level of co-operation exists and (31.3%) agree that moderate level exists in their organisation. This findings support the study by Murphy and Poist (1996:26) where it was established that most respondents agree that there is co-operation between marketing and logistics. Although a large percentage of respondents stated that there is maximum cooperation, the percentage of those stating moderate cooperation is still high (31.3%). This means that there is room for improvement and top management, information sharing and philosophy of cooperation as the most important techniques could be applied in driving that improvement. Management should focus on techniques with very high and high impact on the interface. Refer to Tables 6.16 for very high impact techniques and 6.17 for high impact techniques. Management should focus less or not at all on techniques such as unified department; third-party intervention; distribution specialist and job switching as they are regarded as the least likely to be used. This shows that employees might not support management in the use of these techniques. The findings in this regard agree with the study by Murphy and Poist (1996:26). The number of respondents who mentioned other techniques was low, (25%) of respondents mentioned other techniques. This implies that respondents use mainly predetermined techniques.

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Based on the use of coordination techniques in building cooperation between marketing and logistics, respondents were required to identify benefits that result from the interface. Three statements were posed as advantages. Refer to Table 6.25. Results show that respondents mainly agree or strongly agree with the statements. The most important outcome was on sustainable competitive advantage where 62.5% of respondents strongly agree with the statement that co-operation between marketing and logistics is critical to achieving a sustainable competitive advantage. Other aspects of Question B.6 are important and it was interesting to find out that properties of responses to Question B.6 were also provided as ways in which the cooperation between marketing and logistics creates a sustainable competitive advantage when responding to Question B.7. High levels of customer service is mainly a way in which the marketing-logistics interface creates a sustainable competitive advantage (87.5%). Product and place elements of marketing were considered (43.8%) as some ways in which the cooperation can create a sustainable competitive advantage. This is important since it reflects that not all elements are important in building a sustainable competitive advantage. Logistics elements were not stated as part of ways in which the interface creates a sustainable competitive advantage. However it is important to realise that the price element is highly impacted by logistics costs. Price determines possession utility, which is important to high levels of customer service, which then influence sustainable competitive advantage. Since it is difficult to use price as a way in which sustainable competitive advantage can be created, it is not possible to use logistics costs or elements to create a sustainable competitive advantage in the industry. This is due to high logistics costs that put manufacturers of passenger cars at a cost disadvantage. It can be concluded that all these factors have an impact on each other when considering how marketing-logistics interface can create a sustainable competitive advantage. 6.5 Conclusion The chapter covered analysis and interpretation of both closed and open-ended questions. The questionnaire was administered to gather the responses. The benefit of using a structured questionnaire was that it made the most part of the analysis and interpretation easier. Content analysis method was used to analyse open-ended questions. The advantage of content analysis was that it provided an opportunity to check responses at various stages of the analysis process. Findings have showed that there are issues that have managerial implications and could serve as a guide to the improvement of cooperation between marketing and logistics and the realisation of the interface that can create a sustainable competitive advantage. This chapter has also opened ways to the general conclusion

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and suggestion for further research. In order to suggest further research it is important to test propositions identified based on the findings.

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CHAPTER 7: RECOMMENDATIONS AND CONCLUSION

7.1 Introduction The aim of this part of the study is to bring together all parts of the research in order to identify whether the propositions are supported, make recommendations, suggestions for further research and conclusion. This is the chapter in which the researcher interprets all that is learned in his/her own words. It is an important chapter since it gives the researcher an opportunity to determine the level of knowledge and understanding of the study. At this stage of the research it is important to ensure that every aspect covered is clarified, tested and concluded. The following broad topics will be covered in the in this section:

• Propositions

• Managerial implications

• Recommendation

• Suggestion for further research and conclusion

7.2 Propositions

This is an exploratory study that incorporated quantitative research approach. The population size was small and the topic was applied for the first time in SA, as a result propositions and not hypothesis were determined. Three propositions were determined in chapter one and will be analysed in order to identify whether the findings supports the propositions. Proposition 1: Responses in the study of Murphy and Poist (1996) are similar to those in the passenger car market in SA among marketing and logistics practitioners. This proposition aimed at comparing the two studies to identify similarities and differences in the responses. A general discussion, followed by a summary of similarities and differences was presented. The aim of the study by Murphy and Poist was to identify the fourteen marketing-logistics techniques, to rank them in order of importance, to identify those that are most and least likely to be used and to determine whether cooperation between marketing and logistics exists in the respondents’ organisations. Comparing the level of cooperation responses According to the study by Murphy and Poist the level of cooperation in the respondents’ organisations was moderate to high level of cooperation where (40.9%) of marketing respondents agreed that the level of

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cooperation is moderate and (45.7%) of logistics respondents agreed that the level of cooperation is moderate. With regard to the high levels of cooperation (42.4%) of marketing respondents and (43.2%) stated that there are high levels of cooperation. For ease of reference Table 3.2 is presented again as Table 7.1 for Murphy and Poist study findings on the level of cooperation between marketing and logistics. Table 7.1: Level of cooperation between marketing and logistics functions

Level of cooperation Marketing respondents Logistics respondents

No cooperation 0% 0%

Slight co-operation 7.6% 7.4%

Moderate co-operation 40.9% 45.7%

High co-operation 42.4% 43.2%

Maximum co-operation 9.1% 3.7%

Source: Murphy and Poist (1996:20) Although different scaling was used between the two studies comparison can be made. A five-point ordinal scale was applied in the study of Murphy and Poist, while the current study applied four-point ordinal scale where maximum cooperation was used in the place of high-cooperation. The current study showed that moderate to maximum level of cooperation exists where maximum levels of cooperation equals to the high levels of cooperation in the study of Murphy and Poist, refer to Table 7.1. The current study showed that no respondents stated that there is no cooperation (0%) while (25%) stated minimum levels, (31,3%) of respondents stated moderate levels and (43.8%) stated maximum levels. In the current study minimum represents slight cooperation in the study of Murphy and Poist. Refer to Table 7.2 for summary of comparison. Table 7.2: Summary of comparison between the study of Murphy and Poist and the current study

Study of Murphy and Poist (1996) Current study in the SA

Level of cooperation Marketing respondents Logistics respondents

Total Responses

No cooperation 0% 0% 0%

Slight co-operation 7.6% 7.4% 25%

Moderate co-operation 40.9% 45.7% 31.3%

High co-operation 42.4% 43.2% 43.8%

Maximum co-operation 9.1% 3.7%

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Although the current study had similar findings that cooperation exists at moderate to maximum/high levels of cooperation, the difference is in the spread of percentages of respondents. Comparing the mostly used techniques The study by Murphy and Poist showed that top management support is mostly used (76.4%) of marketing respondents cited it and (74.7%) of logistics respondents also cited this technique, while Information sharing was cited by 65.7% of marketing and 73.5% of logistics respondents in the study by Murphy and Poist. Instilling philosophy of cooperation as a technique mostly used, was cited by 64.2% of marketing and 70.4% of logistics respondents. Refer to Table 7.3 for the summery of findings and to Table 3.1 for complete. Table 7.3: Techniques mostly used in the study by Murphy and Poist

Techniques Percentages of responses in the study by Murphy and Poist

Marketing Logistics

Top management support 76.4% 74.7%

Information sharing 65.7% 73.5% Instilling philosophy of cooperation 64.2% 70.4%

Both marketing and logistics responses ranked these techniques the same way. Since the current study applied a combined result of marketing and logistics, the focus of comparison will be on comparing the current findings to the three techniques of Murphy and Poist study. The current study is similar to the study by Murphy and Poist with regards to top management support and information sharing. The difference between the two studies is on the philosophy of cooperation. The philosophy of cooperation was mostly used by 68.8% in the current study while joint outing was used by 87.5% of respondents in the current study. In the current study, findings show that the following techniques are mostly used:

• Top management support

• Information sharing

• Joint outings This differs from the study by Murphy and Poist since joint outing was considered the least used technique; refer to Table 7.3 of Murphy and Poist findings and Table 6.10 for the current findings. Comparing techniques that organisations plan to use The discussion of the findings in the study by Murphy and Poist (1996:26) as techniques that organisations consider important and plan to use in the future:

• Education and training

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• Mutual goals

• Joint projects According to the discussion of the findings, these techniques are currently being used, however the plan to use imply that a significant number is planning to increase their use and those that do not use them will most likely use them in future. Refer to table 6.11 for all techniques that organisations plan to increase their use in the future. In the current study education and training, mutual goals and joint project score equally (37.5%) in terms of plan to use techniques. This is in line with the study by Murphy and Poist where the three techniques were identified as the ones that organisations plan to use as much as the three that are mainly used; top management support, information sharing and philosophy of cooperation. Comparing the least used or no plan to use techniques When comparing the current study to the study by Murphy and Poist, the following techniques were considered as the least likely used:

• Job switching or rotation

• Unified department

• System of incentives The above techniques in the study by Murphy and Poist are ranked as the three techniques found to be least important and least likely to be used. These three are also considered least likely to be used in the current study. (Refer to Table 6.12). Although the two studies are similar in terms of the above-mentioned techniques, the difference lies with joint outing technique. In the study by Murphy and Poist joint outing was regarded as the least used technique ranking ten and eleven for logistics and marketing respondents respectively. In the current study joint outing is mostly used (87.5%). Comparing the most important techniques The current study and the study by Murphy and Poist showed the following techniques as the most important:

• Top management support

• Information sharing

• Philosophy of cooperation. (Refer to Table 6.23) This showed that the top three mostly used techniques are the most important techniques in both studies, however the difference lies in the percentages of support received by the techniques in the studies. In the study by Murphy and Poist the gap in ranking is not wide between the techniques for both marketing and

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logistics however the current study shows a gap. Refer to Table 3.1 for Murphy and Poist ranking and Table 6.23 for the current findings. Comparing the least important techniques In the study by Murphy and Poist, the least important techniques that were ranked closely together by both marketing and logistics practitioners were:

• System of incentives

• Job rotation

• Unified departments

• Third party intervention Refer to Table 3.1 for the above techniques ranking in the study by Murphy and Poist. The current study shows the following as the three least important techniques:

• Third party intervention

• Distribution specialist

• Unified department Refer to Table 6.24 for the percentages of respondents that considered the above to be the least important techniques. Unified department is the only technique consistent with the results by Murphy and Poist from both marketing and logistics respondents. Distribution specialist was not among the bottom three in the study by Murphy and Poist and was even ranked higher than mutual goals (59.7%) for logisticians in terms of the level of importance. Third party intervention although not ranked among the bottom three in the previous study, it is still ranked lower and considered to be of use by few respondents (19.4%) for marketing and (15.9%) for logistics, refer to Table 3.1 for findings. In the study by Murphy and Poist, system of incentives was considered the least important technique, however in the current study system of incentives was not selected as the most or least important technique. A possible reason for not ranking the system of incentives as the most or least important technique could be that the respondents’ did not understand how it contributes to the interface. A summary of comparisons is presented in Table 7.4 where factors refer to the level of cooperation, the fourteen coordination techniques and elements of comparison.

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Summery of comparisons Table 7.4: Similarities in the responses between the study by Murphy and Posit and the current study

Elements of comparison Factors

Level of cooperation No cooperation Moderate cooperation High cooperation

Mostly used techniques Top management support Information sharing Instilling philosophy of cooperation

Plan to use techniques Education and training Mutual goals Joint projects

Least used or no plan to use techniques Job switching Unified department System of incentives

Most important techniques Top management support Information sharing Philosophy of cooperation

Least important techniques Unified department Third party intervention

Table 7.5: Differences in the responses between the study by Murphy and Posit and the current study

Elements of comparison Factors

Mostly used techniques Philosophy of cooperation Joint outings

Least used or no plan to use techniques Joint outing

Least important techniques Distribution specialist Job rotation System of incentives

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Based on the findings and analysis, P1 is supported since there are similar responses in all elements with seventeen factors that prove the similarities. The difference is in three elements with six factors that make the difference. Proposition 2: The marketing-logistics interface creates a sustainable competitive advantage through high levels of customer service Three advantages resulting from cooperation between marketing and logistics were stated in Table 6.25. It was found that (62.5%) of respondents strongly agree with the statement that cooperation between marketing and logistics is critical to achieving a sustainable competitive advantage. Since marketing and logistics interface, as a way to a sustainable competitive advantage is the gist of the research, it is important to understand how the interface creates a sustainable competitive advantage. The aim of Question B.7 was to determine how sustainable competitive advantage is achieved through the interface. Various ways in which the interface creates a sustainable competitive advantage were identified through content analysis and classified under the following categories:

• High levels of customer service

• Price

• Promotion

• Product

• Place High levels of customer service as a category was largely supported (87.5%) as a way in which coordinated marketing-logistics interface creates a sustainable competitive advantage. This proposition is supported since respondents agree with the fact that coordinated interface creates a sustainable competitive advantage through high levels of customer service. Proposition 3: Logistics costs have a negative impact on selling price of passenger cars in SA. It has been acknowledged in the literature that logistics costs are the most important component, when determining the price of the passenger car. It is important to establish whether they have a positive or negative impact on passenger car prices in SA. The findings showed that logistics costs in SA have a high and negative impact on the price element of marketing. The impact of high logistics costs on price is higher than all other components that have an impact on price. Majority of respondents (68.8%) pointed out that high logistics costs in SA have resulted in high prices of passenger cars, which have negatively affected affordability, refer to Table 6.30). Other factors that have an

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effect on price can positively influence the selling price, however it is difficult for manufacturers and dealers to offer such incentives to customers in order to improve affordability because of high logistics costs. As already stated, price as an element of marketing can be used in creating a sustainable competitive advantage, however this is not possible with high logistics costs. This confirms the arguments in Chapter 4 that manufacturers of passenger cars in SA find it difficult to set competitive car prices. Thus findings support P3 that logistics costs have a negative impact on selling price of passenger cars in SA. 7.3 Managerial implications Managerial implications are deduced from the findings and are supported by the discussions in the literature regarding aspects that relate to the study. These implications are important as a learning tool to the management regarding the findings. Managerial implications will be discussed under the following headings:

• Comparison between passenger cars assembled and those marketed SA

• Employee mobility in the passenger car industry

• Level of cooperation

• Improving the level of cooperation

• Customer service Comparison between passenger cars assembled and those marketed in SA The findings showed that organisations that assemble passenger cars in SA assemble a lesser number of passenger cars than what is marketed. On average 1.75 passenger cars are assembled in SA and 7.75 passenger cars are marketed. This has an implication on the economy and not just on management since it reflects the level of foreign investment that the existing manufacturers are willing to make in SA on assembling processes. It confirms the argument that the industry struggles to create jobs in the same way as in Europe, US and Asia (Furlonger, 2006:22). SA is considered an attractive market for sales despite high passenger car price, which is attributed to high logistics costs (Furlonger, 2006:24). Manufacturers are looking at MIDP as an initiative that can offset high logistics costs, however this is not the case. MIDP effects have not reduced the logistics costs as anticipated and has not encouraged further investments (Furlonger, 2006:234). It is important for the organisations and the government to work together in getting the MIDP initiative to work towards encouraging investment thereby increasing brands assembled or manufactured in SA. Organisations in the passenger car industry believe that MIDP should move from being an initiative that encourages imports and exports to an initiative that encourages investment and increase local content use of components. Organisations believe that by offering tax rebates and improving

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the transport infrastructure a positive effect on cost could be realised, which could improve affordability of passenger cars. Employee mobility in the passenger car industry Majority of respondents (81.3%) have been with the current organisation 2-4 years however a large percentage (43.8%) have been employed in the industry 5-7 years. This shows high level of employee mobility in the industry and this could have a negative impact on the process of improving cooperation between marketing and logistics. With lack of stability in keeping employees in the organisation for longer, it will be difficult to work on the cooperation since it will be difficult to make progress on the improvement. Level of cooperation A large percentage of respondents (43.8%) stated a high level of cooperation between marketing and logistics and this is followed by respondents stating moderate level of cooperation 31.3% and 25% stated minimum cooperation. This shows that there is room for improvement, with respect to the level of cooperation motor vehicle manufacturers should reduce the percentage of minimum and moderate level of cooperation and increase the percentage of high level of cooperation. Improving the level of cooperation In order to improve the level of cooperation, the use of other techniques that have high to very high impact on the marketing-logistics interface should be considered if not mostly used or not used at all. Management should be aware of those techniques mostly used but with a large percentage of respondents stating that they have moderate to low impact on the interface. For instance, joint outing is mostly used (87.5%) however it has a moderate impact (62.5%) on the cooperation between marketing and logistics. Mutual goal which scored lower than joint outing in terms of being the mostly used technique (56.3%) is considered by (31.3%) of respondents to have a very high impact on the marketing-logistics interface. Certain coordination techniques can be applied in improving the level of cooperation. Since the majority (69%) of respondents stated that there are no other techniques used in their organisations, a different use of the fourteen predetermined techniques should be considered. Some techniques that are not used and organisations are planning to use can be put to use in order to improve the level of cooperation. Greater use of mutual goals as a technique should be considered since mutual goals means that the two functions are able to establish joint or collective goals and performance measures. When these goals are shared the organisation is able to realise customer satisfaction and improved overall customer service performance (Mukhopadhyay and Gupta, 1998:7). Other techniques that organisations could increase their use include:

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• Cross-functional training and education: This will increase the level of knowledge that employees have on each others functions and create a responsive organisation to customer needs.

• Joint projects: This will encourage further use of mutual goals since it encourages working together in projects with the same goal. BMW provides a practical example of the importance of joint projects (Benko and McFarlan, 2003:2).

High levels of customer service It is important for management to consider high levels of customer service, which can be achieved through continuous improvement on product performance, product availability, service delivery and assisting customers in possessing a passenger car. The findings show that high levels of customer service depend on other aspects such as customer satisfaction. High levels of customer service as a category that included other aspects is important (87.5%) to the way in which marketing-logistics interface creates a sustainable competitive advantage. Other categories that followed customer service as ways in which competitive advantage is created through the interface, were product and place (43.8%). It is important to note that customer service, is impacted by other aspects considered as ways in which, competitive advantage is created. Factors such as price are important to customer service levels and in this industry it is difficult to create a sustainable competitive advantage through price. This means to some extent customer service is affected. Price dissatisfaction could affect customer satisfaction with the overall product and service and negatively affects customer service levels. 7.4 Recommendations based on the literature, industry analysis and empirical findings The purpose of this section is to provide recommendations to the organisations based on the literature, industry analysis and empirical findings in order to make changes where necessary with regards to improving cooperation, improving affordability of passenger cars, the use of the fourteen marketing-logistics interface coordination techniques, and customer service elements. Suggestions for further research will also be stated. 7.4.1 Recommendations based on the literature review The main aim of this research was to analyse the views of marketing and logistics managers on the use of the marketing-logistics interface coordination techniques and the extent to which a coordinated marketing-logistics interface serves as a way to a sustainable competitive advantage. A successful interface or integration will require commitment, cooperation and understanding from both logistics and marketing practitioners. In order to realise the aim of the research, the literature review was undertaken and this

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served as a foundation upon which the empirical research was formulated. A recommendation was made based on the literature:

• Based on the definition of mutual goal and the fact that marketing and logistics practitioners in the study by Murphy and Poist aim to use the technique more often, it is important that managers in the passenger car industry use this technique in order to improve the level of cooperation.

7.4.2 Recommendations based on the industry analysis Analysis of the industry was done in order to understand and gain insight into issues that are of critical importance in the industry, which have an impact on the study. Two recommendations based on the industry analysis were identified. Recommendation 1 The structure of MIDP requires change if the programme is to encourage local manufacturers and components suppliers to increase their level of investment in the assembling processes. There has to be a shift from import rebates to offering incentives such as tax rebates, which will in turn reduce the cost of investment. With reduced costs and increasing investment, customers can enjoy affordable prices and wide selection of locally manufactured brands. Recommendation 2 The government and local manufactures of passenger cars should work together in improving logistical factors such as transport and security in order to reduce logistics costs. The points system used in MIDP where points are gained through export activities should assist in covering transportation costs of getting the product from SA to other countries and not be used to reduce import duties. This could reduce the level of trade deficit as a result of high import of components and finished products in the industry. Recommendation 3 Manufacturers should improve their relationships with the dealers, by giving dealers a higher level of autonomy in making decisions that affect the customer while ensuring that product and service quality are not compromised. BMW and Toyota are examples of organisation that are achieving with regards to building a mutual relationship with dealers. This relationship is important to getting the product at the right place and time and for meeting customer expectations.

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7.4.3 Recommendations from empirical findings Empirical findings encapsulated the literature and industry analysis findings since the research problem was formulated based on the literature and the industry analysis. Although the population size was small, there were aspects that can be learned from the study. Three recommendations were identified based on the empirical findings. Recommendation 1 It is important to realise that customer service levels are important as a way in which the marketing-logistics interface creates a sustainable competitive advantage. It is important to focus on customer service levels in order to determine the overall customer service performance as defined in Chapter 2. Recommendation 2 The industry should find ways of improving customer service. Based on industry analysis, the industry lags with regards to the quality of service and product. It is important to improve customer service performance since it is considered the primary way in which the marketing-logistics interface creates a sustainable competitive advantage. This can be achieved by improving the relationship with dealers, improving quality of products and continuous negotiations with the government in revamping MIDP so that it can benefit the customer. Recommendation 3 Management should look at improving the level of cooperation between marketing and logistics by applying mutual goal as a technique at a greater length. As already stated above, in the study by Murphy and Poist mutual goals was not a technique that was mostly used, however through empirical study management realised the importance on this technique. In the current study it is still ranking low in terms of techniques mostly used. It is important to realise that it has a very high impact on the interface; as a result organisations should consider using it more. 7.4.4 Suggestions for further research The industry should investigate whether the fourteen marketing-logistics interface coordination techniques can be generalised to other interfaces such as marketing-production interface in the same organisation. It is important that further research considers a different segment of the market if is applied in the vehicle industry.

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7.5 Limitations of the study A number of limitations that can be associated with this study include:

• There is limited literature and related research on the topic of the marketing-logistics interface as a way to a sustainable competitive advantage

• The marketing-logistics interface topic is fairly new in the field of marketing and logistics

• Due to the limited time and financial resource, the population excluded any manufacturer of passenger cars who manufactures all models outside SA because the marketing and logistics covers import and export issues that are outside the scope of the study

• Due to the structure of the industry in SA the population size for the dissertation was small

• The marketing-logistics interface in the literature tends to discuss the interface along the four P’s of marketing however marketing today refers to the seven P’s of marketing.

7.6 Conclusion The research has shown the importance of the marketing-logistics interface coordination techniques, how the interface can create a sustainable competitive advantage and issues that requires improvement in the passenger car industry. The interface creates a sustainable competitive advantage through customer service and all elements of marketing however logistics elements also influence customer service mainly through pricing. In the passenger industry the main element of logistics that have an impact on customer service is transportation cost. This element has a negative influence on pricing and as a result on customer service. The research findings support the literature that customer service is the primary way in which the marketing-logistics interface creates a sustainable competitive advantage. It is important to realise that Figure 2.1 shows all elements of marketing and logistics influencing customer service levels. It can be concluded that all elements of marketing and logistics affect customer service levels. Based on the empirical findings, the research objectives and problem as stated in Chapter 1 were achieved since the findings demonstrated how the interface creates a sustainable competitive advantage and the importance and use of the fourteen interface coordination techniques. The empirical research also supports the theoretical industry analysis where it was found that dealers have to consult with the manufacturer to a moderate and large extent on all aspect except when offering discounts. The findings agreed with the industry analysis on the issue of pricing and logistics costs.

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Further research should use a large population where sampling can be made. This being an exploratory research that incorporated descriptive research, its findings should not be applied without further research.

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Appendix A: Questionnaire (in word format)

Please answer the following questions. All answers will be treated with the strictest confidentiality SECTION A: Background information on the organisation and passenger vehicle industry A.1 In which country is the parent organisation of your enterprise located?

A.2 How many passenger car brands are assembled by your organisation in SA?

A.3 How many passenger car brands are marketed by your organisation in SA?

A.4 What is your job title in the organisation?

A.5 Please indicate the number of years that you have been with the organisation

Less than 2 Years

2-4 Years

5-7 Years

8-10 Years

11-13 Years

14 Years or more

A.6 How many years have you been employed in the motor vehicle industry?

Less than 2 Years

2-4 Years

5-7 Years

8-10 Years

11-13 Years 14 Years or more

SECTION B: About marketing-logistics interface co-ordination techniques B.1 On a scale of 1-4 with 1 being no cooperation and 4 being a maximum cooperation, please rate the degree of cooperation in your organisation between the marketing and logistics functions

1. No cooperation 2. Minimum cooperation 3. Moderate cooperation

4. Maximum cooperation

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B.2 Please indicate, whether your organisation currently uses each of the following techniques to establish cooperation between the marketing and logistics functions. If your organisation does NOT CURRENTLY USE a specific technique, please indicate whether your organisation PLANS to use this technique within the next two years. If you are unsure or do not know, please tick DO NOT USE or DO NOT KNOW.

In order to establish cooperation between the marketing and logistics functions, my organisation uses/ plans to use the following techniques

1=Currently using

2=Plan to use within the next two years

3=Do not use

4= Do not know

1.Top management support: Gaining top management commitment for greater cooperation between the marketing and logistics functions

1 2 3 4

2. Mutual goals: Sharing and working together in achieving functional goals between marketing and logistics

1 2 3 4

3. Joint projects: Establishing and working together on work-related projects that affect marketing and logistics e.g. introduction of new a brand

1 2 3 4

4. Distribution specialist: Designating an employee within the marketing/logistics to act as a liaison person between the two functions in order to make the marketing/logistics aware of marketing/logistics current and future plans

1 2 3 4

5. Information sharing: Establishing information systems that allows sharing of information between marketing and logistics regarding customer needs and preferences

1 2 3 4

6. Co-ordinating committees: Establishing joint committees to identify and discuss matters of interest to both functions

1 2 3 4

7. Cross-functional training and education: Providing opportunities for marketing/logistics personnel to learn about each others’ function

1 2 3 4

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8. Situational bargaining: Holding negotiations without any third party involvement to resolve issues between the marketing and logistics functions

1 2 3 4

9. System of incentives: A reward for working together to achieve goals that affect overall organisation success in the market place

1 2 3 4

10. Unified department: Forming a single department that combines marketing and logistics instead of having two separate functions

1 2 3 4

11. Job switching or rotation: Allowing personnel from marketing to work in logistics function and vice versa

1 2 3 4

12. Joint outings: Providing opportunities for personnel from marketing and logistics to interact outside normal business activities e.g. have sports events together

1 2 3 4

13. Third-party intervention: Using a neutral person outside marketing or logistics functions to resolve disputes between marketing and logistics functions

1 2 3 4

14. Philosophy of co-operation: Instilling a spirit of co-operation through written values that are shared between marketing and logistics functions

1 2 3 4

B.3 What OTHER techniques not mentioned above, does your organisation use or intend to use in order to establish cooperation between the marketing and logistics functions? ____________________________________________________________________________________________________________________________________________________________________________ B.4 On a scale of 0-5 with 0 being N/A, 1 being a very low impact and 5 being a very high impact, please rate the impact of each of the following cooperation techniques on the extent to which the marketing and

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logistics functions work together in your organisation. If your organisation does not use the techniques at present, please tick N/A (not applicable)

Cooperation Techniques 0= N/A 1= No or very low Impact

2=Low impact

3=Moderate impact

4=High impact

5=Very high impact

1. Top management support: Gaining top management commitment for greater cooperation between the marketing and logistics functions

0 1 2 3 4 5

2. Mutual goals: Sharing and working together in achieving functional goals between marketing and logistics

0 1 2 3 4 5

3. Joint projects:

Establishing and working together on work-related projects that affect marketing and logistics e.g. introduction of a new brand

0 1 2 3 4 5

4. Distribution specialist: Designating an employee within marketing/logistics to act as a liaison person between the two functions in order to make marketing/logistics aware of each other’s current and future plans

0

1 2 3 4 5

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5. Information sharing: Establishing information systems that allows sharing of information between marketing and logistics regarding customer needs and preferences

0 1 2 3 4 5

6. Co-ordinating committees: Establishing joint committees to identify and discuss matters of interest to both functions

0 1 2 3 4 5

7. Cross-functional training and education: Providing opportunities for marketing/logistics personnel to learn about each others’ function

0 1 2 3 4 5

8. Situational bargaining: Holding negotiations without any third party involvement to resolve issues between marketing and logistics functions

0 1 2 3 4 5

9. System of incentives: A reward for working together to achieve goals that affect overall organisation success in the market place

0

1 2 3 4 5

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10. Unified department: Forming a single department that combines marketing and logistics instead of having two separate functions

0 1 2 3 4 5

11. Job switching or rotation: Allowing personnel from marketing to work in the logistics function and vice versa

0 1 2 3 4 5

12. Joint outings: Providing opportunities for personnel from marketing and logistics to interact outside normal business activities e.g. have sports events together

0 1 2 3 4 5

13.Third-party intervention: Using a neutral person outside marketing or logistics functions to resolve disputes between marketing and logistics functions

0 1 2 3 4 5

14. Philosophy of co-operation: Instilling a spirit of co-operation through written values that are shared between marketing and logistics functions

0 1 2 3 4 5

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B.5 In your organisation, which ONE of the above mentioned techniques (technique 1 to14), do you consider being the MOST important, and which ONE do you consider the LEAST important. Write down the number of the technique MOST IMPORTANT__________ LEAST IMPORTANT_________ B.6 On a scale of 1-5 with 1 being strongly disagree and 5 being strongly agree please indicate to what extent you agree with the following statements regarding the advantages resulting from co-operation between marketing and logistics functions in your organisation

Advantages

1=Strongly disagree

2= disagree

3=Neither agree nor disagree

4=Agree 5=Strongly agree

Co-operation between marketing and logistics result in high levels of customer service

1 2 3 4 5

Co-operation between marketing and logistics is critical to achieving a sustainable competitive advantage

1 2 3 4 5

Co-operation between marketing and logistics result in the product availability at the right price, time and place

1 2 3 4 5

B.7 In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? ____________________________________________________________________________________________________________________________________________________________________________ ______________________________________________________________________________________

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B.8 On a scale of 1-4 with 1 being to no extent and 4 to a large extent, please indicate to what extent can dealerships in your organisation offer each of the following to customers without consulting the manufacturer?

1=To no extent 2=To a small extent 3= To a moderate extent

4=To a large extent

Extra service features, e.g. road-side assistance or service plans

1 2 3 4

Extra interior features, e.g. hands free device

1 2 3 4

Extra exterior features, e.g. spoilers

1 2 3 4

Discount on customer request 1 2 3 4

B.9 On a scale of 1-5 with 1 being strongly disagree and 5 being strongly agree, please rate your level of agreement or disagreement with following statements: Passenger cars are priced higher in SA than what they are priced in Europe

1-Strongly disagree

2-Disagree 3-Neither agree nor disagree 4-Agree 5-Strongly agree

Passenger cars are priced higher in SA than what they are priced in the US

1-Strongly disagree

2-Disagree 3-Neither agree nor disagree 4-Agree 5-Strongly agree

B.10 Please provide not more than three reasons on which you base your response in B.9 ____________________________________________________________________________________________________________________________________________________________________________ ______________________________________________________________________________________

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Appendix B: Marketing response sheets Response sheet 1- Olivier I

Question A.4: Respondent job title: Customer Support Manager Question B.3-What are other techniques that your organisation use in order to establish cooperation between the marketing and logistics functions? Maintaining dealer-manufacturer relationship is both marketing and logistics responsibility. Question B.7-In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Cooperation between the two functions results in the company that consistently achieves high levels of customer service and customer satisfaction. Question B.10-Provide not more than three reasons on which you base your response in B.9 Manufacturers are faced with high production costs, which translate into high prices to the customer.

Response sheet 2-Gunning L

Question A.4: Respondent job title: Manager-Dealer relations Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? High levels of customer service, which is a critical point that determines the company long-term success in the industry Question B.10: Provide not more than three reasons on which you base your response in B.9: SA is situated far from other markets and this has resulted in high transportation costs of components required for assembling purposes. High transportation costs negatively influence the selling price of passenger vehicles.

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Response sheet 3-Howick A

Question A.4: Respondent job title: Customer Relations manager Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Co-operation between marketing and logistics results in marketing communication that is based on true organisation’s capabilities to deliver on its promised product at the promised time and place. These two functions have a direct impact on customer satisfaction and quality customer service, which are critical company success factors. Question B.10: Provide not more than three reasons on which you base your response in B.9: There has been no price increase in prices of cars in the past three years and this has improved affordability. It depends on the income group one is looking at; it is no good generalising on the issue of prices. Although most parts are imported, rebates through MIDP are available to local manufacturers; these rebates are transferred onto the customer as discounts.

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Response sheet 4-Kleri C

Question A.4: Respondent job title: Product specialist Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Co-operation between marketing and logistics results in maximum sustainable profits. Marketing and logistics are important to achieving a high sustainable level of customer service. Question B.10: Provide not more than three reasons on which you base your response in B.9: There has been an improvement in passenger car affordability. This indicates that local prices are competitive in comparison to Europe and US markets. Some passenger cars are still overpriced but one should avoid generalising that passenger cars are priced higher than what they are priced in the US and Europe. It is important to consider the cost disadvantage that SA is faced with and this is not the case when manufacturing process takes place in Europe or US.

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Response sheet 5-Cundu B

Question A.4: Respondent job title: Customer Affairs analyst Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? No other techniques however the company is in the process of coming up with other strategies that could improve cooperation between marketing and logistics. Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? It allows the company to deliver on promises made through advertising. It results in marketing communication that is aligned with logistics capabilities Question B.10: Provide not more than three reasons on which you base your response in B.9:High prices are due to high logistics costs such as transportation of parts. It takes an average SA citizen about 2-3 years of being employed to afford a cheaper car while a US or European citizen takes approximately 6 months to can acquire the same car.

Response sheet 6-Van Dyk C

Question A.4: Respondent job title: Manager-Customer Services Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? Centralisation of decisions, which that affect both marketing and logistics functions. Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Customer service is a critical point when discussing the issue of competitive advantage in the industry. Marketing and logistics cooperation is important to achieving quality customer service while maximising profits. Question B.10: Provide not more than three reasons on which you base your response in B.9: Increasing production and logistics costs have resulted in high selling prices. As these costs increase so do the selling prices. An average South African takes longer than a European or US citizen to can purchase a passenger car.

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Response sheet 7-Peter F

Question A.4: Respondent job title: Marketing communication specialist Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? Value chain coordination-Bringing marketing and logistics together as part of customer value creation. Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? It results in high levels of customer service, a source of sustainable competitive advantage Question B.10: Provide not more than three reasons on which you base your response in B.9: Car affordability in SA is a problem; it takes an average South African approximately 160-165 weeks to acquire a new car. In Europe and US an average citizen takes approx 24 weeks to acquire a new car. Despite stable interest rates in the past two years, prices in SA are still much higher than in Europe and US. The stability in interest rates and prices has boosted commercial purchases as opposed to individual purchases.

Response sheet 8-Azure L

Question A.4: Respondent job title: Key accounts manager Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? Informal interaction, where marketing and logistics discuss work related issues informally during office hours. Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? The company is able to capitalise on customer service as a competitive strength. Question B.10: Provide not more than three reasons on which you base your response in B.9: On average, it takes 3-4yrs for an average South African to can afford an economy passenger car. Since SA is located far from other markets, local manufacturers are faced with high transportation cost of components; high costs are then factored into the final product price resulting in affordability problems for other market segments.

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Appendix C: Logistics response sheets Response sheet 1-Van der Walt P

Question A.4: Respondent job title: Logistics and quality control manager Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? Dealer-manufacturer relationship management-Both marketing and logistics functions are responsible for developing and maintaining relationships with the dealer network. Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? It results in an efficient distribution process. Question B.10: Provide not more than three reasons on which you base your response in B.9: There are passenger cars that are sold almost at the same price as in the US and Europe. Prices are higher especially for the locally manufactured cars however this is beyond manufacturers control. Prices could come down if manufacturers can procure most parts locally than what it is now.

Response sheet 2-Stevenson B

Question A.4: Respondent job title: Senior buyer-Mechanical parts Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? No other technique Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Through customer service, since both are responsible in ensuring the availability of the product at the right place, time and price. Question B.10: Provide not more than three reasons on which you base your response in B.9: Some passenger cars are not priced higher than in the US and Europe. Comparing developed markets and SA could be inappropriate because of different economic positions.

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Response sheet 3-Shapiro N

Question A.4-Respondent job title: Logistics operations manager Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? No other techniques Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? The organisation is able to deliver a sustainable quality service during and after sale. Question B.10: Provide not more than three reasons on which you base your response in B.9: SA is not in a strong position to can manufacture most of the required parts for assembling and for after-sale service. This results in high importation of parts that translate into high selling prices. Local manufacturers are at a cost disadvantage in SA due to high logistics and production costs.

Response sheet 4-Watson G

Question A.4: Respondent job title: Logistics coordinator Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? It results in high and sustainable level of customer service. Question B.10: Provide not more than three reasons on which you base your response in B.9: SA car prices are approx 25% higher than in the US and Europe. Despite MIDP benefits, logistics costs are still high in SA, mainly due to high importation of parts. This has a negative impact on car selling prices.

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Response sheet 5-Anderson A

Question A.4: Respondent job title: Manager-Logistics services Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? The company is in a position to provide the product at the right time, place and at a reduced cost. This means the company is able to meet customer expectations and achieve high levels of customer service while maximising profits. Question B.10: Provide not more than three reasons on which you base your response in B.9: High importation of parts and lack of skilled labour have resulted in high logistics and production costs. These costs are factored into the selling price and negatively impact on affordability.

Response sheet 6-Meiring J

Question A.4: Respondent job title: Logistics and distribution specialist Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? It results in customer satisfaction at all times since the product is available at the right time and place. Question B.10: Provide not more than three reasons on which you base your response in B.9: SA assembles some car models however it uses a large content of imported parts, this then increases import and transportation costs. High import and transport costs translate into high selling prices of finished products.

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Response sheet 7-Mohale G

Question A.4: Respondent job title: Logistics consultant Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? Customer service levels are important to the company’s success and cooperation between marketing and logistics is important in this regard. Co-operation between marketing and logistics creates sustainable long-term profits and customer satisfaction, two aspects of sustainable competitive advantage. It allows the organisation to deliver the product at the right time, place, quantity and quality Question B.10: Provide not more than three reasons on which you base your response in B.9: Logistics costs such as transportation are high in SA and this have negatively influenced selling prices of cars.

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Response sheet 8-Simon N

Question A.4: Respondent job title: Logistics manager Question B.3: What are other techniques that your organisation uses in order to establish cooperation between the marketing and logistics functions? None Question B.7: In what ways does co-operation between marketing and logistics creates a sustainable competitive advantage? The company is able to deliver on its promised product at the right time, quantity, quality, price and place. A company that is in a position to meet its promises experiences high levels of customer service. Question B.10: Provide not more than three reasons on which you base your response in B.9: Passenger cars are priced approximately 25-30% higher in SA than in the US and Europe, and this has negatively affected affordability mainly among individual buyers. Importing a large content of required parts for assembling and for after-sale service has had a negative influence on transportation costs and selling prices.