Marketing Strategy Optimization: Using Linear Programming

In recent times marketing strategy is playing a vital role in a firm success. It optimizes the marketing resources and can improve the revenue generation and market share. Since the global market place is increasing, companies find optimizing the marketing effort even more complex. As a result operation management techniques like linear programming assist the marketing managers to determine the optimal marketing mix for a company operating in different countries.

Linear programming has been successful in other areas like, BASF utilized linear programming to help restructure their North America distribution system and IBM has used analytical frame work based on linear programming to better match their assets with demand levels throughout their supply chain.

For the current study, the market chosen was the manufacture of brazed aluminum heat exchangers (BAHX) and the company Chart heat exchangers (CHX) based on US & UK. Competitors are Linde AG- Germany, Nordon Cryogenic-France, Kobe Steel- Japan and Sumitomo Products- Japan. In this current study, CHX Japan operation is being considered. Japan has 1.7% of total world market for BAHX. But there is believed to be about 40% unknown market. CHX plans to tap this area and a marketing strategy is to be proposed. So linear programming is used to breakdown CHX’s market structures geographically and determine which of these sectors produce greatest profit. Learn more about T ide Detergent mission statement

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There are 8 decision variables and the objective function is to maximize the profit dollars per unit of product volume. There are 21 constraints developed in this linear programming model. The results of linear programming suggest that the appropriate level of business volume is 996ft3. Although Japanese market is not as profitable but through change in management in sales and marketing strategy can resolve the issues.

There are 5 solutions which can be suggested.

1. First, they can back out.
2. Second, they can maintain current strategy.
3. Third, they can modify their Japanese sales force commission payment system.
4. Fourth, they can contract with third party.
5. Fifth, hire a full time sales engineer in Japan to build relationship with customers.

The fifth one is consider by the company. The operations management tools used assist CHX management in breaking down the market data, analyzed and help provide suggestions to improve the framework of the strategy to be followed.

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