The need for Castrol and similar businesses to invest in research and development
Research and development (R&D) is extremely vital for a myriad of businesses especially those that serve a global market. Castrol has thrived in lubricating and motor oil industry due to intense investment in R&D. The following reasons necessitate substantial investment in R&D for Castrol.
First, machinery and motor industries are extremely dynamic because machinery and motor vehicle manufacturers develop new advanced models almost yearly. Therefore, it is imperative for Castrol to conduct intensive and timely research on every engine and machine innovation and develop the most appropriate products to serve new products in the automotive industry.
Second, the oil and lubricant industry is rather competitive with a number of companies offering similar product and services. Consequently, Castrol must invest heavily on commercial strategy research. Since Castrol operates in countries with different levels of economic growth, it needs to comprehend every market and develop entry and survival strategies for each. Competition is evident from both branded and non-branded products. However, Castrol has managed to outdo most competitors in both rural and urban distribution centres owing to research based commercial strategies (Khandelwal 2015).
Third, Castrol customers are spread out across the globe. They are in different geographical locations with diverse cultures. To meet the unique needs of each, Castrol is required to carry out rigorous research on each of the geographies and cultures and come up with tailored product and services for each.
Fourth, service delivery in the lubricant and oil industry is vital. Hence, Castrol must conduct intensive training and development for its employees. Training and development of employees not only improve service delivery, but also boost customer loyalty.
Research and development, and Castrol competitive advantage
Castrol product portfolio, ranging from premium lubricating oils, greases, control fluids, metal working fluids, among others is one of the most popular in the world. Castrol manufactures and markets its products to a considerable number of customers. Some of the vital Castrol customers include automotive, mining industries, manufactures, marine industries, and oil exploration and production (Castrol InnoVentures 2014).
Castrol products are high quality because of intensive research with 13 research centres that develop and test new products yearly. Castrol works with all the lubricating products’ stakeholders, including major OEMs who are core customers of broad range of Castrol’s products (Castrol Limited 2015). Castrol product portfolios are recommended by and co-engineered with major OEMs, including “Audi, BMW, Ford, Man, Honda, JLR, Volvo, Seat, Skoda, Tata, and Volkswagen” (Castrol Limited 2015, p. 1).
Home and host countries
Intensive research and comprehensive and non-discriminatory approach to local and global customers has allowed Castrol to penetrate both local and global markets. Castrol operates in more than 60 countries dividing their country targets into four broad areas. The areas include Americas, Europe, Asian pacific, and Latin America (Birch 2015).With in-depth technological development and research based experience, Castrol can meet diverse customers’ needs globally.
Social responsibility
Castrol has invested in environmental conservation research, consequently, coming up with rules and regulations to govern the company in environmental conservation. Further, R&D has led to new environment friendly products, which regulate oil and lubricant usage, for instance, the Nexcel innovation (Bruce, 2015). In addition, the company works with REACH, an environmental conservation body established by the European Union to regulate Volatile Organic Compound emission. Thus, Castrol gains a competitive advantage by protecting human health and protecting the environment (Birch 2015). Moreover, its Nexcel Oil Change technology will cut emission and fill the gap left by VW emission fraud (Paulo Acoba 2015).
Cost-effectiveness of Castrol products
R&D has helped Castrol to improve production technology and consequently cutting the production cost. As a result, Castrol products are affordable yet highly effective and are highly recommended by a number of users. The standardization of the quality of Castrol products and affordability has given the company a high competitive advantage.
Collaboration and advice
Castrol has worked with most of its customers to co-develop high performance engine lubricants and motor oils (Paulo Acoba 2015). Additionally, Castrol experts offer informed advice and support to their customers with the aim of improving operational efficiency. Collaboration and offering of support and advice has developed trust among Castrol partners and, therefore, recommending Castrol products to other users (Paulo Acoba 2015).
Policy guidelines suggested to Castrol to ensure that it retains or improves its position in a very competitive marketplace
In a competitive marketplace characterised by fierce competition and global convergence of trade, rapid innovation, robust technologies, great entrepreneurship and abundant information, Castrol must strive to retain or improve its marketplace by developing appropriate policy guidelines. In fact, it is fierce competition, which will propel the company to be more innovation (Turgey & Emeagwali 2012).
First, within the organisation, leaders and managers must always discuss and formulate a culture that supports innovation to ensure that the company is successful in a constantly changing, competitive marketplace (Chuang 2013). Staying competitive requires a culture that supports change and innovation. Thus, Castrol must continuously reinvent itself and invest in R&D and new technologies to develop the best products.
At the same time, the company must also review its market and sales strategies to promote these products. Essentially, Castrol will become a highly innovative, product-focused company that also manufactures high performance automotive products. Castrol must understand that innovation is not a single deed affair. Instead, the company should always strive to surpass and go beyond what it has already achieved in product development in order to stay relevant. That is, it must innovative or face extinction (Bagley 2013).
Second, in most instances, customers do not necessarily understand or know what they want. This situation provides a perfect opportunity for Castrol to innovate and introduce new products to the market. Castrol is known for its innovative automotive lubricants. In the recent years, other companies have also focused on introducing products that are more advanced. Castrol therefore should not be left behind.
Additionally, Castrol can also target new markets with new and existing products. The company will not only have an opportunity to develop a large customer base, but also to grow revenues and grow the brand. As an innovative firm, the company can consider using online marketing tools and reach global markets. Castrol will have to review all market segments and identify specific groups that it has never targeted or reached before, for instance, African or Middle East markets.
Third, Castrol will continue to define its brand. The company currently uses a combination of technology superiority, effective marketing, and sales strategies while constantly changing to meet the needs of the market. Castrol therefore must continue to define its products as innovative, technologically advanced and superior to competitors’ products. The company must understand that competitors will always strive for its market share. Hence, understanding what competitors do is a critical aspect of differentiation by consistently defining Castrol products as superior. At the end, the company will manage to differentiate itself from the rest.
Fourth, the company will have to develop a policy that focus on developing a competitive edge. That is, Castrol must constantly plan how to win in a competitive market. In this regard, it is suggested that Castrol should concentrate on quality of its products while leveraging pricing and service strategies (Eloranta 2009). Castrol is known to develop quality products supported with strong R&D and technologies.
Superior quality products will definitely help the company to grow its market share and retain its competitive edge. As the company offers superior products, it must also evaluate elements related to price and service. It is generally difficult to offer all the three at once because of market dynamics and consumer behaviours. Thus, it is suggested that Castrol should focus on superior products and price to develop competitive edge while using service to deliver exceptional customer experience.
Castrol must recognise that without excellent service, it cannot appeal to customers. While competitors can easily copy pricing and marketing strategies, customer service could be difficult to copy in a competitive environment because it is all about human capital, skills and attitudes, as well as supporting technologies, which Castrol can use to create value (McFarlane 2013).
Finally, adaptability will lead to success. Traditional marketing and sales practices are always consistent. Castrol must however develop sustainable competitive advantage, which it cannot acquire exclusively from its current practices. Significantly, Castrol will find that competitive edge in a competitive market place will always require rapid adaptation (Reeves & Deimler 2011). This implies that Castrol should not concentrate on aspects of marketing, technologies, product developments and sales strategies among others, which it is already good at, but the company should be really an expert at learning how to perform new tasks.
Castrol: a product oriented approach or a market orientated approach and their advantages and drawbacks
It is imperative to note that Castrol focuses on both a product-oriented approach and a market-oriented approach. From the case study, one can observe both approaches, which Castrol uses to create competitive advantage (Mustafa et al. 2015).
A product-oriented approach primarily focuses on product development to meet diverse needs of consumers in various market segments. For instance, it is observed that Castrol has a constantly improving product portfolio. The company has realised that one major issue it faces today is to offer the right products in the right markets. Hence, Castrol must continuously focus on product portfolio adjustment based on its technological capabilities.
A product-oriented approach offers the company some fundamental advantages that create competitive edge. First, Castrol develops quality products because of a product-oriented approach. This approach allows Castrol to concentrate on the product quality (Hill, Jones, & Schilling 2014). As such, the company has been able to provide superior automotive products for various market segments. The major purpose of this approach is purely product development with specific qualities that meet diverse market needs. Second, Castrol has been able to investment in technologically advanced systems to support its R&D for product development.
Consequently, Castrol products are now successful, and they are available in more than 60 countries globally. Finally, a product-oriented approach creates economies of scale for the company. Through economies of scale, Castrol can manage to reduce its costs of product R&D because it can produce more products using available technologically advanced processes and equipment. Product development is often efficient and in mass. Hence, Castrol has been able to produce more automotive products at reduced costs.
Conversely, a product-oriented approach tends to focus primarily on the product while paying minimal attention to market needs. This approach may result in development of less popular products. In addition, the approach can be extremely expensive in terms of costs and time because more resources are needed to develop products that meet specific standards.
On the other hand, a market oriented approach focuses on marketing activities, products and services that meet needs of customers (Leto, 2011). That is, Castrol has been able to base its product and service decisions on market needs largely based on customer feedback. It is observed that the company operates in a tough competitive environment in which successful companies must comprehend the needs of the market. As a result, the company knows that it can only succeed when it provides the best products for its different market segments, including aircraft, motor cars, motor cycles, and trucks among others.
As Castrol becomes more market-oriented company, it has been able to create competitive advantage because of its innovative and market differentiation practices (Zhou, Brown, & Dev 2009). Castrol is therefore able to utilise a market-oriented approach to position itself strategically against competition. The company has combined innovation and market segmentation to create critical market performance noted in its quality products and customer service and in turn, it has been able to grow revenues across through large market shares in 60 countries globally.
By focusing on a market-oriented approach, the main objective of Castrol is to deliver superior customer experience, which is gained from knowledge acquired from customers and rivals’ analyses (Kumar et al. 2011). At the same time, Castrol has been able to develop marketing and sales strategies that appeal to its target market segments because of a market-oriented approach. Castrol has been able to use this approach to understand market trends and then develop specific capabilities to ensure its sustained long-term performance.
A market-oriented approach spurs investments in various capabilities to support marketing and sales strategies. For instance, Castrol must continuously conduct market research to gather relevant information, incorporate customers’ needs into product development and information sharing.
A market-oriented approach requires adequate resources in terms of time and finance. Besides, the returns may not be readily noticed and, therefore, Castrol should use a market-oriented approach as a long-term strategy for creating competitive advantage (Safarnia, Akbari, & Abbasi 2011).
A continuous marketing research programme for business trends and customer needs
It is usually acknowledged that appropriate information is a critical element of a reliable business decisions (Proctor & Jamieson 2004). As such, reliable marketing information is, thus, the basis of effective decision-making for marketing.
Castrol should use continuous marketing research programme to gather relevant information on business trends and customer needs. A primary research programme can provide the best, up-to-date information on areas of interests to Castrol (Malhotra 2002). Castrol will have to conduct market research on all vital areas of the market. Data collected should reflect business trends and customer needs, as well as the overall business environment. This implies that Castrol needs a continuous market research programme to identify trends, new business opportunities and threats to its market share and products.
Castrol should engage in customer market research to determine relevant facts about for its specific markets and market segments. For instance, Castrol must evaluate its market share based on value and unit sales (Proctor & Jamieson 2004).
When the company collects data on customers over time, it would be able to determine trends and develop predictive patterns for the future. Castrol will have clear data on its geographical markets, customer spending habits, possible earnings and perhaps determine their possible future spending. In addition, the company will determine why certain customers prefer its brand while others opt for competitors’ brands, as well as know the price customers are willing to pay for its automotive lubricants (Overton et al. 2008). Finally, it will also allow the company to determine its performance on customer service and identify specific areas for improvement.
Castrol should also use product research to find new markets for its current products while evaluating other competing brands (Ghose & Lowengart 2013). As an innovative company, Castrol can test its product concepts with its existing or future customers before embarking on expensive R&D and product development. If Castrol has a product concept, which is viable, it should then develop small quantities for testing on existing customers, gather feedback and improve the product or abandon it based on information gathered. Product research will assist the company to evaluate its product strengths and weaknesses against competitors’ lubricants.
Research will also assist the company to collect information on the most effective product packaging and then design products in a manner that appeal to its customers while enhancing brand awareness.
Sales research will assist to the company to evaluate and gauge the relevance and effectiveness of its marketing and sales strategies. It will help the company to set relevant sales targets based on regional performances and support staff activities. Castrol can only understand sales patterns across 60 countries when it collects that right data for such functions. As the company strives to create a global brand, sales information will assist in developing appropriate sales training materials and offer extensive information on improving sales activities.
Finally, market research on market environment will provide current business trends to facilitate decision-making (Fleisher & Bensoussan 2003). Information collected from market environment will provide critical information on economic, social, political and technological factors that influence lubricant markets globally. These factors can affect Castrol’s marketing activities. The political aspect of the market is reflected when governments introduce new laws or major political phenomenon takes place that could affect the company’s operations. For instance, lubricants from the Middle East are most likely to flood the market with the entry of Iran. Economic climates could be temporary or permanent, but Castrol must evaluate them when planning its operations to avoid future poor results (Kotler & Armstrong 2007).
Social influences from customers will also affect use of lubricants globally. As more people acquire motor cars, the market is most likely to expand for Castrol. Hence, research will assist the company to determine relevant social factors that can drive growth. Finally, Castrol relies on advance technologies for its product development (Young 2005). Changes in technologies could create sudden, unexpected impact on product developments. For instance, a sudden technological advance could assist the company to develop new lubricants that can meet diverse needs of customers.
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