Marketing Options

STRATEGIC MARKETING OPTIONS
A Research Report
Presented to the
Graduate School of Business Leadership
University of South Africa
In partial fulfilment of the

Requirements for the
MASTERS DEGREE IN BUSINESS ADMINISTRATION,

UNIVERSITY OF SOUTH AFRICA
BY
R Du Toit
May 2010
Declaration of own work

I declare that the work in this research report was carried out in accordance with the
guide line of the University of South Africa. The work is original except where
indicated by special reference in the text and no part of the research report has been
submitted for any other degree. Any views expressed in the research report are
those of the author and in no way represent those of the University of South Africa.
SIGNED: R. du Toit (electronically)

DATE: 02 May 2010
Executive Summary
Over the last four years Palabora vermiculite ore body has shown a decline in
courser grades fractions (large and medium). Process improvements were
implemented to increase recovery rates in all grades. The increase courser grades
recoveries currently have no significant impact on the production output for these
grades. The increase in recovery rates of finer grades resulted in a surplus
production of superfine and micron and is currently stockpiled on site. With the
decline in coarser grades, PV is unable to satisfy market demand for coarser grades.
In order for PV to stay ahead of competition and to further enhance the companys
position as the market leader in todays changing environment, this research will
indeed outline the key issues PV should consider for future business.
In this research, relevant data from within the PV markets were gathered which
included qualitative and quantitative data. Qualitative research was selected due to
its ability to allow respondents to speak freely about the chosen subject and its ability
to obtain the widest possible responses.
The aim of this research was to determine if strategic marketing options will grow the
sales of finer grade vermiculite. The objectives that were looked at were:
To determine why the customers prefer coarser grades.
To investigate potential alternative uses for finer grades.
To determine how the finer grades can be marketed to current users of

coarser grades.
Definite boundaries exist with in the research study due to geographical

displacement in the majority of vermiculite consumers across the world. The
problematic issue of supplier and customer loyalty in an intense competitive industry
has proved to have inherited barriers to competitor specific information, thus the
reliance on secondary data with regards to competitors mining capability, crude
production and competitive advantages.
From analysis of data collected, the following observations were made:
There is a consistent perception that the specific grade been used is critical to
an application.
Only 27% of PVs customer base is currently doing R&D. This is mainly in
refractory and construction industries.
Customer indicated that they are not flexible on product qualities i.e. screen
sizing and yield. This indicates that to market finer grades in coarser grade
markets will require R&D and marketing on the part of PV.
For PV to increase its finer grades sales they need to adopt a new or change their
existing marketing strategy. PV management needs to consider the following:
Different price strategies can be adopted for different situations i.e.:

o Penetration pricing - The price charged for products is set artificially low
in order to gain market share. Once this is achieved, the price is
increased. (local and Asia markets)
o Value pricing - This approach is used where external factors such as
recession or increased competition force companies to provide 'value'
products to retain sales. (Europe and American markets)
To develop alternative uses for finer grades vermiculite PV needs to engage in

R&D. Management needs to be well informed about the marketplace and in
particular customers who are more likely to envision realistic and meaningful
new product ideas. Consistent market understanding best comes from formal
processes designed to generate market intelligence and not from merely ad-hoc
interactions with the marketplace (Flint, 2002: 306).
TABLE OF CONTENTS
CHAPTER 1......................................................................................................................... 9
1.
Problem in context, Problem statement and Objectives ............................................... 9

1.1
Introduction ............................................................................................................ 9
1.2
Background and problem in context .................................................................... 10
1.3
Problem review .................................................................................................... 12
1.4
Problem statement/ Research question............................................................... 16
1.5
Importance of the research to Palabora Vermiculite ............................................ 17
1.6
Research limitations ............................................................................................ 17
1.7
Summary ............................................................................................................. 17
CHAPTER 2....................................................................................................................... 18
2.
Problem analysis / theoretical consideration............................................................... 18

2.1
Introduction .......................................................................................................... 18
2.2
Determine why customers prefer coarser grades ................................................ 20
2.3
Investigate potential alternative uses for finer grades .......................................... 21
2.4
How the finer grades can be marketed to current users of coarser grades. ........ 22
2.5
Summary ............................................................................................................. 25
CHAPTER 3....................................................................................................................... 26
3.
Literature Review ........................................................................................................ 26

3.1
Introduction .......................................................................................................... 26
3.2
Customer preference ........................................................................................... 26
3.3
Product development / innovation and alternative uses ...................................... 28
3.4
Marketing strategies ............................................................................................ 30
3.5
Summary ............................................................................................................. 34
CHAPTER 4....................................................................................................................... 35
4.
Research Design and Methodology ............................................................................ 35

4.1
Introduction .......................................................................................................... 35
4.2
Aims of Research ................................................................................................ 36
4.3
Research design.................................................................................................. 36
4.4
Data gathering procedures .................................................................................. 36
4.5
Characteristics of the sample .............................................................................. 39
4.6
Data analysis approach ....................................................................................... 40
4.7
Limitations of the research project ....................................................................... 41
4.8
Summary ............................................................................................................. 41
5
CHAPTER 5....................................................................................................................... 42
5.
Results ........................................................................................................................ 42
5.1
Introduction .......................................................................................................... 42
5.2
Primary results..................................................................................................... 43
5.3
Secondary results ................................................................................................ 51
5.4
Summary ............................................................................................................. 60
CHAPTER 6....................................................................................................................... 61
6.
Discussion of Results ................................................................................................. 61

6.1
Why customers prefer coarser grades ................................................................. 61
6.2
Potential alternative uses for finer grades ........................................................... 61
6.3
How the finer grades can be marketed to current coarser grade users ............... 62
CHAPTER 7....................................................................................................................... 63
7.
Conclusions and Recommendations .......................................................................... 63
8.
References ................................................................................................................. 66
9.
Appendices ................................................................................................................. 70
9.1
Appendix 1: Palabora Vermiculite open pit mining area ...................................... 70
9.2
Appendix 2: Theoretical underpinnings of new product adoption in uncertain
environments .................................................................................................................. 71
9.3
Appendix 3: South Africa customers questionnaire. ........................................... 72
9.4
Appendix 4: International customers questionnaire. ........................................... 74
9.5
Appendix 5: South Africa customers questionnaire feedback ............................. 77
9.6
Appendix 6: International customers questionnaire feedback ............................. 79
LIST OF TABLES
Table 1.1: Ideas and issues raised from the brainstorming sessions.11
Table 2.1: Anshoffs matrix..............................................................................................22
Table 3.1: Specific key questions to be answered during the gap analysis..31
Table 4.1: List of subsidiaries..........................................................................................37
Table 4.2: Sample characteristic of the Vermiculite Industry...40
Table 5.1: Global vermiculite producers..56
LIST OF FIGURES
Figure 1.1: Brainstorming outcome..11
Figure 1.2: Brain map.12
Figure 1.3: Winnowing process.13
Figure 1.4: Vermiculite percentage sales per Region 2009..15
Figure 2.1: Coarser grades production (Large and Medium) from 1996 to 2009.....18
Figure 2.2: Finer grades production (Fine, Superfine and Micron) from 1996 to 200919
Figure 2.3: Customer demand versus actual production from 2007 to 2010 plan19
Figure 2.4: Porters Five Forces23
Figure 2.5: Boston Consulting Group's (BCG) Growth Share Matrix..24
Figure 5.1: Percentage end application types use in South Africa..................................44
Figure 5.2: Percentage end application types use in America.46
Figure 5.3: Percentage end application types use in Europe..........................................46
Figure 5.4: Percentage end application types use in Asia47
Figure 5.5: Tonnes sold per geographical area 2004 2009..........................................51
Figure 5.6: Tonnes sold in Europe from 2004 2009.....................................................52
Figure 5.7: Price increase per grade for Europe from 2004 2009................................52
Figure 5.8: Tonnes sold in America from 2004 2009...................................................53
Figure 5.9: Tonnes sold in Asia from 2004 2009..........................................................54
Figure 5.10: Price increase per grade for Asia from 2004 2009...................................54
Figure 5.11: Tonnes sold in South Africa from 2004 200955
Figure 5.12: Price increase per grade for South Africa from 2004 2009......................55
Figure 5.13: Global vermiculite production for 2004..57
Figure 5.14: Global vermiculite production for 2009..57
Figure 5.15: Annual production by SA, USA, China and Zimbabwe 2004 to 2009..55
LIST OF ABBREVIATIONS
BCG - Boston Consulting Group's
EDA - Explanatory Data Analysis
PAL - Palabora Asia Limited
PEL - Palabora Europe Limited
PMC - Palabora Mining Company
PP&V - Phlogopite, Phosphate and Vermiculite
PV - Palabora Vermiculite
PESTLE - Political, Economic, Social, Technological, Legal, Environmental
R&D - Research and Development
SCL - Sectoral competition level
SWOT - Strength, weakness, opportunities and threats analysis
VOD - Vermiculite Operation Department
UAE - United Arab Emirates
UK - United Kingdom
USA - United States of America
CHAPTER 1
1. Problem in context, Problem statement and Objectives
1.1 Introduction
The mineral name Vermiculite might not be a familiar term to many people in South
Africa unless you are a geologist or employed by a mining company that mines
minerals from the mica family. This unfamiliar mineral is mined in South Africa which
also hosts the single largest vermiculite mine in the world, Palabora Mining Company
(The Economics of Vermiculite, 2004). Furthermore, the vermiculite department has
been summarised within this chapter to outline the complexity of the operations and
highlights the importance of the study to Palabora Mining Company, hereafter refer
to as PMC. Specific terms and definitions that are associated with the industry are
explained and will assist with interpretation of the study.
Muscovite, biotite and phlogopite are the three most common members of the mica
family. Vermiculite is a member of the mica silicates. Vermiculite has resulted from
the hydration of phlogopite (and biotite) by the loss of alkali and the addition of water
(Ross, Nolan, Langer, and Cooper, 1993). Vermiculite is volcanic mica compounded
through evolution and has the unusual property of expanding into worm-like pieces
when heated. The name was derived from the Latin vermicular that means to breed
worms. Vermiculite is found throughout the world in Australia, Brazil, China, Kenya,
South Africa, Zimbabwe, and the United States these countries hold commercial
vermiculite mines (The Economics of Vermiculite, 2004).
South Africa accounts for over 35% of the world's crude vermiculite production and
90% of South Africas vermiculite reserves are located in the Phalaborwa complex.
Crude vermiculite is exhumed through open pit mining methods, in some cases
dynamite blasting is used to loosen the ore, followed by wet or dry beneficiation
processes. The resulting product normally contains up to 90% vermiculite, and is
commonly available to the market in up to six grades, ranging in flake sizes from 16
mm down to 0.25 mm with a bulk density of 600 - 1505 kg/m3.
1.2 Background and problem in context

Dr. Hans Merensky initiated a geological survey into the occurrence of vermiculite
and apatite (source of phosphate) in the Phalaborwa area. The Phalaborwa Igneous
Complex (Vermiculite ore deposits) consists of two vermiculite ore bodies, VOD and
the South Proximate (PP&V). The Transvaal Ore Company Ltd. acquired all the
mica rights in 1939. Vermiculite mining operations commenced in 1940 and were
owned by the Transvaal Ore Company located in the Limpopo Province. PMC was
established in 1956 since the entire share capital of the Transvaal Ore Company was
purchased with the main intent to proceed with copper mining operations (PMC
archives). With the transition from vermiculite to copper in 1956 as the companys
core business, the vermiculite operations have remained intact and became the
worlds single largest vermiculite mining operation. Palabora Vermiculite hereafter
refer to as PV, produce approximately 200 000 tonnes of vermiculite annually and
supply more than 35% of all crude vermiculite used worldwide (The Economics of
Vermiculite, 2004).
Mining operations commenced on the rich inner serpentine core of vermiculite pit
which provided high-grade easily mine-able and cheap vermiculite. The operation
was capable of producing premium, large, medium, fine, superfine and micron
grades. Throughout the years up and until 2005, PV was able to satisfy market
demand for coarser grades (large and medium). As the vermiculite open pits became
deeper the volumes of coarser grades in the ore body declines. This is leading to an
increase in finer fractions delivered to the process plant. Future mining areas are
available but the exploration drilling indicates that the coarseness of these ore bodies
is less than the existing open pits. This is due to these areas being at the outer rim of
the rich inner serpentine core of existing vermiculite pits. This will result in less
coarse grade production in the future. Appendix 1 illustrates PV open pit mining area.
To get a better understanding of the entire operation and perceiving issues/problems
within the vermiculite operations, brainstorming sessions were conducted. These
sessions were conducted with internal colleagues in the relevant function areas, as
well as colleagues from PVs subsidiaries. These sessions were conducted face to
face as well as telephonic.
10
Figure 1.1 illustrates the brainstorming outcome and figure 1.2 illustrates the Brain
map.
Brainstorming outcome
Vermiculite
department
First round
brainstorming
session
More
complex
issues
Objectives
Research Question
Ore reserve
Mine plan
Ore body
Decline courser
fraction
Customer
relationship
Competitors
Quality complaints
Customers
Substitute
products
Branding
Brainstorming
session
To determine if possible strategic marketing

options will grow the sales of the finer grade
vermiculite.
Product
development
Old technology
Process
plant
Set cultur
Low courser grade
recovery
Markets for finer
grades
Local &
internationsl
markets
Marketing
options
Markets
Increase logistic
costs
Figure 1.1: Brainstorming outcome
Table 1.1 illustrates the issues/problems raised during the brainstorming sessions.
Table 1.1: Ideas and issues raised from the brainstorming sessions
Customers
Quality
Process plant
Old technology
complaints
Substitute
Set culture
Ore body
Decline
Marketing
courser Difficult
to
market
fractions
excess finer grades
Ore reserves
Increase logistic costs
products
Competitors
Low
courser Mine plan
grade recovery
Local
and
international markets
rate
11
Brain map
Product
Customers
development
-
Technology
Quality
Alternative uses
Communication
Relationship
Product importance
Strategic marketing
options for finer
grade vermiculite
Marketing
Buyers powers
Competitors
Differentiation, strategy
Figure 1.2: Brain map
1.3 Problem review

Customer
PV has business relationships with several American and Europe customers over the
last 30 years. Reputation was built on product quality and availability. PMC has two
fully owned subsidiary branches, Palabora Europe Limited (PEL) in England
servicing the European and UAE related counties. PEL supplies vermiculite to
customers from warehouses at Rotterdam in the Netherlands and Flixborough in the
UK - this enables Palabora to offer customers a 'just-in-time' service. The American
Vermiculite Corporations offices situated in the US service American and Canadian
customers. Contracts to supply vermiculite to these customers do not exist. This
12
leaves PV in a vulnerable position which can lead to competitors entering their

markets.
Palabora Asia Limited (PAL) is a non-legal entity based in Singapore managing the
customer base in the Asian and Australian market segment. Asian customers are
very stringent on product quality and delivery. All Asian and Australian customers
insist on a contract with PV to secure supply of product.
Local customers are based in the Western Cape, Gauteng, Mpumalanga and
Kwazulu Natal Provinces. The number of customers locally is almost the same as
the number of European customers. Local vermiculite sales for 2008 were in the
region of 9 340 tonnes which is only 11% of the total sales to European customers.
This is an indication that the local vermiculite market is not as strong and developed
as the European markets.
Process plant
Vermiculite mining and concentration were started by the late Dr Hans Merensky at
Phalaborwa during 1946. The ore is fed to the dry beneficiation plant where it is
crushed, dried, screened and air classified using winnowers. Figure 1.3 illustrates the
winnowing process.
Figure 1.3: Winnowing process

Adapted from: Palabora Vermiculite data base
13
PV is one of a few operations in the world that use a dry beneficiation process to
recover all five marketable grades. Most of the operations are using a wet process to
extract finer grade vermiculite (superfine and micron). The total recovery rate for the
process plant was approximately 47% up and until the mid 1990s. Some of the
conveying and screening circuits were upgraded and the recovery rate improved to
57%. Improvements were made to the vermiculite plant in 2006 to improve the
recovery rate of the process plant. The improvement was initiated by the decline in
the coarser fractions in the ore body. The process improvements resulted in 15%
increase in recovery rate of finer grades and only a 3% increase in recovery rate for
coarser grades. The 15% increase in recovery rate of finer grades resulted in a
surplus production of superfine and micron that needs to be stockpiled on site.
Ore body
According to Schoeman (1989: 7) the PaIabora Complex, vermiculite has resulted
from the hydration of phlogopite (and biotite) by the loss of alkali and the addition of
water. Vermiculite is therefore essentially a complex hydrous silicate of magnesium
and aluminium with varying amounts of iron, possibly of isomorphous replacement.
The ideal formula for hydrophlogopite is given as:
22 MgO. 5 A~O3' FeO. 22 SiO2. 40 H2O.
South African ore reserves of vermiculite are estimated to be 80Mt with 73Mt being
located at Phalaborwa (The Economics of Vermiculite, 2004: 50). At Phalaborwa all
evidence indicates that surface weathering, under the influence of percolating
meteoric water, was the main cause of the conversion of phlogopite to vermiculite.
Mining operations commenced on the rich inner serpentine core of Vermiculite
Operation Department (VOD) pit which provided high-grade easily mine-able and
cheap vermiculite. The operation was capable of producing premium, large, medium,
fine, superfine and micron grades. Throughout the years up and until 2002 PV was
able to satisfy market demand for coarser grades (large and medium). As the
vermiculite open pits (Shonalanga, Centre and Mpumalanga) were getting deeper
the volumes of coarser grades in the ore body were declining leading to an increase
in finer fractions delivered to the process plant. Future mining areas are available but
the coarseness of the ore bodies are less than the existing open pits which will result
in less coarse grade production in the future.
14
Marketing
PV produce approximately 200 000 tonnes of vermiculite annually and supply 38% of
all crude vermiculite used worldwide. PV export 94% of its products to Europe,
America and Asia. Only 6% of its products are sold locally. PVs success since 1964
can be contributed to the fact that the majority of their production fell within the
coarser fraction of particle size distribution.
As vermiculite is an industrial mineral and a low price commodity it is easy for
competitors to enter the market and with the geographical displacement of their
customers, PV has to satisfy customers by supplying a high quality product and a
good service to retain them (Kotler, 2001: 15). PV has a relationship marketing
approach with their bigger customers globally and transaction marketing approach
with its smaller customers (Open University, 2006: 14). PV together with key
customers continually collaborates to improve product quality and service delivery
(improves size distribution of product and supply chain).
Europe is PVs largest market and in 2009, 50% of its total sales were to the Europe
market as indicated in figure 1.4. America is PVs second largest market. The Asia
markets are still new compared to the American and European markets. These
markets insist on contracts to secure supply.
% Vermiculite sales per Region - 2009
Local
6%
Asia
21%
Europe
50%
America
23%
Figure 1.4: Vermiculite percentage sales per Region - 2009

Adapted from: Palabora Vermiculite data base (2010)
15
1.4 Problem statement/ Research question

Over the last four years the vermiculite ore body has shown a decline in courser
grades fractions (large and medium). The entire plant recovery traditionally was 54%
at a feed rate of approximately 6000 tonnes per day. The process technology being
use in the plant is winnowing. This winnowing does not basically differ from the
age-old proverbial process of separating the grain from the chaff, but here the
'chaff' is the desired commodity.
Improvements were made to the vermiculite plant in 2006 to improve the recovery
rate of the plant. The improvement was initiated by the decline in the coarser
fractions in the ore body. During the improvement process no new technology was
introduced to the plant. The focus was based on eliminating process variation and
the training of plant operators. The process improvements resulted in 15% increase
in the recovery rate of finer grades (fine, superfine and micron) and only a 3%
increase in recovery rate for coarser grades. The recovery rate for these grades is
currently running at 62%. The increase courser grades recoveries currently have no
significant impact on the production output for these grades. The 15% increase in
recovery rates of finer grades resulted in a surplus production of superfine and
micron that needs to be stockpiled on site.
There are several issues that the vermiculite department is currently faced with
derived from the information above, three core problems were identified and tested
against the SMART criteria.
The courser fractions are declining in the ore body, can the process plant by
means of improvement and innovation be able to maximise the recovery rate
of the courser grades?
There is an increase in finer grade production, what strategic marketing

options are available to increase the sales of these grades? Is there potential
to grow this market?
Not all the customers using courser grades demands can be fulfilled due to
the decline in courser grade production. Is there a possibility that some of
these customers can use finer grade vermiculite instead of the courser grades
in their products/process?
16
Research question (Problem statement)

Will strategic marketing options grow the sales of finer grade vermiculite?
Objectives

coarser grades.
1.5 Importance of the research to Palabora Vermiculite

In order for PV to stay ahead of competition and to further enhance the companys
position as the market leader in todays changing environment, this research will
indeed outline the key issues PV should consider for future business. As outlined in
the problem statement summary, the key strategic issues faced by PV and more so
the threat to the continued existence of PV, will be exposed and highlighted.
1.6 Research limitations

Definite boundaries exist with in the research study due to geographical
displacement in the majority of vermiculite consumers across the world. The
problematic issue of supplier and customer loyalty in an intense competitive industry
has proved to have inherited barriers to competitor specific information, thus the
reliance on secondary data with regards to competitors mining capability, crude
production and competitive advantages.
1.7 Summary
Each industry, irrespective of the nature of the product produced, should always be
watchful of changes within the environment it is active in, since any change no
matter how big or small has an effect on its overall performance and success. This
research will be an acknowledgment of the changes currently experienced within the
PV operation.
Chapter two is dedicated to outline the problem analysis/ theoretical considerations
that include the use of business theories and models to gain a broader
understanding of the issues around the problem.
17
CHAPTER 2
2. Problem analysis / theoretical consideration
2.1 Introduction
In the problem statement it is mentioned that the coarseness in the vermiculite ore
body is declining and PV cannot satisfy its coarser grade customers needs. Large
and medium grade production is declining at a steady rate since 2003 as indicated in
figure 2.1. The coarseness determines the size distribution of the vermiculite flakes.
The higher the coarseness factor the higher the volumes of coarser grades in the ore
that is supplied to the process plant. Due to the decline in the ore bodys coarseness,
finer grade ore is supplied to the process plant, leading to an increase in finer grade
production. Figure 2.2 illustrates an increase in finer grade production since 2003.
Due to this, the supply of finer grades exceeds the demand, causing the company to
stockpile excess product onsite.
There are several strategic issues that the vermiculite operation is currently faced
with, and the primary aim of the research is pointed out below:

coarser grades.
60000
50000
Tonnes
40000
30000
20000
10000
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Years
Large
Medium
Fine
Poly. (Large)
Poly. (Medium)
Poly. (Fine)
Figure 2.1: Coarser grades production (large, medium and fine) from 1996 to 2009
18
65000
Tonnes
55000
45000
35000
25000
15000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Years
Superfine
Micron
Poly. (Micron)
Poly. (Superfine)
Figure 2.2: Finer grades production (superfine and micron) from 1996 to 2009
Finer grade inventories increased
For the last few years PVs finer grades inventories onsite increased and
management believe it is due to the plant improvements which resulted in an
increase in production of the finer grades. The question that needs to be asked is it
only due to production increase that the company has to stockpile excess finer
grades or is there another reason for this? To determine this, one need to look at the
history of what the customers demands were comparing with what was produced.
Due to availability of information on customer demands only four years data was
used. Figure 2.3 illustrates the customer demand versus actual production from 2007
to 2010 plan.
Customer de mand vs Actual procuction 2008
70,000
60,000
60,000
50,000
50,000
40,000
40,000
Tonnes
Tonnes

70,000
30,000
20,000
20,000
10,000
10,000
0
-10,000
30,000
0
LARGE
MEDIUM
Production 2007
FINE
SUPERFINE
MICRON
-10,000
Variation between Demand/Supply 2007
Customer demand 2007
MEDIUM
FINE
SUPERFINE
MICRON
Custome r demand vs Plan procuction 2010
60,000
60,000
50,000
50,000
40,000
Tonnes
40,000
Tonnes
LARGE
Production 2008
30,000
20,000
30,000
20,000
10,000
0
10,000
-10,000
LARGE
MEDIUM
FINE
SUPERFINE
MICRON
-20,000
0
LARGE
MEDIUM
FINE
SUPERFINE
MICRON
-30,000
-10,000
Production 2009
Plan Production 2010
Actual Customer demand 2010
Figure 2.3: Customer demand versus actual production from 2007 to 2010 plan
19
Looking at figure 2.3 one can see that the demand for superfine has decreased from
just over 67 000 tonnes per annum for 2007/2008 to 50 000 tonnes for 2010. This is
approximately 25% reduction in demand. The same is evident for micron with a
decrease in demand of more than 40% between 2007 and 2010. The demand for
large and fine grades is more or less constant throughout the years. Medium grade
demand for 2007 to 2009 was constant and only in 2010 the customer demand
increase substantially, is there a reason for this?
To gain a broader understanding of the issues surrounding the problem I will be
looking at each key issues (objectives) as outlined above.
2.2 Determine why customers prefer coarser grades

For PV to address the issues they face, they need to understand their customers
business, e.g. what market they compete in, the process they use to produce their
final product, what their future market predictions are for their product and why do
their customers prefer their product. PV delivers vermiculite to a number of
customers based in Europe and America since 1964. For these customers PV is the
preferred supplier of vermiculite due to quality and availability. Most of them are
family owned businesses passed on from generation to generation. PV has a
relationship marketing approach with most of the Europe and American customers
and transaction marketing approach with its Asian and local customers as described
by Kotler, (2000: 13).
Almost 70% of the Europe and American customers are purchasing large and/or
medium to use in their process or products they sell. Large and medium is used in a
horticultural application due to its excellent property of improving soil aeration while
retaining moisture and nutrients to feed roots, cuttings and seeds for faster,
maximum growth (The Vermiculite Association, 2010). Customers who are in the
horticultural application business claim that their customers purchase their products
on how it looks. The coarser the product the better it works. Ritzer (2009) has argued
that consumption is separated from production, logically, because two different
consumers are involved. In the first case consumption is by the primary individual; in
the second case, a producer might make something that he would not consume
himself. Therefore, different motivations and abilities are involved. PV customers are
20
producing a final product which they would not consume themselves. The focus
should be on a consumer rather than a customer.
According to Galles (2007), preferences and circumstances differ, and anything that
could alter the value of the expected marginal benefits or the marginal opportunity
costs of a choice to a decision maker could change what people deem efficient.
According to Boztepe (2007: 7), the value of a product is not only relative to the
context but also to the alternative products users are acquainted with.
There are several approaches in preferential choice studies, one of which is the
multi-attributed modelling approach. Benefits of adopting the multi-attribute modelling
approach is such as its potential insights to consumers cognitive processes and its
pragmatic values to industry were listed in past streams of research (Muthitacharoen,
Gillenson & Suwan, 2006: 679). Muthitacharoen et al, (2006: 679) indicated that
within the domain of the multi-attribute modelling approach, two concepts of
preference development have emerged. They are Attribute-Based Preference and
Attitude-Based Preference. The first approach suggests that preference formation
involves comparing specific attributes (Attribute-Based Preference), while the second
approach indicates the overall evaluation of alternatives (Attitude-Based Preference).
This model can be use to compare PV customers alternatives in detail.
2.3 Investigate potential alternative uses for finer grades

PV used to be the leader in research and development in the vermiculite industry
until mid 1990 when they sold their research and development division, Mandoval
vermiculite, losing patent rights and trade secrets. The management of PMC at the
time did not see the research and development division of PV as part of the core
business. The focus was on producing crude vermiculite and to improve their
relationship with their customers whereas research and development was left to the
customers.
For PV to stay ahead of competition and to enhance the companys position as the
market leader of vermiculite in todays changing environment, the company need to
consider product innovation or product development. Product innovation involves the
21
introduction of a new product that is new or substantially improved (Open University,

2006: 41).
Igor Ansoff (1957) has developed a framework that aims to assist management in
this analysis. This framework is known as The Ansoff matrix. Table 2.1 illustrates
the Ansoff matrix which entails four possible product/market combinations: Market
penetration, product development, market development and diversification. Ansoffs
matrix is a useful framework for looking at possible strategies to reduce the gap
between where the company may be without a change in strategy and where the
company want to be. For PV to look into alternative uses for the finer grades they will
have to look at product development. Product development refers to significant new
product developments and not minor changes in an existing product of the company.
According to Lynch (2003) the reasons that justify the use of this strategy include
one or more of the following: to utilise the excess production capacity, counter
competitive entry, maintain the companys reputation as a product innovator, exploit
new technology, and to protect overall market share.
Table 2.1: Ansoff Matrix
Adapted from: http://tutor2u.net
Existing product
Market penetration
New Product
Product development
Increase sales to the existing New product development for

Existing markets
market.
existing markets.
Penetrate more deeply into the

existing market.
Market development
New markets
Existing product
markets
Diversification
sold to new New products sold in new

markets
2.4 How the finer grades can be marketed to current users of

coarser grades.
From the information in figure 2.3 it is evident that the demand for finer grades has
declined in the last three years and one need to asked the questions, are the
22
customers purchasing from other suppliers, have they change their process, did they
scale down, do they use a substitute product or is the product our customer produce
losing market share. PV is losing market share and it might be linked to several
reasons i.e. pricing, competitors products are improving and the availability of
material from competitors is increasing. Managers are faced to analyse competitive
forces in an industry environment in order to identify the opportunities and threats
confronting a company.
Michel Porter (1980) has developed a framework that aims to assist management in
this analysis. This framework is known as The five forces model. Figure 2.4
illustrates factors influencing company marketing strategy. Porter has identified five
competitive forces that shape every industry and every market. These forces
determine the intensity of competition and hence the profitability and attractiveness
of an industry. Porters model supports analysis of the driving forces in an industry.
Based on the information derived from the Five Forces Analysis, management can
decide how to influence or to exploit particular characteristics of their industry.
New Market Entrants, e.g.
Supplier Power, e.g.
Brand reputation
Geographical coverage
Product/service level quality
Relationship with customers
Bidding processes/capabilities
Entry ease/barriers
Geographical factors
Incumbents resistance
New entrant strategy
Route to market
Competitive Rivalry, e.g.
Numbers and size of firms

Industry size and trends
Fixed vs. variable cost bases
Product/service range
Differentiation, strategy
Buyer Power, e.g.
Buyer choice
Buyers size/numbers
Change cost/frequency
Product/service importance
Volume, JIT scheduling
Product and Technology

development, e.g.
Alternatives price/quality
Market distribution changes
Fashion and trends
Legislative effects
Figure 2.4: Porters Five Forces

Adapted from: Grant, (2008:73)
23
To get a helicopter view of the PV business, Ward (2005: 7), proposes one needs to
look at the Boston Consulting Group's (BCG) Growth Share Matrix which is like the
Ansoff Matrix. It is generally used to analyse the standing of single business unit or
company enterprise. The analysis is based on the combination of two dimensions:
Business Growth and Market Share. This model can be used to determine what
priorities should be given in the product portfolio of the PV business. The idea is that
the bigger the market share the product has, the more cash it can earn, and the
faster the product grows, the more investments are needed (Ward, 2005: 7). Figure
2.5 illustrates the Boston Consulting Group's (BCG) Growth Share Matrix.
The Boston Consulting Group Matrix
high
Select a
Business
growth
few
Invest
rate
Remainder
divested
low
high
Liquidate
low
Relative position (Market share)
Figure 2.5: Boston Consulting Group's (BCG) Growth Share Matrix

Adapted from: Ward (2005: 7)
From the above a gap analysis can be conducted which is a very useful tool in
helping marketing managers to decide upon marketing strategies and tactics. The
simple tools are the most effective and there's a straightforward structure to follow.
The first step is to decide upon how you are going to judge the gap over time.
Strategic gap closing options
For PV to close the gap between where they are and where they want to be, internal
and external factors that can influence the business should be analysed and
evaluated. The basic analytical techniques management can use are the strength,
weakness, opportunities and threats analysis (SWOT), value chain analysis,
strategic cost analysis and competitive strength assessment. Focus should be
placed on the identification of the firms strengths, weaknesses, opportunity and
24
threats. It is, however, important to have insight of their definitions for adequate
identification. The aim of any SWOT analysis is to isolate the key 'issues' that will be
important to the future of the organisation which will assist in better marketing
planning.
2.5 Summary
It can be concluded that the issues facing PV is much larger than just the internal
issues they are facing. The coarser grades in the ore body are declining and at the
same time the demand for finer grades are deteriorating. Different models and
frameworks are available to analyse and evaluate the companys position in the
market,
locally
and
internationally.
From
these analyses
and evaluations
management can make strategic decisions in which direction they want to steer the
vermiculite business. The following chapter will review what the gurus have to say
on customers preferences, product innovation and development, strategic gap
analysis and strategic marketing options.
25
CHAPTER 3
3. Literature Review
3.1 Introduction
Chapter three includes a literature review in support of the strategic management
issues identified in the problem statements. The review describes theoretical
perspectives and previous research findings regarding the problem at hand. Its
function is to look again (re + view) at what others have done in areas that are
similar, though not necessarily identical to, one's own area of investigation (Leedy
and Ormrod, 2005: 64). The theoretical view of customer preferences, product
development and innovation, strategic gap analysis and strategic marketing options
will be discussed.
3.2 Customer preference

As mentioned in the problem analysis PV needs to understand and be familiar with
the real reason/s why customers are using a specific vermiculite grades. Will the
customers be able to use a different grade of vermiculite in their process or product?
Do customers have preferences that can be ascertained? According to Kwon, Cho, &
Park (2009) a traditional perspective to studying customers decisions, mostly
attributed to economists, makes the common assumptions that each individual has
stable and coherent preferences and that people know their preferences That is,
one of the implied assumptions of this economic perspective is that customers know
what they like and are able to make choices among options based on these
underlying well-defined, pre-existing preferences.
According to Simonson (2005) the studies done on preference construction, has
agreed that customers preferences develop with growth in their familiarity with or
experience of a specific product. He also claims that peoples preferences are likely
to be stable over time, and people are likely to be well aware of their preferences. If
customers have stable, pre-existing preferences and they know their preference well,
they may appreciate the offers that providers customize after uncovering the
26
preferences, whereas they may not do so if they have not. If the recommended offers
based on the revealed preferences do not conform to the actual preferences, it might
be ascribed to the customers unstable preferences rather than to a problem in the
preference elicitation or recommendation algorithm (Simonson, 2005: 32-45).
However, Kwon et al (2009: 263) claimed that recent customer psychological
research on the construction of preferences suggests that customers often do not
have well-defined, pre-existing preferences that are merely revealed; instead, they
construct their preferences as they make choices. With this argument PV might find it
difficult to determine specific customers preferences because they may not have
well-defined preferences.
Muthitacharoen et al, (2006) conducted a study of online consumer behaviour using
the multi-attribute modelling approach as discussed previously. The study strived to
extend current knowledge in this area by examining the role of business sales
channel strategies in consumers sales channel preferences. Their study also
provided concrete examples of how consumer preferences of sales channels are
developed and influenced by business strategies of using sales channels. The study
proposed a version of Attribute-Based Preference and its relationship with AttitudeBased Preference. The study defines four attributes:
Transaction Cost Preference: The ability to provide its customers with

favourable product price and other financial transaction costs (i.e. shipping
cost, sales taxes, etc.) occurring during the purchasing process.
Product Preference: The ability to provide its customers with a favourable

product at the point of purchase, including variety, selection, and availability of
product.
Social Interaction Preference: The ability to provide its customers with

interactive communications and a supportive sales environment.
Risk Preference: A higher degree of personal risk inherently stemmed from

the use of a sales channel to make purchases.
(Muthitacharoen et al, 2006: 680)
From their study they determine that risk preference was the most important attribute
in the process of preference development and found that business strategies play an
important role in the consumer preference development process.
27
3.3 Product development / innovation and alternative uses

For a company to be competitive they need to ensure they stay ahead of their
competitors with product development and innovation, some companies more than
others. Companies marketing industrial minerals (i.e. vermiculite) need to look at
alternative uses for their products if they want to stay competitive and not lose
market share. Vermiculite is a low cost commodity and companies have to sell large
volumes to be profitable.
Customers involvement
In a global competitive era, customers are becoming vital role players in the
manufacturing or research and development (R&D) process and companies should
invite customer to form part of the R&D process and ultimately treat customers as
partners. Alam (2006), describe customer involvement as product/service providers
and current/potential customers jointly engage in innovation projects, and exchange
ideas to anticipate customers demands and develop new product/services.
According to Flint (2002: 305), many organisations do not know what kinds of
customer information they ought to be collecting, do not have the skills to do so even
when they do know, do not have formal processes designed to capture important
customer information, and/or are in too much of a hurry to move from ideation (i.e.
idea generation) and screening to development phases of new product development.
He suggest that many of the new product ideas floating around firms these days may
be unhelpful at best and harmful at worst because they are internally generated
creative ideas not well founded in customer understanding that act more as
distractions than sources of meaningful opportunities. He argues that managers who
are well informed about the marketplace and in particular customers are more likely
to envision realistic and meaningful new product ideas than those managers who are
less market-oriented. Consistent market understanding best comes from formal
processes designed to generate market intelligence and not from merely ad-hoc
interactions with the marketplace (Flint, 2002: 306).
Eng and Quaia (2009: 276) developed a table that provides an overview of main
theoretical concepts used in previous studies for improving new product adoption.
Appendix 2 illustrates the theoretical underpinnings of new product adoption in
28
uncertain environments. One of the concepts in the table is market orientation which
is focused on customers, competitors and inter-functional coordination and promotes
information sharing and market intelligence that are critical in the early stages of a
new product. In their study they indicated that communication within the organisation
and with customers reduces uncertainties and poor communication with customers
could lead to purchase decision based on past experience.
Customer requirements
According to Yadav and Goel (2008: 1000) an essential and key step in the product
development process is the identification of customer requirements. They emphasise
that when gathering customer requirements, it is important to capture the right kinds
of information, which is really necessary to successfully implement quality
improvement tasks. Any quality improvement effort is directed towards customer
satisfaction. According to them there are various tools and techniques available to
capture customer requirements and expectations i.e. intensive personal interviews,
focus group discussion, expert interviews, customer surveys via paper and pencil, or
via internet, trend analysis, and scenario approaches (Yadav and Goel, 2008:1001).
Ulwick, (2002) identifies the main problem with using customers input for innovation
as; customer will tend to provide solutions instead of desired outcome. He claims
that their solution space is very small with only little insight in the possibilities of the
given industry and its supply chains. Customers will unlikely be asked for solutions
which include emerging materials and technologies which they do not know of yet.
According to Ulwick, in best case scenarios the customer input can lead to
incremental improvements of products already in the market as long as one keeps
asking the customers for solutions instead of what outcomes they would like to be
improved. He has identified three distinct types of information that must be captured
from the customer to identify the real customer requirements:
jobs customers are trying to get done when using a product or service,
the outcomes they are trying to achieve when performing these jobs in a
variety of circumstances, and
the constraints that stand in the way of them adopting or using the product.
29
Product development / innovation

According to Linneman, Verkerk & Boekle (2006: 185), in a consumer-orientated
approach new product development will start with consumer and market research to
identify the specific characteristics that a new product has to have. The next step is
to realise co-operation and information exchange among all the actors in the
production chain. This gives rise to several new issues, like the question how the
descriptive and qualitative terminology in which consumers express themselves can
be translated into technological specifications.
Innovation capability constitutes the link between the company and the dynamic
environment of the industry (Isik, Arditi,
Dikmen & Birgonul, 2009: 630). The
vermiculite industry is not static and introverted any more. Globalisation and higher
rates of competition between companies force vermiculite companies to change.
Innovation capability is an important factor in achieving cost leadership, focus, and
differentiation, hence enhancing competitiveness (Isik, Arditi, Dikmen & Birgonul,
2009: 631).
3.4 Marketing strategies

Strategic gap analysis
After sufficient industry, market environment and organisational specific data has
been gathered and analysed, this will allow management to know exactly where their
organisation is situated in the market they compete in. Companys strengths and
weaknesses should be known, as well as industry opportunities and threats that will
have identified gaps between the current performance of the organisation and the
desired performance required for the successful realisation of its strategic business
model. Furthermore, the gap analysis requires the development of specific strategies
to each gap identified. The importance of the gap analysis as indicated by Johnson
and Scholes (1999:366) clearly contrasts the organisations wants against reality.
Benchmarking performance measurements (Johnson and Scholes, 1999:181) may
be used to conduct a gap analysis. This can be achieved through projection of a
companys performance on the basis that it continues to follow existing policies. The
resulting level of profitability, rate of return and rates of profit growth, should be
compared with the benchmarks and the gap between these calculated. In order to
30
use this premises of the gap analysis, it is necessary to project the profit
consequences of continuing to pursue existing strategies and the consequences of
alternative proposals to fill the gaps. The projection and comparison of different
courses of action for a firm can be facilitated through computerised corporate
financial models.
An interesting observation was made from Staceys (1996) view in establishing gaps
within the business through financial modelling. The single most important objective
of every profit seeking organisation should be to generate as much profit as possible
and increase shareholders value. Thus, the importance for the projection of an
organisations future should be, not to change any aspects of the business, pursue no
new product development, market penetration, cost reduction schemes and so on,
as this is the best way of highlighting gaps within the firm. The added advantage of
the computerised modelling is the fact that what if scenarios can be simulated,
especially with reference to foreign currency changes experienced in the South
African exporters market. The expected outcome of the gap analysis is a strategic
plan that has a reasonable probability of success. The purpose of the analysis is to
bring the test of the current reality that organisations experience to the dream of
tomorrow. Goodstein et al. (1993: 263) has identified five basic approaches in
analysing the gap, as depicted in table 3.1, through detailed examination of the
distance between each element of the strategic business model and the current state
of the firm, as revealed in the environmental audit.
Table 3.1: Specific key questions to be answered during the gap analysis
Adapted from: Goodstein, Nolan and Pfeiffer. (1993: 263)
1. How does your desired strategic profile compare with the current one?
2. How does your planned line of business fit with your existing ones and with
your resources, both current and planned, bring them on line?
3. Where does the organisation stand with regards to their current critical
success indicators and what do they tell us about the capacity to meet new
ones?
4. What are the current strategies of the firm and what do they tell
management about the capability to execute new ones?
5. How different is the existing culture from the required one?
31
Strategic marketing options

Kotler (2000: 74) discussed how Ansoff has proposed a useful framework for
detecting new intensive growth opportunities called a product-market expansion grid
as illustrated in table 2.1. The company first considers whether it could gain more
market share with its current products in their current markets (market-penetration
strategy). Next it considers whether it can find or develop new markets for its current
products (market-development strategy). Then it considers whether it can develop
new products of potential interest to its current markets (product-development
strategy). Later it will also review opportunities to develop new products for new
markets-diversification strategy. Looking at product development Kotler suggest
three approaches management can look at new markets whose needs might be met
by its current products (Kotler, 2000: 74).
Identify potential user groups in the current sales areas.
Seek additional distribution channels.
Consider selling in new locations in its home country or abroad.
Ansoff analysis helps in mapping the strategic options for companies, it is important
to note that like all models, it has some limitations. By itself, the matrix can tell one
part of the strategy story but it is imperative to look at other strategic models like
SWOT analysis and PESTLE in order to view how the strategy of an organisation is
formulating and might change in the course of its future. It is imperative to the market
analysis to assess a companys strengths and weaknesses to determine whether
and how the opportunities may be exploited.
As discussed earlier in the problem analysis, Porters five forces model was design
to assist managers analysing external environment of their companies. The centre
point of the model is dominated by competition between established companies
within an industry while the outer four forces have direct impact on these firms. The
model assumes that suppliers, buyers, potential entrants and substitute products
affect the intensity of competitive rivalry among existing firms and the collective
strength of the five forces determines the sectoral competition level (SCL) of the
organisation (Dagdeviren, Yksel, 2010: 1005). Management with effective
strategies should carefully react upon the analysis of the potential threats and
opportunities posed by the outer-rimed forces. The two forces the author values the
most in this model is the threat of substitute products and potential competitors that
32
can be exploited through some manipulation by management in creating barriers of

entry to future competitors.
Identifying and evaluating opportunities, threat, strengths and weaknesses for
strategic gap closing options
According to Chang and Huang (2006: 258) the SWOT analysis of external
opportunities and threats as well as the internal strengths and weaknesses of the
enterprises is important for strategy formulation and development. The purpose of
the analysis of external opportunities and threats is to evaluate whether an enterprise
can seize opportunities and avoid threats when facing an uncontrollable external
environment, such as fluctuating prices, political destabilization, social transition,
change in the rule of law, etc. The purpose of the analysis of internal strengths and
weaknesses is to evaluate how an enterprise carries out its internal work, such as
management, work efficiency, research and development, etc. If used correctly,
SWOT can provide a good basis for successful strategy formulation (Chang and
Huang, 2006: 258).
John Pearce and Richard Robinsons definition of opportunity and threats is not as
descriptive as Chang and Huang but the importance is very clear. They define an
opportunity as a major favourable situation and a threat as a major unfavourable
situation with in a firms environment. Pearce and Robinson (1997:171) Market
opportunities and threats is a big factor in shaping a companys strategy since they
not only affect the attractiveness of a company situation, but point out the need for
strategic action. Key trends could be one source of opportunities such as overlooked
market segments, changes in competitive or regulatory circumstances, technological
changes, and improved buyer and supplier relationships. The following key
impediments to the firms current or desired future, such as the entrance of new
competitors, slow market growth, increased bargaining power of key buyers or
suppliers, technological changes, and new or revised regulations, could be
presented as threats to a firm. From these examples it can be seen that similarities
exist within the variables that make up opportunities and threats.
The importance for the analysis of past trends in a firms sale, costs and profitability
is of major importance in the identifying of its strategic internal forces. According to
(Pearce & Robinson, 1997) sales trends should be broken down by product line and
33
the channel of distribution. A detailed investigation of the firms performance history

trends should allow management to isolate the internal factors that influences its
sales, cost and profitability. However, there is a direct relationship between the
results of the internal trend analysis and the external forces that affect these results.
In most cases the economical and political environments are the major influences of
internal factors of globalise organisations, as will be seen in sales and profitability
analysis of PV business. Theoretically there are several ways to close the gap
between the organisations current state and its desired future state. According to
Goodstein et al. (1993) these options will generally either fall into a growth or
retrenchment category, depending on the relationship of the current organisation and
its desired future. The essence to understand what the key opportunities and threats
are facing a firm, helps management identify realistic options from which to choose
appropriate strategies.
3.5 Summary
It can be concluded that organisational success can be contributed to well defined
and superbly executed strategies according to prevailing environmental situations.
For the company to stay competitive product development and innovation is very
important in the short-term as well as in the long-term. Companies should employ the
fundamentals of strategic management through portfolio and strategic gap analysis
to firstly, establish where the organisation is currently positioned in a market
(strength and weaknesses) and secondly acknowledge the threats and opportunities
faced within the enterprise. Selecting the right strategy to ensure that the
organisation is successful with regards to short, medium and long term objectives,
the evaluation and identification of different marketing strategy for different
vermiculite grades are of the utmost importance, since the availability of each grade
will guide the organisation towards strategic options.
34
CHAPTER 4
4. Research Design and Methodology
4.1 Introduction
Cooper and Schindler, (2001: 75) describe research design as the blueprint for
fulfilling objectives and answering questions. According to Leedy and Ormrod, (2005:
93) data and methodology are inextricably interdependent. For this reason, the
methodology to be used for a particular research problem must always take into
account the nature of the data that will be collected in the resolution of the problem.
There are two research design approaches namely qualitative and quantitative.
Qualitative research involves analysis of data such as words (e.g., from interviews),
pictures (e.g., video), or objects (e.g., an artifact). Quantitative research is an inquiry
into an identified problem, based on testing a theory, measured with numbers, and
analyzed using statistical techniques. The goal of quantitative methods is to
determine whether the predictive generalizations of a theory hold true (Leedy and
Ormrod, 2005: 95).
The information gathered will be used to identify and define customers preference,
alternative uses for finer grade vermiculite and marketing opportunities to increase
vermiculite sales. The methodology relies on exploratory as well as qualitative
research that is based on seeking in-depth, open-ended responses through one-onone interviews, telephonic interviews and specific questionnaires that utilises close
and open-ended questions. Brady, Collier & Seawright (2006: 355) have argued that
causal process observations can be adjoined to data set observations. This
implies that qualitative methods can be used to add information to problematic
quantitative data sets and hence can solve quantitative research design issues. An
explanatory study goes beyond description and attempts to explain the reasons for
the phenomenon that the descriptive study only observed (Cooper and Schindler,
2001: 13). The Sample characteristics are discussed with focus sited on stratified
sampling procedures, which allow for the proportional allocation of sample size to
each identified group. Data analysis techniques used for the research, are
highlighted with specific mention of the descriptive approach that draws upon a
graphical nature.
35
4.2 Aims of Research

The aim of this research is to gather relevant data from within the PV markets,
including qualitative and quantitative data, which will concentrate on analysing the
following specific problems mentioned.

coarser grades.
From the analysis, with the consideration of underlining opportunities and threats,
management should be able to construct strategies with more confidence and less
risk for short and long-term success for the vermiculite business. The study is aimed
at identifying ways of improving the sales of finer grades vermiculite.
4.3 Research design

The nature of the research
The reason why a qualitative research nature was selected is due to its ability to
allow respondents to speak freely about the chosen subject, and its ability to obtain
the widest possible responses. Since any type of research that would provide
management with ideas and insight (broad and/or vague), exploratory research can
be classified as such, as indicated by Cooper et al. (2001: 13).
4.4 Data gathering procedures

To identify and highlight strategic management issues inherent to vermiculite
business the following data gathering procedures were adopted.
1. Primary data collection (internal & external) - questionnaires as well as focus
group discussions.
2. Secondary data collection (internal) - annual sales reports of Palabora
vermiculite.
3. Secondary data collection (external) - international market information on
competitors mining capabilities and competitive advantages.
4. The collection of historical data, pertaining to annual world production, relied
solely on published production records.
36
Focus group discussions (Primary Data)

The primary aim of the focus group discussion is to investigate the reasons why
certain customers prefer coarser grade vermiculite, alternative uses for finer grades
and marketing strategy to increase finer grade sales. Table 4.1 illustrate the list of
subsidiaries within PMC for the focus group discussions. The reason for selecting the
particular individuals is they are seen as committed participants. Committed
participants are those respondents who are uniquely qualified to provide the desired
information that is required. The individuals will be able to truthfully answer all
questions and have some personal experience of the research topic. Thoughts were
directed towards their customers in each of their respective geographical market
area. Discussions took place to identify marketing strategies to improve the sales of
finer grade vermiculite.
Table 4.1: List of subsidiaries
Company
Region
Palabora Vermiculite
South Africa
Palabora America Limited
America
Palabora Asia Pacific
Asia
Palabora Europe Limited
Europe
Questionnaire design (Primary Data)

South African consumers
The aim of the questionnaire is to gather quantifiable data of what local customers
opinions are with regards to customer product preference, future growth
opportunities and barriers restricting them to grow. Growth attribute selected were
product grades availability, end applications produced and a number of initial
enquiries received during the last two years on using vermiculite as a substitute
product for asbestos. A copy of the questionnaire is reflected in Appendix 4.
Inductive (start with closed (detailed) questions and end with open-ended questions)
approach was used when ordering questions. The format of responses that was
used in the questionnaire was dichotomous (a question offering a choice of two
answers), normal (values have no referential or positional meaning), likert scale (the
customer is presented with a statement and is required to indicate their level of
37
agreement) and rating (a scale defined for rating the importance of a specific
attribute) (Kelly, 2003: 4)
International customers
This questionnaire was designed at gathering quantifiable specific data from
international customers in researching customer product preference, use of
competitors/substitute products, vermiculite application by country, future growth
opportunities and barriers restricting them from growing there business. Europe and
America customers make use of central warehousing facilities whereas the Canadian
and Asia customers are serviced with direct shipments, which add to the difficulty of
on time delivery to such a huge geographically displaced market segment. Questions
asked were constructed to establish whether having central warehousing being
convenient and advantages in the case of European and American customers.
Concerning Canadian and Asia customers who have a complex supply chain,
questions asked were constructed to establish whether having central warehousing
will be beneficial to them. Results pertaining to this question are critical with regards
to competitors and substitute products. The format of responses that was used in the
questionnaire was dichotomous (a question offering a choice of two answers),
normal (values have no referential or positional meaning), and rating (a scale defined
for rating the importance of a specific attribute) (Kelly, 2003: 4)
Insuring that all responses are received back from customers as well as being valid
and reliable, a special effort will be made by sending questionnaires electronically to
the sample population and followed up telephonically, explaining the context of the
questionnaire in detail. Appendix 5 reflects a copy of the questionnaire sent to the
sample group.
Market related data gathering (Secondary Data)
Internal secondary data source of company records, with regards to PV product
range sales volume history, was exploited in constructing PV vermiculite local and
international market situation.
38
4.5 Characteristics of the sample

Non-probability convenient sampling will be used for selecting respondents in
gathering primary data on the basis of convenience and availability. Respondents
selected for the focus group discussions, as reflected in table 4.1, are purely based
on employment by PMC and the various major market segment representations. It is,
however, important to mention that the attendance to the focus group respondents,
are made possible, since the focus group discussion is scheduled to take place
during a quarterly strategic planning meeting in the third week of March 2010.
Sample population selected for the South African market will rely on probability
convenient sampling, specified by selecting all PV active local customers. However,
bearing in mind that PV is the sole supplier of vermiculite in South Africa, thus the
whole sample population being included in the study for this specific market
segment. Sample population selected for the international markets also relies on
non-probability convenient sampling, specified by, customer purchasing more that a
1000 tonnes of vermiculite per annum.
Scope of the sample for secondary data collection relating to PV and other
Vermiculite Producers
The value of information gathered for a project is greatly influenced by how well a
sample represents the total population. A sample that is not a true representation of
the total population may not project a true picture. Taking this into account, the
Stratified Random Sampling procedure was selected for the research of strategic
consideration within the vermiculite industry. The characteristics of the sample, has
compelled the selection of the sampling procedure. The selection was made due to
the fact that the total population could be divided into distinct exclusive groups.
Stratified sampling allows for the proportional allocation of sample size to each
identified group; since this is possible without a detailed population frame. The total
vermiculite consumption may not be determined due to geographical displacement
from the major vermiculite consuming markets. Thus, the samples have been divided
into distinct exclusive market segments of the vermiculite industry, according to the
following criteria, as indicated by table 4.2. From this information PV management
will be able to identify which markets they can target or which markets they can
abolish.
39
Table 4.2: Sample characteristic of the vermiculite industry

Distinctive groups
Vermiculite ore deposits
Characteristic
Countries having reported ore deposits (Population)
Countries producing vermiculite (Sample)
Countries producing more than 10 000 tonnes per
annum
Vermiculite Market
(Exclusive group)
Countries consuming vermiculite (Population)

PV market segment (Sample)
End applications (Exclusive groups)
Construction
Agricultural & Horticultural
Refractory
Friction lining
4.6 Data analysis approach

There are three popular data analysis approaches namely:
1. Classical
2. Exploratory (EDA)
3. Bayesian
The Explanatory Data Analysis (EDA) approach will be used to analyse the data
collected, as it was based on a philosophy that employs a variety of techniques,
mostly of a graphical nature, including scatter plots, histograms, probability plots and
mean plots. The Exploratory Data Analysis approach does not impose deterministic
or probabilistic models on the data. On the contrary, the EDA approach allows the
data to suggest admissible models that best fit the data (NIST/SEMATECH. 2006:
1.1.2). The main focus of the EDA approach is on the data, its structure, outliers, and
models suggested by the data. Most EDA techniques are graphical in nature with a
few quantitative techniques. The reason for the heavy reliance on graphics is that, by
its very nature, the main role of EDA is to open-mindedly explore. The graphics give
the analyst unparalleled power to do so, enticing the data to reveal its structural
secrets and always ready to gain some new, often unsuspected, insight into the data.
40
The Mean Plot Technique

This technique was chosen as it can be used with ungrouped data to determine if the
mean is changing over time. Although the mean is the most commonly used
measure of location, the same concept applies to other measures of location. For
example, instead of plotting the mean of each group, the median or the trimmed
mean might be plotted instead. This can be done if there are significant outliers in the
data and a more robust measure of location than the mean is desired.
4.7 Limitations of the research project

Limitations within the research have led to the adopting of the qualitative approach,
due to inaccessibility of international market participants, especially competitors and
their customers.
4.8 Summary
Collecting primary data from PV management, local and international customers will
assist the author to identify underlying factors why customers prefer specific
vermiculite grades. The data will also assist in identifying whether customers are
willing to assist PV in product development and product innovation. Selecting the
scope of the secondary sample for the research has posed as an initial hindrance,
but the stratified sample procedures have assisted in dividing the sample into distinct
exclusive market segments. This has proved to be successful, ranging from ore
deposits to consumer market segments.
Data gathered during the research will be discussed in chapter five with graphically
representation of primary and secondary data.
41
CHAPTER 5
5. Results
5.1 Introduction
The content of this chapter is dedicated to the representation of findings gathered on
the study subject, pertaining to customers preference to coarser grades, potential
alternative uses for finer grades and marketing finer grades to current users of
coarser grades. Data gathered was sorted, organised and structured to become
information. Primary data was gathered through focus group discussions and
questionnaires, whereas secondary data was gathered through internal reports,
external reports and publications.
Focus group discussions were concentrated around the international markets and
how the subsidiary managers view their customers. Discussions concerning finer
grade market growth also took place. The customers questionnaires focused on
what grades of vermiculite they are using, what product qualities are important to
their process, reasons for using specific vermiculite grades, product research and
development, expansion of customer product application and product range.
Secondary data market results are divided into four sections, representing the four
main market segments in which PV competes namely; Europe, America, Asia and
local. Since each market has shown distinctive differences, thus the need to address
it as such.
Results pertaining to international markets focused on different countrys mining
capacities and their competitive advantages. Each country has a fixed ore reserve
base, which directly effects the competition within the PV international market. It is,
however, important to point out that secondary data pertaining to PV, is exclusively
sourced from individuals that attended the companys annual strategic meeting held
in 30 March 2010 or internal records and reports, unless otherwise referred to. All
other secondary data was sourced from external reports and publications.
42
5.2 Primary results

5.2.1. Why the customers prefer coarser grades
Focus Group discussions
The focus during these discussions was on the three objectives of this research
project. The responses are summarised within this sub-section of the chapter,
reflecting on the views and perceptions of the three major market regions namely
America, Asia and Europe.
Respondents have shown mixed views with regards to why customers prefer coarser
grades. The Asian representatives response was that it is important to understand
the technology developed for each end-product application where specific grade of
vermiculite provides the desired results. Key driver is product technology
development using a specific grade best-fit in achieving product performance.
The response from the American representatives was that their customers
customers require a specific grade e.g. in the horticultural market where growers
want to see a certain size of vermiculite in their mix even if it does not specifically
have to be that size in order to work. Another example raised by the respondent was
that in certain refractory applications, using a finer size of vermiculite does not work
as well due to the additional components that are needed in order to pump long
distances which results in higher costs.
Europes representative response was that it is all to with historical formulations.
Customers have been using these formulations for years and rely on the old adage
if it works do not change it It was also mentioned that Europe is a very mature
market and the companies dealing with Palabora Europe Limited have been buying
the same grade and the same amount (roughly) for years and years.
These mixed views and perception can be contributed to personal connections in the
respective market segments. All respondents agree that in general the type of
vermiculite grades used is dependant on the end-product application.
43
Questionnaires South African Customers

A total of twelve responses were received back from sixteen that were included in
the study population sample. A full overview of the responses can be viewed in
appendix 6.
One of the objectives in the questionnaire was to establish why customers prefer
using coarser grades in their processes and applications. Four questions were asked
to determine this. A question was asked to determine what grade of vermiculite
individual customers are currently using. From the analysis it was determined that all
twelve respondents are using coarser grades and 42% of them are also using finer
grades.
Customers were also asked in what end application they are competing in and the
result of the analysis is illustrated in figure 5.1.
South Africa
Friction lining, 0%
Refractory, 22%
Constuction, 24%
Horti/Agriculture, 54%
Figure 5.1: Percentage end applications types use in South Africa

Its clearly evident from the analysis that horti/agricultural is the dominant end
application and that refractory and construction making up the rest. Horti/agricultural
and refractory applications are predominantly using coarser grades (large, medium
and fine) while construction and friction lining applications are mainly using finer
grades (superfine and micron). Furthermore it is clear that the South African market
lacks consumption representation within technologically advanced applications,
where finer grades are generally more suitable.
44
One of the questions asked intended to determine how important certain product
qualities are for the customers process. All the respondents indicated that screen
sizing is either very important or important to them. None of them indicated that they
are flexible when it comes to the specific grades used in their process. The only
product quality that is of less importance for some customers is moisture content.
A more direct question was asked why customers prefer using a specific grade. 50%
responded (all in the horti/agricultural applications) that it is a requirement from their
customers. They claim that their customers buy their product on the visual
appearance of the product, the coarser the product the better the product. The other
50% indicated that it is the best fit product for their particular end application.
Questionnaires International Customers
The subsidiary managers in Europe, America and Asia requested that the
questionnaire be sent to them in order for them to forward it to the selected sample
population within each of their geographical areas. The questionnaires were returned
to the subsidiary managers and the feedback from their customers was summarised.
A full overview of the responses can be viewed in appendix 7.
The international customers were asked the same questions as the South Africa
customers to determine why customers prefer using coarser grades in their
processes and applications. Looking at PV vermiculite grades used by customers in
the different geographical, one can observe a distinct difference between them. From
the analysis conducted it is evident that 90% of American customers use coarser
grades and only 10% of them are using finer grades. In Asia 75% of customers are
using all five grades and 25% indicated that they only use coarser grades in their
applications and processes. In Europe the representation is different compared to
Asia and America. 33% of the customers use only finer grades and 17% only using
coarser grades. The remaining 50% indicated that they use all the grades.
Looking at the end applications customers competing in America is similar to South
Africa with the exception of the friction lining market. Figure 5.2 illustrates the
percentage end application types use in America. Horti/agricultural and refractory
represents 73% of the customers end applications which confirm the reason why
90% of customers using coarser grades. A friction lining and construction application
uses finer grades and seeing that American customers purchase very little finer
45
grades from PV, one can assume that they purchase these grades for other
vermiculite suppliers. An opportunity might exit in these markets.
USA
, Constuction
12%
, Friction lining
15%
Refractory, 27%
Horticulture/Agri
culture, 46%
Figure 5.2: Percentage end applications types use in America

In Europe construction and friction lining make up 53% of end applications while
horti/agricultural and refractory make up 47% of end applications. Figure 5.3
illustrates the percentage end application types used in Europe.
Europe
, Friction lining
4%
Refractory, 16%
, Constuction
49%
Horti/Agriculture
31%,
Figure 5.3: Percentage end applications types use in Europe

46
Europe is PVs biggest vermiculite customer as indicated in figure 1.4 in chapter 1

and with construction and refractory applications contributing to 53% of total
European vermiculite use, makes Europe also the biggest user of finer grades
(superfine and micron) as indicated in figure 5.3.
Looking at Asias end applications it is obvious that the Asian market follows the
European market in technologically advanced applications, where finer grades are
generally more suitable. 45% of the applications used are in construction and friction
lining. Horti/Agricultural applications are still the biggest users of coarser grades in
Asia to ensure food supply to the population. Figure 5.4 illustrates the percentage
end application types use in Asia.
Asia
, Friction lining
6%
Refractory, 11%
, Constuction
39%
Horti/Agriculture
44%,
Figure 5.4: Percentage end applications types use in Asia

Looking at the response concerning product quality importance, it is evident that

there is a distinct lack of flexibility on the part of the customers. The comparison
between local and international customers is consistent looking at screen sizing,
non-exfoliating content, yield and moisture analysis. All customers regarded these
product qualities as very important or important.
The responses from the international customers concerning the reasons why they
use a specific vermiculite grade differ in Europe as opposed to other regions. Most
European customers indicated that due to historical formulation, the grade used is
47
best fit for the application and that the end application almost dictates the type of
vermiculite used.
5.2.2. Potential alternative uses for finer grades

The respondents feel that the vermiculite mines and associations should be
facilitating R&D. The European representative comment that customers will not
assist PV with R&D unless they could secure some kind of saving whether it be price
or more product of the coarser grades. The other regions responses were different,
indicating that customers doing any type of R&D work would be delighted if PV
assists.
Respondents are adamant that R&D, in perusal of new end-applications, will ensure
alternative uses for finer grades vermiculite. In addition, they have also indicated that
R&D should not be limited to customers alone, as the case has been for the past
fifteen years, but suppliers (PV) should assertively pursue R&D.
From the analysis it is evident that 50% of local customers are doing some R&D with
vermiculite. 75% of the customers doing R&D are in the construction and refractory
industry, which might create opportunities in the development of finer grade
applications. The remaining customers doing R&D are in the horti/agricultural
industry. All these customers indicated that they will welcome PVs assistance in
R&D. More research is necessary to determine in which specific grades these
customers are doing research.
50% of the respondents indicated that they have received enquiries concerning using
vermiculite as a substitute product for asbestos. A second observation regarding the
positive acknowledgement of this opportunity, was that all the customers were from
the high tech product market segment. It is quite clear from the analysis that the new
asbestos legislation does not possess an opportunity for the horti/agricultural
industry, but rather the products entailing a higher level of research and engineering,
such as the lightweight board, fire proofing and construction industry.
48

In Asia 60% of the respondents indicated that they are doing R&D and some of the
customers are owners of product technology. In America only 17% are doing R&D.
All these customers indicated that they will welcome PVs assistance in R&D. It was
a surprise to discover that there is no R&D currently taking place in Europe and that
customers are only looking at existing application improvements. European
customers indicated that they are not willing to assist PV in doing R&D, but want PV
to pay to help them improve their own end use applications but are obviously not
willing to share this enhancement with others. It is concerning to discover that a first
world region like Europe which competes in technologically advanced application
market does not do R&D.
5.2.3. How can the finer grades be marketed to current users of coarser
grades
During the focus group discussion it was noticed that respondents were not totally at
ease when questions were asked regarding the use of finer grades vermiculite in
existing courser grade applications. One of the responses was that, given the
amount of time and investment spent from development phase to qualification and
certification of end-product, any attempt to change the original recipe would warrant
significant re-work and investments i.e. going through the whole process again.
All respondents are in agreement that it will be difficult to market finer grades
vermiculite to customers that are only using coarser grades vermiculite. Price is also
becoming a problem when it comes to the finer grades due to cheaper prices
competitors are offering.
Questions were presented to customers to ascertain how one can market finer
grades to existing coarser grade customers. Predominately the South African
customers using coarser grades are satisfied with product availability and quality.
This is mainly due to the fact that local customers are close to the supplier and
receive priority over international markets. From the analysis it is evident that
customer using coarser grades are not comfortable in using finer grades in their
existing applications.
49
Looking at the barriers restricting customers from expanding their business, 25% of
the respondents indicate that their business risk is too great, 34% claim that there is
not sufficient demand to grow their business, 41% indicates that the cost of
vermiculite is a constraint to grow their business. The customers claiming there is not
sufficient demand are all in the horti/agricultural industry and those indicated that the
cost of vermiculite is a limiting factor, are in the construction and refractory industry.
Analysing the feedback from the three regions it become evident that there is a
distinct difference in the way international customers feel about the PVs product
availability compared to PVs local customers. Asian customers response was
neutral while American and European customers responses were dissatisfied and
very dissatisfied respectively. To determine why these customers are unhappy, a
sample group was selected and were asked to elaborate on why the dissatisfaction.
The responses received back indicated the dissatisfaction is mainly because PV
introduced a product allocation program to customers using coarser grades in
America and Europe.
From this analysis it is evident that customers using coarser grades vermiculite, end
users are very niche applications and unless one can use another (competitors)
vermiculite or substitute away from vermiculite, will remain until vermiculite is not a
viable ingredient.
From the analysis it was found that the price gap between PVs and competitors product
restrict customers from growing their business. The lack of technology development,
limited number of applications and availability of coarser grades are some of the other
constrains customers reported on.
50
5.3 Secondary results

5.3.1. Annual sales history of PV
As previously mentioned in the introduction of chapter 5 the secondary data market
results are divided into four sections namely; Europe, America, Asia and local. To
determine how PV markets are performing data on sales tonnes from 2004 to 2009
were gathered and analysed. Figure 5.5 illustrates the total tonnes sold per
geographical area from 2004 to 2009.
120,000
100,000
Europe
Tonnes sold
80,000
60,000
America
40,000
Asia
20,000
Local
0
2004
2005
2006
2007
2008
2009
Years
Figure 5.5: Total tonnes sold per geographical area from 2004 to 2009
Europe accounts for 50% of Palaboras total annual sales volume and any changes
or trends noted within this segment will have a more profound effect on the
companys profit margin than any other segment. Figure 5.5 clearly indicates that the
European market is in a decline since the end of 2007. Tonnes sold in 2009 were
lower that the tonnes sold in 2004. The American market had a significant decline in
tonnes sold for the period 2005/2006. The Asian markets were relatively constant up
to the beginning of 2007 and grew almost 70% from 2007 to 2009. Local markets
indicate gradual growth since 2005. A more in-depth analysis was conducted on
each geographical area to determine the reasons for the decline and/or growth in the
different areas.
51
Figure 5.6 illustrates the tonnes sold per grade in Europe from 2004 to 2009. From
the analysis the decline in European sales were mainly in superfine and fine grade.
Medium and micron had a marginal contribution to the sales decline. Large sales
remain relatively constant through this period. Further analysis has revealed that the
decline in sales were price related. Figure 5.7 illustrates the price increase per grade
for Europe from 2004 to 2009.
Europe
50,000
Tonnes sold per grades
40,000
Superfine
30,000
20,000
Fine
Micron
Medium
10,000
Large
0
2004
2005
2006
2007
2008
2009
Years
Figure 5.6 Tonnes sold per grade in Europe from 2004 to 2009
Europe
R 2,500
Medium
Large
R 2,300
R 2,100
Fine
Micron
R 1,900
Price (R/t)
Superfine
R 1,700
R 1,500
R 1,300
R 1,100
R 900
R 700
R 500
2004
2005
2006
2007
2008
2009
Years
Figure 5.7: Price increase per grade for Europe from 2004 to 2009
52
Figure 5.8 illustrates the tonnes sold per grade in America. From analysis it is
evident that in 2005 the sales of all grades with the exception of fine grade declined.
Further analysis revealed that the decline of large grade was mainly due to depletion
of coarser grades in the ore body as described in chapter 1. With the decline of
coarser grades in the ore body, a management decision was made to reduce the
sales volumes of some of the coarser grades in America to ensure supply to Europe
and Asia where the profit margins were higher. The decline in superfine and micron
grades occurred due to local American vermiculite mines ability to supply these
grades in the American market. The increase in fine grade from 2007 is mainly due
because of the ability for PV to supply fine grade to supplement large and medium
grades.
America
24,000
22,000
Fine
20,000
Tonnes sold per grade
18,000
16,000
14,000
12,000
Medium
10,000
8,000
6,000
4,000
Superfine
Large
2,000
Micron
0
2004
2005
2006
2007
2008
2009
Years
Figure 5.8 Tonnes sold per grade in America from 2004 to 2009
Figure 5.9 illustrates the tonnes sold per grade to the Asian market. From the
analysis it is clear that this is a stable market that has grown since 2007. The step
change of superfine was the result of a new market identified in Asia. What is
interesting is that this new market of superfine is in the agricultural sector. This is
contrary to the normal practice globally where coarser grades are traditionally used.
Decline in the large and medium grades are due to product availability as mentioned
previously. The reason for the decline in micron grade was due to price increases
53
from PV and the availability of cheaper product from competitors. Figure 5.10
illustrates the price increase per grade for Asia from 2004 to 2009.
Asia
Fine
18,000
16,000
14,000
12,000
Superfine
10,000
8,000
6,000
Micron
4,000
Medium
2,000
Large
0
2004
2005
2006
2007
2008
2009
Years
Figure 5.9 Tonnes sold per grade in Asia from 2004 to 2009
Asia
Medium
R 2,500
Large
Price (R/t)
R 2,000
Fine
Micron
R 1,500
Superfine
R 1,000
R 500
2004
2005
2006
2007
2008
2009
Years
Figure 5.10: Price increase per grade for Asia from 2004 to 2009
54
Figure 5.11 illustrates the tonnes sold per grade to the South Africa (local) market
from 2004 to 2009. The analysis of the local market shows that it is a stable and
predictable market. The major growth in this market was brought on by micron and
fine grades. The growth in micron was due to a new player in the construction
industry utilising new technology. The decline in coarser grades (large and medium)
was a consequence of price increase through the years. Figure 5.12 illustrates the
price increase per grade for Asia from 2004 to 2009.
South Africa (Local)
4,000
Micron
3,500
Medium
3,000
2,500
2,000
1,500
Fine
1,000
500
Large
Superfine
0
2004
2005
2006
2007
2008
2009
Years
Figure 5.11 Tonnes sold per grade in South Africa from 2004 to 2009
South Africa (Local)

R 1,500.0
R 1,400.0
Medium
R 1,300.0
Large
Price (R/t)
R 1,200.0
R 1,100.0
Fine
R 1,000.0
Superfine
R 900.0
Micron
R 800.0
R 700.0
R 600.0
R 500.0
2004
2005
2006
2007
2008
2009
Years
Figure 5.12: Price increase per grade for South Africa from 2004 to 2009
55
5.3.2. International
market
information
on
competitors
mining
capabilities and competitive advantages
In this section, production of vermiculite is defined as the reported or estimated

output of vermiculite concentrate produced from the mining of vermiculite ore. Table
5.1 lists the vermiculite producers with an annual production of more than 10 000
tonnes in 2009. These countries make-up the total scope of secondary population
sample considered for the study.
Table 5.1: Global vermiculite producers
Adapted from: U.S Geological Survey (2010)
Country
2009
Zimbabwe
11 000 tonnes
Egypt
12 000 tonnes
Brazil
14 000 tonnes
Australia
15 000 tonnes
Russia
25 000 tonnes
China
130 000 tonnes
United States of America
110 000 tonnes
South Africa
194 100 tonnes
Estimated
It is quite clear from table 5.1 that USA, China and South Africa account for more
than 80% of the world production, but by no means should the smaller producers be
disregarded as bystanders. The three major vermiculite producers ore reserves and
production capabilities will be discussed with specific detail to USA and China since
these two make up the key competitors of PV.
Data was collected and analysed to determine the global vermiculite production per
country. The data that was collected was from the countries stipulated in table 5.1 as
these are the countries that can compete against PV.
56
Figure 5.13 and figure 5.14 illustrate the global vermiculite production per country for
2004 and 2009 respectively. Figure 5.15 illustrates tonnes produces by South Africa,
America, China and Zimbabwe. Zimbabwe is the only Southern Africa country that
competes against PV in the international markets.
2004
Zimbabwe
5.5%
Australia
2.4%
Brazil
5.0%
USA
20.1%
China
20.1%
Egypt
2.4%
Russia
5.0%
South Africa
39.5%
Figure 5.13: Global vermiculite production 2004

2009
Zimbabwe
2.2%
Australia
2.9%
Brazil
2.7%
USA
21.5%
China
25.4%
Egypt
2.3%
South Africa
38.0%
Russia
4.9%
Figure 5.14: Global vermiculite production 2009

57
Global vermiculite
production/annum
Tonnes produced per annum
500,000
400,000
300,000
South Africa
200,000
China
100,000
Zimbabwe
0
2004
2005
2006
2007
2008
2009
Years
Figure 5.15: Annual production by SA, USA, China and Zimbabwe 2004 to 2009
It is clear from figure 5.15 that the annual vermiculite production globally is
increasing marginally. The Chinese and American vermiculite producers production
increased while both the Southern Africa producers production is decreasing.
South Africa
According to Roskills Report, (2003: 50) South African ore reserves of vermiculite
are estimated to be 80Mt with 73Mt being located at Phalaborwa and the remainder
also located in the Limpopo Province near Naboomspriut and Louis Trichart. Both
mines have not actively been mined for the past ten years. The PV operations
commenced in 1964 and are capable of producing all five marketable grades, large,
medium, fine, superfine and micron. PV production for 2009 was 194 100 tonnes of
which 94% was exported and the remaining tonnes sold locally. Since 2006 PV
experience a decline in coarser grades in its ore body which resulted in a decrease
in coarser grades production and an increase in finer grades production as described
in chapter 1. From the figure 5.13 and 5.14 it is evident that PV (South Africa) has
lost global market share.
China
Vermiculite deposits in China are to be found in Shanxi, Inner Mongolia, Hennan,
Hubei Xinjang and Hebei. Xinjang and Hebei represents the most competitive threat
to PV.
58
Xinjiang Yuli Xinlong Vermiculite Co Ltd, the largest vermiculite supplier in China has
three entities consisting of one vermiculite mine in Qieganbulake of Xinjiang Yuli
County, one vermiculite processing plant and a vermiculite compound fertilizer plant.
This vermiculite deposit is 14.8 million tonnes and an estimated reserve of 100
million tonnes is the largest in China. The company can supply all five marketable
grades and has an annual estimated production capacity of 130 000 tonnes
vermiculite concentrate. The quality of Xinjiang vermiculite ranks No.1 in China. The
designed mining capacity is about 220 000 tonnes with a process design capacity of
170 000 tonnes per annum. From figure 5.12 and 5.13 it is apparent that China is an
emerging major player in the global vermiculite market.
Almost half of the worlds vermiculite reserves are located in the USA estimated at
25 million tonnes. Over 95% of the United States vermiculite reserve base is found in
Montana, South Carolina and Virginia. Minor reserves are reported in Texas,
Kansas, Colorado, Alabama and California. Production commenced in the 1920s
and rose to a peak of 331 00 tonnes in 1973. During the early and mid 1980s,
production remained fairly level, fluctuating annually between 280 000 and 290 000
tonnes. Since then production has declined and it was reported by the US Geological
Survey to have been 110 000 tonnes for 2009. From figures 5.12 and 5.13 it is
evident that the production output of America increased by 1.4%, indication that their
market is growing.
W.R. Grace & Co. is a major vermiculite producer and the company operates several
mines around Enoree, South Carolina and is the largest American producer of
vermiculite concentrate. The company also operates vermiculite plants in the USA at
locations such as Phoenix, Arizona, Pompano Beach, Florida and South Carolina.
The Enoree beneficiation plant operates a wet process for the production of
vermiculite concentrate. The annual capacity of the Enoree operations is believed to
be in order of 100 000 tonnes, mostly of finer grades of vermiculite. W.R. Grace & Co
also operates several exfoliation plants and distributes the final exfoliated product to
the end application producers.
Virginia Vermiculite Ltd. operates vermiculite mines and wet process beneficiation
plants in Louisa County, Virginia and Woodruff, South Carolina. The annual
59
combined capacity of the two operations is believed to approach 100 000 tonnes. In
general, these mines produce finer grades of vermiculite. The majority of the US
beneficiation plants operate on a wet process that is common to mines processing
finer grade of vermiculite. There is no evidence available that suggests that any ore
deposit in America contains larger vermiculite grades.
5.4 Summary
Primary data collected, indicates that management needs to recognise the
unhappiness of their major regions customers due to product availability and delivery
time. PV is faced with a decline phase in Europe hence the slowdown of sales in
historical application market segments as well as the decline in the ore bodys
coarser fraction size.
From the analysis of the data collected, the following observations can be made:
There is a consistent perception that the specific grade been used is critical to
an application. There is a general consensus under the coarser grades
customers that their clients require coarser material in the end product.
Only 27% of PVs customer base is currently doing R&D. This is mainly in the
refractory and construction industries. Europe, which is PVs largest customer
base, is not doing any R&D only improvements on existing applications. 75%
of customers indicated that they are willing to collaborate with PV on R&D as
well as sharing information freely. It is also evident that there is a lack of R&D
in the coarser grade applications.
Customer indicated that they are not flexible on product qualities i.e. screen
sizing and yield. This indicates that to market finer grades in the coarser
grade markets will require R&D and marketing on the part of PV.
Data collected of the international vermiculite mining capacities indicated that

South Africa and China are able to produce all five marketable grades, while
America is only able to produce finer grades.
The following chapter reflect on the relation of the results to the research objectives,
literature review as well as link findings summarised above to the appropriateness of
theoretical and conceptual framework.
60
CHAPTER 6
6. Discussion of Results
This chapter is dedicated to the discussion of the results related to the research
objectives, which will be linked to literature review and theoretical framework.
6.1 Why customers prefer coarser grades

From the results in chapter 5, it was discovered that customers using coarser grades
for specific applications are doing it because of historical formulations, perception
that it is the best product for the application and that their customers prefer coarser
grades. According to Simonson (2005) the studies done on preference construction,
has agreed that customers preferences develop with growth in their familiarity with
or experience of a specific product. He also claims that peoples preferences are
likely to be stable over time, and people are likely to be well aware of their
preferences.
Looking at what PVs customers have to say about their customers preferences, one
can link it back to what was discussed in the literature review chapter where
according to Kwon et al (2009: 263) a traditional perspective to studying customers
decisions, mostly attributed to economists, makes the common assumptions that
each individual has stable and coherent preferences and that people know their
preferences This relates back to findings that customers know what they like and
are able to make choices among options based on these underlying well-defined,
pre-existing preferences.
6.2 Potential alternative uses for finer grades

To develop alternative uses for finer grades in the current markets PV serves, will be
a substantial challenge. Only 27% of PVs customer base is currently doing some
R&D. From the analysis it is evident that most of the customers in the four regions
are willing to except assistance or are willing to assist PV in R&D. Alam (2006),
describe customer involvement as product/service providers and current/potential
customers jointly engage in innovation projects, and exchange ideas to anticipate
customers demands and develop new product/services.
61
From 2004 to 2006 superfine sales in Europe increased by 25.6% while for the
period 2006 to 2009 it decreased by 25.3% as indicated in figure 5.6. Sales for
micron also decrease by 35% for the period 2006 to 2009. This indicates a negative
market growth in Europe for finer grades. Figure 5.7 illustrates the price increases
per grade for Europe which resulted in an average of 51% increase for all grades for
the period 2004 to 2009. Europe lost customers due these price increases. This
linked to Muthitacharoen et al, (2006: 679) multi-attribute modelling approach, the
Attribute-Based Preference and Attitude-Based Preference. One of the four attributes
identified is transaction cost preference which relate to the ability to provide its
customers with favourable product price and other financial transaction costs (i.e.
shipping cost, sales taxes, etc.) occurring during the purchasing process. PV lost it
market share in the finer grades most likely due to this.
In view of R&D done by Asian customers, Ansoffs matrix framework was considered
using product development to develop new products in existing markets. This relates
to the use of superfine in the agricultural industry.
6.3 How the finer grades can be marketed to current coarser grade
users
The results from the field study indicated that none of the customers are flexible in
product qualities currently used. It will be very difficult for PV to market finer grades
to customers using coarser grades if the customers are not flexible. Due to the
depletion of coarser grades in the ore body customers at some stage will have to
convert to finer grades or face losing their business. When this happens customers
will have to do a SWOT analysis to determine their threats and opportunities if they
want to stay competitive.
International regions finer grades sales have decline which can be linked to Porters
five competitive forces. From these results it appears that customers have buyer
power in the case of finer grades where customers have more choice due to multiple
suppliers feeding the market as indicated by the secondary data analysis. Chinas
vermiculite production is growing annually and is becoming a bigger rivalry,
threatening PVs global market share. The finer grades price gap between PV and its
competitors are also contribution to this.
62
CHAPTER 7
7. Conclusions and Recommendations
This chapter is dedicated to summarise what can be concluded from the results of
the research study, specific to the research statement. From the conclusions
recommendations will be made to change or solve the problem PV is currently facing
concerning finer grades vermiculite.
While the ore body is declining in coarser grades, PV is facing more than one
challenge. Coarser grades production is declining while finer grades production
increased and stockpiled onsite. The research study revealed that PV is also losing
finer grade sales in all four regions they compete in. The decline in the coarser grade
sales are due to the product availability. Europe superfine and micron sales have
decrease by 25.3% and 35% respectively. With an average product price increasing
of up to 50% in this region, surely this had an influence on the sales of these specific
grades.
Superfine and micron sales in America follow a similar pattern and it was revealed
that no PV micron will be sold in America in 2010. The vermiculite quality of the
American local vermiculite suppliers is not as good as PVs quality, but quality is not
everything. If the price of a product is becoming too expensive customers as indicate
in the study purchase second best. In light of todays competitive pressures and a
rapidly changing environment, to not doing something different is to give way to
ones competitors.
The remaining regions (local and Asia) are both growing markets and the opportunity
for growth is vast. Less than a third of vermiculite used locally fulls within the finer
grade fractions. There is a lack of using high technological end application in South
Africa
comparing
with
Europe
and
Asia.
Customers
using
superfine
in
horti/agricultural application in Asia opens up new markets for finer grades.

The limitation of this study was the gathering of data and the inaccessibility of
international market participants, especially competitors and their customers.
63
To answer the research question as stated in chapter one, will strategic marketing
options grow the sales of finer grade vermiculite, the answer is yes.
Recommendations
For PV to increase its finer grades sales they need to adopt a new or change their
existing marketing strategy. PVs strategy needs to take in account the competitive
and rapid changing environment we are living in today. PV management needs to
consider the following:
Finer grade supply excess demand and currently PV stockpile the excess finer
grades while their finer grades sales globally are declining. To increase finer
grade sales PV needs to adopt a price strategy approach. Different price
strategies can be adopted for different situations i.e.:
o Penetration pricing - The price charged for products is set artificially low
in order to gain market share. Once this is achieved, the price is
increased. (local and Asia markets)
o Value pricing - This approach is used where external factors such as
recession or increased competition force companies to provide 'value'
products to retain sales. (Europe and American markets)
To develop alternative uses for finer grades vermiculite PV needs to engage in

R&D and need to look at the argument made by Flint (2002: 306), those
managers who are well informed about the marketplace and in particular
customers are more likely to envision realistic and meaningful new product ideas
than those managers who are less market-oriented. Consistent market
understanding best comes from formal processes designed to generate market
intelligence and not from merely ad-hoc interactions with the marketplace.
Further research recommendations

Local market
Strategic marketing planning should focus on attaining the right product mix for each
market segment PV competes in and always reach maximum profitability. New
government legislation within South Africa can be isolated as an opportunity to
increase sales, particularly in the board applications, possessing unique fire
resistance attribute for the low cost housing project and upgrading of informal
64
squatter settlements. It is thus suggested that further research should be conducted

in perusal of the opportunity draw from the broad product ranges produced by
international customers.
Vermiculite producers ore body constraints
Each organisation has to recognise that they are constantly faced by the depletion of
resources. Ore body constraints inherent to the mining industry play a major role in
shaping the future and in particular for PV, maintaining their foothold as the market
leader. Market leadership however, will no longer be possible in large and medium
grades. The use of vermiculite in historical applications, such as the horticultural and
refractory industry, will not be able to sustain business for PV any more, however
particle size distribution in finer grades increased leading to increase production in
these grades. The indication that demand has exceeded supply for the larger grades,
for the past three to four years at PV, is an indication that other producers who may
have had limited quantities of these grade, might also have reached their limits in
coarser grades. It is therefore recommended that a specific research study be
conducted to establish and accurately prove world vermiculite production life span of
its resources in correlation to world demand for each specific particle size.
65
8. References
Alam, I. 2006. Removing the fuzziness from the fuzzy front-end of service
innovations through customer interactions, Journal of Industrial Marketing
Management, [online]. 35(4), 468-480. Retrieve January 18, 2010. From
Elsevier.
Available from:<http://www.
sciencedirect.com.oasis.unisa.ac.za/
science> [Accessed on 18 January 2010]

Ansoff, I. H. 1957. Strategies for diversification. Harvard Business Review, 35(2):
113-124.
Boztepe, S. 2007. User value: Competing theories and models, International
Journal of Design, 1(2): 55-63.
Brady, H. E., Collier, D & Seawright, J. 2006. Toward a Pluralistic Vision of
Methodology. Political Analysis, 14: 35368.
Chang, H. H and Huang, W. C. 2006. Application of a quantification SWOT
analytical method, Mathematical and Computer Modelling, [online]. 43, 158169. Retrieved January 25, 2010. From Elsevier. Available from:< http://www.
sciencedirect.com.oasis.unisa.ac.za/ science> [Accessed on 25 January 2010]
Cooper, D. R., and Schindler, P. S. 2001. Business research methods. 7th edition.
New York: McGraw-Hill.
Dagdeviren, M. and Yksel, I. 2010. A fuzzy analytic network process (ANP) model
for measurement of the sectoral competititon level (SCL)
Eng, T.-Y. and Quaia, G. 2009. Strategies for improving new product adoption in
uncertain environments: A selective review of the literature, Industrial
Marketing Management, [online]. 38, 275-282. Retrieved January 15, 2010.
From Elsevier. Available from:<http://www.sciencedirect.com.oasis.unisa.ac.
za/science> [Accessed on 15 January 2010]
Flint, D. J. 2002. Compressing new product success-to-success cycle time. Deep
customer value understanding and idea generation, Industrial Marketing
Management, [online]. 31, 205-315. Retrieved January 18, 2010. From
Elsevier. Available from:< http://www.sciencedirect. com.oasis.unisa.ac.za/
science> [Accessed on 18 January 2010]
Galles, G. 2007. Can You Say Marginal Rates of Substitution?. Alabama: Mises
Institute.
Available
from:<http://mises.org/daily/2734#ixzz0mmlwW59J>
[Accessed 20 January 2010]

66
Goodstein, L., Nolan, T. & Pfeiffer J. W. 1993, Applied Strategic Planning. New York:
McGraw-Hill, Inc.
Isik. Z, Arditi, D,
Dikmen, I. and Birgonul, M. T. 2009. Impact of corporate
strengths/weaknesses on project management competencies, International

Journal of Project Management, [online]. 27, 629637. Retrieve January 19,
2010. From Elsevier. Available from:<http://www. sciencedirect.com.oasis.
unisa. ac.za/science> [Accessed on 19 January 2010]
Grand, R. M. 2008. Contemporary Strategy Analysis. 6th edition. Massachusetts:
Blackwell Publishing.
Johnson, G. and Scholes, K. 1999. Exploring Corporate Strategy. 5th edition.
Harlow, England: Prentice Hall Ltd.
Kelly, S. 2003. Devising questionnaires for market research and customer
segmentation. Ireland: Comhra Limited.
Kotler, P. 2001. Kotler on Marketing: How to creaste, win and dominate markets.
Greater Britain: Simon & Schuster UK Ltd.
Kotler, P. 2000. Marketing Management. The Millennium Edition. Upper Saddle
River, NJ: Prentice Hall.
Kwon, K., Cho, J. & Park, Y. 2009. Influences of customer preference development
on the effectiveness of recommendation strategies, Electronic Commerce
Research and Applications, [online]. 8, 263275. Retrieve January 15, 2010.
From Elsevier. Available from:< http://www. sciencedirect.com.oasis.unisa.
ac.za/science> [Accessed on 15 January 2010]
Leedy, P. D. and Ormrod, J. E. 2005 Practical Research: Planning and Design. 8th
edition. New Jersey: Pearson Prentice Hall.
Linneman, A. R., Verkerk, M. B. R. & Boekle, M. A. J. S. 2006. Customer-driven
food product development, Journal Trends in Food Science & Technology,
[online]. 17, 184-190. Retrieve January 25, 2010. From Elsevier. Available
from:< http://www. sciencedirect.com.oasis.unisa. ac.za/science> [Accessed
on 25 January 2010]
Lynch, R. 2003. Corporate Strategy. 3rd edition. Prentice Hall Financial Times.
Muthitacharoen, A. M., Gillenson, M. L. & Suwan, N. 2006. Segmenting online
customers to manage business resources: A study of the impacts of sales
channel strategies on consumer preferences, Information & Management,
[online]. 43, 678695. Retrieve January 15, 2010. From Elsevier. Available
67
from:<http://www.sciencedirect. com.oasis.unisa.ac.za/ science> [Accessed on

15 January 2010]
NIST/SEMATECH. 2006.
Commerce
e-Handbook of Statistical Methods. [online]. U.S.
Department's
Technology
Administration.
Available
from:<http://www.itl.nist.gov/ div898/handbook/> [Accessed on 07 February

2010].
Open University. Dept of Business Studies. 2006. Strategy Formulation. MiltonKeynes: Open University.
Pearce J. A. and Robinson R. B. Jr. 1997. Strategic Management Formulation,
Implementation and Control. 6th edition. Boston: Irwin Chicago
Porter, M. E. 1980. Competitive Strategy: Techniques for Analysing Industries and
Competitors. New York: The Free Press
Ritzer, G. 2009. Correcting an Historical Error. Keynote Address, Conference on
Prosumption, Frankfurt, Germany, March, 2009.
Ross, M., Nolan R. P., Langer, A. M., & Cooper, W.C. 1993. Health Effects of
Mineral Dusts Other than Asbestos. In: Guthrie, G. and Mossman B. T. eds.
Health Effects of Mineral Dusts. Washington: Mineralogical Society of America.
361-407.
Schoeman, J. J. 1989. Mica and vermiculite in South Africa, Journal of the South
African Institute of Mining and Metallurgy, [online]. 89(1): 1-12.
Simonson, I. 2005. Determinants of customers responses to customized offers:
conceptual framework and research propositions, Marketing, [online]. 69(1),
3245.
Retrieve
January
15,
2010.
From
Elsevier.
Available
from:<http://www.sciencedirect.com.oasis.unisa.ac.za/ science> [Accessed on

15 January 2010]
Stacey, R.D, 1996. Strategic Management & Organisational Dynamics. 2nd edition.
London: Pitman Publishing.
The Economics of Vermiculite. 2004. Roskill Information Services Ltd. 8th edition.
London: SW19 7BB
The Vermiculite Association. 2010. Papers and Reports. [online]. Available from:<
http://www.vermiculite.org/papers.htm > [Accessed 18 January 2010]
Ulwick, A. W. 2002. Turn customer input into innovation, Harvard Business Review,
80(1): 91-7.
68
U.S Geological Survey, 2010. Vermiculite Statistics and Information. [online].

Available from:<http://minerals.usgs.gov/minerals/pubs/commodity/vermiculite/
[Accessed 28 February 2010]
Ward, D. 2005. An Overview of Strategy Development Models and the Ward-Rivani
Model. Italy: European School of Economics.
Yadav, O. P. and Goel, P. S. 2008. Customer satisfaction driven quality
improvement target planning for product development in automotive
industryInt, International Journal of Production Economics, [online]. 113, 9971011. Retrieve January 18, 2010. From Elsevier. Available from:<http://www.
sciencedirect.com.oasis.unisa. ac.za/science> [Accessed on 18 January 2010]
Web sites:
http://www.vermiculite.org/pdf/vhse.pdf (TVA)
http://tutor2u.net
Data Bases:
Palabora Vermiculite: L:Drive
69
9. Appendices
9.1 Appendix 1: Palabora Vermiculite open pit mining area
Source from: PMCs archives
70
9.2 Appendix 2: Theoretical underpinnings of new product adoption in uncertain

environments
Theoretical underpinnings of new product adoption in uncertain environment

Theory / conceptual
Theoretical insight
Outcomes
model
Innovation
diffusion S-shaped new product

diffusion and adoption rate
model (Rogers, 1983)
Categorizing customers on
adoption rate
Communication to diffuse
new product information
Market orientation (Kohli Customer orientation

& Jaworski, 1990)
Competition
Cross-functional integration
Product orientation
Technical superiority
Speed to market
Timing of product
launch
Targeting customer
initiators
Product meets
customers needs
Create customer
demand
Achieve customer
satisfaction
Customer input and
feedback
Product technical
sophistication
Product technology
Technical / product synergy
Organisation
learning Continuous learning
(Slater & Narver, 1995)
Technology-base
competencies
Discontinuous
innovations
Customer education
Exploit competencies
Extensive communication
Flexible systems
Challenge existing
technology
Product-user interface
Source from: Eng and Quaia. 2009. Strategies for improving new product adoption in uncertain
environments: A selective review of the literature. 276.
71
9.3 Appendix 3: South Africa customers questionnaire.

South African Customers Questionnaire
Dear, Vermiculite Consumer
Company Name
Confidentiality
Your survey responses will be strictly confidential and data from this research will be reported
only in the aggregate. Your information will be coded and will remain confidential. If you have
questions at any time about the survey or the procedures, you may contact Ronald du Toit by
email at the email address [email protected].
You are hereby invited to participate in Vermiculite market research survey. As part of my MBA
studies your participation will enable Palabora Vermiculite (PV) to identify customers product
preference, why curtain grades demand increase and others decrease and to determine
alternative uses for finer grades vermiculite. Special attention regarding questions has been
placed on the marketing of finer grade vermiculite.
Question 1
What type of Vermiculite grades is your company currently using?
Large
Medium
Superfine
Fine
Micron
Question 2
For what type of applications does your company use vermiculite?
Boards
Construction
Fire protection
Insulation
Agri-/Horticultural
Refractory
Friction lining
Question 3
What product qualities are the most important to your process?
a) Screen Sizing
Unimportant
Less important
Important
Very important
Flexible
Less important
Important
Very important
Flexible
Less important
Important
Very important
Flexible
Important
Very important
Flexible
b) Non exfoliating content

Unimportant
c) Yield
Unimportant
d) Moisture analysis
Unimportant
Less important
72
Question 4
How would you rate Palabora Minings product availability?
Very satisfied
Satisfied
Neutral
Dissatisfied
Very dissatisfied
Question 5
Is your company currently doing research and development (R&D) with regard to vermiculite?
(Product development / product innovation)
Yes
No
If Yes, would your company be interested in PV assisting your company with R&D
Yes
No
If No, would your company be interested in assisting PV with R&D

Yes
No
Question 6
Has your company considered expanding their applications / product range?
Yes
No
If Yes, please print the applications types. _______________________________

Question 7
Has your company had any enquiries regarding the use of vermiculite as a substitute product
for asbestos? (New Asbestos legislation introduce in 2004)
Yes
No
If YES, please state the application and number of enquiries. ________________

________________________________________________________________
Question 8
What are the main reasons for your company using a specific vermiculite grade?
_____________________________________________________________________
Question 9
What do you like about Palabora Vermiculites products?
_____________________________________________________________________
Question 10
What
barriers
restrict
your
company
from
growing
your
vermiculite
business?
_____________________________________________________________________
73
9.4 Appendix 4: International customers questionnaire.

International Customers Questionnaire
Dear, Vermiculite Consumer
Company Name..
Confidentiality
Your survey responses will be strictly confidential and data from this research will be reported
only in the aggregate. Your information will be coded and will remain confidential. If you have
questions at any time about the survey or the procedures, you may contact Ronald du Toit by
email at the email address [email protected].
You are hereby invited to participate in Vermiculite market research survey. As part of my MBA
studies your participation will enable Palabora Vermiculite (PV) to identify customers product
preference, why curtain grades demand increase and others decrease and to determine
alternative uses for finer grades vermiculite. Special attention regarding questions has been
placed on the marketing of finer grade vermiculite.
Question 1
What type of Vermiculite grades is your company currently using?
Large
Medium
Superfine
Fine
Micron
Question 2
For what type of applications does your company use vermiculite?
Boards
Construction
Fire protection
Insulation
Agri-/Horticultural
Refractory
Friction lining
Question 3
What product qualities are the most important to your process?
a) Screen Sizing
Unimportant
Less important
Important
Very important
Flexible
Less important
Important
Very important
Flexible
Less important
Important
Very important
Flexible
Important
Very important
Flexible
b) Non exfoliating content

Unimportant
c) Yield
Unimportant
d) Moisture analysis
Unimportant
Less important
74
Question 4
How would you rate Palabora Vermiculite product availability?
Very satisfied
Satisfied
Neutral
Dissatisfied
Very dissatisfied
Question 5
Is your company currently doing research and development (R&D) with regard to vermiculite?
(Product development / product innovation)
Yes
No
If Yes, would your company be interested in PV assisting your company with R&D
Yes
No
If No, would your company be interested in assisting PV with R&D

Yes
No
Question 6
Has your company considered expanding their applications / product range.
Yes
No
If Yes, please print the application types. _______________________________

Question 7
Do you think having a central warehouse in your country will or is beneficial to your business?
Yes
No
If YES, please state the reasons for this.
_____________________________________________________________________
_____________________________________________________________________
Question 8
Does your company make use of other vermiculite suppliers?
Yes
No
If YES, please state the reasons for this.
_____________________________________________________________________
_____________________________________________________________________
75
Question 9
What are the main reasons your company uses a specific vermiculite grade?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Question 10
What barriers restrict your company from growing your vermiculite business?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
76
9.5 Appendix 5: South Africa customers questionnaire feedback

Company
V-Board
Xstrata
name
Insutech
Mandoval
Techniblend
Micronized
Insulation
(Respondent)
Q1
M,S/F
M,F,S/F, mic
L,M,F,S/F, Mic
M,S/F, Mic
Q2
C,H/A,R
C,H/A,R
C,R
H/A
Q3 a
Q3 b
Q3 c
Q3 d
Q4
Q5
Yes
PV
to
No
Yes
assist
Q6
PV
to
assist
Yes
No
Yes
construction
,Friction
Yes
PV
to
Yes
PV
to
Yes
PV
assist
assist
assist
No
No
Yes
lining
to
construction
Q7
Yes
No
Yes
Yes
Yes
Yes
Q8
Best
Best product
Customer
Customer
Customer
Customer
for
Requirement,
Requirement,
Requirement
Requirement
best
best
Quality
product
for
end
end
application
application
Q9
product
for
end
application
Product
Product
Product
Product
Product
availability&
availability
availability
availability&
availability&
Quality
Quality
Demand
Demand
Cost
of
vermiculite
Company
end
application
Quality
Q10
product
for
Cost
of
vermiculite
Cost
of
vermiculite
Business
risk
Parma
Rascal
Rosarium
CPS
Ezigro
Nurseries
Seeds
Nursery
Seedlings
Seedlings
Q1
M , F, Mic
L,M
L,M,F
Q2
H/A
H/A
H/A ,C
H/A ,C
H/A
H/A
Q3 a
Q3 b
Q3 c
Q3 d
Q4
name
Vermix Agric
(Respondent)
77
Q5
No
No
No
No
No
Yes , PV to
assist
Q6
No
No
No
Yes
No
Yes
refractory
Q7
Q8
No
No
Yes
No
Customer
Customer
Customer
Best
Requirement
Requirement
Requirement
for
product
end
No
No
Customer
Best product
Requirement
for
application
Q9
Quality
Quality
Quality
refractory
end
application
Quality
Quality
Product
availability
Q10
Business
Demand
Demand
risk
Cost
of
vermiculite
Business
Cost
of
risk
vermiculite
Legend
Grades
Applications
Question 3
Question 4
Large
Construction
Flexible
Very Satisfied
Medium
Horti/Agricultural
H/A
Very important
Satisfied
Fine
Refractory
Important
Neutral
Superfine
S/F
Friction lining
Fl
Less important
Dissatisfied
Micron =
Mic
Unimportant
Very Dissatisfied
78
9.6 Appendix 6: International customers questionnaire feedback

Geographical area
Asia
America
Europe
Q1
L,M,F,S/F, Mic
L,M,F,S/F
L,M,F,S/F, Mic
Q2
C,H/A,R,FI
C,H/A,R,FI
C,H/A,R,FI
Q3 a
Q3 b
Q3 c
Q3 d
Q4
Q5
60% of customers are doing
17% of customers are doing R&D ,
No , only improvements on
R&D , 90% want PV to assist
all want PV to assist
existing end applications
40% consider expanding ,
100 % consider expanding,
Mostly high , tech applications
construction refractory
(Respondent)
Q6
i.e.
Yes , friction lining
I .e construction refractory
Q7
Q8
Yes , just in time (JIT) delivery
Yes , just in time (JIT) delivery to
Yes , just in time (JIT)
to customers
customers
delivery to customers
No
Yes
due
to
coarse
grade
availability and price

Q9
Best
product
for
end
application
Customer
Yes , due to coarse grade

availability and price
requirement
best
product for end application
Best
product
application
for
end
historical
formulations ( if it works do
not change it )
Q10
Product availability price gap (
Product
PV vs Competitors ) Lack of
grades
availability
in
coarse
Product availability in the

coarser grades , cheaper
technology development
substitutions
price
of
vermiculite and financial

constraints , the limited
number of applications
Legend
Grades
Applications
Question 3
Question 4
Large
Construction
Flexible
Very Satisfied
Medium
Horti/Agricultural
H/A
Very important
Satisfied
Fine
Refractory
Important
Neutral
Superfine
S/F
Friction lining
Fl
Less important
Dissatisfied
79

Marketing Options

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Marketing Options

Uploaded by

Copyright:

Available Formats

STRATEGIC MARKETING OPTIONS

In partial fulfilment of the

MASTERS DEGREE IN BUSINESS ADMINISTRATION,

Declaration of own work

SIGNED: R. du Toit (electronically)

To determine why the customers prefer coarser grades.

To investigate potential alternative uses for finer grades.

To determine how the finer grades can be marketed to current users of

Definite boundaries exist with in the research study due to geographical

From analysis of data collected, the following observations were made:

Different price strategies can be adopted for different situations i.e.:

To develop alternative uses for finer grades vermiculite PV needs to engage in

Problem in context, Problem statement and Objectives ............................................... 9

Background and problem in context .................................................................... 10

Problem review .................................................................................................... 12

Problem statement/ Research question............................................................... 16

Importance of the research to Palabora Vermiculite ............................................ 17

Research limitations ............................................................................................ 17

Problem analysis / theoretical consideration............................................................... 18

Determine why customers prefer coarser grades ................................................ 20

Investigate potential alternative uses for finer grades .......................................... 21

Literature Review ........................................................................................................ 26

Customer preference ........................................................................................... 26

Product development / innovation and alternative uses ...................................... 28

Marketing strategies ............................................................................................ 30

Research Design and Methodology ............................................................................ 35

Aims of Research ................................................................................................ 36

Data gathering procedures .................................................................................. 36

Characteristics of the sample .............................................................................. 39

Data analysis approach ....................................................................................... 40

Limitations of the research project ....................................................................... 41

Secondary results ................................................................................................ 51

Discussion of Results ................................................................................................. 61

Why customers prefer coarser grades ................................................................. 61

Potential alternative uses for finer grades ........................................................... 61

Conclusions and Recommendations .......................................................................... 63

Appendix 1: Palabora Vermiculite open pit mining area ...................................... 70

Appendix 2: Theoretical underpinnings of new product adoption in uncertain

Appendix 3: South Africa customers questionnaire. ........................................... 72

Appendix 4: International customers questionnaire. ........................................... 74

Appendix 5: South Africa customers questionnaire feedback ............................. 77

Appendix 6: International customers questionnaire feedback ............................. 79

1.2 Background and problem in context

To determine if possible strategic marketing

Figure 1.1: Brainstorming outcome

excess finer grades

Increase logistic costs

courser Mine plan

Figure 1.2: Brain map

1.3 Problem review

leaves PV in a vulnerable position which can lead to competitors entering their

Figure 1.3: Winnowing process

% Vermiculite sales per Region - 2009

Figure 1.4: Vermiculite percentage sales per Region - 2009

1.4 Problem statement/ Research question

There is an increase in finer grade production, what strategic marketing

Research question (Problem statement)

To determine why the customers prefer coarser grades.

To investigate potential alternative uses for finer grades.

To determine how the finer grades can be marketed to current users of

1.5 Importance of the research to Palabora Vermiculite

1.6 Research limitations

To determine why the customers prefer coarser grades.