So, the marketer Is bound to face many challenges as new companies and new Improved products make their entry on the market, the availability of new services roughs about by latest technology and the price reduction entailed in the process. The battle for conquering new clients and to retain the old ones is on, and only those marketers who have adopted the best strategies will finally succeed. The marketer has in hand many tools that he can use to help him in his task to have an edge over his company’s competitors.
He needs to find out all he can about them. He must constantly compare his company’s products, their prices, channels of distribution and the promotion campaigns with those of close competing firms. In this way he will be able to sort out areas of potential competitive advantage and stagnated. Competitor analysis Involves first Identifying and assessing competitors and then selecting which ones to attack or avoid. One of the most efficient tools used by marketers today is Porters Five Forces Analysis which helps them to contrast a competitive environment.
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It has similarities with other tools for environment audit, such as PEST analysis, but tends to focus on the single, stand alone, business or Strategic Business unit rather than a single product or range of products. The Five Forces Analysis looks at five key areas that the marketer must address 1 . The competitive rivalry within the industry . The threat of substitute products 3. The bargaining power of buyers, 4. The bargaining power of suppliers and 5. The threat of new entrants. Pick] 1 THE COMPETITIVE RIVALRY WITHIN THE INDUSTRY This force describes the intensity of competition between existing companies in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry. Competition between existing companies is likely to be high when There are many companies of about the same size, having similar strategies, and struggling for market leadership,
There is not much differentiation between companies and their products; hence, there is much price competition, Low market growth rate, so that growth of one particular company is only possible at the expense of a competitor, Barriers for exit are high, implying that companies have to strive within the industry rather than High fixed costs result in an economy of scales, when total costs are mostly exit, fixed costs, the firm must produce near capacity to attain the lowest unit costs, Low switching costs when a customer can freely switch from one product to another, High storage costs or highly perishable products cause a producer to sell goods as soon as possible, thus the competition for customers intensifies, Strategic stakes are high when a firm is losing market position or has potential for great gains, diversity of rivals with different cultures, histories, and philosophies make an industry unstable, Industry shakeout when a growing market and the potential for high profits induces new firms to enter a market and incumbent firms to increase production and appoint is reached where the industry becomes crowded with monitors. The marketer needs to look at all of the dimensions that identify strategic groups and mix, customer services; pricing policy; distribution coverage; sales force strategy; and advertising and sales promotion programs. He must also study the details of each competitor’s R, manufacturing, purchasing, financial and other strategies. The marketer needs to assess each competitor’s strengths and weaknesses carefully in order to forecast competitor’s future strategies.
He may also conduct primary marketing research with customers, suppliers, and dealers. He can resort to enchaining the company’s products, processes and services to other leading firms in other industries to find ways to improve quality and performance. Benchmarking has become a powerful for increasing a company’s competitiveness. Michael Porter suggested four basic competitive positioning strategies that companies can follow-three winning strategies and one losing one. The three winning strategies include: I) Overall cost leadership: Here the company works hard to achieve the lowest costs of production and distribution so that it can price lower than its competitors and win a large market share. It) Differentiation:
Here the company concentrates on creating a highly differentiated product line and marketing program so that it comes across as the class leader in the industry. Iii) Focus: Here the company focuses its effort on serving a few market segments well rather than going after the whole market. More recently it has been suggested that companies can gain leadership positions by delivering superior value to their customers, by adopting any of these three strategies called value disciplines which are: (a) Operational excellence: The company provides superior value by leading its industry in price and convenience by educing costs and creating a lean and efficient value-delivery system. B) Customer intimacy: The company provides superior value by precisely segmenting its market and then tailoring its products or services to match exactly the needs of the targeted customers. Product leadership: The company provides superior value by offering a continuous stream of leading-edge products and services that make their own and competing products obsolete. So the marketer will eventually design his plan according to whether his firm is a market leader, or a market challenger, or a market follower, or finally a market niches. THE THREATS OF SUBSTITUTE PRODUCTS A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose.
They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing firms. This category also relates to complementary products. The marketer must bear in mind the factors that determine the threat of substitutes like: Brand loyalty of customers, and their willingness to substitute, Close customer relationships, The relative price for performance of substitutes, Current trends. 3 THE BARGAINING POWERS OF BUYERS The power of buyers is the impact that customers have on a producing industry. In general, when buyer is strong, the relationship to the producing industry is near to what an economist terms a monopoly – a market in which there are many suppliers and one buyer.
Under such market conditions the buyer sets the price. In reality few monopolies exist, but frequently there is some asymmetry between a producing industry and buyers. Bargaining power of buyers depends on: Concentration of buyers; there are a few buyers with significant market share ND many sellers in the industry, Buyers purchase a significant proportion of output – distribution of purchases when the product is standardized, The role of quality and service, Threat of backward and forward integration into the industry where buyers can threaten to buy producing firm or rival, Switching costs, it is easy for buyers to switch their supplier. THE BARGAINING POWER OF SUPPLIERS The term ‘suppliers’ comprises all sources for inputs that are needed in order to provide goods or services. A producing industry requires raw materials – labor, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at high price to capture some of the industry profits. The power of suppliers tends to be a reversal of the power of buyers. 4. 1 Supplier bargaining power is likely to be high when: The switching costs are high e. G. Witching from one software supplier to another, Brand is powerful e. G. Cadillac, Pizza Hut, Microsoft, There is a usability of the supplier integrating forward in order to obtain higher prices and margins e. G. Brewers buying bars, Customers are fragmented (not in clusters) so that they have little bargaining power e. G. Gas/Petrol stations in remote places, The market is dominated by a few large suppliers rather than a fragmented source of supply, There are no substitutes for the particular input, The suppliers customers are fragmented, so their bargaining power is low, The switching costs from one supplier to another are high. 4. Supplier bargaining power is likely to be weak when: The suppliers customers are fragmented, so their bargaining power is low, The buying industry has a higher profitability than the supplying industry, The buying industry hinders the supplying industry in their development (e. G. Reluctance entry. 5. THREAT OF ENTRY It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms may enter the industry and affect competition. In theory, any firm should be able to enter an exit a market, and if free entry and exit exist, and then profits always should be nominal. In reality, however, industries possess heartsickness that protect the high profit levers of firms in the market and inhibit additional rivals from entering the market. These are barriers to entry.
Barriers to entry are more than the normal equilibrium adjustments that markets typically make. For e. G, when industry profits increase, we would expect additional firms to enter the market to take advantage of the high profit levels, over time driving down profits for all firms in the industry. When profits decrease we would expect some firms to exit the market thus restoring market equilibrium. Firm may also be elucidate to enter markets that are extremely uncertain. Firms keep prices artificially low as a strategy to prevent potential entrants from entering the marker. Barriers reduce the rate of entry of new firms, thus maintaining a level of profit for those already in the industry. 5. Barriers to entry Economies of scale (minimum size requirements for profitable operations) High initial investment and fixed costs Cost advantages of existing firms Brand loyalty of customers Switching cost for customers Access to distribution channels controlled by existing firms Scarcity of important resources e. G. Qualified expect staff Government regulations Access to technology The likelihood of retaliation from existing industry firms Access to raw materials is controlled by existing firms Existing firms have closed customer relation, e. G. From long- term service contracts Patents and proprietary knowledge serve to restrict entry into an industry Some of an industry entry and exist barriers are summarized as follows:- I Easy to Enter if there is : I I Common technology how Difficulty in brand switching channels I Low scale threshold
I Easy to Exit if there are: I Salable assets I Low exit costs I Difficult to Enter if there is: I Patented or proprietary know- I Little brand franchise I Access to distribution I Restricted distribution channels I High scale threshold I Difficult to Exit if there are: I Specialized assets I High exit costs Barriers to exit work similarly to barriers to entry. Exit barriers limit the ability of a firm to leave the market and can exacerbate rivalry- unable to leave the industry, a firm must compete. The nature and fascination of business is that it is not static for instance phone impasses, computer firms, and entertainment are merging and forming strategic alliances to remap the information terrain.
To counter the five forces, strategies can be formulated on three levels: Corporate level Business unit level Functional or departmental level The business unit level is the primary contest of industry rivalry. The three generic strategies (cost leadership, differentiation and focus as discussed earlier) that can be implemented at the business unit level to create a competitive advantage. The proper generic strategy will position the firm to leverage its strengths and defend against the adverse effects of the five forces. Having seen the strategies to counter the negative effects of the five forces model, the marketer must now consider the limitation of this same five forces model. Care must be taken not to under estimate or underemphasize the importance of the existing strengths of the organization, It does not cope with synergies and interdependencies within the portfolio of large corporations, From a more theoretical perspective the model does not addressed the possibility that an industry could be attractive because certain companies are in it, Some claim that environments which are characterized by rapid, systemic and radical change require more flexible, dynamic or emergent approaches to strategy formulation, Sometimes it may be possible to create completely new markets instead of selecting from existing ones. ON MARKETING PLANS”. WHAT ARE THE DIFFERENT STAGES OF ANY MARKETING PLANS. Marketing is a critical component of any business strategy. Unfortunately, it is not often given the importance it deserves. This is due to a multitude of misconceptions. For starters, it is treated as a cost instead of an investment. Using this stance, it is often one of the first things to take a cost cut when controls become tighter.
Secondly, younger organizations hardly ever commit to long term campaigns with consistency, primarily because of lack of instant results. Along with a few other misconceptions involving lack of expertise and experience, marketing is often left on the back burner. Listed below are five steps to get any marketing strategy in place, with a plan. 1. 1 Step One – Situational Analysis: Prior to starting any marketing campaign, it is essential to do a thorough analysis on the industry. Facts such as market share, growth, trends and economic policies are critical pieces of information. Next, it is important to find out about the entrenched competitors. Who are they?
What is their market share? How fast have they been growing? Then comes the search for the major distributors in the industry, discounting policies, strategic alliances and any other information that may help to get a better understanding of where to take a stance while taking into account the following factors: Marketing environment, Laws and regulations, Politics, The current state of technology, Economic conditions, Socio-cultural aspects, Demand trends, Media availability, Stakeholder interests, Marketing plans and campaigns of competitors, Internal factors such as experience and resource availability. PEST, Porter’s Five Forces, Marketing environment.
Listed below are some of the critical things to look at when doing a situational analysis: (l) The Industry: Before going any further, there is a necessity for information regarding the growth rate of the particular industry. What are it’s historic trends? What were the revenue figures for the segment? Have any major genealogical innovations taken place in it recently? Is the industry very segmented? These are some preliminary questions of interest and importance when looking at an opportunity in a particular industry. (II) Competitors: This is an important segment, one in which the need to document as many direct and indirect competitors in the market place as possible.
To look at their teams, products/services, pricing and any other marketing collateral which could be found. It is important to remain constantly vigilant about all competitors, this is a must for any company regardless of size. Creating document files which can be referenced easily, this will come in handy during later sections, when positioning and promoting the product as well. (Ill) Distributors: Is the industry dependent on any major suppliers or distributors? If this is the case, then there is a need to find out maximum information regarding their operations, team, pricing and discounting practices. Developing strategic partnerships with key distributors in the market place can become a very strong competitive advantage in the market place.
Dell has executed this superbly in partnerships with Intel and Microsoft. ‘V) Internal Assessment: If you have already developed, or are in the process of developing a product/service line, this section will highlight where you stand in the current market place. Through this section, a SOOT (Strengths, Weaknesses, Opportunities, Threats) analysis is available. This analysis will also help identify your strengths, and pinpoint where you should avoid competing in the market place. Using data assembled in this section, you will be able to identify, where you face major threats and where the most opportunities lie. It will also help you gauge market demand with a closer and more precise perspective.
This step requires considerable searching and scouring for data, do this as a team, it becomes a little more exciting! 1. 2 Step Two- Marketing Objectives: Every plan needs to have specific goals and targets that it wants to achieve. This section can be used to plan what the organization’s major marketing objectives need to be. This could include market share, customer acquisition, customer retention, website traffic or expected ROI on certain marketing tactics. These need to be thought through, and be strongly linked to major objectives set out in the business plan. Using the opportunities identified in the situational analysis post, we will construct the next part of the marketing plan, which includes establishing objectives.
These objectives will serve as beacons to be used as guides when developing specific strategies. It is important that these objectives should be specific, measurable, attainable, realistic and time specific. Without clearly identifying targets, is like objectives should be established: (l) Market Penetration: Using data collected during the research phase, should give an approximate idea of the market share held by the competition. Sometimes this data is difficult to come by, in the past, lists of the major competitors when adequate information was not available. The point of this task is to identify the competition, and set realistic targets of where you want to be on that list.
The important part is setting a target.. (II) Marketing Metrics: When setting objectives, it is important to use key benchmarks which can continuously compare yourself with. These objectives can be pegged to major activities such as website traffic, newsletter sign-up rates, number of queries, pipeline activity, deal closings or sales staff turnover. These numbers will be a reflection of whether promotional strategies are paying off or not. More importantly is to develop promotional strategies around these numbers as well. If the current website is attracting about 1000 visitors daily, what will it take to hit the website traffic objectives of 2000 visitors?
When establishing these metrics it is necessary make sure they are realistic and attainable. (Ill) Financial Objectives: The company SCOFF is always wary of the marketing budget. The reason being, there are often no clear financial objectives justifying marketing plans. This section of the plan should outline specific financial argues that need to be achieved when devising the plan. This would include turnover targets, profitability targets as well as improvement of product/service margins. At the end of the quarter or year, there should be Justification for the expenditure incurred on marketing. It is important for a startup with limited resources to think this section through carefully.
Usually the opportunity cost is high, it is imperative that it is used correctly. It is up to the team to set objectives in such a manner, that responsibility for certain key metrics and objectives, is person specific. It is that individual’s responsibility to continually monitor progress and provide feedback to the team. This will create a culture where responsibility will be shared, and more importantly, will help the team realize the importance of good marketing. The objective must pass the SMART test otherwise it will be too vague and will not be realized, because the rest of the plan will hinge on the objective. If this is not correct, the plan may fail.