Term Paper on "Marketing Strategy"

Term Paper 4 pages (1674 words) Sources: 1+

[EXCERPT] . . . .

Marketing Strategy

Discuss the conditions that might enable a new competitor to enter a mature product-market.

The factors that favor the success of an entirely new competitor entering a mature product-market have often been correlated to the level of research & development investment that fueled the innovation of next-generation products and services. This dynamic has certainly been the case in the high technology industries. Dr. Michael Porter's Determinants of Competitive Advantage Model is one of the most used by practitioners to analyze why new entrants to markets are successful in gaining significant competitive advantage. Ketels (2006) states that the Porter Model highlights the fact that new competitors entering existing markets stand the best chance of success by significantly increasing the productivity of customers through the use of new processes and technologies. The Boston Consulting Group growth/share matrix based on the strategic planning completed at General Electric also illustrate how new competitors can enter an existing mature market through an aggressive substitution of under-performing products that may lack differentiation and have resorted purely to price. The growth/share matrix and comparable models are analyzed by Proctor and Kitchen (1990) and the conclusion is that new entrants have the advantage of re-directing mature markets through more precise alignment of product strategies to current unmet needs. New competitors can also enter and dominate mature markets by re-defining the market itself, using insights into the unmet needs and concentrating on delivering entirely different, and often higher levels of value to customers. This is often called blue ocean strategies, based on the research of W. Chan Kim and Renee Mauborgne (2005) who found that through empirical analysis of mature markets, there was an inflexion point where new competitors redefined the needs of customers and in the process created entirely new markets. Taking an entirely different perspective on the customers' substitute products and the needs they have leads to the creation of blue ocean markets, which as Kim and Mauborgne define, are uncontested markets. All of these models and tools together can lead to successful introduction of new products and services into mature markets.

Q: Are vertical relationships more likely to be successful than horizontal relationships? Discuss.

The fact that the majority of supply chains are vertical in design, and that given the increase in speed, accuracy of information, and response times are often making the difference in profitability in entire industries, vertical relationships are more critical. What makes supply chains and their vertical relationships so important is the need to have demand (or orders) known instantly throughout the supply chain so that each contributing supplier to a product can respond and ensure all necessary components come together to deliver the finished product on time to the customer. The concept of the Demand Driven Supply Chain (DDSN) originally defined by AMR Research and discussed in an article by Ledyard and Keough (2007, July) illustrate how the synchronization of suppliers can have immediate financial impact on both the suppliers and the manufacturers they serve. Nokia's success with this approach to vertical integration of suppliers is illustrated in the research completed by Collin and Lorenzin (2006) and is well-known from the successes of the Toyota Production System (TPS) supply chain synchronization aspects.

Q: What factors may affect the length of the new-product planning process?

The new product development process is one of the most complex within any organization. It requires intensive coordination between engineering, product development, marketing, management, service, support, purchasing, procurement and sales. With so many departments involved, it is common to find companies relying on cross-functional meetings to manage the process and ensure products under development are released on time. The first and most significant factor that influences the new product planning process is the level of communication between these departments in an organization. The second factor is the ability of the company's marketing, engineering, and product development teams work together to understand the direction of the markets they plan to develop products for, and this includes an expert-level knowledge of the potential customers' unmet needs and substitute processes and products being used. Third, the need for having engineering be highly collaborative during the development process is crucial, and this pervades from the design documents to the actual Computer-Aided Design (CAD) files and resulting definition of the prototype as well. Fourth, there needs to be tight integration with suppliers and the ability to quickly gain prototypes of components and subassemblies that are in more advanced products, built for the first time specifically for the product under development. An example of this type of sourcing is the flat plastic panels on the front of the Apple iPhone, which were specifically created for the phone with specific coatings to reduce glare yet allow for viewing of all forms of content available on the device. Fifth, there needs to be a high degree of synchronization across all of these processes and programs to create new product development systems that are highly attuned to the demands of customers and reflect that demand back into the supply chain. The following figure from Burkett (2005) illustrates this point.

Source: Burkett (2005, July).

Q: How can a company combine the strengths of global brands with the need to adapt to local market requirements in a multinational operation?

Increasingly global brands are relying precisely on this strategy, as is evidenced by the work of Nike in Europe relative to the U.S., the pervasive use of this practice by Coca-Cola, and the innovative new branding techniques Starbuck's is using globally. Each of these companies uses their brand to generate awareness in local markets globally and then tailored their entire marketing mix, including products, to the needs of the local market or region. The entrance of Starbuck's into Asia and Australia is a case in point. The familiar stores are located on corners throughout Sydney for example, yet the drinks and menus are tailored to the tastes and preferences of the Australians. Nike is doing the same strategy in Europe, tailoring their products and most importantly, messaging to the European markets where Adidas dominates the majority of Western European nations. The bottom line is that companies rely on their global brand to generate awareness yet tailor their entire product mix to the needs of a given market, often taking great efforts to be as aligned with the preferences and wants of the country or region.

Q: Distribution analysts indicate that costs for supermarkets equal about 98% of sales. What influence does this high break-even level have on supermarkets' diversification into delis, cheese shops, seafood shops, and flowers?

Supermarkets are actually supply chain consolidators that act as both pick, pack, and ship and retailing locations. Fulfilling these dual roles is costly and requires intensive inventory and retail management at the same time. As is typical of many distribution-centric businesses, these dual roles are expensive to complete and by themselves, are not margin producing. Due to the low margins that supermarkets, as distribution businesses generate it's critical that higher-margin businesses be launched. These higher-margin businesses include delis, cheese shops, seafood shops, and flowers that are relied on to bring the aggregate gross margins of the supermarket up from a typical 1 or 2% level based on grocery sales alone. In addition to the increase in margins due to these complimentary businesses, supermarkets also position their stores as more convenient by having all these additional shops. Supermarket chains in fact position these specialized shops as making the store more attractive and more trendy, and hopefully generating more loyalty from its shoppers as a result.

Q: Under what conditions is a firm's promotion strategy more likely to be advertising/sales promotion-driven rather than personal selling-driven?

When a company chooses an advertising and sales promotion-driven strategy over personal selling, it is because the sales cycles for the products being sold are typically much… READ MORE

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