2.1. THEORETICAL FRAMEWORK
As already stated in the first introductory chapter, the goal of this research is to use several methods of assessment of the corporate market position, or in other terms the competitive position of the company, apply them to LLC “United Confectioners” and design a marketing strategy plan.
Currently there is no generally accepted method of assessment of company’s competitive position or, in other words, company’s competitiveness. There are many methodologies used in business or proposed by different authors. First of all, they can be divided into graphical and analytical. Some of these methods are presented in the Fig.1
Figure 1. Methods of assessment of company’s competitive position Source: Developed and summarized
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According to the first one, company’s status can be evaluated from industry monopolization level point of view, i.e., concentration of production and capital and the barriers to enter the market. The latter one is determined by the price-cost ratio, the level of the use of production capacities, production output, rate of return, etc. According to this approach, companies with more efficient production, sales and effective financial management are more …show more content…
Matrix methods
Matrix methods of assessment base on the use of matrix tables organized by rows and columns of elements. There are many matrix models, which can be used to assess the level of competitiveness of the company: The Boston Consult Group growth-share matrix; Porter 's strategic matrix, GE/McKinsey attractiveness-competitive position matrix [5]; directional policy matrix or «industry attractiveness/competitiveness» formulated by Shell; matrix «stage of the market / competitive position» (model Hofer/Schendel); the ADL Life-Cycle matrix. This group also includes the method of SWOT and PEST-analyses.
Using matrix methods, executives have the opportunity to assess the level of potential competitiveness both for their company and their competitors, which will help to develop a strategy for marketing behavior.
These methods, however, have certain advantages and disadvantages, which need be taken into consideration, while choosing the method for analysis. On the positive side are:
- simplicity of generalization of research
This business uses ANSOFF MATRIX for a growing business in the market and it uses penetration by increasing sales and profits in its stores by competing in the market using its products and services. RSPCA uses this strategy to increase the percent of sales without changing their product or service and it carries this out by improving the quality of its products and services so it meets customers’ needs and wants. It also carries out by attracting competitor’s customers in order to sell its products and services to the existing customers. Product development in this business is when there is a major change in the product or service. This is carried out in order to offer new product or service and to be marketed to existing customers
When testing if a corporate strategy is leading the company to success, there are techniques that can be used to project data collected from the company. Long term attractiveness, competitive strength, and the nine cell industry attractiveness/business strength matrix are used to highlight strategic positions of each business in a diversified company. The industry attractiveness gages the prospects for long-term performance. Competitive strength measures how strong the units are positioned in a business in their industry. Lastly, the nine cell industry attractiveness/business strength matrix merges information on attractiveness and competitiveness to show where in the industry does a unit fit when it comes to long-term success. Walt Disney
Each section of Ansoff's matrix shows a strategy which would be used in times with what you are doing. For example this is particularly relevant to Apple. Apple found a new market with an existing product. It decided to sell its laptops to a new market. Instead of promoting the power of the portable Mac to the middle of the road businessman who perhaps only needs a word processor and does not need a powerful laptop so originally it didn't take off. Instead it marketed as to a younger audience who saw it as a stylish yet powerful tool alternative to the laptop which in terms style was old fashioned. When the product was marketed to a different audience it stood out and it proved a very successful move in terms of sale. Another example of Apple's understanding of the matrix was its use of the iPod. The iPod has proved to be very successful due to its diversification. At the time of iPod's release there was nothing on the market that was similar to it in terms of style and capacity of songs. So therefore it was different to both a cd player and minidisk, which at the time were it's nearest rivals, and in this proved a very popular move and although it is a particularly high risk strategy it Apple would have had proven popularity in several different markets. This also applies to the PC market. Although Apple had originally had success in the war against PC's recently there had been much less success and PC had dominated households and businesses. However Apple recently diversified yet again and turned to a very user friendly product called a G5. The G5 leads the world in creating a new product for an old market. The PC market comes into threat because of a G5 which is essentially a touch screen computer without the need of a mouse etc. so it would be very useful in terms of businesses. There would be without the mandatory clicking which is notorious in businesses such as call centers and the G5 is similar in price to a PC yet is much more user friendly and takes much more space.
The BCG Growth-Share Matrix is a portfolio planning model that was developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. It is based on the observation that organisations business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor. Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability.
It is used to measure the position of a firm in relation to its relative market share as well as its market growth. Based on this the situation where in all of the given four divisions of the firm are at different levels of performance can be evaluated in order to formulate a 5 year strategy plan. This can help in the creation of a portfolio where in returns are optimized by re investing in growth oriented sectors and divesting out of the sectors that are saturated and loss making for the firm.
Analyzing situation prior a strategic decision is critical for generating or sustaining competitive advantages, especially when facing the dynamic environmental trend which can affect corporations’ performance positively or negatively. The main task for a situation analysis is to explore the external factors (that can imply what opportunities a firm should seize and what threats it has to pay caution to) and internal factors (that can tell what a firm can do to develop its strengths and to avoid its weaknesses). And as Sally, Lyndon & John (1996: 3) defined, the terminal object of a marketing plan is to achieve particular marketing strategy. And a marketing strategy, which expressed clearly by Subash (2004: 26), requires a corporation using its relative corporate strengths to better satisfy customer needs and finally achieve maximum positive differentiation over its competitors in a numbers of internal and external variables. While Malcolm (2006: 376) concluded that the main concern of a strategic marketing plan is to establish, defend and maintain competitive advantage. However, the market environment today is changing quickly, followed by the increasing keen competition. To maintain a certain competitive advantage is impossible in such situation and the only way to earn above-average return is to react rapidly with updated information from environmental scanning. Thus, no matter what the purpose of a marketing plan is, situation analysis is crucial to provide an overall understanding of existing competitive position, organizational capabilities and market trends which is ever-changing.
By using this structured analysis, firms can more easily evaluate the attractiveness of an industry and gain a complete overview of all relevant competitive factors that have to be considered in the process of establishment. It helps to better understand the present market structure and to evaluate as a consequence of that external threats and opportunities. Unfortunately, the analysis established by Porter is not a guarantee for success and above that, it is often accused for limitations, lack of considerations and inoperative outcomes. The non-observance of a collaborative economic behaviour and of governmental influence, the inflexibility of the model and furthermore lack of application to rapidly changing market conditions are major limitations that have to be considered.
We analyzed the competitive forces in an industry to help define an appropriate overall business strategy. It basically helps to determine which of the forces pose a major threat to the future success of the business and in what way.
The BCG matrix is used to identify fast growth opportunities accourding to that specific companies products in regards to the growth rate as well as the market shares. When the company takes advantage of high cash flow in hot selling products that company can make a profit on market shared growth opportunities. “ Named for its creator, the Boston Consulting Group, the BCG matrix aims to identify high- growth prospects by categorizing the company’s products according to the growth rate and market share. By optimizing positive cash flows in high- potential products, a company can capitalize on market-share growth opportunities.” Arline, K. (2015, February 3). However, like many strategies this does have its share of disadvantages. The BCG Matrix as good as it is, is only really effective in rating businesses and companies as very profitable
When a business thrives in gaining competitive advantage, it often sets eyes on a manifold of strategies that aim to em-better its image and its competitive positioning. It focuses on strategies that may help increase its rate of consumers acquisition, retention and satisfaction; strategies of industry and competitors analysis. Moreover, it sets eyes on those strategic process to build strong investments portfolios ( Liquidity) that can help establish longevity and leadership in the market. Competitive advantage inevitably leads to faster, continual exponential growth, increased sales, market share gains and overall business profitability.
3 0.36 4 0.48 2 0.24 Financial position 0.10 3 0.30 4 0.40 3 0.30 Profit Margin 0.11 3 0.33 4 0.44 3 0.33 Consumer loyalty 0.10 3 0.30 3 0.30 2 0.20 Value added services 0.06 3 0.18 3 0.18 2 0.12 Price Competition 0.10 3 0.30 3 0.30 3 0.30 Technology 0.06 3 4 0.40 4 0.40 3 0.30 TOTAL 1.00 3.35 3.43 2.57 This comparative analysis provides important internal strategic information. Numbers reveal the relative strengths of firms, but their implied precision is an illusion. Key performance indicators Source: TRAI, Crisil Research 1.
On the Ansoff matrix below is shown what growth strategies for new and existing products and markets can be used from the company.
Jerry Y. Wind has argued that “Market opportunity analysis is key to the survival and growth of any firm including national and international companies , particularly in the competitive marketplace.” ( The Lauder Professor and professor of Marketing, The Wharton School, Trustee, The Philadelphia Museum of Art) .
For assessing the industry profitability, Porter 5 Forces analysis tools were used to analyze one organization evaluation. In this case, the technique were used to analyze 7-Eleven Convenience Store specifically in Malaysia. Porter 5 Forces consists of 5 important area which is Threat of New Entrants, Bargaining Power of customers, Threat of substitute Products and services, Bargaining Power of suppliers, and competitive rivalry within the industry. Theoretically, the more powerful these forces in an industry, the lower its profit potential. The strength of each force differs by industry and changes over time. The competitive advantage that 7-Eleven has using these five forces is it has raised the barrier of entry for other competitors to enter the convenience store market as new competitors will require a huge capital investment in order to implement the information technology in their business in order to be competitive. Also, hypothetically being the first in the market, 7-Eleven could have made contracts with the Malaysia government to not allow other 24-hour convenience stores in the market for a certain time period, such as Astro had done, thus having a monopoly market in the beginning of their operations which will allow them to target a bigger market share.
Understanding sources of Sustained Competitive Advantage is extremely crucial to survive in the industry and this has become a major area of research in the field of strategic management. This paper correlates the relation between firm resources and sustained competitive advantage, based on the presumption that strategic resources are distributed across the firm.