EMG500: Principles of Engineering Management
Dileep Bhargava Bharatula (89683),
Nikhita Peram,
International Technological University.
Strategies to fight low-cost competitors in the long-term
Introduction.
Any company with its premium products and brands will be facing low-cost competitors. In order to succeed in the market, companies need to develop strategies to fight its low-cost competitors. Companies with traditional customers ignore threats from low-cost competitors. This may cause the loss in the long term.
Low-cost competitors.
Low-cost competitors, increase their market slowly and in subtle ways. They may start to concentrate more on undeveloped market segments. They may replicate the original product model, use cost effective
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Short-term success is crucial for any business. Whether you are a startup looking for funding, or a company looking to successfully launch a new product or service, short-term success is necessary for long-term growth.
To achieve short-term marketing success here are few tactics:
1. Reduced pricing promotions: Limited time price reductions encourage customers to act. You likely have individuals within your sales channel who intend to buy but haven’t yet pulled it. Lowering the price will give them an incentive to purchase.
2. Group offers: This is an effective strategy for gaining exposure, especially with a new set of customers. Offers could also be tailored to provide a permanent discount to important groups. For example, you can target members of an organization that fall within your target market.
3. Pay-per-click (PPC) advertising: Pay-per-click campaigns are another way to become visible to new customers. Effective implementation of PPC campaigns are known to drive significant targeted traffic to your website. Be sure to run the numbers and make sure that you understand the break-even point so that you do not bid more per click than you expect to
The threat of new entry for the industry is low, as considered by high costs and intense price competition, which make the industry’s profit margins very low. In the United States the market is concentrated, where the 50 top firms, including: Wal-mart, Kroger, Safeway
Rivalry among established firms is fierce. There are several factors that illustrate this: established market players (6.1). The product is highly standardized and the switching costs of the customers are low. Players are aggressive (6.2)
Apart from brand confusion, competing to be the best, although initially advantageous to customers in terms of price reductions is disastrous for companies due to the costs involved in this race to converge offerings.
Firm E also has higher technological capability to reach out to market segment that our firm dominates. It has also been noted that the stock price of Firm E rose $7 to $50, increasing its value and giving the firm an incredible amount of capital to be invested for market capture. It has also been identified that our firm mostly compete against other players in market segments that are more price sensitive than those in others. This generally results in generating low returns when the cost of competition is high. For this particular market segment, however, price-based competition does not necessarily lead to increases in the size of the marketplace. Although, price-based competition is minimized with minimal gross margin for economy products, this competition could be intensified by providing our customers with rebates, preferred financing and long-term warranties. With such immediate capital available at hand, firms such as Firm E can attract our customer at its
Perhaps the most versatile of the marketing Ps is promotion. It covers all phases of communication between the seller and the potential customer. It is versatile because a change in budget, media or target audience can be made quickly. Promotions also can be effectively changed for specific market segment efforts. Major promotional concerns include the following:
In a monopolistic competitive market the product of different sellers are discerned on the basis of brands. Here the product differentiation given rise to an element of monopoly to the producer over the competing product. As such the producer of the competing brand could increase the price of the product knowingly well that the brand loyal customers are not going to leave them. This is possible as here the products have no effective substitutes. How ever since all the brands are of close substitutes to one another the seller would lose some of their customers to these competitors. In the past many companies have faced the trouble of having a bag full of customers and due to close-fitting .competitors they end up only having a few. Most entrepreneurs fell that fronting their competitors is the toughest part of running a business in a monopoly market. Thus the monopolistic competitive market is a mixture projecting out both monopoly and perfect competition.
In addition, supply-side economies of scale in the industry are crucial as new entrants would have to enter with large investments in scale in order to compete on a cost basis with companies within the industry. Last, an incumbency advantage independent of size is established brand value by big players in the industry making it extremely tough for new entrants to compete against. High rivalry exists in the sporting goods and apparel from brands such as Under Armour, Nike and Adidas potentially limiting the profitability in the industry. This can lead to price competition as these companies offer some similar products, and buyer switching costs are relatively low. Also, with larger amounts of resources available, the big players in the industry have the flexibility of their strong brand value to gain market share in international markets. The bargaining power of wholesale buyers in the sporting goods and apparel industry is high, as they can negotiate for lower prices amongst brands and drive down profitability within the
It is hard for new firms with a small market share to enter the oligopoly market and produce enough to make the product cheap for consumers to buy. The small amount of large firms can often produce large amounts of quantity to provide for all consumers to purchase. It is difficult for new firms to win market shares form existing producers, particularly if those firms have large advertising budgets, licenses, design patents or restrict access to raw materials on one way or another.
In today’s highly competitive market there is an overabundance of companies providing consumers comparable products and services. For a company to be competitive and remain solvent within the market business owners and managers must analyze and utilize multiple strategies to maintain and increase their market share. Of the many strategies the two most commonly utilized are the low-cost and best-cost providers. To understand these two commonly utilized strategies one must review the companies that have successfully implemented them.
More competition in lower trade as other firms will try to convince that their product is better than K2-products.
In today’s world, it’s hard to compete for accompany that don’t known well their competitors. It ‘s like walking blind into a fire. For instance, knowing a great deal on what a competitors is offering in term of products can help a company to differentiate it’s product and make it more appealing for the customers. If the competitor’s products have weakness, one could build a better product without the same weakness the competitor had and from there gain competitive advantage. Furthermore, knowing the price of the competition can allow one to set competitive prices as
In today’s world virtually all businesses are born into competition. There are situations in which multiple organizations offer similar products, a limited number of firms seek the same consumers, and other organizations offer the exact same product just at a different price or in a different variation. So how do firms attempt to outperform their competitors and sustain profits? They create a competitive advantage. A competitive advantage is a business concept that allows firms to outperform their competition by generating greater sales margins/profits or retaining a larger number of consumers. In knowing that different customers are attracted to different attributes companies use a variety of competitive dimensions in order to set themselves apart, these include: cost or price, quality, delivery speed and reliability, and flexibly and new product introduction. Each of these dimensions can be strategically used by an organization to outperform its competitors and ultimately result in giving that firm a distinct competitive advantage.
... types of offers like, discounts or whole different affordable packages. It merly depends on the situation and position of the business because if the company offers these discounts and packages throughout the year then they will not earn much profit. These offers can be given in the situations where company’s sales are becoming less or there is a low demand for the product. This strategy can boost up the sales and will help the company to stand back to it’s position in the market.
New entrants to an industry, with a desire to gain market share, will put pressure on prices, costs and capital needed to compete. It can affect the profit potential.
Those competitors who are selling the products which fulfill the same needs of the customer.