March 31, 2012

Marketing of Financial Services-Designing Competitive Strategies

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Designing Competitive Strategies

Designing Competitive Strategies

We can further classify the firms by the role they play in the target market. These are :
1.     Market leader – Who has 40 % or more then market shares in the industry. 
2.     Market challenger – Who has 30 % market shares in the industry.
3.     Market follower – Who has 20 % market shares in the industry.
4.     Market nicher – Who has 10 % or below 10 % market share in the industry.

Market leader Strategies.

A.  Market leader Strategies.          (To Get Download Option Click Read More)
            Many industries contain one firm or a firm, which has 40 % or more than 40 % market share is called market leader. It usually leads the other firms in price changes, new product
innovation or introduction, distribution coverage and promotional intensity. Some of the well known market leaders are Kodak ( photography ), Coca - Cola ( soft drink ), Mcdonald ( fast food ), Microsoft ( computer software),  and so on.    

1.  Expanding total market :
            The dominant firm normally gains the most when the total market expands. In general, the market leader should look for new users, new uses and more usage of its products. 

(a)  New users :
            Every product class has the potential of attracting buyers who are unaware about the product or who are resisting it because of price or lack of certain features. A company can search for new users among the three groups. Those who might use it but do not use or buy it at present ( market penetration strategy ), those who have never use it ( new market segment strategy ) or who live elsewhere ( geographical expansion strategy ).   

(b)  New uses :
            Markets can be expanded through discovering and promoting new uses for the product. In many cases, customers deserve credit for discovering new uses. For example, Vaseline petroleum jelly started out as a lubricant in the machine shops. Over the years, users have reported many new uses for the product, including a skin ointment and hairdressing.    

(c)  More usage :
            A third market expansion strategy is to convince people to use more products per use occasion. Soft drink manufacturers convince the customer to use more soft drinks daily rather than to use on occasions.  

2.  Defending market share :
            While trying to expand total market size, the dominant firm must continuously defend its current business against rival attacks. The market leader leads in the industry in developing new product and customer services, distribution effectiveness and cost cutting. It keeps increasing its competitive strength and value of the customers. Market leaders are using different types of strategies to defending their market share. These are : 

(a)  Position defense : 
            The basic defense is to build an impregnable fortification around one’s territory. Coca – Cola today, selling nearly half the soft drinks in the world, has acquired fruit drink companies and diversified into desalinization equipment and plastics. Although defense is very important, leaders under attack would be foolish to pull their resources into only building fortifications around their current product.     

(b)  Flank defense : 
            The market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. 

(c)  Preemptive defense : 
            A more aggressive maneuver is to attack before the enemy starts its offense. A company can launch a preemptive defense in several ways. It can wage guerrilla action across the market – hitting one competitor hare, another there – and keep everyone off balance. Or it can try to achieve a grand market environment. It can begin sustained price attacks. Or it can send out market signals to dissuades competitors from attacking.   

(d)  Counteroffensive defense : 
            Most market leaders, when attacked, will respond with a counterattack. The leader can not remain passive in the face of a competitor’s price cut, promotion blitz, product improvement or sales territory invasion. In a counteroffensive, the leader can meet the attacker frontally or hit his flank or lunch a pincer movement.
            An effective counterattack is to invade the attacker’s main territory so that it will have to pull back some troops to defend the territory. Another counteroffensive defense is the exercise of economic or political clout to deter the attack. The leader may try to crush a competitor by subsidizing lower prices for the vulnerable product with revenue from its more profitable products. Or the leader may prematurely announce that a product upgrade will be available to prevent customers from buying the competitor’s product. Or, the leader may lobby legislators to take political action that would inhibit or cripple the competition.   

(e)  Mobile defense :
            In mobile defense, the leader stretches its domain over new territories that can serve as future centers for defense and offense. Mobile defense can be classify into two categories : 
(i)  Market broadening :
Market broadening involves the company in shifting its focus from the current product to the underlying generic need. The company gets involved in research and development across the world range of technology associate with that need. Such as, thus ‘petroleum’ companies sought to recast themselves into ‘energy’ companies.  

(ii)  Market diversification :
Market diversification into unrelated industries is the other alternative. When U.S. tobacco companies are well known about the movement against cigarette smoking, they were not content with position defense or even looking for substitutes for the cigarette. Instead they moved quickly into new industries, such as beer, liquor, soft drink etc.      

(f)  Contraction defense : 
            Large companies sometime recognize that they can no longer defend all of their territory. The best course of action for company, then appears to be planned contraction ( also called strategic withdrawal ). Planned contraction means giving up weaker territory and reassigning resources to stronger territories. 

3.  Expanding market share :
            Market leader can improve their profitability by increasing their market share. Achieving or gaining increasing market share in the served market will not automatically improve the profitability of the company. Because the cost of gaining higher market share may far exceed its revenue value, a company should consider three factors before pursuing increased market share :
The first factor is the possibility of provoking antitrust action. This rise in risk would cut down the attractiveness of pushing market share gains too far.
The second factor is economic cost. The cost of gaining further market share might exceed the value. So, some market leaders have even increased profitability by selectively decreasing market share in weaker areas.
The third factor is that companies might pursue the wrong marketing mix strategy in their bid for higher market share and therefore fail to increase profits. Companies that win more market share by cutting price are buying, not earning a large share and their profits may be lower.    

Market challenger strategies.

B. Whom to attack by the market challenger.

            A market challenger must first define its strategic objective. Most aim to increase market share. The challenger must decided whom to attack.

1.  It can attack the market leader :
            This is a high - risk and huge investment but potentially high pay- off strategy and makes good sense if the leader the leader is not serving the market well. The alternative strategy is to out innovate the leader across the whole segment.

2.  It can attack firms of its own size :
            It can attack the firm of its own size that are not doing the job and are under financed.

3.  It can attack small local and regional firms :
            Several major market challenger companies grew to their present size by gobbling up small firms.          

C.  Attacking strategies of market challenger.
1.  Frontal attack :
2.  Flank attack :
3.  Encirclement attack :
4.  Bypass attack :
5.  Guerilla attack :

D.  Choosing a specific attack strategy by the marketer challenger.
1.  Price discount :
2.  Cheaper goods :
3.  Prestige goods :
4.  Product proliferation :
5.  Product innovation :
6.  Improved services :
7.  Distribution innovation :
8.  Manufacturing cost reduction :
9.  Intensive advertising promotion :

E.  Market follower strategies.

1.  Counterfeiter :
            The counterfeiter duplicate the market leader’s product and package and sells it on the black market or through disreputable dealers. 

2.  Cloner :
            The cloner emulates the market leader’s products, name, brand and packaging with slight variations. 

3.  Imitator :
            The imitator copies some things from the market leader but maintains differentiation in terms of packaging, advertising, pricing and so on. The market leader does not mind the imitator as long as the imitator does not attack the market leader aggressively.

4.  Adapter :
            The adapter takes the market leader’s products and adapts or improves them. The adapter may choose to sell his product to different markets. But often the adapter grows into future market challenger.    

Market Nicher Strategies.

F.  Specialist roles are open to the market nichers :
01.  End - user specialist : 
02.  Vertical - level specialist :
03.  Customer - size specialist :
04.  Specific - customer specialist :
05.  Geographic specialist :
06.  Product or product line - specialist :
07.  Product - feature specialist :
08.  Job - shop specialist :
09.  Quality - price specialist :
10.  Service specialist :
11.  Channel specialist :

Designing Competitive Strategies

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