Accounting Research Report, Strategic Marketing programs for Pioneer and Followers

Accounting Research Report, Strategic Marketing programs for Pioneer and Followers

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Subject: Marketing

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September 2, 2013

Strategic Marketing:

Introduction:

Present strategic planners, having established as much value as they possibly could by reducing costs, are now seeking to expand domestic markets, generate revenues and develop new markets in countries such as South Africa, Malaysia, India, China and Brazil.  Though, before they strike out, they should be able to provide answers to some important questions. Whether or not it pays to be the pioneer with a service or product? Is it desirable to kill time and learn from the pioneers’ market experiences? What would be best balance between the rewards and risks?  What strategies pioneer can implement to avoid market share erosion when followers enter?  What strategies followers can implement to ensure a successful entry?

Strategic Marketing programs for Pioneer and Followers:

In most cases, according to Aaker (1998) studies indicate that being a pioneer to the market offers sustained and considerable market-share leverage over the followers.  However, followers can succeed by implementing distinctive marketing and positioning strategies. In most industries generally, once pioneers have acquired incumbent status, they remain powerful. However, sometimes they become complacent or are not in a position to manage the shifting or growing marketplace demands. Followers can take advantage of failures of the products or services of these aging companies or devise innovative methods to market their service or product.

Pioneers that have a distinctive presence within the market should be in a position to react or better still, expect potential followers and improve their entry barriers. For instance, pioneer may be in position to lower its price and lower the business value for the follower or it can entirely obstruct entrance by controlling important distribution channels.  Whether a pioneer or follower it seeking to frustrate newcomers, it is important to have a clear understanding of the defensive and entry strategies available, a game plan and good.

Strategies for pioneers

Typically, competitive strategies rely on the market environment and product portfolio and positioning of the existing companies and the basics regarding the study business include:

Lowering the price to enable penetration of the existing market: (Mass-Market Penetration): According to Leslie (2010) through the introduction of a low price product than the pioneer’s, a follower would attract new consumers who otherwise would have not bought the burger thus, growing the total market. Low prices can also motivate the existing customers of the pioneer to switch.  This strategy however, would result in reduced profits for the follower in comparison to other market players, unless the cost of production of the follower is relatively lower.  This can be implemented by both the pioneers and incumbents as well (Barnhart et al, 2007).

Improve service or product targeting niche market (Niche Penetration). Wansink (2006) argues that corporations can compete by becoming innovative within the marketplace and the innovation processes can be incremental or radical. Incremental innovation can be achieved through improving the version of the already existing product. The improved product can then directly compete within the existing offering, or it can be positioned to in such a way that it attracts a minor segment of the existing market.

Targeting new geographical markets with the already existing offering:  With maturing home base markets, firms usually seek outside for more rewarding markets. A number of consumer goods companies such as McDonald, are seeking to ventures in China.

Establishing new distribution channels:  McDonald can establish new distribution channels to effectively penetrate existing markets or access new ones. Going international cannot be the sole solution. In some instances the investment needed and the risk involved to penetrate the global markets may not have good return of investment. Concentrating on the existing markets where McDonald has proper understanding of the market environment, can bring rapid successes and may prove to be less risky.  McDonald has achieved this through repositioning of its services and products through advertising and marketing (McDonald, 2013).

Apart from choosing the best marketing program, it is important to establish the timing of the introduction of the new offering.  This is particularly true for the fast food companies, whose product life cycles are relatively short and it is hard for the followers to match them or draw reasonable returns. In a number of instances, when one is entering later or second in such a market, it is important to act so right away after the pioneer (Callaghan, Mc Coll, Palmer, 2008).

Strategies for followers:

The later entrant can implement a number of strategies to effectively compete within the market. Later entrant needs to substantially differentiate itself in the consumers’ mind. It can achieve such positioning through extensive changes in either its promotional activities or product.

The second strategy for followers is to determine creative means to improve product trail. According to Jagdish (2005) market-share leverage for the pioneers originates from greater trial penetration. If the follower can establish higher trial market share, then it can overcome its disadvantage. Trials of sample product can be an effective strategy. For instance in fast food business, consumer can be given a sample product for their trial.

The follower can as well adopt market segmentation through focusing on a specific target market. By offering desirable value, the follower can extract extra rents. A follower can also position itself as variety enhancer as opposed to a substitute or replacement for the early entrants.

Follower can also succeed through attacking high-growth marketplaces, especially when there industry is experiencing a significant shift. Those shifts can be as a result of technological breakthroughs or changes in regulations that enhance the product or breakthroughs which enhance the process of product production and delivery.

The other strategic option for followers can be micro-segmenting the clientele base, which implies targeting high-value consumers who are willing and able to pay premium price for service or product relative to the expenses accrued while providing to that segment (Sally & Robin, 2002).

Even as followers try to establish niche programs or redefine the business to attack established market segments and profitable businesses, pioneers can retaliate to regain their competitive edge. The fundamental marketing programs for the pioneers include; 1) enhancing the barriers for followers, 2) faster innovation than followers, and 3) develop flexible and market responsive company.

Growth-Market Strategies for the Market Leaders:

In most instances the strategic objective of the leading firm such as McDonald is to uphold its lead share position even as it faces growing competition with the expansion of the market.  The marketing objective of McDonald who is share leader is to maintain its current customers, excite selective demand among afterward consumers.

Mainly, there are five consistent internal strategies that a company can adopt to ensure it has a leading share position and they include; position or fortress Defense strategy, confrontation strategy, flanker strategy, strategic withdrawal or contraction strategy, and market expansion strategy. The best strategy combination or most apt strategy is based on; the characteristic of customers and the size of the market, relative strength and number of competitors, and the leader’s competencies and resources (Bartol and Margaret, 2011).

1. Position or Fortress Defense Strategy

McDonalds continually makes stronger its already strongly seized current position. The company continues to improve the satisfaction of the existing clientele and enhances the attractiveness of its products.   In improving customer loyalty and satisfaction, the company particularly pays focuses on quality control. It continues to improve and modify its offering, and this is not just the physical product but also the perception of customers regarding the company as well. This entails shifting of promotion focus from rousing primary demand to establishing selective demand, as this promotes repeat purchases among the current consumers and provide improved focus to post-sale services.  Some of the actions that McDonald uses to simplify and encourage repeat customers include, reducing stock-outs within the store shelves. The more proactive processes comprise properly integrated supply-chain relations (Reid & Bojanic, 2009).

1. Flanker Strategy

This strategy involves developing another brand that will compete against the rival’s offering or products and defend against an attack that would be aimed at weaknesses in its present offering (Sutton, 1990). McDonald does this through trading up, for instance developing high quality product that is offered at premium price. In some cases, it entails a low quality brand to protect the primary brand of the leader from direct price wars and normally used in combination with position defense approach. This strategy is more effective when a company has enough resources to support and develop multiple entries.

1. Confrontational Strategy

This tactic involves beating or meeting the attractive features of the rival’s product after the success of the competitor has become apparent (a reactive approach).  Confrontation approach largely based on reducing price renders more problem of reducing profits for all the parties concerned. McDonald avoids s the confrontation strategy problem by reestablishing the competitive edge (Westwood, 2010).

1. Market Expansion Approach

This is a more proactive and aggressive version of the flanker approach.  Market Expansion approach shields market share through expansion into a several market segments and is especially appropriate within the fragmented markets.  McDonald implements this through new brands, line extensions, alternative offering forms applying the same processes, and maintaining basic offering however, vary other aspects of marketing program (Reid & Bojanic, 2009).

1. Strategic Withdrawal or Contraction Strategy

This is the process of abandoning or reducing efforts in certain segments to concentrate in areas where the company enjoys the greatest growth potential or greatest advantage.  Therefore, a company needs to consider this strategy in highly fragmented segments where it might to be capable of defending itself in all the market segments.

Followers’ Share Growth Strategies:

The main marketing aim for followers is seeking to establish profitable venture within a small segment whereas escaping direct competition from huge rivals (niche strategy). They may also seek to become a major competitor or displace the major competitor/leader (enhance growth share).  The marketing strategies and action for followers to attain share growth include, when the market leader has penetrated a huge market portion, the follower can steal some repeat customers or replace the demand from the rival’s existing clientele.  If it’s a fragmented or heterogeneous market or if the market is at the growth phase, the follower can attract a huge portion of new potential clients.

Share growth has five major strategies and what strategy to be deployed relies on the current strengths or position of the existing competitor, market characteristics, as well as the challenger’s own competencies and resources.

1. Frontal Attack

This involves head-on attack on your major competitor. Frontal attack has high chances of succeeding if the existing clientele does not have strong brand preferences, the target rival offering does not gain from the positive network effects and followers’ resources and competencies are stronger than that of the target rival. To effectively adopt this strategy, a company should differentiate its offerings in a manner that better meet the preferences and needs of the consumers within the mass market.

1. Leapfrog Approach

This strategy is designed to gain a considerable advantage through the introduction of a new generation of offerings that considerably outperform or offer greater attractive benefits compared to the existing products. It can be adopted to prevent rapid retaliation by huge competitors. To succeed, the brand should have a superior marketing resources and process engineering capabilities.

1. Encirclement and Flanking Strategies

This strategy focuses on weakness aspects of the product. Flank attack captures a considerable portion of the total market by focusing on a single huge untapped segment.  The strategy meets the special needs of the untapped market segment through the provision of meticulously designed distribution channels or customer services. Encirclement targets underdeveloped or smaller untapped segments simultaneously.  Followers achieve this through developing a number of line products with features and benefits tailored to meet the needs of various market segments.

1. Gorilla Attack

This tactic can be deployed when a huge well-grounded leader already covers the main segments and the follower has limited resources. It entails launching varies shocker raids against the main rivals and it is desirable to do it sporadically, within a limited geographical zone. A company can implement gorilla attach through, local advertisement blitzes, sales promotion activities, as well as short-term reduction of prices through sales promotions (Mark, 2013).

The core objective of this strategy is to stop a strong leader from expanding further its share or pursuing aggressive measures that would be expensive for the followers to react to.

Maintaining Competitive Edge in Declining, Mature and Shakeout markets:

Shakeout Markets:

This stage is characterized by decline in the overall rate of growth and manifested by price reductions (Wansink, 2006).  There are also significant changes regarding competitive structure of the industry. The company should rationalize its offering line by getting rid of weaker items, improve channel relationships and focus on ingenious promotional pricing.

Mature Stage:

In mature stage, there is stability in respect to competition, technology and demand. Any considerable breakthrough in engineering or Research and Development, which can assist in differentiating the product or reducing its costs would have a significant payout.  In this regard McDonald’s unique services become a mean of differentiation from its competitors.  In overall, the prices and promotional expenditure seem to remain stable (Shukla, 2008).

Decline Phase:

A company or a product can get into this phase because of shifts in consumer beliefs, values and tastes or due to technologically advanced substitutes. As sales decrease and expenses raises, efforts are required to lower costs and asset base.  In this stage, prices can stay stable when the decline rate is slow, however when the rate of decline is erratic and fast, aggressive pricing should be considered.  For companies that offer consumer goods such as McDonalds, marketing activities should focus on distribution (Mark, 2013).

The Strategic Implications of Maintaining Competitive Edge in Declining, Mature and Shakeout markets is that it helps a company to better predict change in the brand’s strategic market objective, its marketing program and its strategy.

Relevance of New-Economy Markets:

According to Walters & Derek (2009) new-economy markets refer to those industries which significantly participate in the Internet or electronic commerce. Increasing market acceptance of electronic commerce as well as other new-economy processes and the inherent leverage that they create imply that McDonalds .............