Competitive position and market structure form part of the current situation analysis whereby they contribute to the identification and ranking of opportunities and threats in the SWOT analysis. These considerations need to be used as an input when selecting the most appropriate strategies to take the advantage of opportunities or counter threats.ABC Cheese Factory fits in the market structure of oligopoly where in this market structure there is several numbers of sellers in which recognized interdependencies exist among actions of firm.
The profit they gain depends not entirely on its price and sales strategies but also on those of its competitors. ABC Cheese Factory must consider how its competitor will react to any change in its price, output, product characteristic or advertising. To be more specific, ABC Cheese Factory operates in the differentiated oligopoly where their offering is partially differentiated in term of quality, features, price points and image. They offer 15 different taste using Tilba Club as the brand name and vacuum-packed portion of random weight.
Differentiated oligopoly usually engage in considerable competition and supported by heavy advertising and promotions.In term of competitive directions, ABC Cheese Factory as an oligopoly market aims at creating and sustaining a desired point of differentiation. They created the vintage cheese that was noticeably different to everybody else’s. Using the brand name of Tilba Club which exists in the business for 106 years as a strong branding strategy, they developed the growth of the market through market penetration and market development.
ABC Cheese Factory expand their business through good relationship with the distributor in order to tap the existing market potential and try to penetrate market by attracting new customers or competitors market with their well known brand name. They also move their product to more geographic coverage.ABC as an oligopoly market structure need to combine growth strategies with the product development and loyalty program in order to prevent loss of market share to its competitors. They need to have cost management strategies that suit the positioning of the business and its offering as their main competitive direction.
B. COMPETITIVE POSITIONCompetitive Position is also known as Market Share Strategies which refers to strength and weaknesses of a firm in relative to its competitors in the market. The competitive position often based on combination factors and it can be calculated similarly as BCG Model. The competitive position can be categorized as strong, medium or weak.
The detailed composition of competitive position discussed as follows:-a) StrongStrong competitive position can be further narrowed down based on the followings:-* DominantThe firms control the behavior of other rivals and have a wide choice of strategic option, for instance, competition between AirAsia and MAS.* StrongFirm can take independent action without endangering its long-term position regardless of rival’s action, such as Astro and Mega TV.b) MediumWhilst Medium competitive position can be grouped as follows:-* FavorableThe firm has a strength that is exploitable in particular strategies and has a more-than-average opportunity to improve its position.* TenableThe firm is performing at a sufficiently satisfactory level to stay in business and has a less-than-average opportunity to improve its position.
c) WeakThere are two types of Weak competitive position and discussed as follows:-* WeakThe firm has an unsatisfactory performance but an opportunity exists for improvement and it must change or exit.* Non-viableThe firm has unsatisfactory performance and no opportunity for improvement.Which Strategies to ChooseBefore the management to decide selecting the strategies, one must determine the attractiveness of the market. If the market is low attractive, then the best strategies is to choose defensive strategies.
However, if the market is considerably classified as high attractive, one can choose either growth strategies or combination of both.The quadrant of the relativity of attractiveness of the market and competitive position of a firm can be describe as follows:-Growth StrategiesAs discussed earlier, this strategies applicable if the market attractiveness is high. A firm has various options to grow their market share, enlisted as follows:-a) Increase sales within existing market by penetrating the market, increase share at the expense of competitors;b) Increase profitability within existing market by backward and forward integration;c) Increase market segment target through franchising;d) Moving into new and different markets or industries through concentric and conglomerate diversification.Defensive StrategiesA firm may decide to choose defensive strategies if they feel that the market attractiveness is low.
However, this strategy may also adopt for high market attractiveness is high in order to dilute competitors’ market share. The various options available as follows:-a) Protecting existing market share through brand equity and customer loyalty program;b) Retrenchment strategies to withdraw from market slowly by liquidating remaining stocks;c) Retrenchment strategies to withdraw from market quickly such by selling business if a buyer can be found. For instance, Tony Fernandez has bought AirAsia from a bankrupt government-aviation in 2001.C.
MARKETING WARFARE STRATEGIESSeveral marketing theorist have suggested that warfare principles can be successfully translated into marketing. As in war, the business with the best strategies and resources are the most likely to succeed. There are four classifications according to Kotler and Singh. Market leader, market challenger, market follower and market nicher are the classification.
This market strategy also calls as “market dominance strategies’ mostly calculated based on the qualitative terms.Market leaderMarket leader is the firm with the largest share in the relevant product market and is dominant in its industry. It has substantial market share and often extensive distribution arrangements with retailers and leader in new technologies and new production processes. It sometimes has some market power in determining either price or output.
Market leader was the most profitable strategy in most industries. Company strategies to expand the whole market, expand their market share or maintain and defend their market share are the main competitive direction for the market leader.The main options available to market leaders are:Expand the total market by finding,ï¿½ New users of the productï¿½ New uses of the productï¿½ More usage on each use occasionProtect your existing market share by,ï¿½ Developing new product ideasï¿½ Improve customer serviceï¿½ Improve distribution effectivenessï¿½ Reduce costsExpand your market share,ï¿½ By targeting one or more competitorï¿½ Without being noticed by government regulatorsMarket challengerMarket challenger is the firm with a smaller share than the market leader but have a relatively large share. A market challenger is a firm in a strong, but not dominant position that is following an aggressive strategy of trying to gain market share.
Market challenger can be also defined as the most quickly growing share of the market and has the objective of becoming the market leader. Their main strategy is to gain market share. They can attack the market leader, attack businesses of a similar size or attack smaller businesses (for example, Pepsi targets Coke).Some of the options open to a market challenger are:ï¿½ Price discounts or price cuttingï¿½ Line extensionsï¿½ Introduce new productsï¿½ Reduce product qualityï¿½ Increase product qualityï¿½ Improve serviceï¿½ Change distributionï¿½ Cost reductionsï¿½ Intensify promotional activityMarket followerMarket follower is the firm with a smaller market share than the market leader but prefer to follow rather than attack, lacking either the resources or the desire to become the market leader.
The rationale is that by developing strategies that are parallel to those of the market leader, they will gain much of the market from the leader while being exposed to very little risk. The main strategies for market follower are cloner, imitator or adapter (for example, Burger King retains its position behind McDonalds).The advantages of this strategy are:ï¿½ No expensive R&D failuresï¿½ No risk of bad business modelï¿½ “best practices” are already establishedï¿½ Able to capitalize on the promotional activities of the market leaderï¿½ No risk of government anti-combines actionsï¿½ Minimal risk of competitive attacksï¿½ Don’t waste money in a head-on battle with the market leaderMarket nicherMarket nicher is a smaller firm that targets segments within segments or sub-segments or market niches. In this niche strategy the firm concentrates on a select few target markets.
It is also called a focus strategy. It is hoped that by focusing ones marketing efforts on one or two narrow market segments and tailoring your marketing mix to these specialized markets, you can better meet the needs of that target market. The niche should be large enough to be profitable, but small enough to be ignored by the major industry players. Profit margins are emphasized rather than revenue or market share.
The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency and most suitable for relatively small firms. The strategies for market nicher are end-user specialist, vertical level specialist, customer size specialist, specific customer specialist, geographic specialist, product or product line specialist, job-shop specialist, quality-price specialist, service specialist and channel specialist.The most successful nichers tend to have the following characteristics:ï¿½ They tend to be in high value added industries and are able to obtain high margins.ï¿½ They tend to be highly focused on a specific market segment.
ï¿½ They tend to market high end products or services, and are able to use a premium pricing strategy.ï¿½ They tend to keep their operating expenses down by spending less on R&D, advertising, and personal selling.Market Warfare strategies for ABC Cheese FactoryIt is important for ABC Cheese Factory to define its strategy for sustain in the market. ABC Cheese Factory can be best fit the market nicher strategy since the cheese been produced by the factory is a vintage cheese.
Cheese produced can be differentiated with other competitors and ABC Cheese tends to focus on the specific market segment. In implementing market nicher strategies, ABC Cheese use it competitive advantage of their Tilba cheese brand. Tilba cheese is well known in the New South Wales and consider as specialist in the production of vintage cheese. Furthermore focus in the providing the quality cheese is a priority to the ABC Cheese.
With the market nicher strategy, ABC cheese created the high value brand for their cheese and able differentiate its cheese as a niche products.