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Strategies for Growth Markets

Strategies for Growth Markets. 9. Discussion Question. 1. Why are growing markets attractive?. Gaining share is easier Share gains are worth more Price competition is likely to be less intense Early entry may be necessary to keep pace with technology. Discussion Question.

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Strategies for Growth Markets

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  1. Strategies for Growth Markets 9

  2. Discussion Question 1. Why are growing markets attractive?

  3. Gaining share is easier Share gains are worth more Price competition is likely to be less intense Early entry may be necessary to keep pace with technology

  4. Discussion Question 2. Once a pioneer’s market becomes attractive to others, what are the pioneer’s strategic options?

  5. The primary objective of the early share leader (usually the market pioneer) in a growth market is share maintenance. • The share leader must accomplish two tasks: • Retain repeat or replacement business from its existing customers • Continue to capture the major portion of sales from the growing number of new customers entering the market for the first time.

  6. Growth stage strategic options for pioneers • Fortress defense • Flanker defense • Confrontation • Market expansion • Contraction or strategic withdrawal

  7. Market Leader Strategies • Fortress or Position Defense Strategy • Continually strengthen a strongly held current position • Flanker Strategy • Develop a second brand (a flanker) to compete directly against the challenger’s offering (a flanker strategy is always used in conjunction with a position defense strategy) • Has to have resources to support both brands

  8. Confrontation Strategy • Meet or beat the attractive features of a challenger’s offering by product improvements, promotional efforts, or lowering price. The challenger is attacking the leader head-to- head and is attempting to steal the leader’s main target market. • Market Expansion or Mobile Strategy • The leader defends its relative market share by establishing positions in a number of different market segments. The leader is trying to capture a large share of new customer groups who may prefer something different that the firm’s initial offerings. (This is a more aggressive and proactive version of the flanker strategy)

  9. Contraction or Strategic Withdrawal Strategy • The leader is unable to defend itself adequately in all segments. Consequently, the firm reduces or abandons its efforts in some segments to focus on areas where it enjoys the greatest relative advantages or that have the greatest potential for future growth.

  10. Discussion Question 3. Under what circumstances might each option be more likely to succeed?

  11. Discussion Question 4. How do you retain current customers? • Maintain or improve satisfaction and loyalty • Encourage or simplify repeat purchase • Reduce the attractiveness of switching

  12. Discussion Question 5. If you want to be a follower, what are your strategic options?

  13. The challenger’s strategic objective in a growth market is usually to build its share by expanding sales faster than the overall market growth rate. • The challenger does this by: • Stealing existing customers away from the leader or other competitors • Capturing a larger share of new customers than the market leader (or other competitors)

  14. Deciding Who to Attack • Attack the market share leader within its primary target market [frontal assault, leapfrog or guerrilla attacks] • Attack another follower who has an established position within a major market segment [frontal assault] • Attack one or more smaller competitors who have only limited resources [frontal assault] • Avoid direct attacks on any established competitor [flanking or encirclement]

  15. Strategic options for followers • Frontal attack • Leapfrog • Flank attack • Encirclement • Guerrilla Attacks

  16. Challenger Strategies • Frontal Attack Strategy • Tackle a competitor head-on by lower costs or differentiated position • Leapfrog Strategy • Offer a far superior product based on advanced technology or a more sophisticated design. Possibly a new generation of products.

  17. Flanking Strategy • Capturing a significant share of the total market by concentrating primarily on one large untapped segment and developing product features or services tailored to the segment’s needs and preferences. • Encirclement Strategy • Targeting several smaller untapped or underdeveloped segments in the market simultaneously. Surround the leader’s brand with a variety of offerings aimed at several peripheral segments.

  18. Guerrilla Attack Strategy • Making a series of surprise raids against competitors. • Use of sales promotions, coupons (drops), advertising blitz, legal action, and short-term price reductions

  19. Discussion Question 6. Under what circumstances might each option be more likely to succeed?

  20. Discussion Question 5. How do you capture competitors’ customers?

  21. Some Advice for Followers • Differentiation is key for followers • Better benefits • Better service • Better marketing • Lower price • Beware of competing on price, however, unless your costs really are lower than competitors’

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