Strategies for Mature and Declining Markets

1. Strategies for Mature and Declining Markets 10

2. Discussion Question 1. What are some the characteristics of the transition period [shakeout or competitive turbulence]?

3. Excess Capacity • Expansion plans eventually overshoot market demand • More Intense Competition • Battle for increased volume and market share • Difficulty Maintaining Product Differentiation • Weakening brand preference • Distribution Problems • Channel members may reduce the number of brands they carry as sales diminish • Pressures on Prices and Profits • Prices decrease and profit margins are squeezed.

4. Discussion Question 2. What are some common strategic traps during market shakeouts?

5. What are some common strategic traps during market shakeouts? • Failure to anticipate transition from growth to maturity • No clear competitive advantage • Assumption that an early advantage will insulate the firm from price or service competition • Sacrificing market share in favor of short-run profit

7. Discussion Question 3. What are the keys to surviving shakeouts as markets mature?

8. Two keys to surviving shakeouts • Sustain your competitive advantage (low cost or differentiation), customer satisfaction and loyalty • Pursue growth opportunities that arise as market and competitive conditions change

9. Discussion Question 4. In mature markets with many competitors, what business strategies are most successful?

10. Both analyzer and defender strategies may be appropriate for units with leading, or at least a profitable share of one or more major segments in a mature industry. • Analyzer Strategy • Most appropriate for developed industries that are still experiencing some technological change and may have opportunities for continued growth.

11. Defender Strategy • Works best in industries where the basic technology is not very complex or is unlikely to change dramatically in the short run. • Both analyzer and defenders can attempt to sustain competitive advantage in established product markets. • Through differentiation of their product offering (using superior quality or service) • Through maintaining a low-cost position.

12. Discussion Question 5. In mature markets with many competitors, how can one maintain a differentiated position?

14. Methods of Differentiation • Product quality • Functional performance • Durability • Conformation to specifications • Features • Reliability • Serviceability • Fit and finish • Quality reputation of the brand name

16. Methods of Differentiation • Service Quality • Reliability • Responsiveness • Empathy • Assurance

20. Measure Customer Satisfaction • Measure • Expectations/preferences (importance) • Perceptions on how well the firm is meeting expectations and preferences. (satisfaction)

21. Satisfaction and Importance

22. ANALYSIS Importance / Satisfaction Matrix Automobile Not Satisfied Satisfied • Disgusters • Engine Power • Transmission • Seat comfort • Delights • Fun to drive • Overall handling • Vehicle safety Important • Annoyances • Roominess • (rear seat) • Niceties • Fabric color Not Important

23. How satisfied are you with: • How important is: • Engine power • Smooth transmission • Rear seat roominess • Fabric color • Overall handling • Fun to drive • Vehicle safety • Seat comfort

24. Measure Customer Satisfaction • Value of Loyal Customers • Concentrate purchases (higher volume)  lower selling/distribution costs • Provide positive word of mouth/referrals • May pay premium prices for the value received

26. Discussion Question 6. In mature markets with many competitors, how can one maintain a low-cost position?

27. Maintaining a Low-Cost Position • A no-frills product • Innovative product design • Cheaper raw materials • Innovative production processes • Low-cost distribution • Reductions in overhead

28. Discussion Question 7. If you are in a mature market, what are your strategic options for maintaining market share?

29. Strategic Options for Maintaining Share in Mature Markets • Fortress defense • Improve customer satisfaction and loyalty • Encourage and simplify repeat purchasing • Add flanker brands • To fend off aggressive competitors • Pursue niche strategy • If low share competitor

30. Discussion Question 8. If you are in a mature market, what are your strategic options for growing the market

31. Strategic Options for Growing a MatureMarket • Increased penetration: adding new users • Line extensions • Systems selling • Added value services • Expand distribution • Extended use: adding new uses or increasing frequency of use • Move product inventories closer to point of use • Offer additional package sizes or designs • Sales promotion programs • Line extensions • Develop and promote new uses

32. Strategic Options for Growing a Mature Market • Market expansion: add new geographic or customer segments • Develop a differentiated flanker brand • Develop multiple line extensions • Produce private labels • Design marketing campaigns that address specific interests of potential customers • Build unique distribution channels • Enter global markets • Domestic  less developed  well developed

35. Discussion Question 9. If you are in a declining market, what are your strategic options and under what circumstances might each option be more likely to succeed?

36. Strategic Options for Declining Markets • Divest or Liquidate (barriers?) • Harvest • Maintenance • Profitable survivor • Niche

37. Strategic Options for Declining Markets • Divest or Liquidate (barriers?) • Sell the business – sooner the better • Harvest • Maximize short-term cash flow; reduce expenses to minimum; increase efficiencies • Maintenance • Maintain share in short term

38. Strategic Options for Declining Markets • Profitable survivor • Increase share of the declining market with an eye to future profits • Encourage weaker competitors to exit • Become industry leader • Niche • Focus on strengthening position in one or a relatively substantial segments with potential for future profits

39. Six Major Product Deletion Strategies • Announce deletion decision publiclyDiscontinue the product by holding a public sale of assets (buildings, land, raw materials, work in process, and finished goods). • Discontinue product, but make no public announcementBid high on quotation requests to avoid getting new orders. • Become a contract manufacturerDiscontinue sales effort, but keep production facilities. Sell product to wholesalers and retailers as private-label purchases.

40. Six Major Product Deletion Strategies • DivestCombine all the operations into a subsidiary; then offer the subsidiary for sale. • Become a sales agencyDiscontinue manufacturing, Buy the product for resale from a foreign supplier or former competitor, but continue selling operations to satisfy customers. • Sell Know-howSell machinery, tools, and parts to a firm (domestic or foreign) in a noncompeting or competing area.

44. Some Advice for Marketers in Mature Markets • Don’t give up - think strategically. Most of the world’s leading companies and brands serve mature markets. • A key imperative: maintain the satisfaction and loyalty of existing customers • Find avenues for market growth: someone will, so it might as well be you!

45. Some Advice for Marketers in Declining Markets • Again, don’t give up - think strategically. Money can be made in declining markets, depending on market conditions. • Others’ desire to exit can be your chance to grow, if you believe the market will survive. Look for opportunities to acquire your competitors for little or no cash. This can improve industry attractiveness.