edited -marking strategy report
TRANSCRIPT
April 2011
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Oracle
Marketing Strategy Report
Industry Red Company O
This Report outlines and evaluates the strategic options that Oracle can implement in the future in order to sustain competitive advantage.
Candidate Numbers
457949 686794712744 965359605336 122475
ContentsTable of Figures.........................................................................................................................3
1. Executive Summary..............................................................................................................4
2. Introduction...........................................................................................................................4
3. External Analysis..................................................................................................................5
4. Customer Analysis................................................................................................................7
5. Market Analysis..................................................................................................................10
6. Competitor Analysis............................................................................................................15
7. Internal Analysis.................................................................................................................23
8. Competitive Positioning & Strategic Options.....................................................................30
9. Implementation – Marketing Mix......................................................................................42
10. Conclusions & Recommendations....................................................................................45
11. References.........................................................................................................................46
12. Appendices........................................................................................................................47
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Table of FiguresFigure 1......................................................................................................................................6
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1. Executive SummaryOracle has three Sonite products within the Red industry; developed over a period of seven years. It is facing increasing challenges from rivals differentiating their products to gain competitive advantage, and exploiting their assets to enter new markets. The key strategic issues for Oracle have been devised through internal and external analysis:
1. SOLD losing sales from Firm E because of the modification and their strategy that penetrates the HiEarners market.
2. Oracle lack of innovation to expand our brand portfolio in the Vodite market which has already been achieved by one of our main competitors, Firm Y.
3. As Oracle successfully become the market leader of the Sonite market, it is necessary to defend our position to avoid losing the shares while Oracle expands in the Vodite market.
This led to the creation of three possible strategies for Oracle to pursue for implementation, from the short term through to the long term:
1. Merge with Firm E2. Guerrilla attack on SEEM3. Enter Vodite Market
Results indicate that merging with Firm E would be an appropriate short term strategy. This will resolve the third key strategic issue relating to defending Oracle’s position in the Sonite market. Over the longer term, entry to the Vodite market would be most advantageous, particularly as the Sonite market reaches a point of maturity and decline.
The chosen strategies, as well as referring to external and internal threats, will also take into account the key success factors identified in 5.9.
2. IntroductionIn Period 0, Oracle recruited six new marketing directors to manage the company. After seven years of trading, Oracle has made a strong impact within the Sonite market; achieving sustainable sales and profit and a dominant position within the Singles and Others markets.
This report will outline how Oracle has operated within the industry, highlighting key external and internal factors that affected performance and discuss and analyse six potential strategies for Oracle’s future direction. These strategies have been developed with the aim to improve stock price index, gain a long-term competitive advantage and ensure that Oracle’s products meet the needs of its target markets; in turn creating a strong brand image that will enable continued success in the Sonite market and future penetration of the Vodite market.
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3. External AnalysisA critical analysis of the external environment highlights specific trends related to the industry and lead to the identification of opportunities and threats that impact on Oracle’s future strategies.
3.1 PEST Analysis
The PEST analysis provides the main factors in the macro-environment that are likely to impact on the business in the future (Egan and Thomas, 1998).
Figure 1
PEST AnalysisImpact on Oracle’s
Strategy
Pol
itic
al
GNP growth fairly stable, remaining at 2%. Inflation growth fairly stable, remaining at 2%. Stable government.
Prices adjusted in line with inflation.
Less uncertainty in the market.
Eco
nom
ical
Monetary unit is the Markstrat Dollar. Distributor margins: 40% for speciality stores, 30% for
department stores and 30% for mass merchandisers. Mass merchandisers offer 10% discount off list price. Staff costs (operation, hiring and firing) increased by 2%
p.a. Inventory holding and disposal costs expected to remain
constant.
No increased risk or costs in holding stock.
Cost reduction via Mass Merchant distribution channel.
Soc
ial
250 million inhabitants. Sonite market has five major segments with similar needs
and purchasing behaviour (buffs, singles, professionals, high earners and others), now maturing after a period of growth.
Singles and buffs are price sensitive. Vodite consumers are similar to Sonite, but adopt new
products according to three groups (innovators, early adopters and followers).
Consumer wants and needs constantly evolve, from ideal product characteristics to willingness to pay.
Consumers shop via three distribution channels (speciality stores, department stores and mass merchandisers).
Changing shopping habits for segments in Sonite market (speciality store 30.1%, department store 36.1% and mass merchandiser 33.8%).
Increasing opportunity in Vodite Market.
Price monitoring and adjustment based on growing and declining segments.
Constant change in consumer needs drives need for market research and innovation.
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Tec
hn
olog
ical
Electronic product advancement in Vodite market requires large investment.
Extensive research available for Sonite market. Competitive Research and Development. Competition in Sonite market poorly positioned, to take
advantage of defined customer segments, positioning products correctly will be the key to success.
Position products close to customer ideal values to reduce potential threat from competitors.
Continuous R&D is essential to sustain competitive position.
Expensive R&D costs in Vodite market due to new technology.
3.2 Scenario Analysis This process aids improved decision making by analysing possible future events and considering alternative outcomes and their implications.
Scenario 1 “Competitor exit from Sonite Market”
Oracle’s competitors may choose to focus their future strategies within the Vodite market as it begins to grow and develop. This may result in a lack of focus within the Sonite market as resources are reallocated, or possible withdrawal from the Sonite market altogether. Oracle could capitalise on this opportunity, and focus on long-term growth and sustainability within the Sonite market, by effectively responding to the changing needs.
Scenario 2 “Accelerated Vodite Market growth”
As the Vodite market grows and develops, Oracle’s competitors will exploit first mover advantage as barriers to entry are low and new product innovations can be easily imitated (Makadok, 1998). Studies have found this creates a highly sustainable pricing advantage and a moderately sustainable market share advantage, leaving it difficult for Oracle to enter the market and gain sales and market share. However, with the high marketing expenditure, Oracle may be able to benefit from the initial risks taken by the competitors, and use first order segmentation to better base product specifications on the benefits the customers require (Hooley et al, 2008), whilst differentiating themselves from competitors offerings.
3.3 Key Strategic Uncertainties
Figure 2
Market Will the growth in Sonite segments continue? Or will the market become saturated? Is SODD or SOLD the master brand of our firm?
Competitor
Will first mover advantage of competitors within the Vodite market create high barriers of entry for Oracle?
How intense will rivalry among competitors become?
Customer What impact will the future decline of the High Earners market have on SOLD? How will the segments in the Vodite market develop?
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Source: MarkStrat company report and MarkStrat handbook
3.4 Opportunities and Threats
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Opportunities
O1- Substantial growth forecasted for Vodite market; an opportunity to segment the market into distinct consumer groups.O2- Better meet consumer needs through extensive Sonite market research.
Threats
T1-High barriers of entry into Vodite market, if too many competitors enter market segment competition will increase.T2- Changing customer needs resulting in products becoming vulnerable to attack from competition, these must be researched into and developed to better meeet customer needs.
4. Customer Analysis4.1 Target segmentsTo understand specific marketing conditions and use them as a base on which to build clear strategies, it is important for Oracle to understand the general needs, habits and characteristics of its target consumers. The Sonite market consists of 5 customer segments (Fig. 3).
Figure 3Segment Description Reason to Avoid Reason to TargetSingles Demand average
performance and convenience.SODD specially designed and marketed for market.
No reason to avoid at the time, SODD key to success.Rising expectations will require constant product modification.
Already established in this high growth market.Likely to increase SODDs success.
Professionals
Expect to pay higher prices.Perception of quality is based on price. SOLD was previously targeted at Pros due to close ideal values and higher purchase intent.
From P5 forecasted growth in next five periods was 27.6%. Although other markets are growing faster.Very crowded market, competition has better products and brand awareness.
A high profit margin is achievable due to preference for higher prices.Competition are leaving segment, leading to potential gap in the market (also HiEarners).
High Earners Demand high convenience and performance; influenced by social status perception.SOLD modified specifically to target this market.
Main competitor, Firm E, has modified their product. Its sales increased 200% in P7. Need substantial resources to overcome this threat.
Only one major competitor.Ability to achieve high profit margins.3rd largest market.Similarities between HiEarners and Pros mean one product can attract sales from both markets.
Others Demand low performance and price; average convenience.SOKK caters for segment.
Low margin market; consists of sub-segments.All competitors seem to be performing badly.
Few competitors have got successful products in this segment.Opportunity to learn from their mistakes; second mover advantage.Largest Sonite segment.
Buffs Demand high performance, average price and reasonable convenience.Very tough market.
Competition has stronger product.Strongly declining market with tight margins.
Two competitors; no feasible reason to re-enter market. Withdrawing SONO in P6 was a key decision.
4.2 Shopping HabitsChanges in Sonite market shopping habits were tracked in order to identify implications for Oracle’s customer targeting. As seen in Appendix 1, mass merchandisers showed significant improvement in total sales between P1 and P7 while speciality and department stores decreased despite being the two most popular distribution channels. A large sales force was assigned to speciality and department stores at the launch of SODD in P4 to allow Oracle to penetrate the Singles market and gain a strong position.
Appendix 2 shows a more detailed view of distribution channel preferences which varies between segments; moreover it identifies the significant shift towards mass merchandisers for the Singles and Others segments. Oracle took advantage of the relatively untapped Singles market though the mass merchandisers channel. Future efforts should be made to take advantage of this growing channel as it coincides with the preference for low price and
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convenience by consumers in the Singles and Others segments. Despite High Earners being the only segment to grow in speciality store spending, the negative growth of the distribution channel indicates that SOLD could be repositioned to instead capture both Buffs and Pros who seem to have similar shopping habits across all distribution channels.
4.3 Customer Segments The Buffs market declined from a total demand of 233k units in P1 to 129k units in P7, leading to Oracle withdrawing SONO from sale. The Singles segment has grown tremendously from 169k units in P1 to 756k units in P7, strengthening the growth of SODD. The Pros grew roughly 15% each period, with HiEarners growing at a similar pace. Others is the biggest market, growing every period. SOKK was introduced to enter this market and obtained 36.4% market share in P7.
The huge growth in the Singles and Others markets shows that consumer tastes and trends are adjusting towards average performance, low price and average convenience. This provides the opportunity for Oracle to further exploit the market.
Figure 4
Perio
d 1
Perio
d 2
Perio
d 3
Perio
d 4
Perio
d 5
Perio
d 6
Perio
d 7
Perio
d 8 (F
orec
asted
)0
100200300400500600700800900
Market Size by Segment
Segments Buffs
Segments Singles
Segments Pros
Segments HiEarners
Segments Others
Period/Years
Mar
ket S
ize
by (0
00's
Uni
ts)
4.4 Customer Perception & Ideal Value EvolutionFig. 5 (below) shows the changes in consumer preferences and how Oracle targeted its products to match those changes. More detail in terms of highest consumer preference conducted in conjoint analysis Appendix 3.
Figure 5
Oracle’s targeted products compared to period 1 and 7 ideal valuesPeriod 1 MDS Oracle Product Targeting Period 7 MDS
Brands Eco Perf Conv Eco Perf Conv Eco Perf ConvSingles(SODD)
5.5 0.1 2.7 8.0 3.8 2.1 8.2 4.5 2.4
HiEarners(SOLD)
-12.2 3.2 8.8 -12.3 -1.3 11.3 -10.6 -1.0 8.0
Others(SOKK)
12.6 -9.5 -4.0 14.8 -5.3 -2.0 13.1 -4.9 -3.0
Source: Markstrat software data on ideal values
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Source: Markstrat software data on market shares
We have identified that, between P1 and P7:
The Singles market now demand higher performance at a lower price point, given the multi-dimensional scaling. We need to adapt our products to meet the required performance but still retain a cost base that reflects consumer price needs.
The performance and price required by HiEarners decreased. This gives us the opportunity to modify our product and reduce costs.
Others demand higher performance and lower prices. Oracle needs to modify SOKK to meet these trends and sustain profitability.
As outlined above, the product characteristics demanded by consumers have, and continue to, change. Oracle has achieved success by matching product position with ideal values. This has boosted brand awareness and purchase intentions (Appendix 4, 5).
Figure 6 shows the movement of customer ideal values over the last 7 periods. The key point to recognise here is the performance shift in HiEarners, Singles and Others markets (Oracle’s primary markets). This is important because investment is required to adapt to changing performance ideal values, unlike price which a more flexible element.
Figure 6
4.5 Opportunities and Threats
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Opportunities
O3 – Shift of purchasing habits increasing towards mass merchandisers
Threats
T3 – Several Sonite segments in decline indicating that lucrative segments will become heavily concentratedT4 – SEYA also well positioned in the Others segment
5. Market Analysis
5.1 Market Shares and Key Judgments Below is the perceptual map in P3, a key point in which Oracle decided to modify SOLD to target HiEarners and create a new product to enter the Singles market. SODD is experiencing heavy growth; after launching in P4 it took 37.9% of the singles market, up to 66.7% in P7. SOLD was re-launched in P6 and capitalised on 48.1% of HiEarners market, moving away from the more competitive Pro segment.
Figure 7
Source: Perceptual map period 3, from Markstrat software
The re-launch of SOLD is part of our frontal attack (Hooley et al, 2008) on Firm Y’s SYCA, which did not closely match the needs of HiEarners. Our strategy gained a significant share in segments where competition is weak. SOKK launched in P6 and took 20.7% of the market, which increased to 36.4% in P7 with a price cut and increased marketing.
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5.2 Cost StructuresAppendix 6 shows Oracle’s main competitors in red. Firm E entered the HiEarners segment in P7 taking away market share from SOLD, which dropped from 48.1% to 38.4%. SEEM has similar margins to SOLD, but was priced $10 lower. SYCA has a much higher margin than SOLD; we may need to modify our product to meet future needs of HiEarners. Below are the cost structures for Oracle’s Brands:
Figure 8
Cost Structure BrandSOLD SONO SODD SOKK
ExpenditureCost of goods sold -24454 -3194 -38255 -21753Average unit transfer cost 117 183 73 80Advertising expenditure -4000 0 -3800 -4200Advertising research expenditure -600 0 -600 -600Sales force -2254 -286 -2307 -1909Contribution after marketing 34356 -33 64784 10706
Source: Markstrat software data on brand contribution breakdown
The table shows expenditure for each brand and contribution. SOKK was launched in P6 and therefore low sales can be expected in the introductory stage of PLC. SODD has excellent cost structure, due to high production levels average transfer costs has decreased. This makes it a highly profitable cash cow that provides funding for future product motifications.
5.3 Distribution Patterns Fig. 9 shows an increase in mass-merchants due to growth of the Others and Singles markets. Department stores remain established as the main channel for shopping, while a slow decline in Specialist stores is driven by decline in the Buffs and Pros markets (as seen in Fig. 4).
Figure 9
Period 1
Period 2
Period 3
Period 4
Period 5
Period 6
Period 7
0.00% 5.00% 10.00%15.00%20.00%25.00%30.00%35.00%40.00%45.00%
Sonite Distribution Channel Evolution
Mass MerchandisDepartment StoresSpecialist stores
Source: Markstrat software data on distribution channels
Singles and Others segments are shopping more in mass merchant stores, with department stores seeing slow decline. Department stores are the main distribution channel for HiEarners, although speciality stores are increasing. More sales staff need to be dedicated to department stores and mass merchants due to these trends.
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5.4 Sales Force Firm E has grown since P1. Need to build a stronger sales-force to increase our sales and market share. Oracle’s sales-force arrangements match the trends of the market to maximise impact and efficiency. The pattern of sales force distribution from Firm E is similar to Oracle’s, due to offering similar products.
A E I O U Y0
50
100
150
200
250
300
Sales Force Size
Specislity StoresDepartment StoresMass MerchandisTotal
Firm
Num
ber o
d Sa
les-
Forc
e
Source: Markstrat software data on sales-force sizes
Fig. 11 shows brand is distributed according to the shopping habits of target markets; this shows that Oracle’s product portfolio utilizes a number of distribution channels providing opportunities for consumers. SODD the cash cow is our leading product, which is supported by the higher amount of sales-force.
Specislity Stores Department Stores Mass Merchandis Total0
10
20
30
40
50
60
70
80
90
100
Brand Distribution Coverage
SOLDSODDSOKK
Source: Markstrat software data on sales-force sizes for each brand
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Figure 10
Period 7 data
Figure 11
Period 7 data
5.5 Market Growth The Sonite market is still growing and is highly competitive, although beginning to reach maturity. This is expected to change, with the anticipated rapid growth of the Vodite market attracting competition away from the Sonite market. Firms Y and I have already introduced three Vodite products between them and the gap between markets is closing (Fig. 12, below).
Figure 12
Perio
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d 7
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0500000
100000015000002000000250000030000003500000
Total Sonite and Vodite Market
Total Sonite Market
Total Vodite Market
Period/Year
Mar
ket S
ize
in K
U(u
nits
)
Source: Markstrat software data on Sonite and Vodite market sizes in units
5.6 Key Market Trends (i.e. Opportunities and Threats)
5.7 Market Developments Firm Y was leading by a huge margin until P5 when its stock price dipped
dramatically; their entrance into the Vodite market gave Oracle the opportunity to attack their Sonite products.
Competition is high within the Sonite market but expected to drop as the Vodite market grows; we estimate this will occur around P15 (extrapolating Fig. 12, above).
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Opportunities
O4- Sonite market is still growing; beginning to reach maturity.O5- ‘Singles’ and ‘Others’ rapidly growing markets which is increasing the whole Sonite market as shown in figure 2. SODD further pentrate marketO6 -Mass-Merchandise is becoming more popular, as shown in Fig. 9. Opportunity to drive SOKK and SOLD and reduce costs (cheapest channel).
Threats
T5- Pros and are in decline, HiEarners market is becoming saturated as indicated in figure 2
5.8 Key Success Factors Product Range and Positioning
Wider range improves performance and spreads risk. Better positioning (product specific for target segments) increases sales. This is likely to decrease with importance as competitors migrate to the Vodite market. Sonite is primary base of operations.
Distribution Channels & Sales Force
Trends should be analysed and salespeople focused on the most popular outlets. Should be optimised to give highest effectiveness and cost efficiency.
Perceptual Marketing
It is important to match actual and perceived perceptions when launching and adjusting products in order to gain a better position amongst competitors.
Vodite Market
Entering this market is a long-term strategy because it is still at an early stage of development, and uncertainty is high. There is currently little competition and many segments are untapped. Entering this market at a later stage will be less risky, because we can observe the competition, making use of the late-mover advantage.
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6. Competitor AnalysisStrategic group analysis (Thompson et al, 2005) highlights competitors positioning within an industry. This allows Oracle to identify its position in relation to key competitors and identify any gaps in the market.
6.1 Strategic group analysis: Firm level (Sonite Market)Period 2 Period 7
Firm Market Share (%)
Product Range Firm Market Share (%)
Product Range
Y 24.6
All firms have two products
O 40.4 3
E 19.9 E 26.9 3
O 19.0 Y 14.0 3
U 17.4 U 8.2 3
A 10.8 A 8.0 3
I 8.2 I 2.4 2
Adapted from (Thompson et al, 2005)
Figure 13
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Figure 14
Strategic Group Period 2 Period 7
1 Firms: Y & E Strongest performing firms Firm Y increase of 73.6% in volume sold for their SYGU
product between period 1-2 Firm E performed well the second highest amount of
retail sales in the industry after firm Y.
Firms: O, E & Y This group has the highest market
share, (Oracle, 32%). Firm Y has recently dropped in
market share and sales, however still has 22.8% of the Sonite market.
Firm E consistent growth. All have 3 Sonite products.
2 Firms: O & U Moderate market share in period two. Oracle lacked quick decision making which led to lower
increases in sales; more research was undertaken to gain better market understanding.
Firm U also stayed at a moderate level with less penetration of the marketing – e.g. lower advertising spend, compared to strategic group 1.
Firms: U & A Medium level of market share and a
3 Sonite product range.
3 Firms: A & I Both firms have the lowest market share Attempting to target ‘others’ and ‘singles’, opposed to
firms in strategic group 1 and 2 who have at least one product in ‘High Earners’, ‘Buffs’ or ‘Professional’ markets. In this period the ‘Singles’ market was the smallest, the ‘Others’ was the hardest to penetrate due to varied sub segments.
Firms: I The only firm that still has 2
products within period 7 - less opportunities and a lower spread of risk.
Figure 14 demonstrates a shift with the firms in each strategic group. In period 7 there are more firms within strategic group 1 showing more competition in the market. In period 7 all firms have three products in the Sonite market apart from firm I. This shows a similar size in product portfolio, again increasing competition for firm size and market dominance.
Figure 15 (below) shows a fairer representation of overall competitor performance. This shows that Firm I’s overall performance slightly increased due to introducing a Vodite product between P6 and P7. This shows that introducing a Vodite product does increase the value of a firm.
Figure 15
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6.2 Strategic Group analysis: Product level (Sonite Market)The graph below shows the various product groups at the end of Period 7.
Figure 16
Figure 17
Product Group Description
1 Professionals market, two main players SEMI (firm E) – closest targeted product through modification and marketing. SULI (firm U) too expensive, losing out on market share.
2 Buffs market, 1 main player out of 3 (SAKE) SAKE (firm A) MORE appropriately modified -taking share from SYCO (firm Y) and
SALT (firm A), who have struggled with product modification.
3 High Earners, three main players including Oracles SOLD Very competitive, all strongly targeted SEMI (firm E) being the most successful.
4 Singles Market, two main players Oracles SOLD- very strongly positioned taking a large amount of market share, leading to
SYGU (firm Y) to follow behind.
5 Others Market, many players Very fragmented, products lack positioning. Most successfully targeted is SEYA (firm E) Oracles SOKK also well targeted but needs a slightly lower price
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1
2
3
4
5
6.3 Strategic Group Analysis: Vodite MarketOracle did not enter the Vodite market within the 7 periods due to financial implications and a lack of Vodite knowledge. There are only three products from two firms within the market. The map below highlights the difficulties these firms have had with targeting their products to match the specific segments due to new market conditions, a lack of research and experience. There are potential gaps for a specifically modified product and targeted marketing approach as a market follower; however, a future successor in this market could be Firm Y with their VYFI product, which is attempting to capture both the Innovators and Early Adopters. Even though Firm I’s VIBO is not well targeted, its established presence in the market could prove to be an advantage in future.
Figure 18
6.4 Direct CompetitorsThe following have been identified as direct competitors due to similar product characteristics, target markets and overall company performance.
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Firm Y
Firm Y has been identified as a direct competitor due to their success throughout the majority of the seven periods, whist competing for similar target markets. Their SYCA product directly competes with SOLD in the High Earners market; additionally SYGU competes directly with SODD in the Singles market.
Figure 19
Strengths Weaknesses Wide product portfolio – have presence in Vodite
and Sonite markets – strengthens their corporate brand.
Highest total market share in Vodite market First mover advantage Potential to generate more revenue and spread risk
through a wide product portfolio. Has a good margin on SYCA; base cost is $136,
and is sold at a retail price of $500.
Summary: Has gained from first mover advantage and quick decision making from P1 to P5. We expect to see price reductions in SYCA, which would impact on SOLD.
More recent (P6-P7) reduction in market share and sales.
Falling market share in growing Singles market. Steep fall in return on investment. Increasing inventory costs due to weaker sales in
period six and seven Recently falling budget A wide product portfolio that needs large amounts
of investment and maintenance
Summary: Weaknesses began to emerge in P6 and P7. Entered the Vodite market with a lack of experience and knowledge; this has led to a reallocation of resources from the Sonite market to their newer Vodite products. They have a wide product portfolio, but falling financials.
Firm E
Firm E has seen a steady increase in its performance within the Sonite Market across all seven periods. SOKK is positioned within the Others market and is in direct competition with firm E’s SEYA. Firm E has also had huge success penetrating the High Earners market between Period 6 and 7 with SEEM - a significant threat to SOLD. The penetration of SEEM has been implemented through a guerrilla attack on SOLD, through increased modification and advertising. Oracle will need to establish a strategy to remain competitive with SOLD due to this attack, which has given SEEM a significant advantage in position within this market (see Appendix 7).
Figure 20
Strengths Weaknesses Good Stock Price Index and growth. Second highest market share of Sonite market Brand awareness Strongly positioned products with high market
shares in the ‘Professionals’ and ‘Others’ market. SEEM performance strong in P6-7.
Summary: A consistent performance, strong growth and implementation of competitor tactics. SEEM’s growth has an adverse impact on SOLD market share.
SEMI lost 31.1% market share between P6 and P7 (targeting Pros).
Summary: Possible opportunity to create a product for the Pros segment in competition with SEMI.
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6.5 Strength Analysis: Competitor Capabilities and AssetsThe tables below highlight relative capabilities of Oracle with the identified direct competition. Each firm is ranked along six key success factors from -2 (very poor) to 2 (very good). This illustrates key capabilities and competitive advantages of each firm.
Figure 21
(adapted from Hooley et al, 2008)
Oracle has the strongest capabilities in the Sonite market compared with competition, however the capabilities of Firm Y’s product investment and range, and therefore more recognisable brand name, could pose a significant threat to Oracle and Firm E. Firm E has also invested in their products with higher advertising expenditure in period seven and constant modification between Period 3 and 7. These modifications and possible penetration tactics could pose further, future threats. Due to Oracle’s strong financial position it may be attractive to other firms who want to join forces to further penetrate the market.
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Competitive Rivalry
SoniteForecasts show sindustry in a maturity stage
Fall of strong market leader in period six- slightly more fragmented market
Less differentiated products due to attempts to meet ideal valuesVodite
Forecasts shows high industry growth ratesHigh fixed costs associated with Vodites : R&D
Sonite- Medium to High
Vodite- Low
Supplier Power
Assumption is no negotiation with suppliers
other than to state required demand for a period
Vodite -Less buyers, increasing powerSonite - Medium
Vodite - High
Threat of New Entrants High experience barriers as production costs become cheaper as more units are produced
Sonite
Low R&D costs for firms entering the marketSlightly more fragmented due to fall of market leader in period six
Less attractive, many segments in declineLess gaps in the market many firms cover each segment
VoditeHigh R&D costs for firms entering the market
New products from competitors entering the market are differentiated increasing customer loyalty
Sonite- MediumVodite-High
Buyer Power
SoniteDeclining number of buyers within the market
Less product differentiation- increasing buyer powerVodite
Lower number of buyersNo significant switching costs amd lower alternative vendors
Sonite- Medium
Vodite- Low
Threat of substitutes
Sonites and Vodites are not substitutes foreach other -low threat
Sonite - less differentation, more established market with more potentials to substitutes, continual investment and modification takes place this could leave
some products redundant and obsolete.
Sonite - Medium, Vodite - Low
6.6 Porter’s Five Forces There are high levels of competition in the Sonite market. Many firms are not entering the Vodite market due to the high barriers of entry, i.e. capital costs. Our financial capabilities reduce the barriers in the Vodite market for Oracle, hence providing an opportunity.
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(Adapted from Hooley et al, 2008)
6.7 Competitor Analysis Summary & Future Strategy ConsiderationsFigure 22
Competitor
Possible future strategies
E Enter Vodite market - followers segment due to its growth appeal Further penetration of High Earners market with SEEM due to period 6-7 success Enter singles market as replicated Oracles move into High Earners, which paid off
Y
Harvest and defensive strategies of Sonite products to generate cash for Vodite market. Shift focus to growing Vodite Market Launch new product in followers Vodite segment due to segment growth Improve positioning of VYHE towards innovators in attempt to capture larger market
share.
U
Sonite product modifications and advertising to increase purchase intentions across product range – SULI in professionals market is their only successful product in terms of purchase intentions.
Possible Guerrilla attack with SULI on Firm E’s SEMI, due to high competitive rivalry between these two products
A Poor positioning and lack of success with SALT- their worse performing product – may harvest and use resources/ financials in new Vodite product development
I
Sonite market – improve and modify products Additional focus with repositioning to followers and investing in VIBO Possible future strategy of Firm I is to merge with Firm Y to gain dominance and
knowledge in the Vodite market.
6.8 Opportunities and Threats
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Opportunities
O7- Lack of competition in Vodite market with a gap in the market for a successful market followerO8- Lack of competition around follower segment in Vodite market, also a fast growing segment O9- To take further Sonite market share and sales from Firm Y who have worsening financials from period 5
Threats
T6- Firm E’s recent guerrilla attack on SOLD by their SEEM product – SEEM taking market shareT7- Firms I,Y have already entered into the Vodite market, becoming established and gaining experience/market shareT8- Sonite market- competitive rivalry increasing and market reaching maturity stageT9- High Earners market becoming concentrated with three key players – competitive rivalry towards SOLD
7. Internal Analysis7.1 Performance AnalysisOracle started in a strong position, with two products (SOLD and SONO) holding 17.5% of the Sonite market (Fig. 24). Sales increased steadily over the first three periods before starting to decline in Period 4 as the market grew more competitive (Fig. 23). After the failed re-launch of a modified SONO in Period 3, Oracle developed a new product for the Singles market, SODD, which launched in Period 4. The rapid success of SODD enabled us to invest in modifying SOLD to more closely match our target market (High Earners), and later develop and launch a fourth product, SOKK, targeting the Others market, in Period 6.
Figure 23Oracle Sales
(From: Contribution by Brand)
Mirroring the sales figures above, Fig. 24 shows the strong decline in market share between Period 3 and 5 for SOLD and SONO. This demonstrates how failure to keep products up-to-date with consumer demands (SOLD), or market entry of a superior substitute product (SONO), can have a detrimental impact on sales. The problem with SOLD was by targeting both High Earners and Professionals we limited its appeal to either segment. Fortunately SODD and SOKK, along with a modified SOLD, have quickly built strong market presences, to the extent that now, in Period 7, Oracle controls 40% of the entire Sonite market.
Figure 24Oracle Market Share
(From: Market Shares Based on Unit Sales,
Market Forecast)
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Advertising and brand awareness are important for Oracle’s sales. However, brand awareness on its own clearly does not make a sale, something particularly evident in the case of SODD. Note its success (Fig. X, X) in relation to brand awareness (Fig. X), which only recently surpassed 40%. This demonstrates the importance of research and design, which enabled us to create a product that almost perfectly correlates with consumer demand.
Figure 25Oracle Brand Awareness
(From: Brand Awareness by Segment)
Brand awareness depends on advertising, however Fig. 25 and 26 show that once the awareness has been established, advertising has a reduced impact. In Period 4 the advertising budgets for SOLD and SONO were cut to fund the launch of SODD. Despite a 40% cut in advertising spend SOLD lost less than 5% brand awareness, while SONO still had 50% brand awareness two periods after its advertising was effectively stopped.
Figure 26Oracle Advertising
Expenditure(From: Detailed Brand
Expenditure)
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7.2 Portfolio AnalysisThe Boston Matrix below (Fig. 27) shows the performance of Oracle’s product portfolio over the past seven periods. SOLD is shown at P0, P4 and P6; SONO at P0, P3 and P5 (when withdrawn from sale); SODD at P4 (when introduced) and P7; and SOKK at P6 (introduced) and P7. Oracle is currently in a strong position with three Cash Cows in its portfolio.
Figure 27 Oracle Boston MatrixAdapted from Hooley et al, 2008
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SOLD started strongly, but market trends and competition led to a significant decline in Periods 4 and 5 (Fig. 23). After modification in Period 6, it recovered strongly but is in danger of being eclipsed by a competing product, SEEM, which has recently followed suit.
SONO initially held 5% of the Sonite market, but its primary market segment was the declining Buffs market. Despite an attempt to corner the Buffs market with a modification in Period 3, it never generated significant sales and was withdrawn from sale in Period 5.
SODD was launched in Period 4 and immediately captured 38% of the Singles market. Continued growth has led to it being the dominant product in the Sonite market with over 20% of all sales (Fig. 24), including two thirds of the Singles market.
SOKK is a recent portfolio addition, designed to target the difficult Others market. It debuted with 5% of the total Sonite market (Fig. 24), but rapid sales growth has strengthened its position. Hhad production in Period 7 kept up with demand it might have captured an even greater portion of the market.
Above are Product Life Cycles for each Oracle brand. Note the correlation with the performance progression displayed in the Boston Matrix (Fig. X).
Figure 28 Oracle Product Life Cycles(From: Contribution by Brand)
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According to the GE Matrix (Fig. 29), Oracle has improved its position from Period 0 and is now in a very strong position with SODD dominating the highly attractive Singles market and SOKK holding 36% of the sizeable, but diverse Others market. SOLD is in a more precarious position, holding one third of a mature and potentially declining market. This positioning indicates that Oracle should continue to invest in SODD and SOKK, while considering the merits of harvesting SOLD.
= Market Size & Product Share Figure 29 Oracle GE MatrixAdapted from Hooley et al, 2008
7.3 Financial Performance AnalysisFig. X shows Oracle’s past and projected financial performance. The rapid increase in revenue shown between Period 5 and 6 can be attributed to the revival of SOLD and the continued growth of SODD, both of which more than doubled their sales over the previous period (Fig. X), and the introduction of SOKK.
The projected performance is based on SOLD and SODD retaining their respective market shares, while SOKK continues its rapid growth in the Others market. We anticipate revenue growth slowing once SOKK reaches maturity, however these figures exclude the possibility of Oracle entering the Vodite market, which would reduce net contribution prior to entry (due to investment in product development) and increase revenues afterwards.
Figure 30Oracle Revenue
(From: Company Performance)
Slow revenue growth between Period 1 and 5 held Oracle’s stock price at a steady 1200 points (Fig. 15), after which the rapid success of SODD and SOKK generated interest from investors.
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7.4 Key ResourcesFig. X shows Oracle’s resources. These need to be developed and enhanced to ensure that we retain our position as the market leader.
Figure 31 Hierarchy of Resources(Adapted from Chaharbaghi & Lynch, 1999)
7.5 Strengths & Weaknesses
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Strategic Resources
Competitive Resources
Base ResourcesGood Brand Awareness
Extensive Market Research
Peripheral ResourcesEstablised Distribution Channels
Strengths
S1: High market share in Sonite market (40%).S2: Product portfolio contains three Cash Cows.S3: High profit margins.S4: Strong financial positon.S5: Good brand awareness.S6: Two successful new product launches.S7: Good positioned products shows effective R&D capaiblites
Weaknesses
W1: Low brand awareness for newer products, could be limiting sales growth.W2: Inconsistent brand management, variable advertising focus.W3: Limited R&D experience.W4: Slow to modify products in face of changing market conditions and consumer tastes.W5: Need to develop strategic resources to maintain position as market leader.
8. Competitive Positioning & Strategic Options
8.1 Current Position and Strategy (Period 1-7)Actual Position in Period 7
1. The stock price indicates that some of Oracle’s share was captured from Firm Y after SODD and SOKK penetrated their markets. SODD is Oracle’s most valuable product, followed by SOKK and SOLD.
2. Compared to our competitors, Oracle better understands consumer needs. The well positioned SOKK and SODD have thus boosted company performance which can be seen in the rocketing stock price (Fig. 15) in P7; making us the industry leader.
3. SOLD is facing increased competition in HiEarners, being attacked by Firm E’s SEEM which increased its market share by 203.5% between P6 and P7.
4. No products released in the Vodite market.
8.2 Four Key Performances for OracleThe table below shows four key performances when Oracle was affected by decisions the company or competitors made.
Figure 32
Pd Situation Oracle Decisions Competitor Actions2-3 Stock Price Index fell
from 1260 to 1206.Total Sonite market share dropped 4.2%. Current ROI decreased 35.1% from 3.56 to 2.31
Poorly modified SONO brand only changed volume; too high cost base for price sensitive Buffs market.Lost money on pre-modified stock (10328 units).No targeted advertising, 45% of budget spent on segments not focus of SONO.
SYCO was the only competitor for SONO, and much more tailored to the Buffs market. Released in P3. SYCO had lower cost base and retain price than SONO; captured 47.9% of market at launch, they also spent more on advertising.
3-4 Stock price remained static but current ROI increased 43.9% to 3.32. Total Sonite market share dropped -10.3%; net contribution +27.2%.
The launch of SODD, tailored brand took 37.9% of singles market. Spent $2m on advertising, hired 32 sales-force, mostly focused on dept. stores. Decreased advertising for SOLD by $1m; sales dropped -42% on prev. year.
SYCO’s grew rapidly, held 66% of Buffs market in P4. Y spent $1.3m on advertising compared to our $300k. SONO’s sales dropped 2.3%. SYGU was modified to target singles, following our lead.
5-6 Stock price rose 63.4% to 2209.Current ROI up 80.8% to 5.77.Total sales increased 84.2%.
Withdrew SONO, no advertising or production; sold off remaining stock, officially dropped in P6.SOLD modified to target High Earners; perception marketing used to inform market of modification. R&D took 2yrs. Spent $3m on advertising re-launch.SOKK, targeting others market, put into R&D at last minute. Same spend on advertising; transferred and hired 37 sales force for SOKK.
Firm Y released a Vodite product, with limited resources they paid less attention to their Sonite brands.Sales force for SYGU was 32 compared to our 52 for SODD. Advertising for SYCA (targeted at HIE) remained the same at $1.25m and no change in sales-force.
6-7 Stock price increased 22.5% to 2706.Total sales increased 21.5%. Net contribution rose 26.2%; but ROI decreased 11.4%.
Continued high growth of SODD; spent $3.8m on adverting it. Hired an extra 110 sales-force in total. Overall 2nd highest spender on advertising.Dropped price of SOKK from $250 to $220; inducing extra sales.
Firm E experienced steady growth in all periods. Their modified SEEM took 45.1% of HiEarners market and undercut SOLD by $10.They spent $1.4m more on advertising SEEM than we did on SOLD. Firm Y increased sales-force but was not optimised.
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8.3 Strategic Problem1. SOLD is losing sales to firm E due to SEEM modification; their increased awareness and
purchase intentions have affected Oracle’s success in the High Earners market.2. Oracle has been slow to innovate products and introduce a wide product range across
the Sonite and Vodite markets. This has been achieved by competing firms, e.g. Firm Y has two products in the Vodite market.
8.4 TOWS MatrixFigure 33
Opportunities
O1,O2,O3,O4,O5,O6,O7,O8,O9
Threats
T1,T2,T3,T4,T5,T6,T7,T8,T9
Strengths
S1,S2,S3,S4S5,S6,S7
Merge with Firm I.
Enter the Vodite Market, organic growth and By-pass strategy.
Pre-emptive defence, price cutting to closest ideal value.
Guerrilla attack with SOLD on SEEM
Weaknesses
W1,W2,W3W4,W5
Increase profitability of SOKK & SODD, improve competitive advantage.
Protect our positionConsolidation .
Merge with Firm E.
Re-modify SOLD productEncirclement attack.
8.5 Main Strategies1. Merge with Firm E
2. Guerrilla Attack Strategy (SEEM)
3. Enter Vodite Market
Alternate Strategies (Appendix 8, 9, 10)
4. Merge with Firm I
5. Protect Current Position
6. Increase Profitability of SOKK & SODD
Ansoff’s Matrix can be used to show the type of strategy each of the above are:
Figure 34
Source: Adapted from Ansoff (1987)
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Mission Statement
“To meet changing consumer demands through constant innovation”
This ethos is central to everything Oracle does and is an important part of its success.
Objectives
The strategies formulated aim to address the strategic problems highlighted. Our objectives are:
Increase market share and sales in the Sonite market by acquiring new resources. Create sustainable competitive advantage that will spearhead the growth of the company
to keep ahead of competitors. Increase profit and share price through improved performance
8.6 Strategy 1“Merge with Firm E: Medium-term Strategy”
Looking at the company’s current position, Oracle is the leader in the ‘Singles’ segment and has a growing stake in the ‘Others’ market. Given our strategic problem, merging with Firm E will acquire their SEEM which is their leading product. Then the company will have a larger and healthy stake in three key segments in the Sonite market. It will also acquire their SEMI brand which targets the Pros market although losing market share, the company can modify the product to better suit the target market.
Key strategic approaches, customers, competitors and resource based. This strategy concerns all three factors. In terms of customers, we can forecast future trends of our key target segments. This merger will build upon our company’s capabilities by acquiring new resources that will achieve sustainable competitive advantage in the Sonite market, which will pull the firm well ahead of our competitors.
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Factors Affecting Strategy
Financial Implications
Merging with Firm E in Period 8 and restructuring in Period 8 (left) or Period 9 (right), based on data obtained from company reports.
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Merging with Firm E leaves Firm Y as our main competitor, but considering Oracle has gained a wider product portfolio there are no main competitors as each brand targets different segments. There is a possibility that FirmY will focus more on the Sonite market as their postion in Vodite market is weak. Firm U is the next competitor of concern. Their SUKI brand grew 30.8% in P7, and we expect increased advertising and sales force from them, attacking the Sinlges and Others market. This could inhibit SODD and SOKK's growth. SULI grew 9.1% in P7 and is the only competitor in the Pros segment, already taking market share from SEMI.
C o m p e ti t o r R e a c ti o n
The merger may also result in confused brand image which may lead to bad positioning of both groups, very similar products in the HiEarners segment. Thus SOLD will be withdrawn as SEEM has slightly better product characteristics and higher purchase intentions. There is a need to organise our marketing mix so we can prepare to withdraw SOLD and make sure SEEM will be successful. The merger will allow higher production levels as serving more of the market, Oracle can lower prices due to economies of scale that will benefit consumers and allow Oracle to be more competitive. The combined financial resources will allow the merged firm to constantly modify products in line with consumer demands.
C u s t o m e r R e a c ti o n
High Earners’ prefer shopping in Department stores and secondly Speciality stores. Professionals also mainly shop at Speciality stores (41.8% in P7) this will benefit Oracle as other firms have little presence at this moment. Competitor’s sales forces are likely to decrease in Speciality stores due to a decrease in all segments. However trends may continue changing Oracle’s strategy in distribution channels.
D i s t r i b u ti o n C h a n n e l s
Sonite Market –Position Defence Strategy
Vodite Market –Non-Aggressive Expansion
Sonite market – Guerrilla TacticPreparation - Around 2 Periods
Resources Generation
Resources Generation
Figure 35
Market Growth Rates
The Professional and High Earners markets have peaked and are now in decline (Fig. 4), while Singles and Others are still growing. By merging with Team E we can reinforce our position in the High Earners (SOLD, 38%, SEEM, 45%) and Others (SOKK, 36%, SEYA, 27%) markets and our respective strengths in the Singles (SODD, 66%) and Professionals (SEMI, 58%) markets.
Combating Strategic Problem
Merging with Team E will counter Strategic Problem 1 by withdrawing SOLD and focusing on growing sales for the better designed SEEM. In addition, there will be financial savings from consolidating both firms’ product portfolios and reducing staff and marketing costs.
8.7 Strategy 2“Guerrilla tactic with SOLD on Firm E’s SEEM: Short-term Strategy”
Oracle will implement a defence strategy for P8 and P9, in order to defend the SOLD product and generate revenue. Guerrilla tactics will then be implemented with the SOLD product on firm E’s SEEM, as they previously attacked Oracle by using the same strategy. Guerrilla tactics involve surprise attacks on the competition to weaken their position in a particular market (Hooley et al, 2008).
Due to the nature of this strategy we will also need to defend against FIRM Y’s SYCA product, third in the market. Even though we will defend our position from this threat it is predicted that their limited resources will be used to support their Vodite products.
A harvesting strategy was considered due to the SOLD product now being classified as a Dog; however, this has only occurred in period seven due to the attack from the SEEM product. SOLD still has high purchase intentions, 99,131 sales in period seven and 11.4% share in the market with SEEM only just overtaking with 12.8%. This gives reason for continuing the product and investing in guerrilla tactics.
Advertising needs to be sustained to compete with SEEM’s brand awareness levels, but will need increasing when a modified product is launched (guerrilla tactics).
Factors Affecting Strategy
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Combating Strategic Problems
The amount of resources and finances needed is a particular problem, due to the nature of guerrilla attacks and the R&D needed to modify products to meet market needs. A defence strategy will also need some resources to maintain awareness. The finances have been generated from the current successful position of Oracle and the follower advantage obtained (see finances, below).
Due to the risk involved in attacking the current market leader risk management and assessments must be employed. The experience of Oracle can help with the way that risk is approached and managed in the Sonite Market.
Market research and high quality management is also needed in order to predict future trends. Oracle has invested in large amounts of market research in the Sonite market over the last seven periods, helping with predicting future trends.
The success of this strategy may undergo certain amounts of threats from competitor reactions. Competitors will be monitored and evaluated and a certain amount of benchmarking will be used.
The market for High Earners is also decreasing, on average of-3.1% over the next five periods, however other markets are decreasing at a higher rate. Our successful product portfolio in the Sonite market can cover any market growth or decline.
Finances
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Firm E may assume that our focus has completely shifted to the Vodite market and that a harvesting strategy has been adopted for SOLD. SEEM might implement a rapid counter-offensive strategy, after our guerrilla attack they could attack SOLD’s weak points. However their counter-offensive strategy could limit their ability to react quickly to further external threats.There is also a competitive threat with SOKK if focus is only put on the Vodite market and guerrilla tactics focused on the SOLD product. SOKK faces strong competition, regular monitoring is essential. Due to the weakening SEMI (market decreasing by -8.2% average over the next five periods), Firm E may decide to harvest this product and concentrate more on SEEM, or modify SEYA and shift resources to the Vodite market.
C o m p e ti t o r R e a c ti o n
If a defence strategy is adopted this will lead to less penetration of the market, making Oracle appear to be a company in decline. Consumer expectations are falling within the market but it is still important to remain competitive, therefore consistent advertising will be implemented. Consumers will react positively to guerrilla attacks with new modified products meeting their needs and increasing awareness through increased advertising.
C u s t o m e r R e a c ti o n
Distribution will focus on department stores as high earners shopping habits are 50%.Speciality store will also be utilised due to their shopping habits of 30.9 %.
D i s t r i b u ti o n C h a n n e l
Defensive position SOLD– for two periodsEstimated total costs for two
years*Advertising Expenditure
Sales force
K$4,550 advertising expenditure x 110% each yearK$5,005 -YEAR 1K$5,505.5- YEAR 2
K$2,154 sales force increase by 5 each yearK$25.3 PER PERSON
K$2,271.5 x2
K$ 10,510.5
K$4,543Defensive position SOKK– for two periods
Advertising Expenditure
Sales force
K$4,850 advertising x 105% each yearK$5,092.5-YEAR 1K$5,347.125- YEAR 2
K$1,824 (maintained) sales force x2
K$10,439.625
K$3,648
Defensive position SODD – for two periodsAdvertising Expenditure
Sales Force
K$ 4,400 advertising X120% each yearK$5280 YEAR 1K$6336 YEAR 2
K$2,204 sales force increase by 10 each yearK$25.3 PER PERSONFor one year 2,457 x2
K$11,616
K$4,457Market Research and advertising research for two periods (all markets)
K$1,038 all market research x2
K$2,000 advertising research expenditure each year
K$2, 076
K$4,000
The third period will include focus on the SOLD product and guerrilla tactics
Guerrilla attack – for one periodModification for SOLD Previous modification for SOLD in period one
K$1,500K$ 1,800
Launch new SOLD product (Based on SEEMS’s previous guerrilla attack on SOLD)
SEEM increased advertising by K$ 2,000
Advertising for modified SOLD - K$ 10,510.5 + K$ 2,000
SEEM increased sales force by K$1,500
Sales force for modified SOLD - K$2,271.5 + K$1,500
K$ 12,510.5
K$3,771.5Modification for SOKK (if necessary)
Previous modification for SOKK K$1,750 Period five
K$1,800
*Cost’s and decisions depend on competitor’s reactions and strategies. Adaption’s to decisions regarding expenditure will also depend on yearly market research results. Figures mainly based on costs in period seven. Economic factors e.g. inflation considered in calculations
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It has been recognised that due to steady levels of advertising expenditure during the defence strategy the production cost will decline slightly.
It has also been recognised that advertising and sales force for SOKK is not cost effective. Therefore Oracle will only implement a 5% increase per year to maintain brand awareness.
8.8 Strategy 3 “Enter the Vodite Market: Long-term strategy”
Oracle has no presence in the relatively new Vodite market. As illustrated by the industry life cycle (Fig. 36), the Vodite market is entering the growth stage due to its forecasted growth rate of 419.3% over the next 5 periods. Consequently barriers to new entrants are low because of low market presence, however as indicated in the Porter’s Five Forces (see above) investment costs create some minimal barriers. Despite this, Oracle has the financial resources to take advantage of this lucrative opportunity and undergo a bypass strategy to enter the market in P13.
This will enable us to build on market share and therefore testing both Firm Y and Firm I. By identifying gaps in the market Oracle will be in prime position to release a product which closely matches the specific characteristics of the Followers market. Since Oracle is already established in the Sonite market with sustainable levels of market share and brand awareness, it provides an opportunity utilise these capabilities and resources into a new market.
Figure 36
Figure 37
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Vodite brand perceptions based on Economy and Efficacy
Factors affecting Strategy
Page 39
Customers are likely to respond favourably towards our new products if we tap into their unmet needs, current rivals are not serving all segments. In normal circumstances the Innovators and Early Adopters, while not highly profitable, could act as a key springboard to develop the most lucrative segment which is Followers. However, Oracle is to launch its product soley to Followers since the segment size is expected to grow by 1113% in the next 5 periods.Although consumer research was only purchased during the latter periods, it is evident that we should position the product with sufficient levels of efficacy while also taking into account their price sensitivity. Meeting these needs should allow us to create and prolong the maturity phase of our products in the market. While it is important to satisfy our customers, our costs strategies must be well planned to ensure that positive profit margins can be maintained.
C o n su m e r R e a cti o n
Firm Y currently has an 81.7% share of the Vodite market with Firm I holding 18.7%. Being a direct competitor of Oracle, Firm E’s strength and position is similar to Oracle yet to enter the Vodite market, thier possible future strategy. Possibility that Firm E could hinder our customer purchase intention levels if they employ an aggressive frontal attack to consolidate their existing products and extend market presence Vital therefore to use our market research effectively in order to gain a competitive advantage. Potential high profit margins are likely attract competitors. Market growth rate indicates opportunities for constant waves of innovatiion . In order to defend their market share, Firm Y may seek to sacrifice their high margins to prevent competitor’s penetration strategies to succeed. It is suggested that our company launch a product that is also matched more closely to the ideal values of the Followers market than that of VIBO and VYHE. Although they are heavily targeted through advertisements, their position is quite distant to the actual consumer needs allowing us to strategically slot right into those market segments with the least possible time and costs (Fig. 37). Despite investments costs in the region of $10million competitors are likely to discover the profitable attraction of the 1113% growth rate in the Followers market over the next 5 periods.
C o m p e ti to r R e a cti o n
The consumer shopping habits predominantly lie in the distribution channel of mass merchandising, due to the characteristics of low price and high volume, that the Followers segment typically possess. Speciality and department stores will also be targeted albeit to a lesser extent due to their large product range and added cust. 50 sales people will be allocated across the channels with 30 sales people allocated to mass merchandisers and the other weighted equally to create awareness and high purchase intentions. This is to ensure Oracle maintains its positiong should the Bypass strategy prove successful with a sustainable market customer base that will be difficult to shift due to our preffered distribution channels.
D istr ib u ti o n C h a n n e l
Financial Implications
Factor CostsCreating new product to launch into Vodite Market 10,000,000Launching new product (based on R&D costs) 10,000Cost of all Vodite research studies (total periods 5,6,7) 135 9000Launching new product into Vodite market (Based on period 8 forecasted costs, and 50 sales men, increase in line with firm Y and I)
(6,182 x 50) – hiring and training= 309,100
Total 11, 678, 100
Market Growth Rates
The growth in the Vodite Market (Fig. 12) is a highly valuable opportunity. Oracle can successfully penetrate the market and target the needs of the Followers successfully, in comparison to the Sonite market which was split between six competitors.
Combating Strategic Problem
Entry into the Vodite market would increase Oracle’s product portfolio and sustain its competitive advantage as market leader by increasing its revenue and profits, rivalry is low as a result of Oracle being only the third firm to enter into the market. Oracle identifies untapped ‘followers’ needs, wider portfolio reduces risk. In the short-term profit margins may be low, however in the long-term this would increase as products become more established. This increase in profits can be ploughed back into our Sonite products to sustain market leadership or into R&D for new products in the Sonite and Vodite market. Overall this strategy solves only the second problem but this could be enough for long term success given this strategy meets all KSFs.
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8.9 FSA for Strategies
Primary Strategies
Suitability Feasibility Acceptability Total
Strategic ProblemsExploiting Resources &
Capabilities Resources Availability Return on Investment Level of Risk
(1)Merge With
Firm E
5 4 3 4 3 20Take advantage of Firm E’s product portfolio and expertise.Firm E’s R&D resources will benefit our research.
Exploit strong market position to further our strategic goals.Sustain our competitive advantage.
Need strong management to implement the merger.Would require a bank loan to fund the strategy.
Reduces costs and enhances economies of scale.Oracle would control x% of the Sonite market.
May require approval from relevant competition authorities.Potential cultural difficulties between organisations.
(2)Guerrilla Attack on
SEEM
5 3 4 4 1 17Overcome loss of sales and market share by penetrating market and reducing competitive effectivenessFocus on main competitive product (SEEM)
SOLD a successful product through the 7 periodsLarge amounts of modification and investmentExploits market research collected
Attacking increases returns which can increase resource availability.Have good current financial resources.Returns from a larger product portfolio including products in the vodite market.
High costs but returns can be high – e.g. results seen through competitors guerrilla attackFinancial Returns - shares, sales, stock priceReturn and value creation with a stronger brand and company position
High due to competitors reactionsHigh risk due to the need to meet future consumer wants and needs, especially in vodite market.Current capabilities which can help to lower risk.
(3)Enter the
Vodite Market
4 4 4 2 3 17The Sonite market is not as profitable as it once was and despite Oracle being in a good position with both primary segments in the growth stage, the market is likely to become more concentrated. In order to remain competitive entry into the Vodite market seems inevitable.
It is financially possible to increase our shares amongst a lucrative followers segment despite the high investment. Such a strategy will place Oracle in a position where our resources will be stretched
Oracle have the required finances to enter the market, however our existing products in the Sonite market are likely to be affected. Once the strategy has been implemented, adjustment of operations will need to be prepared to defend from the possibility of frontal attacks from Firm Y and a similar entry to ours from Firm E.
High cost in implementing a Bypass strategy. Needs top level investment to leapfrog competition. Our strategy could be hindered if we fail to deliver a profitable Vodite product into the market. A planned approach could potentially increase our profitability. Continuous R&D may limit profitability as customer’s attitudes and requirements continue to develop.
Product development into a relatively young and unknown market place places great risk on our decision to enter. Continuous changes are likely to occur in the coming years from both competitors and customer behaviour.
Alternate Strategies
Suitability Feasibility Acceptability Total
Strategic ProblemsExploiting Resources &
Capabilities Resource Availability Return on Investment Level of Risk
(4)Merge with
Firm I
4 3 3 4 2 16Takes advantage of Firm I’s vodite product. Helps reduce vodite market cost of entry- R&D resources.
Exploits current resources and product range due to becoming a larger more dominant firm - exploits Oracles brand name and position across markets and through a wider product portfolio.
Need strong management to implement the mergerWould require a bank loan to fund the strategy.Further funds available from drop of SIRO.
Reduces costs and enhances economies of scale.Modification needed however due to growth in vodite market the return has potential to be large.
Strategy has a large element of risk due to the lack of success in Firm I’s sonite product, which could impact brand name and stock price index. Also potential for a culture clash and resistance to change.The Vodite market is a risky market to enter, even with a merge.
(5)Protect Current Position
1 4 4 3 2 14Not being pro-active and adapting to the environment doing the same does not sustain competitive advantage
This strategy focuses Oracles core strengths by aiming to gain larger market share to the three key segments
Have the $24m marketing budget enough financial funds to support the marketing mix.
ROI is unclear as SOLD position is weakening, but SODD is the main product to provide overall returns for Oracle.
Potentially high as Firm E is always releasing and modifying products, Firm Y may return focus to, the Sonite market.
(6)Increase
Profit Margins
2 3 3 2 2 12Decreasing profitability and extreme competition of Sonite market causing increased operational costs to sustain competitiveness
This strategy takes advantage of the current positional strength of the SOKK and SODD on the MDS perceptual map in relation to the relative position of competition
Consumers are already loyal to current products and have relatively high brand awareness. Maintain lower degree of advertising and focus on strong customer related distribution channels.
Reduce production and base costs as a part of the cost reduction strategy will allow for short term financial gain.
High risk due to consumer disapproval of economically reduced brands despite their needs for quality enhanced products.
The table above demonstrates the advantages of the chosen strategies, e.g the guerrilla attack on SEEM scored low and risk and high potential returns. The alternate strategies were not chosen because they resulted in a low FSA score, as outlined above.
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9. Implementation – Marketing Mix
9.1 Strategy 1
Brands SODD SOKK SEYA SEEM SEMIPrice ($) 325 220 200 500 535
Promotion ($) 4500k 4000k 3700k 4800k 4200
Target Segments
100% Singles 100% Others 100% Others 100% HiEarners 100% Pros
Production (units)
640k 350k 200k 440k 250k
Place: sales-forceSpeciality Stores
31 10 15 52 30
Department Stores
41 25 35 75 20
Mass Merchandise
30 37 50 43 18
Total 102 72 100 170 68
Key Points
Price
SEYA price lowered as product is at very low end of Others market, compete in sub-segment avoiding competing with SOKK. SEEM price raised from $470 to $500, as SOLD is withdrawn Oracle can charge higher prices weak competition from SYCA. Slight decrease in for SEMI, as market share has dipped.
Promotion
Singles fast growing market with only 66% brand awareness and advertising effectiveness, decision to increase advertising. SEEM is the highest spend as it replaces SOLD for the target segment.
Product/Production
SEEM output doubles to compensate increase in demand as SOLD is dropped. SODD output increases by around 20% as this is the market growth rate.
Wider product range that targets specific segments spreads our risk and will increase Oracle’s performance.
Place – Sales force
All optimised to meet target segments shopping habits and sales-force research given. Again SEEM sales-forces is the largest, need strong sales and delivered through right channels as this is one of our KSFs.
9.2 Strategy 2 Defensive Phase
Brands SODD SOKK SOLDPrice ($) 325 220 465Promotion ($) 4400k 4850k 4550kTarget Segments
100 % Singles 100% Others 100% HiEarners
Production (units)
600k 300k 240k
Place: sales-forceSpeciality Stores
31 10 26
Department Stores
40 30 40
Mass Merchandise
26 32 24
Total 97 72 90
Key Points
Price
Undercutting SEEM taking back market share, decrease SEEM’s growth.
Promotion
Increases across the board to maintain and build target market awareness.
Product/Production
SOOD and SOKK increased in line with predicted market demand. SOLD output maintained as in P7 still have 30k units left in stock.
Place – Sales force
Increased sales-force for all products to enhance product availability in store
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9.3 Strategy 3Period 13 Launch
Brands VOGGPrice ($) 400 ESTPromotion ($) 4000kTarget Segments
100% Follows
Production (units)
300k
Place: sales-forceSpeciality Stores
35
Department Stores
40
Mass Merchandise
48
Total 123
Key Points
Price
Ideal values slowly going down but hard to predict price 5 years later
Promotion
Solely targeted to followers high expenditure for product launch.
Product/Production
Output at 20% of expected market size at launch given by the market forecast
Place – Sales force
Basing it on competitors current sales-force figures plus assigned on consumer shopping habits. Mass Merchandise most popular currently possible to change in coming years.
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10. Conclusions & RecommendationsStrategy Strength Weakness
1. Merge with Firm E
Increase presence in the market and exploit strategic goals
Take advantage of Firm E’s resources
Sustainable competitive advantage
Benefit from economies of scale
Need strong management Financial implications e.g. may
need to take out a loan Cultural difficulties which could
impact implementation Disruption from authorities
2. Guerrilla attack Strategy (SEEM)
Focus on strong/direct competitors that cause significant impact to Oracle
Overcomes loss of sales and market share
Makes use of the investment in market research
Exploit’s successful product and resources – SOLD
Potential for high returns Strengthen products
Needs consistent modification Cannot always predict future
trends and consumers wants and needs
Success depends on competitor reactions and tactics
High cost, large amounts of finances needed in the short term
3. Enter Vodite Market
Entering a growth market with high potential
Low number of firms and products in the Vodite market
Could stretch resources over Oracles possible capacity
Lack of focus and resources in Sonite market
High costs e.g. R&D expenditure New market risk due to changes in
competitors and customer behaviour
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11. ReferencesChaharbaghi, K. & Lynch, R. (1999). Sustainable competitive advantage: towards a dynamic resource-based strategy. Management Decisions 37 (1). P. 45-50
Egan, C. & Thomas, M. (1998) The CIM Handbook of Strategic Marketing, 1st ed. Oxford: Butterworth-Heinemann
Hooley, G. Piercy, N. & Nicoulaud, B. (2008) Marketing Strategy and Competitive Positioning, 4th ed. Harlow: Financial Times Prentice Hall
Makadok, Richard (1998). “Can first-mover and early-mover advantages be sustained in an industry with low barriers to entry/imitation?”Strategic Management Journal, Vol 19, Issue 7 (July 1998), pp 683-696.
Markstrat (2011). BM3399 Marketing Strategy. Industry Red – Firm O [Based on Scenario F6M2A0). Period 7
Thompson Jr, A. Gambl, J. & Strickland III, A. (2005). Strategy: Winning in the Marketplace, 2nd ed. Maidenhead: McGraw-Hill Education
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12. AppendicesAppendix 1: Sonite Market Shopping Habits
Distribution Channel Total % Sales Period 7 % Change Period 1-7Speciality Stores 36.8 (4.2)Department Stores 37.9 (1.7)Mass Merchandise 25.3 5.9
Appendix 2: Change in Sonite Market Shopping Habits Per Segment Distribution Channel Buffs (%) Singles
(%Professionals (%)
High Earners (%)
Others (%)
Speciality stores (P1) 70.0 40.0 50.0 20.0 20.0Speciality stores (P7) 59.1 34.5 41.8 30.9 14.5Change P1-P7 (10.9) (5.5) (8.2) 10.9 (5.5)Department stores (P1)
25.0 40.0 30.0 50.0 40.0
stores (P7) 22 Department.3
34.5 27.3 50.0 34.5
Change P1-P7 (2.7) (5.5) (2.7) 0 (5.5)Mass Merchandiser (P1)
5.0 20.0 20.0 30.0 40.0
Mass Merchandiser (P7)
18.6 30.9 30.9 19.1 51.0
Change P1-P7 13.6 10.9 10.9 (10.9) 11
Key:Green - % Increase Red - % Decrease Blue - Main Shopping Outlet for segment
Appendix 3: Changes in importance’s of attributes and consumer preference based on conjoint analysis from period 1-7 (includes all segments in sonite and vodite markets)
Sonite Market
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
4.2%3.3% 3.1% 2.2%
0.8% 0.7% 0.5%3.2%3.3% 3.5%
1.6%2.6% 2.5% 2.2%
41.9% 38.6%44.9%
36.2% 34.7% 33.0% 29.7%
50.7%54.8%
48.5%
60.0% 61.8% 63.8%67.6%
Changes in Importances of Attributes to Singles market
Design (Index) Max Frequency (KHz)Power (W) Price ($)
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HiEarners Market - Changes in Highest Consumer Preferences (the closest value to 1.00 based on the Conjoint Analysis)
Level +-1 Period 7 Period 6 Period 5 Period 4 Period 3 Period 2 Period 1Design (Index) 8 to 10 8 to 10 8 to 10 8 to 10 8 to 10 8 to 10 8 to 10Max Frequency (KHz) 13 or 37 15 or 39 33 to 41 15 to 23 or 39 32 26 to 34 27Power (W) 57 44 47 60 61 49 to 65 52Price ($) 432 433 426 430 431 423 414
Period 7 Period 6 Period 5 Period 4 Period 3 Period 2 Period 10.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
12.4% 12.3% 11.5% 12.2% 8.9% 8.9% 8.0%4.6% 3.4% 2.6% 2.1% 1.5% 2.0% 3.5%
32.4% 32.6%38.1% 36.2% 38.7% 35.5% 34.8%
50.6% 51.7%47.8% 49.6% 50.9% 53.6% 53.8%
Changes in Importances of Attributes to HiEarners market
Design (Index) Max Frequency (KHz)Power (W) Price ($)
Professionals Market - Changes in Highest Consumer Preferences (the closest value to 1.00 based on the Conjoint Analysis)
Level +-1 Period 7 Period 6 Period 5 Period 4 Period 3 Period 2 Period 1Design (Index) 8 8 8 to 9 8 to 9 8 to 9 8 to 10 8 to 10Max Frequency (KHz) 34 to 42 34 to 42 34 to 42 26 to 34 or 50 34 34 to 42 34Power (W) 84 84 84 84 84 82 65Price ($) 517 516 513 513 431 421 414
Period 7 Period 6 Period 5 Period 4 Period 3 Period 2 Period 10.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
5.3% 3.9% 2.7% 2.8% 3.9% 3.5% 2.6%3.0% 2.5% 1.2% 1.2% 1.9% 2.4% 3.3%
46.9% 47.2% 48.5% 48.0%43.0%
37.2%31.6%
44.8% 46.4% 47.6%48.0% 51.2%
57.0%62.5%
Changes in Importances of Attributes to Professionals market
Design (Index) Max Frequency (KHz)Power (W) Price ($)
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Others Market - Changes in Highest Consumer Preferences (the closest value to 1.00 based on the Conjoint Analysis)
Level +-1 Period 7 Period 6 Period 5 Period 4 Period 3 Period 2 Period 1Design (Index) 7 7 7 7 7 7 7Max Frequency (KHz) 21 to 37 29 to 37 13 to 21 or 37 25 24 to 32 23 to 31 23 to 31
Power (W) 46 30 33 42 39 39 38Price ($) 183 191 182 182 182 180 179
Period 7 Period 6 Period 5 Period 4 Period 3 Period 2 Period 10.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
5.3% 5.8% 4.0%
13.0% 11.5% 9.7% 6.5%3.0% 2.3% 0.9%
5.1% 3.8% 2.7% 2.4%
46.9%40.9%
49.3%
35.2% 37.4% 35.2% 31.9%
44.8%51.1%
45.7% 46.3% 47.3%52.5%
59.3%
Changes in Importances of Attributes to Others market
Design (Index) Max Frequency (KHz)Power (W) Price ($)
Vodite Market
Innovators Market - Changes in Highest Consumer Preferences (the closest value to 1.00 based on the Conjoint Analysis)
Level +-1 Period 7 Period 6 Period 5Autonomy (M) 58 56 54Max Frequency (KHz) 15 16 14Diameter (Mm) 49 to 64 60 45 to 75Price ($) 436 441 504
Period 7 Period 6 Period 50.0%
10.0%20.0%30.0%40.0%50.0%
25.3% 25.3%17.6%
35.7% 35.7%44.9%
5.8% 5.8% 2.0%
33.2% 33.2% 35.5%
Changes in Importances of Attributes to Innovators Market
Autonomy (M) Max Frequency (KHz) Diameter (Mm) Price ($)
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Early Adopters Market - Changes in Highest Consumer Preferences (the closest value to 1.00 based on the Conjoint Analysis)
Level +-1 Period 7 Period 6 Period 5Autonomy (M) 63 to 79 61 62Max Frequency (KHz) 13 12 12Diameter (Mm) 38 to 53 50 50Price ($) 376 397 412
Period 7 Period 6 Period 50.0%
10.0%20.0%30.0%40.0%50.0%60.0%70.0%
10.4% 14.1% 14.4%23.8%
36.3%44.3%
1.6% 2.3% 2.8%
64.2%
47.3%38.5%
Changes in Importances of Attributes to Early Adopters Market
Autonomy (M) Max Frequency (KHz) Diameter (Mm) Price ($)
Followers Market - Changes in Highest Consumer Preferences (the closest value to 1.00 based on the Conjoint Analysis)
Level +-1 Period 7 Period 6 Period 5Autonomy (M) 58 58 51Max Frequency (KHz) 15 12 11Diameter (Mm) 49 to 64 36 or 81 55 to 70Price ($) 436 420 357
Period 7 Period 6 Period 50.0%
10.0%20.0%30.0%40.0%50.0%60.0%
13.8% 11.3% 13.0%
28.4% 31.2%38.5%
3.1% 6.3% 2.5%
54.7% 51.2%46.0%
Changes in Importances of Attributes to Followers Market
Autonomy (M) Max Frequency (KHz) Diameter (Mm) Price ($)
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Appendix 4: Brand Awareness by Segment
CONSUMER SURVEY - BRAND AWARENESS BY SEGMENT
Firm
Brand Buffs Singles Pros HiEarners
Others Total
A SAMA
53.80%
60.90%
47.80%
46.30% 59.00%
55.10%
SALT 67.40%
57.10%
52.40%
49.80% 45.20%
51.90%
SAKE 28.40%
16.90%
26.10%
24.90% 13.60%
19.50%
E SEMI 66.50%
55.60%
75.60%
59.40% 44.10%
56.30%
SEEM 62.70%
48.50%
61.20%
75.20% 43.60%
55.10%
SEYA 44.50%
39.30%
33.90%
33.60% 59.00%
43.50%
I SIRO 54.40%
57.40%
43.50%
42.20% 58.70%
52.60%
SIBI 52.60%
56.00%
44.80%
43.10% 43.40%
47.80%
O SOLD 60.00%
51.20%
60.00%
74.10% 43.00%
55.20%
SODD 40.90%
66.00%
31.30%
32.00% 27.80%
41.50%
SOKK 24.80%
17.90%
18.70%
19.40% 41.90%
25.80%
U SUSI 38.70%
46.40%
33.90%
34.60% 47.10%
42.00%
SULI 58.70%
50.80%
56.90%
54.50% 36.80%
48.70%
SUKI 28.40%
38.40%
20.90%
20.20% 24.20%
27.50%
Y SYGU 61.30%
71.00%
51.40%
47.80% 50.60%
56.90%
SYCA 57.40%
50.70%
58.30%
71.20% 40.90%
53.40%
SYCO 67.30%
35.70%
35.30%
24.00% 21.80%
30.70%
Appendix 5: Purchase intentions
CONSUMER SURVEY - PURCHASE INTENTIONS
Firm
Brand Buffs Singles Pros HiEarners
Others Total
A SAMA 1.00% 6.70% 0.10% 0.20% 13.80% 6.60%
SALT 8.00% 2.30% 0.30% 0.60% 0.90% 1.60%
SAKE 25.70% 0.30% 0.30% 0.20% 0.10% 2.00%
E SEMI 2.40% 0.30% 49.30% 0.50% 0.20% 7.80%
SEEM 1.80% 0.40% 0.80% 53.90% 0.30% 10.20%
SEYA 0.50% 0.70% 0.00% 0.10% 19.90% 7.20%
I SIRO 0.50% 0.70% 0.10% 0.10% 6.50% 2.50%
SIBI 0.90% 1.30% 0.10% 0.20% 4.40% 2.00%
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O SOLD 1.40% 0.30% 0.70% 29.10% 0.30% 5.60%
SODD 1.40% 58.30% 0.10% 0.10% 1.60% 15.40%
SOKK 0.30% 0.40% 0.00% 0.00% 35.70% 12.60%
U SUSI 0.30% 0.40% 0.00% 0.10% 2.30% 0.90%
SULI 2.70% 0.30% 46.80% 0.50% 0.20% 7.50%
SUKI 0.50% 2.30% 0.00% 0.10% 9.20% 3.80%
Y SYGU 1.70% 24.20% 0.10% 0.20% 4.00% 7.60%
SYCA 2.10% 0.40% 1.00% 14.00% 0.30% 3.00%
SYCO 48.90% 0.70% 0.20% 0.10% 0.30% 3.70%
Total
100.00% 100.00% 100.00%
100.00%
100.00% 100.00%
Appendix 6: Product margins in Sonite market
Firm
Brand Base Cost $
Retail Price $ Margin
A SAMA
201 250 49
SALT 201 330 129
SAKE 185 380 195
E SEMI 198 550 352
SEEM
159 470 311
SEYA 114 225 111
I SIRO 71 240 169
SIBI 123 280 157
O SOLD
171 480 309
SODD
138 325 187
SOKK
110 220 110
U SUSI 80 204 124
SULI 194 525 331
SUKI 132 259 127
Y SYGU
147 280 133
SYCA
139 500 361
SYCO
181 340 159
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Appendix 7: SEEM’s approach to High Earners
Period 6
Period 7:
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Appendix 8: Alternative strategy - 4
“Merge with Firm I (to gain lower costs in the Vodite market)”
The StrategyFirm I is the second weakest firm in the industry in terms of stock price index. This is due to a lack of resources and insufficient investment. Their SIBI and SIRO products are failing to strategically approach the Singles and Others market. They only have 1.6% and 0.8% of the market share whilst Oracles SODD and SOKK have 21.1% and 10.9% of the Singles and Others market. A merge with firm I will ensure a reduction in competition and avoids any future flanking attacks by Firm I and using their first-mover advantage in the Vodite market.
The reasoning behind this strategy is to gain from Firm I’s knowledge and experience in the Vodite market. An essential benefit is that merging with firm I will make the entry into the Vodite market less expensive due to not having to pay the 10 million costs of first product R&D. Merging will mean we will already have established products in the market, reducing costs and risks. In competitive terms, the merge could be defined as part of the pre-emptive strategy, expanding into an area that Firm E has not yet approached, increasing the barriers to entry through a larger, merged firm.
An element of this strategy is to generate cash whist merging the firms to create a dominant large firm across the Vodite and Sonite market. This means improving and dropping some of Firm I’s products. SIRO will be dropped due to low product performance and low improvement even with substantial investment in the past. Some resources will be shifted to Firm I’s SIBO to focus on the Others market with SOKK. This means a two product penetration will be implemented in the Others market. SIBO has not been too successful in the singles market due to a lack of performance so the price element (which is a more flexible and lower cost method to modification) will be slightly adjusted to sit within the others market.
Factors Affecting Strategy
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Many of the competitor reactions within this strategy are similar to Strategy 3Firm E, may invest in the Vodite market, as their product portfolio shows that although SEEM has potential growth, SEMI is facing declining sales and SEYA has missed the first shot to best match market needs; aggressive expansions can be recognized by Firm E's past tacticsFirm E may attack our Sonite products due to a slight shift in focus in the Vodite market with the merge - we should therefore ensure our financial resources can be allocated to different products sufficiently.Firm Y could use a positin defence strategy in the Vodite market in order to avoid others to attack their position. Oracle should modify the VIBO immediately to match the ideal value of the Followers and also launch new products particularly for each of the Innovators and Early Adopters markets.
C o m p eti tor reacti o n s
Comapny and product brand name confusion - there will therefore be no prodct brand name modification to exsisting productsChanging consumer needs in the sodite market- SODD and SOKK must simultaneously be carefully and strategically positioned and modified to match the consumers changing needs that estimated by looking at the trends on the research (Appendix). Consumers become accustomed to price wars in Sonite market, price competitions in the market might harm our shares, that is we have to simultaneously ensure our products matches close to the ideal value of the segments.Lack of product acceptance in the vodite market however acceptance predited to be higher with Innovators Therefore the market size increases from innovators to early adopters to followers. The products marketing mix could be adjusted in different stage of the product life cycle.
C u sto m er reacti o n s
The merge with Firm I involve a complex mix of the choice of distribution channels for different products and segments.
D istrib u ti o n
Combating any strategic problems A strategic implication can include losing the positioning in the Sonite market due to outstretching company capacity to manage both markets. The SIRO product will be dropped and resources transferred. When firm Y entered the Vodite market we adopted a rapid counter-offensive strategy together with other companies, which significantly affected their performance in the sonite market. This may be a reaction of other firms whilst we adopt this strategy. This makes dropping SIRO and improving SIBI and SOKK and important element. Firm I’s VIBO in the vodite is not well-positioned. The merge, the modification of products and other product launches will require further amounts of resources. It is necessary to define a clear implementation plan to allocate the resources in a cost-effective and efficient way.
Finances:Cost of Merge:
Cost of Merge Withdrawing SIRO
$2,416,042 (est)$500000
No redundancies due to SIRO having very low sales force of only 58 for both of their sonite product, the sales force will be transferred to SIBO.
For additional estimates in entering the vodite market see Strategy 3
Marketing Mix strategy 4
Decisions SONITE VODITESOLD SODD SOKK SIRO
(product dropped in period 8)
SIBI(one year to modify)
VIBO
Price ($) 480 325 220 240 2240 (P7)
450500 (P7)
436 innovators376 (1.00) – 462
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(0.87) Early Adoptors
403 (1.00) – 489 (0.73)
FollowersPromotion ($) 4000k 4500k 4000k 1650k
- 1650k400k + 1650k
3200k
Target Segments
100% High
Earners
100% Singles
100% Others
18.18% Buffs18.18% Singles
12.12% Pros12.12%
HiEarners39.39% Others
25% Singles
75% Others
30% Innovators25% Adopters45% Followers
Production (units)
300k 640k + 40k
350k Volume Sold: 39930
20141+ 20000
52675 +10000
Place: sales-force
Speciality Stores
36 31 10 5 6 + 10 10 +10
Department Stores
38 41 25 13 8 12
Mass Merchandise
30 30 37 20 6 13 +20
Total 104 102 72 38 40 65
Key PointsPrice
Withdrawal of SIRO which means competitions reducing in the Others market, however, it is going to reposition the SIBI from targeting the Singles to Others market. SIBI’s price will be adjusted from $280 by $240 to better meet the value of the Others market.
VIBO’s price is going to be lowered to reach the greatest consumer preferences in the followers segment and innovators (innovators due to introductory stage and followers due to already positioned product and segment growth)
Promotion SIBI undergoing modification in price to shift segment, therefore needs to be
advertised to the new target audience.Product/Production
While SODD will be benefiting from the move of SIBI withdrawn from the Singles market, the demand will increase by around 0.5-0.8% based on the sales and market share growth rate. Therefore production has had to increase for SODD as the competition is reduced.
Increased production for SIBI due to modification towards the Others (Others market due to increase in size). Production is also based on shifted resources from SIRO
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Place – Sales force Due to Oracle now having two products in the others market (once the price and
advertising is modified for SIBI), the sales force coverage will be spread across all outlets. Therefore SIBI adopts a niche distribution strategy.
Appendix 9 -Alternative strategy - 5 “Protecting Oracles position by consolidation”
This strategy refers to market penetration in the Boston matrix. Essentially maintaining Oracles market position by using its current strategy and driving demand for our products by increasing advertising and sales-forces, with minor pricing tweaks. The SOLD only dropped market share in P7 so we are uncertain of its future, very recently modified product the bottom line is being defensive from attacks from Firm E.Factors Affecting Strategy
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Although Oracles products are well-positioned it faces increased competition in all three key segments. Firm E and Firm Y may feel pleased that Oracle isn't doing anything radical. Firm Y is likely to drop the price of SYCA brand as thier margins are high indicated in Appendix 1. Firm E will most likey to push on with thier advertising and sales-force as they have huge marketing budgets.
Com petitorsReactions
This defensive strategy is likely to lead to a fall in prices all around., benefiting customers. Demand will rise and the sonite market will continue to grow. The others market is very crowded, there is no differentiation in this market price is the main factor to purchase products
Custom ers Reactions
The movement of singles and others shopping more at mass-mechandise is beneiftical to Oracle, as its the least cost distribution channel. Reaching HiEarners is mainly done through the department stores.
D istributionChannels
Financial ImplicationsThe limited financial implications for implementing a protective strategy can be accommodated within our current budget:Costs
Hiring & Training1
Total$140,600 (37 staff x$3800)$140,600
Annual CostsMarketing2
WagesTotal
$550,000 (Advertising)$940,000 (37 staff x$25336)$1,490,000
1 Hiring additional sales staff for SODD.2 Budgeting ~$4m advertising and $0.6m advertising research for each product.
Market Growth RatesThe High Earners market has peaked and is now in decline (Fig. X), while Singles and Others are still growing. To protect our position as market leader we should implement a fortress defence in the Singles (SODD, 66%) market, fortress or pre-emptive defence in the Others (SOKK, 36%) market, and a harvesting strategy in the High Earners (SOLD, 38%) market.Combating Strategic ProblemThis strategy does not combat either of Oracle’s strategic problems.
Marketing Mix
Key PointsPrice
Lowering the price for SOLD, undercutting competition SOKK and SODD remain the same.
Promotion
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Brands SODD SOKK SOLDPrice ($) 325 220 450Promotion ($) 4650k 4200k 3700kTarget Segments
100% Singles 100% Others 100% HiEarners
Production (units)
625k 365k 210k
Place: sales-forceSpeciality Stores
38 10 25
Department Stores
46 30 40
Mass Merchandise
33 35 24
Total 117 75 89
Heavy increase for SODD advertising really pushing the product forward. SOKK and SOLD levels remain very similar as the advertising impact is less effective.
Product/Production SODD production increased in line with market growth, same for the SOKK in P7 all
output was sold. Place – Sales force
Plus extra 10 sales staff for SODD to further drives the brand forward. Slight changes to SOLD and SOKK as sales-force research shows little effectiveness.
Appendix 10: Alternative strategy – 6
Increase profit margins
Due to the changing shift in the Sonite market towards the end of maturity, the possibility of competition targeting the more lucrative Others and Singles segments is heightened. To defend our unique reputation Oracle must aim to anticipate and combat future attacks by improving overall profitability by increasing margins. This can be achieved by changing the product mix and maximising cost reduction. Such a strategy will be good for shareholders who will be encouraged by the decreasing production costs of products that in turn will potentially reward them with greater returns on investment. Costs can be reduced through decreased advertising research/expenditure or by offering a re-modified lower quality product at a cheaper base cost.
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With regards to the current state of the market, customers most significantly Others and Singles are likely to withdraw their interest in the brand if they see diminishing performance value which goes against thier evolved ideal needs. Reducing costs on the other hand will not have a direct impact for customers, but reducing advertising research and expenditure might cause Oracle to lose focus on their target audience changing wants and needs. As a result customers may defect to other brands.
Consum er Reaction
With the SOKK already competing in a concentrated market, there is a strong possibility of competitors moving into the Vodite market, therefore reducing the bargaining powers of buyers allowing Oracle to increase profit margins by increasing prices. Direct competitors becoming aware of Oracles cost reduction strategy might identify an opportunity either in the market or internally to imitate. For example as Firm I’s SIROS base costs is significantly lower than SOKKS being $71 to $110 respectively, Firm I could identify our cost reduction strategy and use high investment to implement a rapid counter offensive strike in an attempt to overcome Oracles perceived vulnerability of stretched resources.
Com petitor Reaction
This strategy will also impact on the number of outlets that customers can access Oracle's products from. With regards to the SODD and SOKK, there may the option to just target majority distribution channels where customers are most likely to shop as opposed to spreading the product coverage across multiple formats. SODD will placed in 60% of department stores and 40% in speciality stores due to its higher price margin and decreased distribution channel size. Increased product placement will be directed towards Mass Merchandisers for the SOKK which is growing rapidly and enhances the chances for optimised sales performance.
Distribution Channel
Financial ImplicationsFactor Costs for SODD Costs for SOKKCurrent value 1250 1750Decrease in advertising(SODD current advertising cost 4,400SOKK current 4,850)
- 1200 - 1425
Decrease number of sales force/ distribution channels(SODD = 2,204SOKK = 1,824)
-1,323 -1,095
Combating strategic ProblemImplementing this strategy will allow Oracle to overcome the problem of having to compete with the concentration of firms in the market which in turn is driving average prices down. Despite decline distribution outlets R & D efforts combined with a steady sales force should allow Oracle to cope with such a strategy.Market Growth RatesThe growth in the Sonite market from the 6 competitors means Oracle has to adopt a strategy of sustainability to increase profit margins and cost reduce. This in turn can be ploughed back into the research and development of current and future Sonite and Vodite products, to maintain brand strength and competitive advantage.Marketing Mix:
- Price – SODD and SOKK will be re-modified to be of a lower quality, decreasing the base cost, but retail price charged to consumers will remain the same.
- Promotion - Reducing advertising expenditure decreased in order to reduce the base cost of producing SODD and SOKK.
- Product/Production: SODD and SOKK will be produced at a lower quality across all variables, reducing base cost.
- Place / sales force: Sales force research shows little effectiveness, therefore the sales force can be reduced as the consumers are already have brand awareness.
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