As a regular attendee of business networking events, I have heard more than my fair share of presentations from ‘business advisors’ promising to revitalise your business’s fortunes. Most of these pitches fall into two categories; those based on increasing sales lead conversion; and those based on reorganisation of finances.
Both of these approaches may be of use to some businesses but no amount of sales training or accountancy jiggery-pokery will succeed unless your business is based on a solid strategic plan. In modern, 21st century markets, this means a plan based on strategic marketing principles.
Professor Malcolm Macdonald of Oxford Business School and Cranfield University, in his book Marketing Due Diligence, highlights three factors of modern markets which predicates a marketing strategy approach. These are:
- Market maturity
- Consumer Power
Modern western economies are mature economies both in terms of product life-cycle and the diffusion of innovation. In western economies nearly all consumers have a car, a mobile phone or a laptop computer. New and innovative product classes are the exception, not the rule.
Mature market conditions mean that competitors in that market are competing for the same customers. It is a battle for market share not seeking new customer groups. The predominant business strategy is one of market penetration. Strategic skills in terms of differentiation through the marketing mix are crucially important. Demographics play a major role in developing a mature market strategy, so market segmentation and directional policy frameworks are key. For those seeking to expand their market, diversify or to introduce new products, assessment of risk and market analysis are important strategic skills.
In new or growing markets, there tends to be a significant number of small, equivalently sized competitors. At the beginning of the automobile industry, there were hundreds of small car manufacturers based in back street workshops. As the automobile market matured, some of these small manufacturers went bust, others merged and others became major brands. By the 1980’s, the automobile market was a mature market with a number of large multinationals, some medium-sized firms, such as Alfa Romeo, and some small niche operators like Lotus and TVR.
Today, the automobile industry is globalised. It is dominated by a handful of multinational companies such as Ford, General Motors and Volkswagen. These multinationals have purchased the medium-sized firms or have put them out of business. The remainder of the modern car market is made up of small niche producers, such as McLaren or Ariel.
In globalised market circumstances, the large multinationals can defend their market position against attacks from the smaller firms. If a small company becomes a threat, the larger firms can buy them out or develop equivalent technologies to wipe out the niche firms advantage.
The lack of middle-sized firms also makes growth difficult for smaller competitors. There is no stepping stone between a small niche position and global dominance.
A modern globalised market is like a carcass lying on the African plains. The smaller carnivores have to wait until the dominant pride of lions have had their fill.
These conditions make marketing skills such as market risk analysis and development of competitive strategies central to business strategy.
In today’s modern markets, it is the customer who has the power. It is a state of caveat vendor (seller beware) rather than caveat emptor (buyer beware). Companies can no longer present a single, all-encompassing offering to the market. Instead, bespoke offerings have to be presented to different customer groups. Also, once a customer has been captured, there needs to be significant work carried out to retain that customer. Mature markets mean consumers have significant opportunity to switch to an alternative supplier.
Consumer power means that marketing functions such as key account management and psychological pricing are central to business strategy.
Philmus Consulting can help your business to develop appropriate strategic plans to ensure your business thrives in mature market conditions.