SportUNEs Strategic Marketing Approach - Case Study Example

Strategic Marketing Name Institution Date Introduction The primary impetus behind a company’s strategic marketing initiative is to develop new products or novel technologies that enable it to secure a competitive edge over rivals while maximizing returns to investment. The scenario in the modern business environment is that for companies to survive in the long-term, they must develop marketing strategies that effectively meet the needs of a rapidly evolving competitive environment. This requires consistent research of the evolving environment and developing a marketing mix that corresponds to consumer needs at every stage of the growth process. Such an initiative requires enormous resources and commitment, a factor that has compelled some companies to make a conscious decision to follow rather than innovate. With reference to SportUNE’s strategic marketing approach, this paper explores the process of formulating, implementing and evaluating marketing strategies that enable an organization to meet core objectives and obligations. The primary objective of SportUNE’s marketing strategy is to appeal to both the university fraternity and the larger community through provision of facilities, resources and programmes that evoke public interest in sports and other physical fitness programs. The club was founded to cater for the needs of the university, but opted to stretch its reach to the larger community. This paper provides an in-depth evaluation of marketing approaches that organizations use in managing transitions through the various stages of the Product Life Cycle (PLC). Product Life Cycle (PLC) The concept of Product Life Cycle (PLC) is a fundamental factor in strategic marketing discourse as it explores the future and provides critical information with which marketers can use to evaluate future changes in the market. The main area of focus in PLC management is the use of a products sales history to determine the stages of transition in product development. Typically, from inception to eventual decline, a product goes through a sequence of five stages. The first stage is the introduction stage, where consumers are unaware or have limited information about the product. The second stage is the growth stage. At this point the product has been received in the market, sales are increasing, and the product is readily available in the market. Thirdly is the stage of competitive turbulence, commonly referred to as the shake-out stage. This stage is marked with intense competition in product price, and the market starts to witness a gradual decline in growth rate. The product then moves to the fourth level which is the mature stage. At this point the net adoption rates are held steady or constant. The fourth and final stage is the decline stage, where products may be phased out of the market. Introductory stage At this level the market growth rate for a product is relatively moderate. There is however a significant technical change in the design of products. There are fewer segments and competitors in the market, and profitability is marginal. In this situation, firms respond by developing and implementing marketing strategies that are focused on stimulating primary demand. Resources are channeled into improving the quality of the product, despite the product line being very narrow. Product pricing is done with the primary objective of enhancing product penetration into target markets. Promotions and advertising are normally very expansive as marketers strive to enhance product awareness. Growth stage At this stage of a products life cycle, there is in an increase in market growth accompanied by moderate technical changes in product design. The product is rolled out to appeal to few or several market segments. Competitors are many and profitability is relatively high. Most firms react to changes by initiating aggressive marketing strategies to build a sustainable market share. More resources are invested in improving the quality of the product as the product line broadens. Despite promotions for products increasing substantially, the prices of the products begin to drop. Based on SportUNE’s business portfolio and the larger market environment, the clubs market mix is essentially in the growth stage. The club’s market strategy focuses on penetrating newer markets such as long-distance education. To this end, more resources have been devoted to developing the required technological framework and capacity to effectively and efficiently meet the needs of the global market. Shake-out stage At this stage the market growth rate begins to level off as firms minimize changes in product design. Competitors begin decrease, but available market segments vary from a few to several. At this point firms concentrate on building market share. Products and product lines are rationalized, while prices drop further and promotion becomes more intensive. Mature stage At this level market growth rate becomes insignificant, while product design is limited. Market segments vary in number, competitors are few and profitability for market leaders rises. The typical response from competing firms is to hold onto accrued market share. More emphasis is laid on product features, as prices are upheld or selectively reduced. Promotion at this point can either be high or minimal depending on the size of a firm’s market share. Decline stage This is the final stage of the PLC, and is marked with a significant drop in market growth rate with limited technical changes in the design of products. Targeted segments and competitors are much fewer, and profitability drops. The strategic marketing approach employed by many firms is to harvest. Technological changes in product design are marginal or none, while product lines are significantly reduced. Product prices also drop, and promotion reduces as well. Pioneer and Follower strategies A fundamental consideration for business and marketing leaders while undertaking the strategic management process involves making choices on which is the most appropriate timing for launching new products and technologies in an effort to penetrate new markets. Organizations are compelled to make strategic decisions on whether their objectives would be better met either by being pioneers, or being followers, both of them bearing considerable benefits as well as risks. Previous research on these approaches has established that organizations that employ the pioneer strategy enjoy higher margins in profitability, greater market share, more options in product distribution, better economies of scale, stronger networks and a longer business life. In contrast, followers have the advantage of being able to capitalize on the mistakes made by pioneers in product design, positioning and marketing to develop a more appealing marketing mix. Additionally, followers have the advantage of being able to use the latest technology to develop superior products and processes. Regardless of the approach marketers choose to employ, both strategies are subject to internal and external factors such as the pace of technological and market evolution. Options available to marketers regarding whether to be a pioneer or follower have gained significant precedence in the contemporary era of drastic revolution in information technology and the corresponding uncertainty in the global market landscape. The first-mover advantage has also be achieved by companies that venture into new advertising campaigns, initiate price changes and those that adopt new distribution techniques. New product and new process innovations fall under technological pioneering, which refers the development and subsequent commercialization of a new technology in pursuit of more profit and growth (Zahra 1995:144). Penetration of markets by instituting price changes and new advertising campaigns is referred to as market pioneering. This involves companies with well established products and technology venture into new markets. Technological pioneers and market pioneers are both essentially first-movers, while the rest are followers. As noted by kerin (1992), first-movers reap from the advantage of their timeliness in responding to environmental changes, but this is subject to whether they possess the necessary resources and organizational skills to take advantage of arising opportunities. SportUNE has enormous resources and an established framework that are adequate in developing first-mover strategies. In positioning itself as a global leader in provision of sports education, the club has a sports science precinct that offers Bachelor of Arts degrees in sports studies, exercise and sports science, and exercise physiology. These are degree programs that the institution seeks to utilize to attract the larger international community. Other than education in sports related fields, the club has an elaborate indoor sport and recreation centre that has a strength and conditioning gym, a spin room, a heated 25m pool, group fitness rooms, multi-purpose halls for squash, basketball, netball and badminton, a café, free crèche, club rooms and a climbing wall. The club’s outdoor sporting precinct consists of multi-functional sporting fields, multi-purpose courts for tennis, basketball and netball, children’s playing area, as well as BBQ and picnic facilities. Additionally the club has a Bellevue precinct that consists of a Bellevue AFL/cricket oval and pavilion, a Bellevue sports grandstand with covered seating, a bar, a kiosk, changing rooms and function rooms. Within the club is also the New England hockey center that is equipped with 2 synthetic hockey fields, change rooms and a canteen. These are facilities that by any standards befit the standard of a world class sporting facility able to compete and excel at international level. The challenging has been harnessing and branding what the club has to offer in an effort to attract a clientele of international repute and stature. According to Kapaln and Norton (2004), pioneer strategies are often more compatible with a broad but focused differentiation strategy, while a follower strategy correlates with a focused low-cost strategy. First-movers enjoy several advantages that include: 1) developing a positive image or reputation of being pioneers, 2) a reduction in costs through monopoly of new technology, as well as supply and distribution channels, 3) creation of sustainable foundation of a loyal clientele, 4) possessing the capability to deny would be competitors a chance to imitate products or services (Thompson, Strickland, 2003:193). SportUNE has made significant strides in positioning itself in the global market as centre for research in a wide range of fields that appeal to both the local and international market. In the strategic initiative to harmonize the strategic approach of the university and that of the club, more resources have been channeled into developing the club as international recognized center of excellence in sports research and education. Joint strategic initiatives have been focused on cultivating stronger partnerships and better collaboration with affiliated academic departments with the objective of enhancing efficiency and effectiveness in provision of sport oriented undergraduate and postgraduate programs. The ultimate objective of SportUNE club is to be an institution of distinction in provision of quality fitness and health services. Rather than being a follower, the University and the club have put down an elaborate plan to reap the benefits of being first mover in the industry. The clubs marketing strategy seeks to distinguish the institution through a portfolio that highlights a combination of factors that enhance clients’ on-campus experience. To this end, a core objective of SportUNE’s management strategy is to develop the University’s sports infrastructure and enhance its relevance and benefit to the university fraternity and the public. More resources have been channeled into developing and providing customers with resources and programs that support involvement and participation in sport and physical exercise. The club has invested significant resources in building, promoting and maintaining a framework for increased participation in club programs. This has been achieved through provision of high performance opportunities and grassroots activities that seek to optimize the involvement of the community at large. SportUNE has the necessary resource base able to position it as a successful first-mover entity. The first-move advantage often reaped by pioneers in any industry normally follows a company’s proactivity in developing new products for the market, using new processes or entering new market segments (Heiens, 2003). A according to Heiens, pioneering companies bag most of the benefits by virtue of having the capacity and resolve to create new demand for new offerings and continuing to satisfy the demand in better ways than what new entries would offer. SportUNE’s primary strategic objective is to be a market leader in provision of sport and fitness facilities and programs, both at the national and global level. To this end, the club has invested enormous resources in an innovative technological framework that supports distance education. In an effort to forge better engagement in campus programs by distance education students, the university has initiated programs that support regional integration through networks such as the Elite University Athletes Association. As a proactive player in the sports and recreation industry, SportUNE has set out a framework that supports social inclusiveness and better access to higher education. This is highlighted through the university’s and club’s policy of equity in participation and involvement through mutual respect and engagement of diverse groups and generations of sports enthusiasts. As it is often the case, pioneers enjoy the added advantage of holding on to the larger market share long after the entry of followers. A more sustainable market edge and higher profitability is hence within the reach of pioneers, as they can set high entry barriers by controlling resources such as technology, skilled personnel and locations. Customers may also be deterred from switching to products/services offered by competitors by instituting high switching premiums. First-movers also face a fair share of disadvantages that include: 1) market/technological uncertainties’ 2) unanticipated changes in customer needs and technology, 3) and incumbent inertia, where instead of adopting new and better technologies, players opt of gradual updating of pre-existing technology Through innovative ecosystems, firms develop strategic alliances with emphasis on new product development and new technology. Firms are in the process able to combine individual offerings into coherent customer oriented solutions. The challenge with innovation ecosystems, as noted by Adner (2006), is normally the risks associated with initiative, integration, and interdependence of different forms of offerings. Initiative risk pertains to the unknowns that arise during development and implementation of new ventures. They typically involve technical and marketing components of the market mix. Interdependence risks are associated with uncertainties pertaining to coordination of relevant contributors. This involves the probability of different partners being able to fulfill their commitments within required time-frames. Integration risks concern uncertainties in the adoption or implementation. A core prerequisite in mitigating these risks is the initiative taken by partners to know and try out the product. A bigger number of intermediaries are likely to increase integration risk when it comes to forging customer acceptance and loyalty. When searching for competitive advantage, the foremost factor for consideration is the availability of resources. The resource-based view holds that competitive advantage is a consequence of effective exploitation of resources that are rare, valuable, and difficult to imitate. Competitive advantage however on lasts for as long as the pool of superior resources created is adequate enough to support it. Technological pioneering is likely to succeed where companies are financially strong and with adequately funded R&D programmes to initiate radical changes. A successful and suitable technological pioneering depends on the ability of the company to effectively commercialize the initiative. Market leadership for a pioneering strategy is normally a result of monopoly based on proactive innovation. This must be defended and developed through careful formulation and implementation of astute strategies in innovation, pricing, distribution and promotion. The most common strategies used to this end are price cutting and advertising. Followers in contrast are likely to succeed if the exemplify strong competencies in the areas of production and marketing. This requires possession of valuable assets in an environment where switching costs for customers are low, and market growth is slow. Shake-out, Mature and Declining Market strategies Shake-out strategies Companies that are at the Shake-out (competitive turbulence) stage of transition normally exemplify typical characteristics. The companies face the challenge of having excess capacity where plans for expansion exceed market demand. There is intense competition at this stage as industry player’s battle for more volume and market share. Faced with declining brand preference, companies face challenges in maintaining product differentiation. Companies at this stage also have to deal with distribution problems as partners in the distribution channel consider reducing the quantity of brands they carry due to diminishing sales. There is increased pressure on prices and profits, as prices decline and profit margins reduce. Shake-outs happen when firms fail to anticipate transition from the growth stage through to maturity. Companies in this trap possess no clear competitive advantage, working on the assumption that the early advantage they enjoy in the early stages will insulate the firm against price and service competition. A typical trend at this stage is the tendency to sacrifice market share in favor of profit in the short-term. A key strategy for surviving shakeouts is to maintain the company’s competitive advantage, either low-cost or differentiation, and improving customer satisfaction and loyalty. Secondly, companies ought to purse and capitalize on emerging growth opportunities, as the market and competitive environment will keep on changing with time. Mature market strategies At the maturity stage, companies numerous challenges that can reduce market growth and profitability especially in environments that have numerous players. A product’s financial position and success is largely depended on a company's ability to maintain lower costs while improving product quality and customer service. To be able to sustain a competitive edge over competitors, companies have the option of either employing analyzer or defender strategies. Both strategies have been proven to be very effective especially for units with one or more segments that are market leaders and profitable. Analyzer strategies are most effective in industries that are well developing and have room for technological change that presents opportunities for continued growth. Defender strategies on the other hand work better in industries where the technological requirements are not complex, and are unlikely to experience any dramatic changes in the short run. Analyzers and defenders have chance to sustain a competitive market edge especially in established markets. This can be achieved through differentiation of product offering through improvement of quality or service. Another approach would be to maintain a low-cost position. Differentiation can be better achieved by focusing on product quality and attributes, such as functional performance, durability, conformation to specifications, features, and the reliability of the product. Other attributes that can be differentiated include the fit and finish of the product, serviceability, and the quality repute of the brand. Service quality can also be a key area for differentiation. The areas of focus in service quality include; reliability, responsiveness, assurance and empathy. Reliability involves a company’s potential to undertake the promised service accurately and dependably. Responsiveness involves the willingness to provide prompt service and assisting customers to make the right decisions. Assurance in the product or service offering involves the employees’ level of educational their ability to exemplify trust and confidence. Customers are likely to be more responsive if they can sense the empathy employees convey through caring and individual attention. Companies in their differentiation strategies can consider focusing on maintaining a low-cost position. This entails developing innovative product designs, outsourcing raw materials cheaply, employing low-cost distribution channels, reducing overheads, and developing innovative and more efficient production processes. Companies can enhance their penetration in mature markets by expanding the number of potential customers. This can be achieved by targeting potential customers in underdeveloped geographic areas or application segments. Faster growth can also be achieved by focusing on relatively heterogeneous markets that have a wider range of segments, or unexplored geographic areas, foreign countries and areas that they have experienced low penetration. This strategic approach is particularly effective in cases where competing firms do not have sufficient resources to venture into unexplored geographic areas or segments. More resources need to be invested in enhancing marketing and distribution capabilities in new markets and segments. SportUNE’s product offering and market environment is a typical case of a mature market. In an effort to position SportUNE as a leading provider of sports and fitness services, the university’s administration focuses on fostering business processes that optimize efficiency in service delivery, as well as promoting a culture of quality service delivery that meets the needs of the community as a whole. Provision of high standards of service that reflect the evolving health and sporting needs of society is hence a priority clubs strategic marketing approach. At the core of the clubs marketing portfolio is the need to promote healthier lifestyles for staff, students and the wider community. To this end, the strategic marketing approach employed by the institution is to utilize modern technology to enhance accessibility to SportUNE’s facilities and programs. Declining market Strategies Strategic options for companies in declining markets are influenced by the prevailing conditions of demand. This include the pace of the decline, the probability of a decline happening, absence or presence of an enduring demand, and price stability. Other factors that determine the attractiveness of declining markets pertain to existing exit barriers and rivalry determinants. An evaluation of exit barriers requires consideration of reinvestment requirements, the age of assets, and availability of market for reselling assets, assets that are shared among partners and means of disposing of excess capacity. Strategies that can be employed to enhance market growth in declining markets include the harvesting strategy, maintenance strategy, the profitable survivor strategy, and the niche strategy. The harvesting strategy entails maximizing short-term cash flow and increasing margins often at the expense a gradual decline in market share. A maintenance approach in contrast focuses on maintaining market share in the short term even as the market declines and margins are sacrificed. This happens in scenarios where there has been a recent decline in the market and future prospects are not clear. The profitable survivor approach focuses on increasing the share of the shrinking market thereby encouraging competitors to exit. This is typical of markets with low exit barriers and strong competitors. There is also high probability that the market is bound to decline in future, but a significant level of demand will still be available. Profitable survivors in most cases command a bigger share of the market and possess more resources and superior competencies not within easy reach of competitors. The niche strategy entails firms investing more in forging a stronger position in one or more substantial segments. Despite high chances of the market declining in future, there would still be a few key segments for players to target. Niche strategy applies to situations where there are one or a few strong competitors in a mass market. Conclusion Building a competitive advantage is a long-term venture, often referred to as the build-up period. The period can however be shortened in cases where entities have prerequisite resources and the response from the target market is rapid and spontaneous. The time frame from build-up can however be very lengthy if the demand for the –product or service is marginal, or if the technology used requires time to perfect, or in cases where more time is needed to develop manufacturing capacity. Pioneer competitive advantage is largely depended on follower’s ability to take advantage of low imitation costs, ability to capitalize on pioneers’ mistakes, ability to consolidate the benefits of economies of scope, and the evolving changes in consumer influence and preferences (Kerin, 1992:47). It has been widely recognized among business people and economists that pioneers are often rewarded with greater market share. These rewards however have been observed to decline over time as new players enter the market, compelling pioneers to revaluate and readjust their marketing strategies in defense of their market share. Regardless of preconceived notions pertaining to the benefits and disadvantages of being a pioneer, Lieberman and Montgomery (1998) observed that the advantages of being a pioneer far much outweigh the risks. The success that an organization achieves in being the first to penetrate a given market segment are by and large depended on the resources at the disposal of the organization, relative to those employed by subsequent entrants into the market. References Adner, R., (2006), “Match Your Innovation Strategy to Your Innovation Ecosystem”, Harvard Business Review (April): 98-107. Heiens, R., Pleshko, L. and R. Leach, (2003), “Examining the Effects of Strategic Marketing Initiative and First-Mover Efforts on Market Share Performance”, The Marketing Management Journal, Vol. 14, Issue 1, pp.63-70. Kaplan, R.S. and D.P. Norton., (2004), Strategy Maps: Converting Intangible Assets into Tangible Outcomes, Harvard Business School Press Kerin, R.A., Varadarajan, P.R, and R.A. Peterson, (1992), “First-Mover Advantage: A Synthesis, Conceptual Framework, and Research Propositions,” Journal of Marketing, Vol. 56 (October), pp.25-52. Lieberman, M.B. and D.B. Montgomery, (1988), “First-Mover Advantages,” Strategic Management Journal, Vol. 9, No. S1, 41-58. Read More