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In this article which is based on a marketing analysis of Michael Porter′s definition of competitive strategies, the confusion present in marketing and strategic management texts as to the definitions of the three strategies of low cost, differentiation and focus is noted. The idea that using price to differentiate means a firm is using a low cost strategy is dismissed and the value of a definition of focus strategy as merely some degree of extreme differentiation is questioned. New definitions of the three strategies are proposed which are based upon the idea that firms react to, and take actions which influence, the structure of the market in which they operate. They influence market structure through determining the market′s proximity level ‐the minimum level of marketplace performance which a firm must reach in order to compete across the broad marketplace. If a firm has the ability to reach this level and go further to excel in the provision of one or more benefits, it can implement a differentiation strategy. Alternatively, it can attempt to lift the market′s proximity level or partake in imitative activity, which reduces the potential bases for differentiation in the market, a low cost strategy (only sensible for the firm with the lowest costs of production). If a firm lacks the ability to reach the proximity level, it must seek segments which do not require reaching proximity in order to serve them, a focus strategy.
The article seeks to assist managers in low‐margin markets to grow profitability by applying principles of profit leverage.
The paper identifies a series of principles for targeting market segments and growing profits.
Gross margins are usually taken for granted by managers, but are actually key indicators of the types of marketing strategies – what the author calls “gross profit strategies” – that managers should use to leverage the growth of gross profit. Two general classes of gross profit strategies are identified – volume‐driven, and price/bundling gross profit strategies. The latter is particularly applicable to managers in low‐margin markets. The paper also discusses four subsidiary gross profit strategies and illustrates with examples of real‐world firms and situations.
The paper defines market‐driven costing and stresses the importance of measuring “true” gross margins, by measuring costs based on the cost to serve the customer, including opportunity costs. Finally, the paper explicates the relationship between true gross margins and managers' perceptions of their competitive ability to compete in the marketplace.
This case can be used in a principles of marketing course, at Introductory, Executive or MBA level, it is particularly suitable as a case on promotions policy as one of the 4-P's, to illustrate the role of marketing communications as part of an integrated marketing strategy, or to illustrate the building of a service brand.
The case illustrates a number of practical marketing issues: the marketing challenges of launching a budget airline: gaining high visibility and awareness with a relatively low share of voice; the relationship between an organisation and its advertising agency; the requirement to maintain a consistent marketing strategy over time, but to adapt the execution as market dynamics impact the consumer. Given the dynamics of most industries, kulula.com cannot afford to be complacent, as new entrants are always on the horizon. The dilemma facing Gidon Novick and his team is to rethink the sustainability of its current strategy, how to grow and protect its position, as well as the relationship with its advertising agency and its communication strategy – is a more relevant campaign or a new agency required to keep the marketing communications interesting and current?
Expected learning outcomes
The expected learning outcomes are: to analyse the success of communications campaigns; to explore the issue of client/agency relationships; to understand brand building strategies, how to create a distinctive position, and how to build a services brand; To understand the key success factors for a low-fare niche positioning strategy, and to examine the sustainability of this low-fare strategy; and to identify some product line extension opportunities for kulula.com.
The purpose of this paper is to illustrate that in increasingly financially constrained times, libraries do not require prerequisite specialised marketing expertise to…
The purpose of this paper is to illustrate that in increasingly financially constrained times, libraries do not require prerequisite specialised marketing expertise to promote their institution and its services successfully by engaging in cost effective marketing initiatives. It also aims to highlight the potential and importance of marketing to enhance services, communicate services and improve library visibility.
A case study is undertaken of the marketing experiences of Waterford Institute of Technology (WIT) Libraries, a small to medium‐sized, publicly funded education institute in South‐East Ireland. The paper details a series of low‐cost, practical marketing measures undertaken by WIT Libraries over the period 2007‐2008, and contextualises them for a collective audience.
WIT Libraries are engaged in a wide range of marketing initiatives, adopting traditional means and Web 2.0 technologies where possible to increase the library's exposure and the services it offers. Predominantly these marketing initiatives do not require a significant financial investment and can be implemented utilising existing library resources in terms of staff expertise and facilities. A “one size fits” all approach does not work for all libraries. Specific marketing techniques can be tailored to suit individual libraries and their users' needs. The authors contend that a range of low‐cost initiatives can be used to successfully promote library services amongst users and the wider community. Further mid‐term evaluation may be necessary.
The paper illustrates with concrete examples how a library with no specialised marketing expertise can adapt to the prevailing financial climate, to engage in cost effective initiatives and promote itself and its services successfully. The article will be of value to similar sized and similarly resourced libraries as a basis for engaging in low‐cost effective marketing initiatives.
Introduction This paper attempts to define and illustrate an approach to marketing analysis which reflects the needs, capabilities and resources of decision makers in…
Introduction This paper attempts to define and illustrate an approach to marketing analysis which reflects the needs, capabilities and resources of decision makers in organisations where no sophisticated, explicit marketing information systems exist, and where no advanced marketing research or model‐building is feasible. Typically, this is likely to include small and medium sized manufacturers operating in national and export marketing, rather than the large public corporations and multi‐national marketing companies. This is described as an alternative technology, an analogy drawn from popular usage, where the “technology” and sophistication of marketing research methods used, and the complexity of results produced, should be matched not only with the decision maker's needs for information, but also his resources and ability to handle information. The argument put forward is that we can distinguish between companies in terms of their economic development, in a similar way to the more familiar distinctions made between countries, and that this differentiation has important implications for the “technology” of marketing management information which is most appropriate. This viewpoint is justified in the first part of the paper, in terms of its relationship with marketing theory and management practice. Once the rationale of the alternative technology approach has been established, we can continue by looking at some of the practical applications of the concept. The approach is illustrated firstly, by looking at the use of basic sales data and some of the possibilities for creative analysis to isolate trends and to understand changes in the components making up total sales performance. Secondly, the alternative technology concept is illustrated by examining some of the qualitative and semi‐qualitative methods available for development to provide data on markets and their structure and trends, and the potential for co‐operative research in some markets. It is stressed throughout that these approaches can offer the decision maker useful data, but that it is important to validate these data before they are used. While this paper examines some of the main issues briefly, it is hoped that it will be seen as part of moves to give more rigorous attention to the marketing analysis and research needs of the less sophisticated firm and its marketing information system, which may be quite different in the real world to the needs of the larger organisation.
Low productivity and the prevalence of marketing and demand constraints are all interrelated problems for banana growers in East Africa. The purpose of this paper is to…
Low productivity and the prevalence of marketing and demand constraints are all interrelated problems for banana growers in East Africa. The purpose of this paper is to examine how different marketing policies can alter the incomes of banana‐growing households in the Ntungamo district of Uganda.
A partial equilibrium model and a trader profit‐maximisation model are used to analyse changes in banana market equilibrium conditions, marketing costs and market competitiveness.
The results indicate that increasing supply relative to demand reduces grower returns. It appears that reducing market power and lowering middlemen marketing costs may lead to higher grower returns. Policies facilitating lower marketing costs for traders are proposed in conjunction with strategies that promote banana processing.
Drawing on both primary and secondary data, this paper examines how increasing demand and reducing marketing costs impacts on banana‐grower returns. Furthermore, sources of price movements in the Ugandan banana industry are assessed.
The purpose of this paper is to analyse the role of switching costs (SwCs) on established firm cost behaviour towards a competitive entry in the Spanish domestic airline…
The purpose of this paper is to analyse the role of switching costs (SwCs) on established firm cost behaviour towards a competitive entry in the Spanish domestic airline market, taking into account the entrant profile and airport capacity restrictions.
The dynamic model is based on information of 193 Spanish domestic routes in which incumbents react to entrants (quarterly data during 10 years, 620 reactions are analysed). The balanced panel used is constructed by setting up a multiple-source database based on accounting and industrial engineering procedures.
Results show that both entrant profile and regulatory constraints conditions incumbent cost reaction (CR) to entry at the route-level. Regression models show that the relationship between SwCs and incumbent reaction is moderated by the entrant profile and the regulatory conditions of the market.
This study reveals the importance of policy measures aimed at reducing firm market power and increasing consumer protection in the airline industry, in which SwCs are artificially created at the company’s discretion and where operating costs at the route-level need to be evaluated together with the various service elements.
This study complements current literature related to incumbent CR to entry in the airline industry since it analyses the specific reaction performed by a carrier at the route-level. Moreover, it analyses the whole set of routes in the Spanish domestic market rather than a selection of it. It also explicitly includes three alternative measures of SwCs that can influence such incumbent reaction.
Esta investigación analiza el papel de los costes de cambio en el comportamiento en costes de las empresas establecidas ante las entradas competitivas en el mercado aéreo nacional español, teniendo en cuenta el perfil de los entrantes y las restricciones de capacidad de los aeropuertos.
El modelo dinámico propuesto se basa en la información de 193 rutas nacionales españolas en las que los implicados reaccionan ante los nuevos entrantes (datos trimestrales durante 10 años, se analizan 620 reacciones). El panel equilibrado utilizado se construye configurando una base de datos de múltiples fuentes basada en procedimientos de contabilidad de costes e ingeniería industrial.
Los resultados muestran que tanto el perfil del entrante como las restricciones a la entrada condicionan la reacción en costes del implicado ante la entrada a nivel de ruta. Los resultados de las regresiones muestran que la relación entre los costes de cambio y la reacción del implicado está moderada tanto por el perfil del entrante como por las condiciones regulatorias del mercado.
Este estudio revela la importancia de las medidas de política destinadas a reducir el poder de mercado de las empresa y a aumentar la protección del consumidor en el sector de las aerolíneas, en las que los costes de cambio se crean artificialmente a discreción de la compañía y donde los costes operativos a nivel de ruta deben evaluarse juntos con diversos elementos de servicio.
Este estudio complementa la literatura actual relacionada con la reacción del implicado ante la entrada en el sector de las aerolíneas, ya que analiza la reacción específica realizada por las compañías a nivel de ruta. Además, analiza de forma exhaustiva el conjunto de rutas en el mercado nacional español en lugar de una muestra de ellas. También, incluye explícitamente tres medidas alternativas de costes de cambio que pueden influir en dicha reacción predominante.
The purpose of this paper is to identify low-costbus business models from different parts of the world and check their applicability in the Brazilian market. It also…
The purpose of this paper is to identify low-costbus business models from different parts of the world and check their applicability in the Brazilian market. It also identifies crucial factors for the development of that kind of business and investigates the relationship between low-cost buses and other modes of transport. This research analyzes every relevant aspect to the applicability of low-cost business models in Brazil, driving to discussions and conclusions. The gains on the development of low-cost bus systems in Brazil may have a wide reach, from personal to general public benefits.
Business models for low-cost bus systems are used to analyze in a qualitative approach. The data are collected through semi-structured interviews, direct observations and documental basis. In addition, innovations over the previous five years are evaluated in order to establish a comparative pattern between companies.
There is a great potential in the Brazilian passenger market for the entrance of low-cost bus companies. The only question is just when it is the right time to enter that market. Most of the negative points presented for the implementation of a low-cost company are related to the current economical and political crisis in Brazil. It was identified as a potential cause for the overall decrease of the passengers market in recent years, and specifically of the bus passengers market.
The recent regulation changes, the high demand for passengers and even the similarity of possible routes in Brazil to the ones in Europe and in the USA make Brazil a fertile soil for the development of that kind of business. A similar price mechanism to the ones applied worldwide was also identified as doable in Brazil.
Internet + and Electronic Business in China is a comprehensive resource that provides insight and analysis into E-commerce in China and how it has revolutionized and continues to revolutionize business and society. Split into four distinct sections, the book first lays out the theoretical foundations and fundamental concepts of E-Business before moving on to look at internet+ innovation models and their applications in different industries such as agriculture, finance and commerce. The book then provides a comprehensive analysis of E-business platforms and their applications in China before finishing with four comprehensive case studies of major E-business projects, providing readers with successful examples of implementing E-Business entrepreneurship projects.
Internet + and Electronic Business in China is a comprehensive resource that provides insights and analysis into how E-commerce has revolutionized and continues to revolutionize business and society in China.