Competitive Intensity of the Repair Industry - Assignment Example

Table of Contents Introduction 3 SME (Small Medium Enterprise) 4 Prospects for SMEs 5 Company Profile 6 Introduction 6 The concept 7 Business Model 7Challenges 8 Theory and Analysis 8 Start up firms 8 Information Technology 9 Identifying Industry Maturity 9 Competitive Intensity of the Repair Industry 11 Target Market Indicators 12 Conclusions 13 Isidro, I. (2009).Suzanne Meyer: Success in the Personal Greeting Service Business. The Woman Home Business 15 Annexure 15 Annex 1 15 Annex 2 16 Annex 3 17 Introduction The corporations are order of the day, controlling most of world’s assets and wealth. Many corporations are as big as entire countries and have wealth many times over. The world is however evolving into a place where everyone wants something different. This is because the human population has reached over five billion. This population increase is fuelled by an increased knowledge of medicine and science in general. This has reduced the mortality rate and allowed humans to grow in numbers; as the most dominant race of our planet. This mass production of humans has also been seen for centuries in our economic system. In the second wave we can see concepts of standardization and mass production as center of attention of economist and scientist alike. These systems were basically focused on maximizing production and minimizing inputs. These concepts of mass production have their driving force in the massive increase in population over the last few centuries. With the massive increase in population the only route to success was to increase production and minimize cost. This was basically because technology in genetics was still not advanced, that meant you could not increase production from your raw materials and land many times over. The only control humans had at that moment was on machines, therefore they engaged in a massive mechanization of humans and production systems alike. This revolution was not only aimed towards manufacturing but services as well. This affected local shops and small businesses as they began to die out because they could not compete on price with machine inputs. This revolution was psychological as well as economic people began to look alike, dress alike and think alike. In similar words individuality was slowly becoming obsolete and absent. SME (Small Medium Enterprise) Over time the second wave began to end as we reached the third wave practices of second wave were slowly abolished. The human society began to revert back to old practices and customs. One of the biggest signs of this reversion was birth control. Great emphasis was now being laid on keeping population in check. The concepts of standardization and mass production once again became obsolete. Emphasis was laid on individuality and personality once again. This information wave has triggered a ‘need’ in each human being to be different from others. Therefore in the present age the concept of small business catering to specific needs is once again in demand. These small businesses in management theory are usually termed SME (Small Medium Enterprise) or SMB (Small Medium Business). Different countries have their own definition of a Small medium enterprise. There are however usually two main areas of assessment which help in deciding which classification a business falls in i.e. capital invested and employees. In most European countries a firm with ten or less employees is termed as ‘micro’, with fifty or less as ‘small’ and those with less than two fifty employees are termed as medium enterprise. These SME cater to the need of customization and usually this is their main USP. With small inputs and few employees they usually operate in specific areas and localities. Their target market is usually a small niche around which a USP (Unique Selling Proposition) is built. Prospects for SMEs The SME sector is being increasingly viewed as a pioneer of growth and prosperity in economies. They have a number of advantages which range from economic to social. On a social level SME play a very important role in eliminating income disparity. Usually in emerging markets and mineral rich economies the phenomenon of income disparity is a nuisance. This basically occurs because of bad and ineffective political and legal structures which hinder any grass root development of economy. In these economies rich and elite engage in high capital projects usually catering to foreign needs such as oil refineries, auto assemblers etc. The wealth is thus accumulated because most of the deprived class is given role of laborers from which they do not escape their entire life. SME provide them an opportunity to start small businesses with or without government development funds. This creates a strong middle class thus reducing income disparity. Similar examples of successful SME ventures have been seen in Bangladesh where the concept of micro finance has developed a very strong economy and reduced deprivation of the down trodden classes. SME also lead to economic activity by introducing small economic units which start generating GDP and create jobs. The reduces economic dependence on corporations and an integrated business system is developed which triggers economic prosperity by reducing trade deficit and attracting foreign investments. Company Profile Introduction The company selected for analysis is The Welcome Committee. This is a unique advertising company which has revolutionized the concept of doorstep sales. The business was started by Suzanne Meyers who is a previous employee of Welcome Wagon international Inc. After receiving the pink slip from Welcome Wagon, Suzanne Meyers decided to start up her own business. She was a hardcore sales person; the challenge for her was to start something unique which could grow big. With an entrepreneurial heart, Suzanne Meyers decided to start a business which could help her use her past experiences and links made while working at Welcome Wagon International Inc. Suzanne therefore started the revolutionary idea of starting a different type of doorstep sales service. The concept The Welcome Committee is a marketing company which targets people who move into the lake four county regions. The world of today has evolved into a competitive network of individuals striving to achieve perfection and success. This pursuit of jobs and business takes them far and wide, to places where they have no cultural ties. The business tries to connect business such as barbers, gyms, colleges and bake shops with new movers. The advertisers pay them to promote their products. The people who move in are the ones who benefit the most. The business started in 1999 with a very small target market. Initially My Welcome committee targeted only town of Huntersville, in Mecklenburg County. Now the business has expanded to more than 9 towns with over four different counties. The business has a very expansionary strategy under their CEO Suzanne Meyers, The Welcome Committee moves to a new zip code whenever it has four of more sponsors. Business Model Whenever someone moves into a new town the initial settling period is a very hard time. The newcomers usually do not know anyone in town. This involves not only the parents but sometimes kids also feel uncomfortable and alien. The welcome committee tries to fix these problems by providing a sense of being welcomed. Most of the My Welcome Committee employees are woman with a motherly persona. They come to home once a homer own has moved in with free giveaways, brochures and discount coupons. They extend a friendly hand to ease their discomfort of moving in. As most of the employees are locals themselves they have valuable information about the neighborhood that can be very handy for newcomers. They introduce shops and store which can be a good choice for homeowners etc. Challenges Initially the business faced some challenges due to threat of litigation. Suzanne Meyers had signed a contract with her recent employer Welcome Wagon International Inc. This was a no compete agreement. The agreement disabled Suzanne to start a business with a similar strategy such as Welcome Wagon for next 12 months after leaving their employment. Suzanne also faced some serious warnings against entering into competition but she remained firm to her dreams. Theory and Analysis Start up firms There are different types of startup firms such as life style, salary substitute and entrepreneurial firms. The life style firms are started by individuals who want to engage in activities that they have been involved professionally. A common example is of sports individuals starting up gymnasiums after their prime days are over or actors taking up directions. These firms are basically aimed at fulfilling needs of owners and are not considered to be very ambitious in growth. The owners are more interesting in using their service themselves as compared to being managerially active. The second type of startup firm is called a salary substitute firm and is aimed at providing an alternate source of income to owners just as the name suggests. Common examples of salary substitutes are barbershop and hot dog stands. The owners of salary substitute firms usually lack managerial skills and are just interested in earning enough to support themselves. These types of businesses usually do not grow beyond their locality as well. The startups which are most innovative and ambitious in growing into proper business units are called Entrepreneurial firms. The firm under discussion can be classified as an entrepreneurial firm. Other examples of firms which started as SME and grew into huge corporations are Amazon, e-bay etc. These firms are usually process oriented and everything is done according to a prepared business plan (at least for successful ones). Information Technology A revolution in SME development has been introduction of online technologies. They have changed the concept that an SME is only developed to cater local markets. Corporations had advantages when it came to target markets, this is because usually they were spread far and wide which enabled them to increase their customer base. The internet has however totally changed dynamics of the term ‘Target Market’. Now with the use of internet technology businesses can reach consumers far and wide. The access to a diverse market has greatly reduced costs of advertisement and marketing. The business in discussion has also survived because of its reliance on online technologies. Identifying Industry Maturity The descriptors on which the industry maturity is assessed are as follows: Growth rate: The industry grows at a rate more or less equal to the GNP of the country. This is because, as GNP increases, people will have higher purchasing power and they will buy more houses or make new houses/buildings. More houses mean more homes which can be targeted for service. Industry Potential: The concept of a doorstep marketing company is not new in the industry. There are different types of services being offered in the market which are competitors to My Welcome Committee. The model of My Welcome committee is different from all these industry rivals. They have developed a niche for people who have just moved in. It must be observed that someone who moves into a new locality does not have access to telephone, mail or even television. This means that there is huge industry potential for doorstep marketing in this niche. Product Line: The same products/services are offered by every advertiser in the market; hence there is little change in the product breadth. The Welcome Committee however does focus on specific products which can be important to families. Number of competitors: As mentioned before there are very few competitors for My Welcome Committee. This is because they are operating in a niche and they do not have any direct competitors. There are however a number of indirect competitors. These include all the legacy marketing systems such as telephonic, Television and mail marketing. A threat for My Welcome Committee can be from websites which provide information about local attractions of new towns. Market Share Stability: The market is very unstable. This is because due to tough competition and bad economic conditions all advertisers no matter what their business models are trying to capture clients by better deals. This has reduced industry profits and revenues. Another big problem has been introduced by online marketing which is very difficult to calculate and compete on cost. The number of people totally dependent on the internet for everyday decisions is increasing day by day. This has triggered many businesses to start up their own advertisement programs rather than hire marketing firms such as My Welcome Committee. Technology: There are no technological breakthroughs in this industry. The competitors are still using the same channels for marketing. Considering all these factors, it is determined that the Industry is at an introduction stage. This is because although there are competitors in the market, the business model being used by My Welcome Committee is unique so is their target market. (Annex 1). Competitive Intensity of the Repair Industry The best method to estimate the competitive intensity of any industry is to apply the Porter’s 5 Forces model. This helps the researcher to outline the basic characteristics of the main players in the market and the threats they pose. For the door step marketing industry, the model is applied as: Threat of Industry Rivals: The main competitors in the industry are most of the time more or less affected by the actions of the new entrant and orient themselves accordingly in order to counter the threat. For a new company, it is very important to predict those actions and be prepared to face them up front. In this case, should a company like ours emerge in the market, the first instinct of the players getting directly affected by this would be to maintain their existing customers by lowering the price. This can be a major threat for My Welcome Committee and can affect their revenues. Bargaining Power of Suppliers: The suppliers in this industry are of little significance as it is a marketing agency. Bargaining Power of Customers: Since there are many marketing companies in the market, the customer ultimately can easily switch from one agency to another on the base of price sensitivity which can cause price wars. Thus, the customers bargaining power is medium so far due to lack of any other economical substitute to unique doorstep service being provided by My Welcome Committee. Threat of New Entrants: Since there is no strict government or complicated legal formality in opening up a marketing agency, therefore the barriers to entry are pretty low due to which any new player can enter the industry with ease. This poses a medium/high threat to the industry players further translating into a new entrant invading the market with their service and attract the same target market as the rest of the players. Threat of Substitute Services: Threat of substitute services is medium because there are indirect competitors but not many marketing channels which can target this niche. (See Annex 2) Target Market Indicators Gender: service is meant for both men and women Age: The target market includes people mostly between 20 years to 50 years. This is because these are the ones usually moving with family. Marital Status: Customer can either be married or non-married but mostly they are married. Social Class: The target market reflects the high income groups of the society, who want go for a quality service, and post purchase satisfaction. This is shown by the high cost of houses bought which receive service. Income: A major characteristic of the primary target market is its income as people earning $ 500,000 and above are the potential customers. They are catering to the high income group only. This high price is charged due to the high quality service and individuality that is being provided to the customers. They are giving state-of-the-art facilities to the customers by the using of latest and modern tools, techniques and machinery. Also, this is a door to door service and it is just a phone call away from customers. Therefore, the price charged is very high. Occupation: Anyone who earns or possesses the required amount of money is moving and is in need of some introduction to an alien neighborhood. This can be people from any walk of life. Nationality/Religion: People of every religion and nationality are the same for service. The service however makes its best efforts to provide different service to each customer keeping in mind their different cultural and ethnic requirements. Population Density: The urban class of the society is being targeted. Conclusions The report has analyzed two main operational areas for The Welcome Committee and its future marketing potential. The operational areas under analysis were the customer front (where the service interacts with the customer) and behind the line where clients are targets for advertisement contracts. We have analyzed potential strategies being used by the company and threats it is facing in the market. According to analysis, the market is very tough in terms of competition. This is because due to a recessionary economic environment the growth in all industries is slow. The Welcome Committee is still doing well because it is targeting a niche market. The strategy of this business i.e. taking one step at a time is very prudent in these adverse conditions. This strategy should be continued in the foreseeable future. Works Cited The Welcome Committee. About US. (Viewed on 31-01-2009) (http://www.thewelcomecommittee.net/relocation.php) Isidro, I. (2009).Suzanne Meyer: Success in the Personal Greeting Service Business. The Woman Home Business (Viewed on 31-01-2009) (http://www.womenhomebusiness.com/success/suzanne-meyer-success-in-personal-greeting-service-business.htm) Annexure Annex 1 Annex 2 Factor Level Low Medium High Internal Rivals New Entrants Bargaining Power of Suppliers Bargaining Power of Customers Substitutes Overall Embryonic Growth Mature Aging Dominant Fast grow, Start-up FAST GROW Attain Cost Leadership Renew Defend Position Defend position, Attain cost leadership, Renew, Fast Grow Defend position, Focus, Renew, Grow with industry Strong Start-up, Differentiate, Fast-grow Fast Grow Catch-up Attain cost Leadership Differentiation Attain Cost Leadership, Renew, Focus, Differentiate, Grow with industry Find niche, Hold niche, Hand-in, Grow with industry, Harvest Favorable Start-up, Differentiate. Focus, Fast-grow Differentiate, Focus, Catch-up. Grow with industry Harvest, Hang-in, Find niche, Hold niche, Renew, Turnaround, Differentiate, Focus, Grow with industry Retrench, Turnaround Tenable Start-up, Grow with industry, Focus Harvest, Catch-up. Hold niche, Hang-in, Find niche, Turnaround, Focus, Grow with industry Harvest, Turnaround, Find niche, Retrench Divest, Retrench Weak Find niche, Catch-up, Grow with industry Turnaround, Retrench Withdraw, Divest Withdraw Annex 3 Read More