The Features of the Sector Matrix - Essay Example

Sector matrix Understanding the market is an essential feature of marketing that helps determine, anticipate and satisfy demand. The market refers to both the geographic location in which the exchange of goods and services occur and the actual demand for the product. The determination of the market therefore requires effective understanding of the market and the features that influence the demand for either a product or service. The essay below therefore analyses the features of sector matrix that improves its effectiveness in understanding the market. Furthermore, the essay analyses other tools including value chains and commodity chains in a bid to prove the effectiveness of the sector matrix that provides an in-depth understanding of the patterns of both demand and supply which are the key market features that influences the profitability of an organization (Lane, 2005). The essay will provide a systematic approach to the analysis of the above tools including their strengths, weaknesses and the comparison of their performance against the sector matrix which the paper hypotheses is the most effective marketing tool. Introduction Marketing refers to the management function mandated with the determination, anticipation and satisfaction of the customer demand. Every business organization has a primary objective of sustained profitability in order to increase its market share. The need for growth as Froud, Haslam, Johal & Williams (1998) explain in their sector matrix relies on the determination of the market. Business organizations must have a substantial market shares and possibly increase their shares a feature that will portray growth and sustained profitability. In order to achieve such growth patterns, the organizations must have effective understanding of the factors that influence the demand from the market. By understanding the factors affecting demand, the organization readily manipulates its supply of products thereby cushioning the organization from incurring loses. Additionally, understanding the relationship between demand and supply makes it possible for organizations to plan their productions thereby sustaining their profitability as the below analysis of the sector matrix portrays (Alexander, 2010). Just as the name suggests, the sector matrix breaks down an industry into various factors that influence the production and sale of products. Understanding the industry is fundamental for every organization since it helps the organization appreciate the nature of supply and demand. This way, the sector matric overcomes some of the limitations presented by the value chain system as a marketing tool (Kotler & Fox, 2002). Demand and supply are two fundamental factors that influence the market and the position of the company. The sector matrix therefore provides an organization with appropriate tools that analyze and determine the prevalence of the two factors in a particular industry. Key among the factors that influence demand for either a product or service is the state of the economy. The purchasing power of the people influences their patters of consumption thereby influencing the nature of the demand for products and services in a particular industry (Pickton & Broderick, 2005). The sector matrix provides an organization with realistic tools that helps the organization determine the influence of the state of the economy on the specific industry. An industry consists of several players who compete for a particular niche; the niche has specific motivations key among which is the purchasing power (Tabbush, 2011). The economic growth of a country, the size of population and the nature of either the product or service are key factors that influence the nature of the demand thus the market by extrapolation. By providing the marketers with such an objective view of the factors affecting the demand of a product provides the marketers acquire an elaborate understanding of the both the factors and the economy thereby projecting the patterns of the demand that eventually influence their production (Chatterjee & Hevner, 2010). Supply on the other hand relies on the number of competitors existing in the market. An organization must have an elaborate understanding of the operations of the market including the nature of the competition existing in the market. Every organization has its market share; the size of the market share relies on the competitive advantages the products of a particular organization possess. An organization must determine its market share owing to the competitive advantage that its products possess (Wallace & Henry, 1922). With an understanding of the market share and the reputation of its products in the market, the marketing department easily determines the effective factors that can help increase its market share. Sector matrix also provides for the position of natural monopolies, a marketing feature that helps influence the marketing activities of a company. Every industry has a market leader; by understanding, the position of a company against the market leader helps the company carry out effective marketing and activity projections depending on the marketing aggressiveness of the market leader. Such a strategy alone is capable of cushioning an organization from incurring loses (Peter, 1994). Additionally, the assessment of a company’s market position helps determine the size of the market and the future of the same. Food products for example are basic products that will always have a demand regardless of the economic status. However, even companies manufacturing food products must align themselves with the economic blocs in a country. This ensures that a company portrays their product effectively in order to reach its target market. By positioning itself strategically against the market leader, a company can easily manipulate the features of its products such the price of a product thereby increasing its market share. The sector matrix therefore provides marketers with realistic features through which the marketers analyze both the markets and the products thereby standing a chance to increase its market share thereby sustaining its profitability (Aaker & Aaker, 2010). Value chain system of analysis provides realistic features of both the demand and supply in particular markets especially in the production and sale of foodstuffs. Foodstuff are primary commodities that everyone buys a feature that implies that any company operating in such an industry will always have a substantial market. However, the system cannot explain the relevance of other intricate market features such as the change in infrastructure or the determination of a new technology of production. The market for foodstuff is arguably insatiable with most of the products retaining a minimal price. This differs with the production and sale of other products such as automobiles that have a complex market. The income of a target market may influence their purchase of foodstuff; however, the marketers of such products understand that regardless of the income of the target market. The people must purchase such product a situation that differs with the production and sale of automobiles for example which relies on the size of the disposable income of the target market (Homburg, Sabine & Harley, 2009). The automobile industry provides an effective platform for the application of the sector matrix as a marketing tool. Comparing the effectiveness of the sector matrix against other marketing tools such as value chains and commodity chains and their application in the automobiles industry provides an evident disparity in the three tools as the sector matrix provides the effects of intricate features of both the market and the industry. Unlike foodstuffs, automobiles are luxurious goods that require adequate planning and resource mobilization to purchase (Bogomolova, 2011). People plan and consider several factors before purchasing an automobile. This implies that for a company to sell satisfactory amount of vehicles in order to remain profitable. In such a precarious market, the value and product chain systems cannot satisfy the demands of the marketers thereby imploring the use of the sector matrix system. The basic marketing principle is that an increase in demand should result in an increase in supply. This implies that the demand is the ultimate determinant of the nature and volume of supply. An effective marketing tool should therefore provide an elaborate analysis of the factors that affect the demand for a product (Iacobucci, 2012). The automobile industry for example is precarious with specific consumers who purchase particular type of cars based on myriad factors including the features of the cars and their income. This requires the operators to have an elaborate understanding of the industry and the causes of every change that is likely to influence the purchase of the product. By dichotomizing the industry, a new player for example will understand the factors that influence the purchase of a sports utility van and the markets for such products. Toyota, a leading car manufacturer has portrayed an effective understanding of both the automobile industry and market. By diversifying its products, the company has occupied markets in different continents including Asia, Africa, Europe and the Americas. The company’s success in the industry portrays the success of the sector matrix as a marketing tool since the tool has provided the company with the elaborate understanding of each of the different market niches. The roads in Africa coupled with the poor economies imply that the automobiles industry in the regions consider specific features of the automobiles (Parente, 2005). Toyota therefore manufactures cheaper cars that have features that can endure the rugged terrain in the African roads. This way, the company has succeeded in sustaining its profitability in the continent. The same applies to the company’s assessment of the markets in the developed countries such as the United States and Europe. The two regions have expansive roads systems coupled with strong economies. The people in these countries therefore require automobiles that promise comfort and efficiency. Toyota therefore manufactures specific cars for the same market thereby obtaining a substantial share of the same market (Kotler, 2010). Sector matrix method provides marketers with an objective view and analysis of the market portraying the influence of such intricate features of the industry as the appropriateness of the infrastructure which other conventional tools such as the product and commodity chains does not provide. While the other two concentrate of specific operations in the industry such as production, sales and marketing differently, the sector matrix provides a correlational approach to marketing proving that the marketing department is one of the most fundamental departments in the organization. By determining the market, the department influences the production department. A company should enter a particular industry with an understanding of the economy, the industry and the market. Effective understanding of the three elements helps the company grow progressively. KIA for example is a car manufacturer in the United States. The company got into the market in the 1980s with the market already crowded with such brands as Toyota, Peugeot, and Volvo among other leading German and American brands. The company sought to understand the market, the patterns of the demand for American vehicles among other factors that would influence the cost of doing business such as labor costs and the cost of raw materials. The company operated on the principle of providing the American automobile industry with American products. the enthusiastic and patriotic nature of the American consumers would later help the company position itself as a major player in the industry not only in the country but in countries oversees as well as it began diversifying its production of cars. The sector matrix provides marketers with detailed view of the market providing with a realistic relationship existing between the different elements that are likely to impact on either the demand or supply of a product. The production and sale of such complicated products as automobiles requires an understanding of the market. Unlike the foodstuff industry, that has a definite market; automobile manufacturers must understand the factors that their target customers consider before purchasing a product. Conclusion In their analysis of the sector matrix, Froud, Haslam, Johal & Williams (1998) explain that the other two tools, product and value chains are effective in their own ways but have specific limitations. The sector matrix analysis therefore seeks to overcome such limitations thereby providing marketers with an efficient marketing tool that provides an exhaustive analysis of the market providing marketers with the effects and relevance of every element in the market. The tool provides an elaborate analysis of the nature and relationship between demand and supply besides the basic concept of an increase in demand results in a subsequent increase in supply. In assessing supply, the tool for example analyses the role of competition since an industry is likely to have more players. An industry with several manufactures for example may experience an increase in demand despite a stable demand for the products. This implies that a manufacturer must therefore position itself strategically in the market and provide most of the features that customers seek before purchasing an automobile. This validates the claim that diversification is the most efficient marketing tool available to marketers. By diversifying its products, Toyota has succeeded in winning the rich and the middle class thereby creating a formidable competition against other giant car manufacturers globally (Fournier, 1998). Briefly, the sector matrix analysis combines the strengths of both the value and product chain methods and overcomes their limitations thereby providing marketers with a comprehensive tool capable of analyzing the intricate features of the market that influence the pattern of demand and supply. Understanding the relationship between the different departments with an organization such as the marketing, the production and the sales department creates an efficient system in which the goods manufactured reach their target market. this does not only help an organization retain its market share but also provides the marketers with an effective opportunity to carry out extensive market researches thereby creating a self-sustaining cycle of within the organization thereby providing a progressive growing in the market share of an organization. Reference Aaker, D. A., & Aaker, D. A. (2010). Marketing research. Hoboken, NJ: John Wiley. Alexander, B. (2010). 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