Non-price Competitive Strategy, Best Buy Stage in Life Cycle - Case Study Example

Management Tools Name: Unit: Course: Supervisor: Date of submission: Non-price Competitive Strategy Non-price competitive strategy is a mechanism in which a company puts marketing measures aimed at distinguishing its products from those of the competitors. Many strategies form basis of non-pricing competitive strategy (Clay et al, 2002). The non-pricing competitive strategy is based on the idea of persuading the customer to buy a product not because of cheaper selling price but because they are better than the competitors products bases on different attributes. An example of the non pricing strategy entail changes in design. Common non-pricing competitive strategies include branding, advertising, packaging, service and information. Other strategies employed by the company’s extensive distribution networks, focus on customer needs and other measures that do not rely on price (Clay et al, 2002). Best Buy Best Buy sells different electronic gadgets, music, computers, mobile phones and other household appliances. To sell products to ultimate customers, Best Buy main segmentation has been geographical segmentation in which it has put branded retail stores different countries and use of online selling Consumers differ in preferences and purchasing abilities. Through market segmentation, a business is in a position to define its target market and identify the needs of the customers (Ghodeswar, 2008). Through the understanding of the customers, a company is in a position to device a strategy that is supposed to deliver the product or service to the customer. To overcome competition Best Buy main competitive advantage has mainly been on the service provision (Cruz, 2002). The use of retail stores is a strategy that helps n taking services nearer to the customers and thus offers after sale services to its customers. To gain the competitive edge, Best Buy prides itself in provision of after sale services to customers. On purchase of a product from the company, Best Buy offers technical support, extends maintenance and installation. In addition to the technical support, it also offers services in the mobile phone subscriptions and internet services. This strategy that is mainly targeting the buyers of the electronic consumables capitalises on giving the technical support and advice instead of letting the customers to incur extra costs in hiring technical support providers for the products it sells. Best Buy service support and advice have remained to be the competitive advantage. Competitors such as Wal-Mart have also used pricing strategy thus leaving Best Buy to explore the non-pricing strategy of service support. The range of the services that it extends to the customers include spyware and virus removal, computer tune ups, installation of software and networking support to the computer related customers (Cruz, 2002). Stages in the Industry Life Cycle The typical lifecycle of an industry is divided into five stages that are important for marketers in forecasting of the sales and projection of the market trend, each stage has unique characteristics that have different implication for the business (Bivainiene, 2010). The stages include: (a) Early stage: This is the initial stage in which a company establishes the product design and puts the positioning strategies that are aimed at establishing the boundary of the industry. (b) Innovation phase: This is stage in which the innovation of the product has already been established, the business thus embarks on process innovation that is aimed at enhancing the competitive edge. (c) Shakeout phase: This is the phase in which the company achieves the economies of scale and the company can compete with other main industry players. (d) Maturity stage: At this stage, the company has already experienced growth, the main focus is not on growth but maintaining market share and cash flow are major concerns in this stage. It thus becomes a primary goal to device competitive strategies that are to ensure that company stays on course. At this stage, the business is old enough and there are already many competitors entering the same market hence the market share may decrease (Bivainiene, 2010). (e) Decline stage: This is the final stage of life cycle. The main characterisations of the stage is the sales volume of products start to decrease due to the new products that are being introduced by the competitors (Bivainiene, 2010). The declining revenues due to reduced sales may lead to the industry being supplanted by new entrants. Best Buy Stage in Life Cycle Best Buy is currently inn the maturity stage. This multinational consumer electronic corporation was started in 1966, as an audio specialty shop. The company was later rebranded in which it placed more emphasis on consumer electronics. Since then, the company has grown to have an international presence both in America and outside. After experiencing the exponential growth, in 2013, the company recorded a decline in its revenue. The company has been experiencing a lot of competition from other multinationals such as Wal-Mart, Apple Inc and Amazon.com and other small competitors (Cruz, 2002). Best Buy has already undergone through the growth stage, has established its products and positioned itself as a multinational brand (Cruz, 2002). Therefore, at this point Best Buy has reached the maturity stage. The company thus is not growth oriented, instead, it is focussed on maintaining the cash flow and its revenue base by devising strategies to keep it market share that are features of the maturity stage. Competition Best Buy sells the electronic consumables through three primary channels of retail stores, online and call centres. Best Buy boasts of over 1500 retail stores. Despite of these outlets, the company has been experiencing stiff competition from the other multinationals using similar selling channels. Best Buy focuses on turnaround by leveraging on strategies that will enhance the sale volume. One of the strategies has been using the non-price strategies to keep its customers satisfied through after sale services and advice. The online selling has been facing competition from Wal-Mart, Apple Inc and Amazon.com that have also established online stores. The competitors have also employed the pricing competitive strategy in which they also price their products cheaper. Porters 5 Force of Discovery Porter’s five forces of discovery serve as powerful tools a business can use to analyse its situation in terms of strengths and weaknesses. Through an understanding of where the power of business lies, a business can take advantage and avoid probable wrong steps. According to Porter (2008), the five forces include: Supplier power Buyer power Competitive rivalry Threat of substitution Threat of new entry Supplier power Suppliers are important component of any business; they are part of micro-environment of the business. This means that an organisation can control the forces of the suppliers (Kotler et al 2009). However, this is not always the case. In the Porters case, supplier power is analysed in terms of the ability to cause price rises (Porter, 2008). This is depended on the uniqueness of the products and the ability for the suppliers to have control over a business. This is determined by the cost a business is likely to incur in shifting from one supplier to anther. According to Porter (2008) the fewer the suppliers the more likely they will have power over the business. For Best Buy, the suppliers of the various products are many, the suppliers also happen to be the key suppliers of the competitors. In the electronic business, competition is very high and thus forces of demand and supply affect suppliers. For Best Buy, the business has strong power over suppliers. For instance, each electronic e.g. computer product from different suppliers has unique customer target and the manufacturers have to depend on the retail stores to reach the customers. Buyer power Buyers are very important for any business. They are the source of revenue and thus losing a buyer is a big blow to a business. Each buyer has importance to the business. In analysing the power of the buyers, the key factor to consider is how the buyers can dictate the price of a product a business is offering. This is analysed in terms of the cost of the individual buyers switching from the products offered by your business to the competitors’ products. The buyers can dictate upon business that deals with fewer powerful buyers (Porter, 2008). Best Buy enjoys a big pool of buyers from the retail stores and online sales. However, these customers are also target for the competitors with similar products and pricing strategy. Therefore, Best Buy has low power of the customers. The customers can easily switch to competitors products, if they do not get value for their money. Competitive rivalry This force is based on the number and capability of the competitors. The presence of many competitors offering products and services equally attractive as yours gives a business low power. This is because the buyers and suppliers have alternatives if they fail to get fair deal from the business. If the business is unique and with few competitors then; it enjoys tremendous strength (Porter, 2008). Best Buy faces stiff competition from other multinational retail companies such as Amazon.com, Apple Inc and Wal-Mart. The companies enjoy economies of large scale and have stable capital bases. They have the ability to offer attractive packages and prices. Best Buy thus has weak power over the competitors as the electronic consumables are being sold by many businesses. Threat of substitution This force depends on the power of the buyers to find an alternative of the product. Businesses that have easy substitution weaken their power (Porter 2008). Best Buy buyers depend on the company to get the electronic consumables. Best Buy does not manufacture the electronic consumables; this implies that the consumables can also be accessed from other retail outlets. Best Buy faces strong threat for substitution if there are no strategies to overcome the possible threat from buyers switching to competitors. Threat of new entry The power of a business is affected by the capability of easy entry to the industry by competitors. For the businesses that little time and money is required to enter the market, they have weak power. Pointers to threat of new entry include few economies of scale and lack of protection of the businesses’ technologies (Porter, 2008). Best Buy enjoys big market share and economies of large scale. However, the Best Buy continue to experience a lot of competition from both small and other multinationals, it thus faces high threat of new entry which gives it lo power. Many other businesses can enter the electronic consumables business, as it is not capital intensive. References Bivainiene, L. (2010). Brand life cycle: Theoretical discourses. Economics and Management 15(1), pp. 408-415. Clay, K., Krishnan, R., Wolff, E and Fernandez, D. (2002). Retail strategies on the web: Price and non price competition in the online book industry. The Journal of Industrial Economics, 50 (3), pp. 351-367. Cruz, S. 2002. Best Buy and Greek Squad join forces: Retailer to offer in home support. Star Tribune. Ghodeswar, M. (2008). Building brand identity in competitive markets: A conceptual model. Journal of Product and Brand Management, 17(1), pp. 4-12. Kotler, P., Keller, K., Brady, M., Goodman, M. and Hansen, T. (2009). Marketing management. London: Pearson Education. Porter, M. E. (2008). The five competitive strategies that shape strategy. Harvard Business Review. Read More