Analysis of the Market Strategies - Case Study Example

Analysis of the Strategies Name Institution name Market penetration is important to any business. Trader Joe’s business can penetrate the market through use of SO strategic option. This is attributed by capitalizing on the strengths and opportunities the business has. Looking at Trader Joe’s strengths shows that the business has got an excellent image in the eyes of its customers. Porter, (1985, p. 14) argue that in differentiation a business aim at being unique in production of goods and services valued by customers. Trader Joe’s is seen to excel in differentiation and provide products valued by customers at a reasonable price. Combining this with Trader Joe’s opportunities create excellent market penetration. Looking at the use of technology in business, recovery of US economy and the increase in demand of organic food giving Trader Joe’s quite a number of opportunities. This strategy can weaves perfectly with as a result of known facts which are Trader John familiarity with current existing situation and channels of distribution. Looking at market in another perspective or rather a strategy is Trader Joe’s working on its opportunities and weaknesses. In other word this means maximizing weaknesses and maximizing on opportunities. Trader Joe's major weakness is evident in low investment in technology use and unavailability of the consumer management. To have a market penetration in this case Trader Joe’s need to change and embrace technology and have a better develop a better customer management system. Threat together with weakness and opportunities provide yet another possible direction to Trader Joe's. International strategy is another possible direction at the disposal of Trader Joe's which can be implemented by maximizing on strengths and reducing threats. Threats are seen through substitute goods, competition from existing companies, which create, and new entry into markets. According to Porter, (1985, p.5) this are among the five forces that affect business profitability. Corporate strategy direction is possible through minimizing weakness and capitalizing on the opportunities. Looking at the four possible directions the most viable one for Trader Joe's is market penetration. Market penetration strategy will see Trader Joe's business concentrating of its efforts towards expansion of existing markets share in the current product market. Trader Joe’s therefore under these strategies can do number of thing such as coming up with ways to influence customer’s choice of products and even to establish a reputation for its product brand name (Nordmeye, 2014). Trader Joe's can achieve this through its strengths and opportunities. Market penetration is where a business organization gains the market share. It can be seen as both a measure and a strategy (Grimsley, 2014). Trader Joe' needs to take this into consideration that, in pursuing market penetration its easiness depended on the following factors which must be addressed. Rate at which market is growing, when the overall market is growing or can be made to grow organizations can find it easier to gain market share. This is attributed by the fact that sales levels may still grow and some companies can fail to meet this growing demand. In static market, penetration could be a little bit difficult to achieve. Trader Joe's need to employ the idea of acquiring failing companies in cases where the market seems declining. It is important also to understand that there could be resources issues, which drive or prevent market penetration. This could involve sacrificing profit and taking time to gain market share and penetration it is also necessary for Trader Joe's to understand the complacency of market leaders and try to capitalize on this because in most cases these leaders are not considered as serious treats competitors. It also important for Trader Joe understands the fact that low-share market competitor may establish a reputation in the existing market segment that is of little interest to the market leader and from this point penetrate the wider market. To gain or penetrate a market newer to Trader Joe’s business it is critical to capitalize on this by identifying who the market leader is and look at the avenues which can lead to market penetration from this considering that the market leader could not be taking interest in this avenues (Johnson, Scholes and Whittington, 2006,p. 344). It is essential also to understand that even when Trader Joe’s has gained market share and is among the leaders in the market, the complacency issues need to be taken into account in order to slow down the rate at which newer emerging businesses enter the market, in other words create entry barriers. This is because the new entrants normally bring with them new capacity and need to gain market share and most cases other important resources (Porter, 1997, p. 3). There is need for need to protect and strengthen and protect business position in the current market and current products this idea is termed consolidation. Since the market does not always remain, the same there is need to reshape and innovate in order to improve the business products (Johnson, Scholes and Whittington, 2006, p. 344). Trader Joe’s can in better the differentiation in order to increase the market penetration through by employing the following Increase the unit of purchase through selling of a whole product package or unit rather than single unit. Currently Trader Joe's sell fruit by pieces rather than by the pound. The possible way in which Trader Joe's can increase market penetration in the in the differentiated products is by selling the product per unit as well as a whole, for instance fruit can be sold per Kilogram , pound or any other possible package. Identify special occasion and reasons that in target population such as on special days , birthdays and package the products to suit the occasions. For example on birthday have birthday package with special added features. Increase the products usage by the existing customers through persuasion ways and tactics such as having loyalty schemes, adding value to products or altering the product, which will encourage greater consumption. Trader Joe’s for instance is supplied with yoghurt from the east coast. Some of the ways to increase consumption of yoghurt could be through stressing the benefits of yoghurt to patients with Helicobacter pylori infection and allergies (Adolfsson, Meydani and Russell, 2004, p.245). Trader Joe's can achieve market penetration using focus. Trader Joe's can utilize the two variants of focus, which are the cost focus and differentiation focus. Cost focus to exploit the differences that exist in cost behavior and characteristics of its targeted segment and the focus to exploit the need special to buyers (Porter, 1985, p 15). For instance, Trader Joe's can monitor the competitor performance and know when they are underperforming in meeting the needs of a particular segment because an opportunity for differentiation focus will present itself. In instances where the competitor is over performing in meeting the needs of the segment, a cost differentiation will present itself. The fact that private label items are not selling well in other supermarkets does not mean that they will not improve. Trader Joe's can therefore utilize the lower price in which it acquires the products from supplier and to lower the price further to point where it does not compromise the profits of the business in order to make its products sale and in turn make further penetration into the market. This also applies to the newly products that Traders Joe’s sell, because nothing will hinder the competitor from following that mode of winning customers. The only strong advantage trader Joe’s will have is the ability to focus on differentiation and cost. The simple steps that Trader Joe’s should to estimate the market penetration are identifying potential customers targeting both national market and the immediate market, calculating the total size of the market, determine normal penetration rate of the product, compare and estimate market penetration range with the number of customers needed for the business to gain profit (Nordmeye, 2014). Pros and cons of the strategy Pros Cons In declining market, it is possible to gain market share by acquiring the failing companies. It is possible to gain market share even when there are market leaders through capitalizing on the complacency of market leaders (Johnson, Scholes and Whittington, 2006, p. 344). Through differentiation and good pricing of product on the target market, Customers will be seen to refer others to the business It can act as barrier to entry. Which will slow down the rate at which newer competitors enter the market Through differentiation and focus the business will attain a competitive advantage over its competitors It might be more difficult to achieve market penetration when there is declining markets Establishing a strong market share can be difficult for those companies or business with weakly positions (Johnson, Scholes and Whittington, 2006, p. 344). References Adolfsson, O., Meydani, S. and Russell, R. (2004). Yogurt and gut function. The American journal of clinical nutrition, 80(2), pp.245--256. Grimsley, S. (2014). Market Penetration: Examples, Definition, Advantages & Disadvantages | Education Portal. [online] Education Portal. Available at: http://education-portal.com/academy/lesson/market-penetration-examples-definition-advantages-disadvantages.html#lesson [Accessed 20 May. 2014]. Johnson, G., Scholes, K. and Whittington, R. (2006). Exploring corporate strategy. 7th ed. London: Prentice Hall Europe. Nordmeye, B. (2014). How to Estimate Market Penetration. [online] Small Business - Chron.com. Available at: http://smallbusiness.chron.com/estimate-market-penetration-22714.html [Accessed 19 May. 2014]. Porter, M. (1985). Competitive advantage. 1st ed. New York: Free Press. Porter, M. (1997). How Competitive Forces Shape Strategy. 1st ed. [ebook] Harvard Business Review, pp.1-10. Available at: http://prolog.univie.ac.at/teaching/LVAs/KFK-LM/WS07/Porter.pdf [Accessed 19 May. 2014]. Read More