Industry Sector Performance - Essay Example

?RUNNING HEADER: Strategy and Marketing Strategy and Marketing BY YOU YOUR SCHOOL INFO HERE HERE Strategy and Marketing Industry Sector Performance Industries that offer higher-priced goods and services seem to have the best performance, as they often sustain high volumes of credit purchases or sustain higher profit margins. Such industries include auto and truck dealerships, home improvement industries, computer systems, home furnishings and fixings, and residential construction. These industries seem to have the best performance mid- and long-term. At the same time, this is justified by steady performance in the credit services industry (Morningstar, 2012). Economic conditions as well as lifestyle needs demand that consumers invest in their housing to ensure asset value growth and require adequate transportation and computer systems to facilitate effective and demanded lifestyle quality. Many of these industries do not require a strong market-oriented strategy, since the competitive environment does not mandate being ultra-sensitive to buyer needs (Walker & Mullins, 2011). Companies such as The Home Depot and Lowe’s offer rather standardized products that are in demand due to economic conditions and widespread consumer need for asset protection. In this oligopoly market structure where there are limited competitors, the business can avoid high costs associated with customer relationship management systems and other market-oriented models of doing business. The mid- and long-term factors of high performance are credit availability, limited competition in certain high-performing industries, pricing structures, and high consumer demand. No, it would be difficult to make the assumption that some industries are inherently more profitable than others. Some have operational models that consume a great deal of cash or credit that are not widely understood without examining annual reports or market studies on business strategy and growth. They may offer higher prices, however the cost of goods sold in these industries could be substantially higher than other competitors that have leaner models of production. There are many factors associated with promotions, brand positioning, or even expensive information technology and support that could erode profitability. Walker & Mullins (2011) identifies that market success requires examination of external trends that impact the industry long-term. Ineffective market research, either qualitative or quantitative, as well as a poorly-developed promotional strategy could greatly undercut profitability as compared to more efficient competitors at these activities. Automobile Manufacturing Performance Automobile manufacturer sales volumes are strongly influenced by consumer demand and also short-term economic conditions in key target markets in their desired segments. Morningstar (2012) identifies rather poor mid- to long-term performance at Nissan, but rather high performance at General Motors. Both of these companies offer mid-sized to larger-sized vehicles and operate in generally the same socio-economic market segments. Walker & Mullins (2011) identifies the importance of positioning, which is establishing a product that will emphasize consumer needs and help to differentiate the brand from other competition. General Motors conducts considerable market research on consumer attitudes, behaviors and needs which assists this business in gaining more customers. Psychographics is only one method of establishing connections with buyers. Nissan, on the other hand, might have less developed promotional and advertising strategies that do not stand out from competition. While GM would be positioned as a lifestyle-relevant product line, Nissan might be ineffective at successfully differentiating the product. Though this is only one factor, it does indicate why some companies perform better financially than others due to the importance of successful marketing strategy implementation and control. The automotive industry is also reliant on consumers that conduct a great deal of searches and considerations for these high dollar product purchases (Boone & Kurtz, 2007). It is highly involved, often deal with many test drives, Internet research, and considerations stemming from peer reference groups about price and quality before making a purchase. Companies in this industry that are more market-focused will try to develop more effective sales teams or produce better interactive websites (as only two examples) that continue to bring better performance through marketing strategy long-term. Marketing recognizes the importance of considering all elements of the marketing mix, and General Motors has a better place strategy with broader dealer networks nationwide than Nissan which could contribute to more effective consumer interest and brand loyalty. An Organizational Case Study The clothing company Abercrombie & Fitch operates in the apparel store industry which generally has good financial performance short- and long-term. Over the last several years, this retailer found a lifestyle connection through quality positioning to gain youth market consumer attention and brand loyalty. Using integrated promotional communications about its exclusivity and high quality, buyers found their own subculture using A&F branded clothing to exert their social dominance. The use of attractive young actors in catalogs and in-store promotions also reinforced the exclusivity and made these individuals aspirational reference groups by which youths often will try to mold their behaviors and aspire to become (Boone & Kurtz, 2006). This company believed in the long-term integrity of its positioning and ability to gain target market attention and never added flexibility and adaptability into the long-term strategy. It turns out, however, that the company was not really in the business it thought it was. Recent news releases have indicated that Abercrombie & Fitch will be closing over 70 stores in the U.S. with sudden shifts in sales declines from previous years. One hundred and eighty stores are anticipated to be closed by 2015 (Huffington Post, 2012). A&F expanded so rapidly trying to maintain a market-orientation and now the business cannot afford the high operational costs of store operations. What happened? A&F did not consider the new generation of youths that would be targeted when their previous loyalty based matured and moved on into adulthood. The new generation of buyers are clearly not interested in the showmanship of A&F vanity strategy and thus their desired market base of buyers no longer patronize their stores. Walker & Mullins (2011) indicates the importance of establishing control feedback systems. If A&F has established a more long-term orientation in the market and developed control systems to identify changes in consumer brand sentiment, they could have likely adjusted their long-standing promotional strategies to include new and flexible concepts relevant to a new generation of youth buyers. The Organization’s Orientation The business is currently market-oriented, as the business uses in-store sales representatives and relationship management systems designed to keep loyalty. The fundamental problem for this company, however, is failing to recognize that its clothing was trends-based for an aging generation of youth buyers and is no longer an effective market-oriented sales strategy. The organization’s general approach to market orientation is ineffective and not optimal since it is producing vanity-inspired concepts that are being rejected by its current target market, which is still the youth buyer. Abercrombie & Fitch maintained a look policy, with even the CEO proudly boasting that all sales representatives and customers should fit this desired look to maintain its exclusivity and brand position for high quality. An employee who wore a Hajib, a Muslim headdress, was frowned upon by the company (Live Journal, 2011). This and other situations regarding adherence to the look policy have continued to bring this business much negative publicity in recent quarters, again reducing the brand equity that this business was able to build with a now-aging market of youth buyers. The company’s vision and mission is to provide youth buyers with top quality clothing that build self-esteem through exclusivity, however trends-based lifestyle preferences from its markets dictate a need for more emphasis on product orientation to offset changing social values. Research did not uncover any existing strategies at Abercrombie & Fitch regarding marketing evaluation or measuring customer satisfaction. It would seem that this business was confident that the business it was in was genuinely the business it was operating in and thus relied on high sales volumes and consumer demand for higher-priced apparel that would be sustainable over the long-term. The business has not repositioned or changed its brand image on the youth market and the results of this short-sightedness is apparent in significant sales drops, store closings and stock valuation declines. This impacts competitive strategy by removing flexibility from the company’s marketing strategy by not allowing for flexibility and adaptability needed in highly competitive apparel markets. References Boone, L. & Kurtz, D. (2006). Contemporary Marketing (12th ed.). Thompson South-Western. Boone, L. & Kurtz, D. (2007). Contemporary Marketing (13th ed.). Thompson South-Western. Huffington Post. (2012). Abercrombie & Fitch Closing 180 Stores by 2015. Retrieved September 6, 2012 from http://www.huffingtonpost.com/2012/02/15/abercrombie-closing-stores-2012_n_1280199.html Live Journal. (2011). Abercrombie & Fitch Look Policy Looks Down on Hijab, ONTD. Retrieved September 7, 2012 from http://ohnotheydidnt.livejournal.com/60603352.html Morningstar. (2012). Industry Performance, Retrieved September 7, 2012 from http://news.morningstar.com/stockReturns/CapWtdIndustryReturns.html Walker, Orville C. & Mullins, John W. (2011). Marketing Strategy: A Decision-Focused Approach (7th ed.) McGraw-Hill. Read More