Competitive Strategies Used by Top Companies - Term Paper Example

?Competitive Strategies Used By Top Companies In the world of business, adapting to market conditions is the key requirement when companies devise the strategies that they will employ in their target market segments. This requires them to understand their clientele as well as their competition to ensure the success of the said strategies. In any case, the competition also has a grasp on the market and will come up with its own marketing strategies to trump its rivals. The creation of effective marketing strategies therefore leads to the differences between companies that do well and those that do not meet their targets, essentially becoming failures in that market. This is the leading reason why every company, be it a large multinational or a small home-based startup, should pay attention to its marketing teams and increase the importance placed on the strategies that they come up with. While the main focus of any business is the creation and retention of capital, there is little attention paid specifically to the customers who will be their main source of income. Many companies associate the client and the product that they serve as two different entities, in that product creation happens first before they start targeting a client base to sell it to. In a truly customer-oriented company, the development team identifies a niche in the needs of the client base and develop targeted products that fill these niches (Boscor, 2011). The companies that employ this strategy have a better understanding of the tastes and preferences of their clients and as a result, increase the number of repeat clients that they have, which effectively increases their productivity. The world of business is full of examples of the successes and failures of companies, which essentially increases the knowledge base from which new strategies evolve. One of the country’s best examples in customer relations is Starbucks, a Seattle startup that grew to the giant with 17,000 stores spread over 50 countres with an annual groth rate of about 20% p.a. (Boscor, 2011). These figures act as an inspiration for many business models available today and is indicative of the success that companies would achieve by adopting similar strategies. This is also the reason why the strategies employed by this company warrant such attention and a deeper sense of understanding. One of the ways a company can ensure that it maintains its image and goals is to establish a company profile that future employees and clients can relate with. Since its beginning, the company motto revolved around developing an enthusiastic and satisfied customer base, which was in line with their focus on clients instead of products (Boscor, 2011). While this may not be considered a business move by some, it acted and still acts as their core value and has not failed the company since. As a result, their products and services centre on the specific needs of each client and the company motto is the leading factor that drives their product development and ultimately, their brand’s success. As a leading company in the food service industry, McDonalds targets a different niche in the same market as Starbucks. From the time it opened up its first store in 1940, McDonalds has also risen to the heights of the service industry and now boasts over 32,000 stores spread over 117 countries (Boscor, 2011). This is all in the face of competition which has risen to stiflin proportions in the last decade. The company, however, has maintained its position as industry leader despite these challenges due to constant adaptations to fit the market and this establishes it as one of the successes of our time. Different companies approach their expansion processes in various ways and each alternative has a profound effect on the future of a company. As a market-conscious company, McDonalds handled their transition into international markets quite well. Their chosen method of expansion is franchising and this allows them to better understand their markets. They were considerate of the cultural differences between their home market in the US and those of the countries they chose to expand to. In China, for example, they introduced new items on the menu such as fried rice while adding wine to the menus of their French franchises (Boscor, 2011). This strategy proved itself and the results were clear in the reception that these franchices got in their target markets. Franchises are mainly adapted by a company that has a profit-oriented approach to business and are exceptionally helpful for companies that favor mass-expansion programs. While this is great for the creation of profits, it is difficult for these companies to preserve the traditions and principles that they had in their home countries. This leaves them vulnerable to a multitude of problems that can topple a company from its position as a market dominator, such as the dilution of control that happens when they get into overseas ventures. Some companies like to preserve their traditional practices even when venturing into new markets and as a result, maintain their original values. When Starbucks ventured into international territories, they maintained their originality by funding their own expansion process internally (Boscor, 2011). This enabled them to expand without the limitations of merging their investment with external backers. It also allowed the company to operate autonomously when creating strategies for the culturally diverse European and Asian markets. Operating autonomously requires a company to hire an external firm to analyze the new market or maintain an internal department dedicated to understanding new markets. In the case of Starbucks, the management created a new division to direct their transition and they in turn analyzed the market for the company. The European Divisions department came up with preferences for the different cultures spread across the continents, such as double cappuccino shots for their British markets (Alderman, 2012). European tastes, however, have been tuned to the coffee culture for centuries and the company has faced some problems due to the differing and acute tastes of the European market. The differences between the in-house expansion strategy and franchising is apparent when we analyze the results when they encounter the new markets. The McDonalds approach was detrimental to the company’s autonomous nature but helped them to better understand their market. As a result, they utilized local ingredients which ensured that their food maintained the taste that their clients were used to (Boscor, 2011). Starbucks, on the other hand, maintained their traditions and invested in the same ingredients they use for their “Starbucks experience” which led to high acceptance levels in Asia but less in the European markets, especially France (Alderman, 2012). This implies that the franchise-model strategy is better for understanding foreign markets than making the process in-house. While many companies treat their consumer strategies as the strategies that will help them get and retain clients, this could not be so far from the truth. The facts are visible in the ratings and acceptance that different companies enjoy in their individual markets. McDonalds is an example of a company that has a high turnover rate due to the low wages that they pay their workers. This results in the dilution of their core principles, in that their attention shifts fully to the retention of profits, resulting in them losing the focus of their market. McDonalds faced this issue in the early 1990’s when they reported their first major losses and had to close down over 700 restaurants (Boscor, 2011). The maintenance of the low minimum wage allowed them to bounce back with minimal costs to the company since due to rising unemployment rates and the influx of unskilled laborers from other countries. Consumers in the modern age are more aware of their rights and options than previous generation and companies must accept and adapt to this to survive. McDonalds maintained its position as market leader when they introduced the fast food service system that dominates the service styles of fast food companies today. In its initial days, the company offered little choice but had to improve when their competition increased their food choices. Their use of E-foods also raised concerns and depopularized the company and this time, it chose to include a foray of healthy food options including carrot sticks and salads (Boscor, 2011). They also created an entry for kids with the Happy Meal selection that included a toy, courtesy of an agreement with Disney. These measures contributed a great deal to the company bouncing back and maintaining its market dominance. In previous years, the government had little control over company operations that did not include monetary or legal issues. This has changed due to customer awareness and companies in the food industry are required to publish nutritional information on the packages of the foods they sell. This is in line with consumers being more educated and the obesity scourge that plagues this country (Boscor, 2011). Customer-oriented companies try to ensure the continued supply of products that do not negatively affect the client and in Mcdonalds’ case, the company should have pulled the products that clients felt contributed to obesity. Their adoption of new products to fulfil this need while maintaining their original samplings reaffirmed their stance as a company that pays more attention to profits than they do to their clients and this has done little to endear them in the public eye. One suggested strategy is the absolute exemption of hazardous food additives abd supplements that the public is now aware and cautious about. The in-house changes that a company makes when instituting marketing strategies have a huge impact on their overall success. In any case, companies that require skillful and informed staff can not afford to have high turnover rates since these are a contributor to high operations costs derived from training programs. Starbucks employees enjoy a company structure that promotes from within and maintains remuneration packsges based on employees having adequate information about the company and its products (Boscor, 2011). This ensures that the company retains its values and has a customer base that is dedicated to providing the Starbucks experience. This move also contributes a greta deal to the reduced turnover rates that in turn ensure that the company spends little time and money on educating new employees. The retention of quality employees is vital for companies in the service industry due to the inherent values that each one of them must learn. Starbucks had a goal of reducing waiting times for clients and ensuring that they marketed the experience, which is the service they provide, rather than the coffee they serve (Boscor, 2011). The clients got to taste their coffee before making their choice and got to a first-name basis with the employees who served them on a regular basis. This was part of a value-added package that includes a debit card for use at Starbucks stores and free Wi-Fi at some of its outlets (Boscor, 2011). This strategy was effective since it enhanced customer satisfaction and increased the chances of making repeat clients when the company ventured into new markets. The Wal-Mart company strategy is another example of a company that embraced an expansion strategy that almost led to its collapse. In its initial days, the company invested in presenting low prices that local retailers could not match, essentially running them out of business (Brotspies & Sellani, 2010). A result was a store that sold average merchandise but whose prices and variety could not be matched by their competition. This strategy worked perfectly for them when the company was expanding into other low-income areas but proved disastrous to their expansion into higher-income markets. These markets are dominated by companies that have been providing value-sensitive services to their market for years. Companies such as Target stores is part of this competition and these companies provide quality merchandise that Wal-Mart, with a majority of its imports coming from China, could not match and thus faced difficulties in these new markets. During its days as a startup and until the time it established itself as a dominant market player, Wal-Mart maintained its profit margins by taking advantage of the large labor base available and maintaining low labor costs by paying the minimum wage (Brotspies & Sellani, 2010). This created a negative image of the company when combined with their preference for importing their goods and the pressure they placed on suppliers to maintain their low prices. This soiled their imageand reduced the effectiveness of the brand when it ventured into new high-income markets. They eventually had to hire new staff to help them better understand those markets and this ended up creating a new problem. When dealing with hiring for an organization’s managerial positions, it is important for the incoming management to understand the company and market. Internal hiring and promotions is best suited for this task due to the understanding and motivation that existing employees have (Rosenbaum, 2013). The hiring of new managerial staff and the issues that they had to attend to as soon as they entered office had a negative effect on the company. Roehm, the new head of the Marketing department, had to leave for 100 days to find an advertising company, essentially instituting a breakdown of communications in the company (Brotspies & Sellani, 2010). This led to the creation of ineffective consumer approach strategies. Eventually, companies that fail to adapt properly to new markets fail and are overcome by their competition. While Wal-Mart was busy decentralizing its product base, its competitors were thriving in the individual miches that they had carved out of Wal-Mart’s market (Brotspies & Sellani, 2010). This happened at a time when Wal-Mart was trying out new products and still trying to maintain their hold on their original client base. As it was doing this, the manaement teams still did not embrace each other, with the original members of the merchandise department conducting their affairs independent of the marketing team (Brotspies & Sellani, 2010). Although they lter realized their mistake and promoted from within, the damage of employing multiple strategies in such a short time span was detrimental to the company’s image and solidifies the case for consistency in business as it serves as an example of some ways not to conduct a shift to new markets. One of the best ways to analyze top company strategies is the analysis of companies that go head to head in the same market targeting the same audience. A perfect example cropped up during the E3 conference when Sony and Microsoft unveiled their gaming devices but with profoundly different marketing strategies that ultimately led to the various sucesses that these devices enjoyed in different market segments. The results of this competition between giants provides the perfect reason as to why it is advisable for a company to fully understand the markets it ventures into. Companies that have been in a market for a while have a very wide grasp on the different cultures of these markets and can better target their selected audience. Prior to their venture into the gaming business, Sony had a firm grasp on the entertainment scene and had produced tangible advances in the industry while Microsoft had maintained the primary gaming platform, which was the PC, and had just ventured into investing in a purely gaming system (Datamonitor, 2004). This factor served as the primary driver for the strategies that they employed when popularizing their devices. Sony’s expertise in the home entertainment industry enhanced their marketing pitch, in that they targeted their device to the younger segment of the market while Microsoft wanted to enhance the gaming experience for advanced gamers, who only acount for a small portion of the market (Datamonitor, 2004). The Sony strategy involved a focus on their device as a complete entertainment device that users could use even when not gaming and this was a key factor behind their success. Microsoft, on the other hand, relied on the endorsement of hardcore gamers and this strategy also served as their success factor due to public interest in the device after the endorsement of hardcore gamers. New products always demand a proper understanding of the markets that they venture to and gaming devices are no different. As a result, it was imperative that these companies understand gaming culture before finalizing their marketing strategies. Based in Japan, Sony had an easy time in Asian markets due to the provision of specific titles for this market and the development of a device that appealed to their clients’ styling tastes, a move which Microsoft did not mirror (Datamonitor, 2004). They also included tech enthusiasts and game developers at their events and the results were visible in their sales figures. This was regardless of the fact that Microsoft released their product globally while Sony disappointed clients by a delay of several months before releasing their device outside Asia. The world of business today is dynamic and companies must evolve a great deal to maintain or raise their profile in the public eye. The constant influx of new products and companies targeted towards the same clients indicates the need for effective company strategies that help a company gain a foothold in the market. Today’s clients are smarter, more informed and have higher quality and accountability standards than previous generations. This factor works to endear companies that are perceived to favor the customer over profits. As a result, consumer-oriented companies enjoy the loyalty of their clients, which is one of the main factors we look at when gauging a company’s success. The retention of repeat clients while attracting new ones becomes a non-factor for companies that consumers perceive as friendly in terms of the way they treat their clients as well as employees. As a result, companies that adhere to these positive practices can focus on better service provision with the guarantee that they have appreciative clients and, therefore, stability in their market. References Boscor, T. (2011). Customer-Oriented Marketing - A Strategy that Guarantees Success: Starbucks and McDonald's. Bulletin of the Transilvania University of Brasov, 51-58. Brotspies, H., & Sellani, R. (2010). Wal-Mart: Getting Back to Growth - Old Guard vs. Change Agent Conflict and the Impact on Growth. Journal of the International Academy for Case Studies, 35-44. Datamonitor. (2004). Sony and Microsoft Case Studies: Successful Marketing Strategies in Asia-Pacific Gaming. Hong Kong: Datamonitor PLC. Alderman, L. (2012, March 30). In Europe, Starbucks Adjusts to a Cafe Culture. New York Times. Retrieved July 11, 2013 from http://www.nytimes.com/2012/03/31/business/starbucks-tailors-its-experience-to-fit-to-european-tastes.html?pagewanted=all&_r=0 Rosenbaum, A. (2013). Don't Just Train Sales Reps - Develop Them! U.S. Business Review, 12-13. Tylee, J. (2012). Stephan Croix: What Has This man Got To Smile About? N/A: Haymarket Business Publications Ltd. Read More