Success and Potential Risks of Kids Market Consulting - Case Study Example

Kids Market Consulting Contents Abstract 2 Market Attractiveness of marketing Research Industry in Ukraine 3 a)Segment Rivalry/ Competitors 4 a)Potential for New Entrants 5 b)Supplier’s Bargaining Power 6 c)Customers’ Bargaining Power 6 d)Substitute Products 7 Success and Potential Risks of Kids Market Consulting 7 Internal environment 8 External Factors 9 Future Prospects 10 Future potentials of Kids Market Consulting 10 Strategic Directions 11 Conclusion 13 References 14 Abstract Kids Market Consulting has witnessed a steady growth in a span of 4 years (from 2000 to 2004) in Ukraine’s market research industry. The company however faces increasing competition and slowing revenue in the kids, tweens and teens market niche. This paper evaluates the market attractiveness of Ukraine’s marketing research industry, the reasons underlying the success of Kids Market Consulting, the potential risks and the future potentials of Kids Market Consulting. Further, it suggests relevant potential strategic directions for the company (Brattås and Sandung, 2011). Kids Market Consulting: Strategic Analysis Overview This paper presents a strategic analysis of the company based on a case scenario. The company basically utilizes the business-to-business (B2B) model (Chopra, Dougan and Taylor, 2007). This paper further provides a detailed analysis of the company’s strategic management based on the market situation, policies, management processes, economic climate and the logic behind its strategic choices. It also provides an assessment of the company’s strengths and weaknesses based on RBV, and suggestions for continued substantial advantage over competitors in the kids, tweens and teens niches. Market Attractiveness of marketing Research Industry in Ukraine Market attractiveness describes the possibilities of making profits in a given industry or market segment. Typically, when the market is more attractive, it implies high potentials for making profits (Spohn, 2004). In the case scenario, Kids marketing Consulting enters into the marketing research industry in Ukraine, a move that is viewed as timely as it offers the potential for high profitability and accelerated growth for the company. Several factors that influenced the attractiveness of the company played in the company’s favor, including the available competition, size of the market, influence of customers and suppliers, the prevailing climate of the market, regulation of the market, inflation and political climate (Smith, 2001). Different approaches can be applied to examine the intricacy of factors affecting the attractiveness of the industry. For the purpose of this essay, ‘Porter’s five forces model’ is adopted to explain the attractiveness of the marketing research industry in Ukraine from the perspective Kids Market Consulting (Brattås and Sandung, 2011). a) Segment Rivalry/ Competitors According to Porter (1980), competitive rivalry is the major causal factor for profitability. The influx of competitors and the multiplicity of competitors are typical drivers of competition. In addition, if the products are difficult to differentiate or are similar, there will be higher competition while the margins will be lower. Also, if the marketing segment has numerous excess capacity and many exit barriers, prices will be lowered hence causing lower profits (Porter, 1980). Although prospective competitors exist within Ukraine’s market research industry, they are not fierce or aggressive enough to disrupt the kid, tweens and teens niche. Indeed it can be argued that Kids Market Consulting is a pioneer in the kid’s niche and thus had a potential for profitability, growth and accumulated customer base. However, given that the potential of the competitors to seek make aggressive strategies at the expense of Kids Market Consulting, it is imperative that the company changes tact towards protecting its niche, as firms may plunge into the niche (Smith, 2001). Competition in the industry does not appear to have the potential to subsist Kids Market Consulting in the market segment, with the major competitor being a subsidiary of a global community called ESOMAR community. Although, ESOMAR could be said to be a strategic group that boasts of numerous players in several niches, none of its Ukrainian operations are exclusively dedicated to market research centered on children, a niche that Kids Market Consulting specializes in. Overall, even though there were some 30 market research companies within the segments, including IPSOS S.A., ACNielson Ukraine, Gfk-USM among others, none of them was dedicated to researching in the sane niche as Kids Market Consulting. From this analysis, it can be concluded that the Ukrainian market was attractive as it offered Kids Market Consulting a great opportunity for sustainable competitive advantage (Brattås and Sandung, 2011). a) Potential for New Entrants Porter (1980) explains that when a market segments is lucrative and the rewards constitute high returns of capital, it is likely to attractive new companies from outside of the industry. With regard to the Ukrainian marketing research industry, the threat of entry of other players is based on the barriers of entry and the likely resistance from the existing competitors within the industry (Geroski, 1991). There is high threat of new entrants into the industry as there are weak principal sources of barriers including the low product differentiation, low economies of scale, and low regulations and unlikely retaliation from the competitors (Spohn, 2004). Among the barriers include the existing market climate. Since the market is loosely regulated, it is easy to enter the marketing research industry (Duke, 2011). For example, Ukrainian Marketing Association (UMA) developed policies that were centered on self-regulation. Consequently, companies interested in the marketing research services such as; pharmaceutical and technological firm were given the opportunity of offering a larger customer base presenting a limited challenge for new entrants. Ukraine also has low inflation depicting a stable economic climate. b) Supplier’s Bargaining Power The supplier’s bargaining power also explains the market attractiveness of Ukraine’s marketing research industry. Within Kid’s Market Consulting’s perspective, the bargaining power of suppliers is influenced by such factors as the significance of the supplied service and the likely substitutes. The demand for marketing research appears as high while at the same time, there are many substitutes, as showed by the existence of nearly 30 companies offering the similar marketing research service. With this regard, the suppliers of marketing research service have high negotiation power (Spohn, 2004). Concerning the case of Kids Market Consulting, since it offers a unique service in the area of children’s marketing research; its product is greatly differentiated thus enabling the company to have a high bargaining power in Ukraine’s marketing research industry. This makes the segment attractive. In the larger market research industry, aside from the large firms that competed for contracts, independent consultants also presented a significant extent of competition. For instances during the electioneering periods, they conducted researches for political blocs. c) Customers’ Bargaining Power Customers’ bargaining power plays a role in influencing the attractiveness of the marketing research industry in Ukraine. In mature value chains, customers have the ability to capture an increased share of power thus influencing the profitability of the industry or market segment. This is particularly comparable to Ukraine’s concentrated marketing research industry with approximately 30 companies. Within this scenario, customers control the market and determine the price. With regard to Kids Market Consulting where the company is seen to control the value chain, it was probable that power would shift to the customers in due course. From this perspective, it can safely be concluded that power often shifts to the players in the value chain who reap the largest share of profits (Johnson, Scholes and Whittington, 2011). d) Substitute Products Porter (1980) suggests that customers’ willingness to buy a certain product at a certain price often depends on the accessibility of the substitute products. Under these circumstances, if the substitute is available, then it is possible that customers will switch to the alternative product whose price is lower. This concept explains the attractiveness of the marketing research industry in Ukraine. The existence of about 30 marketing research companies demonstrates that the industry is concentrated with substitute products, which makes the industry less lucrative, as Porter (1980) explains that in such a situation, companies would be forced to lower their prices. The situation is however different for the niche that Kids Market Consulting in engaged in, as it is the sole company in the field (Grundy, 2006). Success and Potential Risks of Kids Market Consulting From the outset, Kids Market Consulting had unique business models customized for the delivery of its ambitious growth strategy to dominate the kids, tweens and teens niche. From a critical analysis, the company’s success depended on its strategy to engage in a unique niche, its good executive leadership and professionalism and lastly, its strengths and weakness assessment. In evaluating the major reasons integral for the success of Kids Market Consulting, the company’s internal and external environments must be considered. Further, in analysis of the factors that influenced Kids Market Consulting’s profitability, this essay adopts the Resource Based View (RBV) that was developed by Wernerfelt (1984 and 1988). Indeed, the framework is considered as highly significant in evaluating the profitability of firms in emerging industries, where much uncertainty exists and thus it is critical to understand a company’s internal and external strengths and weaknesses. Internal environment Kids Market Consulting’s internal environment is composed of the companies, core competences, capabilities, strengths, resources, weaknesses and strengths. Kids Market Consulting has capable and proficient human resource. Berezovskaya, the founder has 10 years of experience in dealing with youth programs and Ukraine’s marketing research industry, as she has worked in an advertising agency. In addition, Berezovskaya’s close association with other market research companies has enables Kids Market Consulting an opportunity to network with Ukraine’s advertising community thus establishing a solid public relations. Berezovskaya also has contact with research firms that serve kids, tweens and teens segment in foreign nations. Kids Market Consulting also had five fulltime employees. Thus the firm has a strong professional network that was speedily leveraged in establishing a strong customer base (Grundy, 2006). KMC can also access a range of corporate resources from other DDI businesses, including interviewers and tools for conducting market research. Further, Kids Market Consulting represents about 40% of DDI’s revenue. Kids Market Consulting also has a huge customer base constituting of domestic and international firms targeting kids, tweens and teens. Berezovskaya, who was the co-founder of Kids Market Consulting, maintained contact with Ukraine’s leading advertising players, which accelerated the success of the company. The company entered the Ukraine’s market research industry while DDI’s support and customer base was substantially accessible. Further, the company was able to promote consolidated research and provided one package of market research to numerous customers, which presented it with an opportunity to strengthen its customer base. The company also offered advantaged to DDI by increasing DDI’s field of specialization, in this way it became a unique source of customers for the entire DDI’s firms’ customer base. The company’s decision to share premises with SC-DOM enabled it to save on overhead cost. Lastly, before entering the industry, Kids Market Consulting studied the market and decided that specializing in kids, tweens and teens niche in Ukraine would be lucrative. External Factors From the outset, Kids Market Consulting’s strategies appeared substantially congruent with its external environment, although to some considerable extent. Towards this end, the prevailing external factors such as the socioeconomic, political, environmental and demographic factors accelerated the success of the company. For instance, the Ukrainian economy was on a stable growth trend, having expanded from 4% to 5% each year since 2000. The growth was due to low inflation that signified a stable economy; in return this presented a concrete domestic demand and strong customer and investor confidence. An addition significant element is the existence of regulations set out by the Ukrainian Marketing Association (UMA) which are seen to be focused on company’s self-regulation. For example, Ukrainian Marketing Association (UMA) developed policies that were centered on self-regulation. This presented an opportunity for the company to operate in a regulated and ethical environment further presenting opportunities for growth due to fair competition (Grundy, 2006). Future Prospects Future potentials of Kids Market Consulting As a market research leader in the kids, tweens and teens niche, Kids Market Consulting appears to have the potential to gain substantial advantage over possible entrants in the niche. Within this niche, the company boasts of a large market share and the potential for growth, both of which have placed it into a strategic position that can hedge off external influences. However, the company’s position in the niche is threatened by Ukraine’s non-specialized market research firms which have not considered entry into the niche market (Geroski, 1991). The future potential exist for the company pursuing geographical expansion, expanding product line offering and diversifying output in market research. Since there is a large number of independent consultants or non-specialized research firms seeking entry into the niche, this threatens Kids Market Consultings localized researches. This means that the company’s localized researches may begin to be viewed as non-exceptional, which may also imply that the company’s relevance is threatened. However, the company has the potential to sustain its relevance in the market research industry. Strategic Directions In the present scenario, Kids Market Consulting faces increasing competition in its niche and slowing revenue. In this case, the company should consider a suitable strategic direction. In particular, the company should come up with a proper strategy to protect itself within its niche market as well as design a way of how to see expansion. The company has sound organization management, which can be argued to be presently too complex for the competitors to understand – since it is empirical and content-specific. Renowned for kids, tweens and teens market research services, the company has built a reputation based on its unique product line and the established brand image, which was originally a challenge for competitors to challenge (Johnson, Scholes and Whittington, 2011). This means the company must sustain its competitive advantage. As showed in the case scenario, the company’s current portfolio offering is still influential; however, it should venture into events and consulting services. Based on the increasing competition in the kids, tweens and teens niche market, the company will have to diversify its product line to include researches in a range of other industries rather than continue specializing in its niche. It should as well consider customized market researches, such as for C-level executives, since it has the potential to increase its customer base and to strengthen its operation base and the pool of its research analysts. As a corporate strategy, diversification aims to increase a company’s profitability by ensuring greater volumes of sales that is stimulated by the varied product lines and the new markets attained through new geographical expansions (Johnson, Scholes and Whittington, 2011). Kids Market Consulting should adopt unique business models designed for delivery of the firm’s ambitions growth. With this regard, the company should employ more research analysts and freelance researchers across several countries to enable it to expand its frontiers, as the niche may soon become concentrated in Ukraine (Gnyawaii and Fogel, 1994). The company should also run other programs such as symposiums in the emerging markets to help it further market its brand and research competences. To cut costs further, as the Kids Market Consulting spends nearly 70% on workers’ salaries and wages, the company should centralize it human, finance and legal resource as this can enable it to benefit from economies of scale. Also, operations that are seen to be in close contact with the customers should be centralized. The company’s strategy should also be such that it enables the company to deliver cont-effective research services while ensuring customers satisfaction (Grundy, 2006). The company should also emphasize on improving its product quality to maintain its reputation, even as the niche market dramatically becomes concentrated, while it still benefits from a near monopoly market situation given the limited competition (Johnson, Scholes and Whittington, 2011). As aforementioned, Kids Market Consulting has unique capabilities and should therefore strive to apply dynamic strategies if it has to gain competitiveness. This is because in a competitive environment, dynamism is critical as it will enable the company to replenish its capabilities in compliance with the changing economic environment. Kids Market Consulting should also increase major barriers to entry into the kids, tweens and teens niche market by employing a large pool of markert researchers, analysts and in consolidating its relationship with global CIOs as this would limit the risk of competition (Brattås and Sandung, 2011). Conclusion In conclusion, Kids Market Consulting, which has witnessed steady growth in a span of 4 years in Ukrain’s market research industry, faces increasing competition and slowing revenue in the kids, tweens and teens niche market, where it specialized. In this case, the company should consider a suitable strategic direction, based on its strengths and weaknesses analysis. In particular, the company should come up with a proper strategy to protect itself within its niche market as well as design a way of how to enhance expansion. This paper concludes that through the understanding of the company’s ‘Five Forces’ as postulated by Porter (1980), the impact of the company’s new potential offering is likely to be successful based on new strategies such as product line diversification that have been adopted by the company. References Bowman, C & Faulkner, D. (1997). Competitive and Corporate Strategy, Irwin, London. Brattås, M. & Sandung, F. (2011). 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(1980). Competitive Strategy: Techniques for analyzing industries and competitors. New York: Free Press. Smith, R. (2001). Market Attractiveness of New Product Concepts. Cincinnati, Ohio: ChemQuest Group. Retrieved from. [http://www.chemquest.com/PDF-files/TAPPI-2001-A-RWSmith%206-01.pdf] Spohn, D. (2004). Evaluating Market Attractiveness - A New Venture Perspective. (Online) Retrieved from: [http://www1.unisg.ch/www/edis.nsf/SysLkpByIdentifier/2917/$FILE/dis2917.pdf] Read More