Strategic Marketing of Michel Patisseries Espresso - Case Study Example

Strategic Marketing Student’s name Institution Executive Summary This report is aimed at offering an overview on the formulation, implementation and measurement of marketing strategies of Michel Patisserie’s Espresso. The report is a marketing plan for Michel Patisserie’s Espresso that makes an analysis of a range of strategies for new market entry, growing markets, mature and declining markets and how to position the business in the new economic environment that calls for sustainable competitive advantage in the product offering. The report suggests a Pioneer strategy and its relevance and fit to the business due to the prevailing conditions in the Australian Espresso Industry and the strengths and weaknesses of the business. The report conducts an analysis of the growth market strategies which would be suitable for the business in terms of either adopting market leader or share growth in the instance of adoption of a follower strategy. Analysis is also made of the choices and possible impact of adopting certain strategies in declining, mature and shakeout market environments for the business weaknesses and strengths. The report makes an analysis of the different designs of organizational structures and marketing plans of the range of competitive strategies on offer. Lastly it acknowledges the role of marketing audit and metrics with regard to Michel Patisserie’s Espresso circumstances. Introduction The Australian Espresso market is one that is very competitive and thus Michel Patisserie’s Espresso must come up with a strategy which offers a good fit for the industry and business environment in order to have competitive advantage. The Espresso market is growing at an exponential rate and is expected to continue growing at rates between 1.5-2.8% from 2015-2018. As a brand that is firmly established in the Australian market, Michel’s has an opportunity to capitalize on this growth to grow its market share. The instance of a fragmented market with no clear industry leader makes enhances the business opportunities for Michel’s. The Australian industry is currently at a mature stage of growth which means that growth is not as high as in new markets. However, there are still many regions in the country whose potential has not been fully exploited. Given the fragmented nature of the market, a pioneer strategy which differentiates its products in terms of quality of offerings and service would set it apart from the competition. Given the macro and micro environment, Michel Patisserie’s Espresso is in a good position to take a pioneering role in the Australian market. Pioneer or Follower Strategy Pioneer A pioneer strategy is a good strategy in markets which are fragmented and offer products which are for the most part similar (Bradway Frenzel & Pritchard, 2012). The Australian market offers just such a market since there re many competitors and no company has a leadership position. This strategy offers several competitive advantages in that the company gets to have first choice of consumer segments, economies of scale and experience, the possibility of preempting suppliers and scarce resources, define the rules of the market, positive network effects, established distribution networks, and high costs of switching for the followers (Dolan, 2011). Michel Patisserie’s Espresso possesses a range of these advantages in the Australian market which would make the Pioneer strategy effective. Michel’s has been in the Australian market for a long time and hence has developed brand value which would make it have first choice of consumer segments. Its 330 shops in the country is a significant distribution network which comes in handy in influencing customer choice. The size of the company and its longevity means it has experience in the industry, and economies of scale which enable it to preempt suppliers particularly in terms of prices of coffee beans. Strategy Michel’s adopts a number of strategies including; product development for changing client needs, market penetration to increase market share, differentiation of relationships with suppliers, production and customer service. The company will draw upon superior product design, supplier relationships and process engineering in achievement of lower unit costs and stimulate elective demand among late adopters (Rao, 2008). Since this a mature market, the company would adopt differentiate positioning in an encirclement strategy aimed at the unreached populations needs in far flung areas of the country. A gorilla attack strategy would also be appropriate due to the similar nature of competencies and RD resources in the market. Follower A follower strategy offers the advantages of; taking advantage of pioneers positioning mistakes, limited resources, marketing mistakes and also taking advantage of the latest methodologies and technologies (Lane, 2011). Given the large number of competitors in the market Michel’s will be aiming at mass and wide market penetration in order to expand its market share with diverse products in a highly segmented market. Strategy The business would most benefit from a Leap frog strategy in seeking to grow its market share in Australia. Through an analysis of the competitors offering, the company will develop service levels and features of its product offerings which are better than those of the competition. The company through its vast resources and distribution network will have economies of scale which will enable it set low prices at comparable level of performance of the competition (Nijssen & Frambach 2010). Through better spending on promotion, the company will stimulate selective demand for its innovative product offerings demanded by certain segments of the population. The use of a frontal attack is aimed at capturing substantial repeat customers from the competition and this may prove costly given the relatively undifferentiated nature of products offered by the industry (Weitz & Wensley, 2013). However offering lower prices may attract new customers. A homogenous market such as the Australian market which has low preference for certain brands would have no positive network effects. Nevertheless Michel’s has positioned itself well and has established brand loyalty foundation on which to expand market share. Given the stronger resources and competencies of Michel Patisserie’s Espresso it is able to have lower operating costs thus making the competition vulnerable to direct frontal attack. Relevance of Growth Market Strategies for Market Leaders Growth market strategies for market leaders are critical for Michel Patisserie’s Espresso plans for competitive advantage. These strategies are critical in setting up a strategic plan for expanding the business sin the highly competitive Australian market. The market leader needs to retain customers and hence growth market strategies assist in a variety of ways such as; improving satisfaction and loyalty, simplifies repeat purchase, and reduces attractiveness of switching (Poiesz & Raaij, 2007). Growth market strategies will assist Michel Patisserie’s stimulate selective demand among later adopters. While the company has innovative products and brand loyalty there are still populations which are unreached. Through growth market strategies these populations would help increase market share. Selective demand among late adopters may also be stimulated through multiple brand offerings that Michel Patisserie has to offer. Through the unique distribution channels it is easier for the company to reach specific consumer segments. A flanker strategy will be suitable in protecting the company from losing its market share since it enables it to come up with improvements to product offerings which enable it attract new customers. In a market which has distinct needs or major market segments such as Australia a flanker strategy enables Michel Patisserie to mobilize resources and competencies towards a differentiation strategy especially if the product offered has some weakness relative to the competition (Cheverton, 2004). A market expansion strategy is relevant for Michel Patisserie since it is more in line with its mission of developing new product lines and user segments. The company would be served by a market expansion strategy which would enable it grow its market share in untapped segments. While the current competitors have a commonality in limited resources and competencies, Michel Patisserie may differentiate itself through its products for market expansion (Bradley, 2013). Relevance of Share-Growth Strategies for Followers Share growth strategies would also be relevant for Michel Patisserie given that in this market there are other similar organizations which have set good standards that could be emulated. The business needs to capture repeat customers of the competing interests in the industry in the effort to achieve share growth. In this regard the company has developed innovative products relative to those in the market as stated in its mission. Through the development of superior product design, special supplier relationships and process engineering Michel Patisserie has an edge in this market and would grow its market share. Capturing repeat purchases calls for the development of awareness through a heavy presence in the market and through promotions (Rogers, 2011). All of these place the company in a good position to take advantage of share growth opportunities in this market. A flanking strategy would be effective in this market based on Michel Patisserie’s stated objective of differentiating of its products in order to take advantage of untapped or underdeveloped market segments (Mercer, 2008). Through its vast network of stores the chain is able to offer differentiate product offerings which the other companies are not currently offering. Given the strength and competencies of the other market competitors with regard to competencies and RD marketing strength this would enable the chain grow its market share without spending a lot on advertising and confrontation. An encirclement strategy would also work effectively for Michel Patisserie since the strategy is aimed at fulfilling the needs of certain segments of a population with unique needs and preferences (Smith Pulford & Berry, 2009). The firm is advantaged in such a strategy since it has the necessary competencies and is decentralized with 330 stores which would enable it to serve many segments of the un-served populations. Strategy in Shakeout Markets A shakeout market is characterized by a market with declining rates of growth. It is also characterized by excess capacity, difficulties in product differentiation and increased pressure on profits (Cravens, 2007). The Australian market is in a state of growth but conditions of shakeout must be anticipated. In order to be sustainable Michel Patisserie has to anticipate the transition from growth to maturity, aim to enhance market share over the long term, seek to maintain its distributive and special supplier relationship advantages. However as growth slows competitive advantage will be less evident and hence market share will be critical. The chain may enhance it competitive advantage through adopting dimensions of product quality such as strengthening of brand, features which stand out and innovative product offerings. Service quality in shakeout markets is critical and this may be enhanced through the service at the cafes being empathetic, responsive, reliable, and the facilities being tangible and proper (Doole & Lowe, 2005). Dealing with service quality gaps is also critical in shakeout markets for Michel Patisserie’s. The chain may also adopt low cost positioning through low cost distribution through it s chain, cheap raw materials due to its capacity for pre-empting suppliers and also through innovative product offerings. Strategy in Mature Markets In mature markets firms will be sustainable if they maintain a balance between customer service superiority, product quality and lower costs (West, 2009). Michel Patisserie achieves cost /product differentiation through constant innovation and differentiation of its products. There are two strategic options available in mature markets; develop sustainable advantage through customer loyalty and satisfaction or the use of creative and flexible marketing and advertising strategies (Bradway, Frenzel & Pritchard, 2012). Michel Patisserie might opt for increased penetration, extended use or market expansion. Increased penetration is effective for this market since Michel Patisserie aims at the un-served segments. Given that there is low penetration and the market is relatively homogenous, the firm will achieve growth through stimulating demand through its R&D and marketing competencies. Through its innovation the firm is able to increase the number of ways for the consumption of coffee through different recipes and product offerings at its cafes in regions with low penetration. Market expansion is also viable for Michel Patisserie since the competition does not possess the supplier and distribution networks that the chain has (Dolan, 2011). The chain therefore has the edge in the undeveloped geographical regions and segments. Strategy in Declining Markets The business in a declining market is faced with the decision on whether to divest, increase market share or consolidate through acquisition of weaker brands. These markets are also unattractive due to fast decline in demand, a lot of exit barriers, enhanced rivalry. Strategies available in a declining market include the harvesting, profitable survivor, niche, and maintenance strategy. Michel Patisserie may employ the harvesting strategy in the instance of the Australian market experiencing a steady decline in the future. However the strategy would be ineffective in the Australian market given the high rivalry in the market. A maintenance strategy for Michel Patisserie may not be as effective for the company given that it is hard to predict future rivalry in such a crowded market. A profitable survivor strategy would be the most effective for the chain since it is aligned to its objectives of increasing market share for long term competitive advantage (Rao, 2008). A combination of a niche and the profitable survivor strategy would also be aligned to the mission and objectives of the chain. Strategies to Serve New Economy Markets In the new economic circumstances there is need for a change in strategy in order to deal with emerging opportunities and challenges. The new economy increasingly calls for industries to be involved in internet and electronic commerce, development of software and hardware, and engage in business through telecommunication technology (Lane, 2011). The new economy has seen the migration to the digital, new marketing and business practices, ease of interaction, accessibility of information, increase in purchasing power, and greater array of services and goods. New Economy Opportunities or Threats Opportunities The new economy offers Michel Patisserie both opportunities and threats in the competitive Australian market. Really Simple Syndication systems allow businesses to form unorthodox distribution channels which bring down costs. New economy offers increasing returns to scale to the business due to the effect of social network advertising. It offers the ability to customize and personalize product offerings in order to suit the specific needs and preferences of the consumer or consumer segment (Nijssen & Frambach 2010). It is also advantageous in having global reach and hence the business is able to reach out to a larger audience. Threats Michel Patisserie is also faced with threats due to the new economy and technology developments. While marketing may be enhanced by technology, ethical issues of privacy may arise and may reflect badly on the company. Given the innovation that Michel Patisserie’s has come up with and its investment in research internet strategies may result in these strategies being imitated thus reducing effectiveness. Coffee like many products has price which is not far from variable cost and the difference between price and variable cost is not substitutable (Weitz & Wensley, 2013). However it is easier for Michel Patisserie to be more informative using internet technologies since people spend more time on the internet for shopping. There are several questions important in the adoption of a strategy. Michel Patisserie being a well known franchise ought to digitize for both cash and goods and services. The chain needs to digitize in order to take advantage of the largely cashless Australian society and the need to enhance accessibility of its products and services. Digitizing would thus enhance Michel Patisserie’s business. There is a need to determine whether to pioneer a given internet strategy. This is a key component of the decision on whether to opt to digitize since good ideas which are put on the internet are quickly imitated. It is thus important that Michel Patisserie finds a strategy of operation which is not easily imitated. The relevance of technology adopted has to take into account the value and criticality of information required by the consumer. Michel Patisserie needs to only invest in internet applications which offer value and time critical information for consumer convenience (Poiesz & Raaij, 2007). The strategy adopted in new economy tools ought to be geared towards enhancing customer service through reaching and building relationships with the target market segments. The new economy technology adopted by Michel Patisserie has to be one that builds long term mutually beneficial relationships between the business and the clients. The strategy for Michel Patisserie must be measured according to whether it offers better value as compared to what the company is currently using. The use of internet technologies such as web analytics is good in offering information on specific attributes of market segments (Cheverton, 2004). Appropriateness of Organizational Structures and Marketing Plans Organizational Structures In order to be successful in the application of a strategy it is important that the organization opts for a strategy which is aligned to its organizational structure. Competitive strategies will be determined by; methodology of evaluation and rewarding of the performance of strategic business unit managers, how the different business units cooperate and share facilities and programs, and the degree of autonomy afforded the management of each business unit. Business Unit Autonomy Michel Patisserie is a low cost defender that aims to increase its market share. The company offers very little autonomy to the SBU managers given that the management of the SBUs is centralized for the most part. Shared Programs and Facilities Michel Patisserie has had to adopt a balance between efficiency and adaptability through having SBUs that share facilities and programs. While the units are to a degree independent, the prospector units will be more effective if they adopted their own programs to penetrate their markets. Evaluation and Reward Systems Michel Patisserie should develop a strategy in which the managers of prospector SBUs are based on performance according to circumstances rather than profitability. The best system would be to emphasize on sales volume or increase in market share for the SBUs in the undeveloped segments (Bradley, 2013). Functional Competencies and Resource Allocation The company will be employing a strategy of prospecting in the undeveloped markets. In this regard its competencies in innovation, product R&D, sales and marketing will be critical. Service Organizations Michel Patisserie as a service organization needs to adopt strategies suitable for service organizations. The chain is pursuing a prospector strategy and hence will need to have greater competence in human resource development for its employees working in the undeveloped markets. The coffee business being high contact calls for efficiency in production marketing and exceptional service (Rogers, 2011). Organizational Structures Michel Patisseries organizational structure is such that there are standard policies and procedures which are followed by all the SBUs. Working relationships between the management and decision making is loosely centralized with the prospector SBUs having a degree of autonomy. Thus the specialized nature of the business prospecting units calls for a degree of autonomy which the chain provides. Market Management Organization Michel Patisserie also conforms to the market management structure of organizations given that it sells only coffee to a number of clients with different tastes and preferences of how they want their coffee. With such a segmented market it is important that the company develops a strategic plan for determining the needs and preferences of the client. This is most effectively done through specialized managers of the different segments (Mercer, 2008). Matrix Organization The different segments of the Australian market also make the matrix organizational structure appropriate for the business. Given the emphasis on specialization of its SBU managers Michel Patisserie would benefit from the application of a participative coordination structure. Such a structure would allow the different business units to adopt different strategies for their specialized segments thus enhancing market share. Market Planning Market planning is relevant for a competitive business environment such as the Australian coffee industry. A market plan has to take into account situation and trends, performance review, key issues, marketing strategies, action plans, contingency plans, and controls (Smith Pulford & Berry, 2009). Trend planning allows for the planning for contingencies, control and action plans to solve key challenges and issues. It is through market planning that Michel Patisseries can develop a suitable strategy which takes into account and reacts to prevailing circumstances. Marketing Metrics and Market Audit Michel Patisserie needs to adopt a strategy of marketing metrics and market audit which fit its strategic objectives. The process involves setting of performance standards, specifying feedback, obtaining data, evaluating the data and taking action. Setting Standards of Performance For Michel Patisserie which has 330 stores spread all over the country in a highly competitive and fragmented market setting standards is critical. The setting of standards of performance will follow the strategies and objectives as adopted by the company towards innovativeness of each SBU towards growing market share. The current circumstances call for the compensation of its SBU managers according to marketing and sales volume metrics rather than the use of financial measures such as profits or losses. The use of SMART objectives is a good tool for performance measures for the specialized SBUs. Profitability analysis may be conducted in the determination of costs and profitability of the different SBUs, distribution channels and market segments. Michel Patisserie could benefit with the shift to activity based costing and service quality analysis to determine the success of the SBUs. Specifying and Obtaining Feedback Data The organization has to specify data to be collected in terms of feedback on objectives set to be achieved. Transaction records, sales invoices and marketing research reports are critical in determining the effectiveness of strategies employed. Evaluating Feedback Data It is critical for Michel Patisserie to evaluate data and identify any deviation from the plans and objectives set. Each SBU will have its own objectives on which they would be evaluated in terms of attainment, non attainment or deviation. The last critical aspect in the plan is taking corrective action in the instance of deviation or lack of attainment of objectives. Marketing Metrics In the determination of marketing metrics the following questions are important; who needs the information? When and how often the information is needed? and how to deal with contingency planning (Cravens, 2007). In the analysis of who needs the information, Michel Patisserie has to determine sales information for its different SBUs through an analysis by territory, customer segments, and specific and product sales. The chain will have to determine when is the best time of obtaining information given the high level of competition it would be good to set a timeline which would allow Michel Patisserie to react fast in order to control deviations, align metrics with strategy and track performance. It is important to take into account possible contingencies, assumptions and how the business will react to unforeseen circumstances such as increase in competitor power or unexpected decline in demand. Marketing Audit Audits in a competitive market such as this are critical since it is only through audit that the viability of strategies may be determined. However since they audit is for the longer time horizons it is more aligned to aspects of market share rather than profitability or sales (Doole & Lowe, 2005). The different SBU units have their own objectives for the different market segments they are targeting. In a market such as Australia, an audit enables contingency planning since it analyses external influences on the business. There are different types of audits which may be undertaken by Michel Patisserie. All aspects of the firm need to be audited in general and also specific units of the firm to determine achievement of objectives or deviations. Measuring Marketing Performance The measurement of the performance of the firm in the market is of great importance and ought to be done in a manner that is timely. These results will be critical not only for the management of Michel Patisserie but also the SBU managers. Such results enable the design of control and arrest systems in order to correct deviations and position the firm for competitive advantage. Conclusion Strategic marketing is very important and this is made even more so in highly competitive markets. Michel Patisserie is company which operates in a highly competitive and fragmented Australian market. It is therefore critical to adopt marketing strategies which are aimed at growing its market share. A strategy of increasing market share is the most effective in this market given that growth in the market is low. Michel Patisserie has also adopted strategies aimed at differentiating its products and services through innovation which makes it have an edge in the market. 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Strategic marketing. Oxford: Univ. Press. Read More