Identifying and Evaluating Marketing Opportunities - Case Study Example

Identifying and Evaluating Marketing Opportunities [Student’s Name] [Institution Affiliation] Opportunities for the Cement Manufacturing Factory The two clear opportunities existing for the cement-manufacturing factory are: Most people are choosing more stable structures and thus the intensive use of cement taking place, even the government is spending more money on infrastructure projects such as buildings; as a result, this is the right time to fully tap these markets. Second, roads are undergoing the transformation process via which the traditional way of building road is being replaced by contemporary concrete roads. In SWOT analysis of an organization or an industry, opportunities are external factors beyond the control of the organization. The factory has to exploit the opportunities, which is one of the best strategies to accomplish the mission of the organization. Organizational opportunities are areas, which may generate higher performance, and in this case, the cement companies can take advantage of the extensive use of cement in infrastructure and road building. The SWOT analysis offers information, which is useful in matching an organization capabilities and resources to the competitive environment in which it operates. The identified opportunities can bring about increased returns and growth. Porter five forces model explains the dynamics of competition in an industry. In choosing the two opportunities, the five forces were considered. First, the threat of entry of new market entrants is very high and thus the factory has to endeavour to expand its customer base to beat its competitors. The threat of substitutes is very low and hence this will check competition from substitutes. The bargaining power of suppliers is high and hence this increases the costs. The competition between the existing players is high and this reduces the profitability of the company as the prices go down as the costs increase. The bargaining power of buyers is high thereby reducing profitability for the company, as prices go down whereas the costs go up. Powerful buyers force prices to decrease and demand more value in the product as a result capturing most of the value for them. The porter five forces model indicate that the cement industry is highly competitive and this translates into reduced profits. The cement industry attractiveness is thus low and hence the cement-manufacturing factory has to take a defensive strategy for coping successfully with the high competition. The defensive strategy will entail taking advantage of the new opportunities afforded mostly by the government because of its increased construction of infrastructure. The factory can beat the rivals by sourcing tenders from government to supply them with cement. The factory would have to offer low and attractive prices, but this would not decrease its prices, as it would supply very large quantities of cement. Strategic Objectives The set of strategic objectives that will enable the cement factory to take advantage of opportunities are To profit from increasing demand for cement in Australia and address the growing demand for economy, increasing profitability in return To enhance the factory growth by taking advantage of increased activity of development of infrastructure. To beat competitors or rivals by selling large amounts of cements at low and competitive prices so as to attract a large customer base. To position the factory at the forefront of the cement industry by promoting revenue, profitability, and growth. The increasing demand for cement in Australia by both people and government presents an opportunity for the cement factory. The factory cement production’s capacity will increase at more than 10% every year and it still expected to rise, as the country infrastructure still requires major improvement. In taking advantage of the increased demand for cement, the factory needs to offer lower and attractive prices to the competitors so that it can enlarge its customer base and capture government tenders, as the government will buy large quantity of cement. The factory should pursue a cost leadership approach to do better than the competitors should by doing its utmost to produce cement at a lower cost than the competitors do. Two advantages will arise from using this strategy. First, this will enable the company to make more profits than the competitors because of its reduced costs. Second, in case rivalry in the industry increases and the other competitors decide to complete on price, the factory will be in a better position to withstand competition better because of its already established customer base and lower costs. As a result, the factory will manage to earn above average returns. Third, in the view of expected increase in the local demand for cement, competition will tend to moderate offering a larger room for expansion. This growing demand will also reduce rivalry as all cement factories will manage to sell more without taking market share away from other companies, which will likely translate to increased profits. How New Strategic Direction will affect Existing Business Porter’s five forces model is based on the insight that an organizational strategy should meet the threats and opportunities in the organizations external environment. In particular, the competitive strategy should be rooted in an understanding on the industry structures as well as the way they change. The five forces by porter determine the intensity of competitions and as a result the profitability as well as the attractiveness of an industry. The aim of all corporate strategy should be to change the competitive forces in a manner that improves the profitability as well as the attractiveness of an industry. Based on the information acquired from the five forces analysis of the cement factory, competition is very high in the cement industry and this reduces profitability of the factory. As a result, there is need to exploit the growing demand for cement and this will bring about changes in the factory. The cost leadership approach will be founded on the idea that the factory can generate as well as market good quality cement at reduced costs that the rivals. These reduced costs will turn to profit margins, which are high than the industry average. The conditions, which will sustain the cost leadership, will be a constant availability of operating capital, a large production capacity, increased labourers and close management of labor. Serving a large customer base will entail expansion of the factory production and this will necessitate more workers for a larger production capacity and service management. The target market will also change as the factory will mostly target the government to increase the cement bags volume as government road and other infrastructure projects are quite big. The overall goals will require to be broken down into core strategies or functional areas and this will include technology management, product management, financial management, people management, and operations/service management. All these functional areas will contribute to achieving the overall strategic plan. The sum of these functional areas will add up to the entire strategy. To pursue the cost leadership strategic, there will be need for strategic managers to devote huge efforts towards incorporating all the latest information about the market, manufacturing technologies into the factory operations as well as materials management, to discover new ways of reducing costs. Using new and up-to-date will increase product quality and responsiveness to customers. A low cost strategy will necessitate continuous strategic thinking to make sure the factory model is aligned with the changing environmental threats and opportunities. How Competitors will React to the same Threats and Opportunities By being a cost leader, the competitors may react to same threats and opportunities by moving quickly to copy the factory innovations, and they may seek to reduce the costs of their company. In this case, the factory should not allow the competitors to gain a cost advantage and should use the high products to pursue an additional strategy such as differentiation and thus beat the competitors at both cost and differentiation. The factory should copy strategic moves by the differentiated competitors and increase the features and quality of cement when they do, to thrive in the end. At its heart, business competition is about struggling for profits: it is a tug of war over who gets to capture the value an industry creates. The porter five force analysis shows the underlying forces, which are at work in the cement industry, the industry overall attractiveness as well as the important aspects, which determine the success of an organization within its industry. The cement manufacturing company is in an industry where competition is very high because of high power of buyers, numerous rivals, ease of entry, and power of suppliers. As a result, there is needed to take advantage of available opportunities to beat competition. The most evident opportunities from the SWOT analysis that the factory can take advantage of is the increased demand for cement by both the government and people. The factory can adopt a low cost strategy to take advantage of the increased demand-to draw customers to low and attractive prices. This strategy would increase the customer base and hence sales and would generate increased profits for the factory. By being the cost leader, the company will have an advantage over industry competitors with a lower cost structures. Its lower costs will mean that it will be less affected than its competitors will by increase in prices of inputs from the powerful suppliers and less affected by the lower prices it can charge from the powerful buyers. Because the factory will acquire a larger market share, it will purchase in relatively large quantities increasing its bargaining power over suppliers. In case of substitute products, the factory will reduce its price to compete with the substitute products and retain its market share. The leaders cost advantage will constitute a barrier to entry, as other companies will be unable to enter the industry and match the factory low prices of costs. The factory will thus be in a relatively good and safe market position. Reference Sumru, A., & Jagjit C. (2003). Dynamic macroeconomic analysis: theory and policy in general equilibrium. Cambridge: Cambridge University Press Read More