Identifying and Evaluating Market Opportunities - Case Study Example

Identifying and Evaluating Market Opportunities Melinda Fernando IDENTIFYING AND EVALUATING MARKETING OPPORTUNITY Super cycles limited Of late, cycling has become more popular not only in Australia but also globally. For instance, there has been a 28 percent increase in the number of people cycling to work world wide since 2006 (Vicroads Bicycle Programs Section, 2009). In Australia, recent research conducted in Melbourne indicated an annual increase of 10% in the number of cyclers on major routes between 2007 and 2011. There has also been an increase in bicycle sales with 2011 being the 11th year in which Bicycle sales in Australia outstripped cars by exceeding one million. Statistics show that bicycle sales reached 1.3 million bicycles in 2010 (Amy Gillet Foundation). However, despite the increase in the number of customers using bicycles in Australia for the various reasons, the market potential remains greatly underutilized. As such, company’s like Super Cycles stand to make huge profits if they can successfully identify and start serving the markets which still remain unutilized to date. This paper explores and identifies such markets with an aim of enabling the company venture into them and hence improve its financial performance. In addition, the paper explains how SWOT and Porters five forces model could be used in identifying the best marketing opportunities for the company. Finally, the paper recommends three marketing opportunities in the industry that the company should utilize in its bid to improve profitability. Potential market opportunities The following market opportunities in the industry have been identified based on the nature and frequency of riding that the riders engage in. a) The riders for pleasure market The market represents the greatest part of the entire market and makes about 50% of the market . Customers in this market generally ride for pleasure and only when conditions suit them (Ryan, 2010). The customers are however risk averse and mostly ride off-road as well as on quieter roads. Their greatest concerns are riding security and are very conscious of traffic rules. Since majority are them are families and own cars, they only tend to ride during the warm months since to them cycling is pleasure and not a form of transport. Although most bicycle sellers tend to serve this market, super cycles has a potential of expanding its market shares by coming up with a new brand that will address the markets security concerns. The company should also engage in vigorous marketing campaigns that will see a substantial part of this market buy super cycle by adopting riding not only for leisure but also for health purposes. By making our bikes supplied to this market more safe and more comfortable, super cycle will make its bicycles to be the ultimate bicycles of choice by this market hence greatly boosting our sales to this market. b) The cycling life market The market contributes about 15 percent of the entire market and consists of those who are regular riders and to them cycling is a way of life (Vicroads Bicycle Programs Section (2009). They ride in all types of roads and conditions. The market is composed of those who earn relatively low levels of income and hence to them pricing of bicycles is of major concern. As such, there exists an opportunity for Super cycles to introduce a new brand specifically meant for this market. By introducing a relatively cheaper but safer brand for the segment, most customers in this segment are likely to always opt for our company’s products. c) Competitive riders market This market constitutes about five percent of the entire market and consists of riders who are confident competitive, active and speed focused riders (Chiu, 2009,). They take riding as a sport/ income earning activity. This market unlike the above markets is not price sensitive but is more concerned about speed, riding security as well as the speed. There exists a huge opportunity in this market for Super cycles as not many companies are able to meet this concerns. The company should therefore introduce a new brand targeted to this market especially since the profitability in this market is likely to be very high. d) The riding for health market According to Vicroads Bicycle Programs Section (2009), this makes a substantial part of the entire market and is composed of riders who taking riding as a way of improving their health through exercising. There is a great potential for the company in this market since it remains the most underutilized market in Australia. This is because everyone can take riding for health purposes. As such, the company the company can form health clubs for riders where members will be educated on health benefits of riding while ensuring they see our products as the best and hence they make them their products of choice. e) The mountain biking market Mountain biking has become popular in Australia of late. Mountain bike Australia (MTBA) is a main player in mountain biking and organizes and runs excellent events which cater for riders at all levels. Many people find mountain biking fascinating due to the pleasures and challenges involved. Furthermore, many environmental organisations are using mountain biking as a way of encouraging environmental responsibility among Australians. Thus, the segment therefore does provide a unique opportunity for our company especially due to our ability to source quality bikes from many suppliers. How I would use porter’s five forces model, SWOT and other marketing analysis to evaluate the potential of these new markets The riders for pleasure market Strengths -we have access to innovative technology which will enable us attract more customers Our experience in the markets we are currently pursuing implies a competitive advantage for us since less research and marketing costs will be incurred-(implying that we are experienced in other markets we operate in which can be used while entering this new market). -We have a strong brand identity we can take advantage of in introducing new brands. Opportunities - Increasing cost of transport has seen many people seek alternative transport such as bicycles -Government schemes and efforts encouraging people to acquire bikes -The increasing trend of active lifestyle can only mean expansion of the market - A lot of learning institutions located within the vicinity which provides a lot of potential customers Weaknesses - limited experience in the market - The marketing manager lacks enough experience for expanding the market while the marketing staffs are not motivated due to low pay. This can be solved through increased pay as we expand. Threats -A lot of companies operating in the market thus flooding the market There is growing competition which calls for additional marketing costs -Competition copying design and increasingly new designs which may threaten our own Challenges of the seasonality of business in the market. The cycling life market Strengths we have access to innovative technology which will enable us attract more customers Our experience in the markets we are currently pursuing implies a competitive advantage for us since less research and marketing costs will be incurred-(implying that we are experienced in other markets we operate in which can be used while entering this new market). -We have a strong brand identity we can take advantage of in introducing new brands. Opportunities -A substantial number of people adopting riding as a way of life especially with increasing transport prices - Increasing population growth implying improved revenue potential - Government’s increased investment in construction of bicycle specific facilities including bicycle paths and improvement of roads Weaknesses -the market is highly price sensitive while our prices are relatively high implying that we need to start producing cheap but quality products specifically for this market if we are to succeed in it. - though the market is relatively established, we lack adequate experience in it and hence we may need to aggressively advertise if we are to gain a substantial market share Threats -The market is highly sensitive to prevailing economic conditions and hence economic fluctuations as witnessed in the recent global economic crisis may adversely affect sales in the market -The market is highly competitive and merchants and large discount chains often exert pressure on pricing The mountain biking market Strengths - -Ease of sourcing since we have already established good relationships with many suppliers. -Though the capital outlay is enormous as suppliers have to have confidence in our ability to sell and pay them back, we can take advantage of the already existing credit facilities with our suppliers hence reducing the amount of cash required to start. Opportunities -The market is relatively untapped hence there is high likelihood of success. -There is great potential for innovation and entrepreneurship There is a rapidly growing domestic market with bicycle transport becoming a more popular mode of transport owing to rising petroleum prices Weaknesses -High cost of production implying low margins since we can not sell our products at very high prices that most customers will not afford. -Lack of necessary skills may necessitate training staff before we start operations -poverty may compel us to sell our products cheaply hence we may not relies as much profits as we would want Threats - The market is highly sensitive to prevailing economic conditions and hence economic fluctuations as witnessed in the recent global economic crisis may adversely affect sales in the market - Competition from big retailers is intense Competitive riders market Strengths -we have established strong relationships with many sporting bikes manufacturers who are ready to give us exclusive distribution deals based on our past successes Ability to use the already existing marketing mechanisms to cover a wide area which will increase our margins -We have well trained cycling enthusiasts who will ensure complete customer satisfaction -we have ability to provide a wide selection of sporting bikes for our customers -Our brand specialty hence increased customer confidence in our brands Opportunities -bicycle sporting becoming more and more popular an opportunity we can take advantage of - there is requirement for huge capital outlay hence market may take long to be flooded Weaknesses -Lack of experience in this market yet operating in it requires some level of technical knowhow -lack of smooth and constant flow of goods in the market -we may have difficulties in predicting customer preference and a wrong choice could be very costly for us Threats -Increasing competition and threat of obsolescence due to increased innovation hence the need to remain innovative. -cancellation of distribution deals The riding for health market Strengths -We have ability to supply high quality specialty bikes which the market will find joy in riding. We have ability to avail bikes for the high end market as well as low end market. -We have extensive experience in other markets that will be of help in venturing the market - We have extensively used health as a reason for riding and organized riding for health competitions as a marketing tool in the past. This provides us with an added advantage when venturing the market. Opportunities -There is an increasing trend of lifestyle changes -Increasing population as well as increase in lifestyle related health conditions provides an opportunity to sell in the riding for health market Weaknesses - no experts in this field -Lack of market experience for this market Threat -Market largely affected by economic changes -Price pressures may reduce profitability level -huge capital outlay may make the suppliers to demand for terms that may hinder our competitiveness in the market Porter’s Five Forces Analysis Rivalry among competitors The riders for pleasure market Rivalry among competitors -There exist many but small competitors in this market. -no single competitor can be said to have established a significant market share in the market apart from Atlas cycles -This implies that we can easily establish a substantial market share within a small time duration given our ability to offer quality but cheap products as well as the highly dynamic customer taste in the market. The- threat of new entrants -the threat of new entrants is very high for the market given the big size of the market, the increasing number of suppliers and the ever increasing innovative ,quality but cheap products for the market. -There are also no significant barriers to entry for the market. The threat of substitutes -There are multiple bicycle brands designed for the market. -In addition, there have been increasing recreational alternatives for the market such as the tri-cycle. Bargaining power of buyers - For this market, the demand for bicycles mainly depends on the buyer’s discretionary income and ability to save. -in other words, a household’s level of disposable income and hence the ability to save will influence the demand. -The buyers also have a variety of places from where to acquire their products given the high number of competitors for the market. Bargaining power of suppliers -There are multiple suppliers for this market and hence we are assured o f constant supply for our products at all times. in addition, we can always negotiate for better terms or choose our products from those who offer quality but cheap products. The cycling life market Rivalry among competitors -Just like in the riders for pleasure market, there exist many but small competitors in this market. -no single competitor can be said to have established a significant market share in the market apart from Atlas cycles -This implies that we can easily establish a substantial market share within a small time duration given our ability to offer quality but cheap products as well as the highly dynamic customer taste in the market. The- threat of new entrants -The products for this market are generally cheap and there generally no major barriers to entry in this market. As such, the threat of new entrants can be said to be highest in this market.. - In addition, there are multiple suppliers and products for this market while margins are relatively good making the market the most attractive for new comers. The threat of substitutes -There are no substitutes for this market although there are very many alternative brands of bicycles that buyers can choose from in this market. This is majorly dependent on price and quality. Bargaining power of buyers -buyers in the market a re highly price sensitive and given the high number of competitors to choose from, their bargaining power is relatively high. Bargaining power of suppliers -There are multiple suppliers for this market and hence we are assured o f constant supply for our products at all times. in addition, we can always negotiate for better terms or choose our products from those who offer quality but cheap products. The mountain biking market Rivalry among competitors -There are few firms dealing with mountain biking products and as such, the effects of price based competition are minimized in the market. -although in the past, the actors in the market have been trying to avid price based competition, this has recently intensified in a bid to lure in customers. However, rivalry among competitors in this market is generally low. The threat of new entrants -It is a fact that the average trader may not raise the huge capital required for operating in this market. However, with globalization, large multinationals are threatening to infiltrate the market with cheap products. However, the barriers to entry in this market can generally be said to be high due to the high quality required of the products as well as the prices of the products. The threat of substitutes -If mountain biking is taken as a leisure activity, there are multiple substitutes for the p products in this market that are even cheaper. Such products include, racing, games, etc. as such, although the threat of substitutes is relatively high in the market, this will also be influenced by money, personal convenience and preference. Bargaining power of buyers -most of buyers in this market are individuals. although they are price sensitive, they have very low bargaining power as they don’t buy in bulk –in addition, this being a leisure activity, buyers tend to buy the products at the prices they are being offered. Bargaining power of suppliers Generally, there are few suppliers for mountain bikes who also rely on few dealers to buy the bulk of their products. As such, if a dealer decided to switch to a new supplier, those could be devastating to the existing supplier. This makes suppliers extremely susceptible to the demands of both the manufacturers and dealers and they hold very little bargaining power. Competitive riders market Rivalry among competitors Rivalry among competitors is low since the competing firms in the market are not equally balanced and only three major firms can be said to possess a substantial market share. -it should be noted that most firms operating in the market mainly seek to introduce superior products and not necessarily increment of sales. –the competition in this market is therefore mainly based on differentiation as opposed to price competition. The threat of new entrants The threat of new entrants in the market is generally low owing to the huge capital outlay required for entrance. There is need for product differentiation, loyalty and strong brand identification while access to supply channels for new entrants may be a challenge for new entrants. The threat of substitutes Since sport biking is a sport, there are many available substitutes for sports bikes that are even les expensive. These include football, base ball etc. Bargaining power of buyers Buyers in the market have very low bargaining power as they don’t buy the product s in bulk and they are not price sensitive but they care more about quality of the products offered. Bargaining power of suppliers The bargaining power of suppliers in this market is very high since it is dominated by few companies. As such, they are able to set conditions that must be observed by sellers. The riding for health market Rivalry among competitors Our main competitors include Felix, Atlas and Heron cycles -all the companies have a long history and have established significant market shares - The rivalry is expected to increase as more firms are eying both the domestic and foreign market The Threat of new entrants Although there is expectation of long-term demand of bicycles in the market to increase in future, we are also threatened by new entrants especially from Japan and Chinese markets making the markets less profitable for us. The threat of substitutes -Bicycles are common with multiple brands that also range in prices - in addition, there are multiple recreational alternatives available apart from bicycles Bargaining power of buyers The bargaining power of powers in this market is very low. -the market is majorly composed of higher income households. - Demand is dependent on household disposable income level as well as health Bargaining power of suppliers We have alternative suppliers who assure us of constant supply of their products hence ensuring our markets are well taken care of at all times. The recommended new markets As observed above, five new potential markets are available for our company. However, after applying the porters five forces model to analyze the market opportunities, it will be recommendable that the company only pursues three of the markets due to their lucrative nature, our experience as well as the financial implications involved in the decisions. The markets include; a) The Mountain bikes market- this market remains largely untapped. Furthermore, investment in the market requires a lot of capital. However, we can take advantage of the credit facilities we enjoy from our suppliers as well as the existing network of suppliers to venture this market which ahs a big profit potential. b) The riding for health market- This is the least exploited market and hence we stand a since it mainly consist of people who are increasingly becoming aware of the need to take care of their health.. However, the company should exploit it since it does not require huge capital outlay and has great potential for success. Bearing in mind that these group is usually idle and hence bound to suffer from conditions related to stress, the company should come up with a strategy of encouraging this people to take up cycling as a way of keeping themselves busy and hence as a way of improving health through exercise and reduction of stress. The market is seen as highly profitable especially since it is not price sensitive and as such the company should find it worth venturing into. c) The cycling life market- this is a market for those who have adopted cycling as a way of life. It includes those who cycle on a daily basis mainly as a transport mode. The company has a great potential for success in this market by introducing a new brand that is more comfortable to ride yet cheaper. With aggressive marketing, the market would be expected to increase in size and hence its profitability to increase due to the high volumes of sales expected. References: John, T2005, Fundamental principles of marketing, London, Rutledge. Chiu, M2009, Recreational Mountain biking in Australia since 2000, University of Tasmania, Australia. Ryan, K2010, Sports biking in Australia: A summary of current trends and future opportunities, Sports and Recreation Journal, vol.25, no.2, pp. 19-25. Vicroads Bicycle Programs Section, 2009, Draft Australia Cycling: Bicycle ownership, use and demographics, Australian Bicycle Council. Amy Gillet Foundation, Annual Report 2009/10. Read More