Competitive Advantage

Hones and Mauritius, or also known for short as H&M, is a big billion dollar Swedish fashion company which engages in designing and retailing fashion products from cosmetics, outwear and accessories for men, women and children. Operating all over the globe, throughout 43 countries with 2206 stores, there are various strategic issues which H&M need to address to keep the company moving forward and increase the market. H&M has a large international incumbents including Ezra being its most significant competitor.

Ezra has not been around for nearly as long as H&M and it is already being considered a ‘serious challenge’ which makes H&M questions the sustainability of the formula at hand. Using strategic management topics we can further discuss this issue. To begin the PASTEL Framework can be used in relation to strategic management and H&M. By using PASTEL we can categories environmental factors into specific key types, which are political, economic, social, technological, ecological and legal.

These will help us to explain that environmental factors do not Just revolve around economic forces but other forces which have been mentioned and all are interactive with one another. Politics are forces both throughout the globe and in specific groups within areas which influence certain behavior and reactions. These influences can come from various political movements and concerned media. For example H&M in the past opened up a store in Israel’s Jerusalem Malta Shopping Mall which is built in a previous Palestinian village of al-Malta.

Since this village has been ethnically cleansed and caused those inhabitants to be referred to as refugees in their own land. This happened throughout the 1948 Naked and caused worldwide protest by activates at H stores. All those protests going on around the world gave a lot of negative reputation and unneeded attention to H. Even though the Israeli Embassy in Stockholm believed that opening the store in Israel would help tit ‘peace processes and profits’ to H – it still did not affect the feelings of those protesting nor did it change the way H handled the situation at hand.

Instead H turned a blind eye to a massive human rights violation and disregarded completely what was happening and this caused activists to begin the world wide approach of operation Boycott. Something similar did happen in the past with a different clothing brand named Mummy, but they did not follow through with their stores in Israel and till today will not open a store until the apartheid system is dismounted. Additionally, in reference to Section C, Article 3 of the Responsibilities of transaction corporations and other business enterprises (2003) H is actually breaching the regulations.

It states that “Business enterprises shall not engage in nor benefit from war crimes, crimes against humanity… Other violations of humanitarian law and other international crimes against the human person as defined by international law, in particular human rights and humanitarian law’ Ecological factors in PASTEL framework is anything that falls under environmental issues which is definitely something relevant to H&M. H&M produces a special collection named the ‘conscious collection” using only sustainable materials.

As mentioned on their website they are trying to push for fashion for the future. With these commitments come seven promises also stated on their website. Provide fashion for conscious customers Choose and reward responsible partners Be ethical Be climate smart Reduce, reuse, recycle Use natural resources responsibly Strengthen communities Under the PASTEL framework, technological is any influences that H uses for their material. Thanks to these, H was ranked number 21 out of 100 for the most label global brands according to inter brand in 2011, with a brand value of 16. Billion dollars. In comparison with close competitor Ezra ranked in at number 44 with 8 billion dollars’ worth of brand value. This huge difference can partly be attributed to H&M’s long term advertising campaigns with high-profile celebrities. In order to enhance the value of its brand name, H spends around 5% of its revenue on advertising. H has also established a strong social media presence. The company aims to become part of its customer’s daily lives through its pages on Backbone,

Twitter, Instating, Google+ and Youth as well as the Chinese social media networks Yuk and Sins Webb. Through these networks followers share ideas and opinions and get quick answers to their questions. This is important for this day and ages were people do not want to wait for too long. Also new fashion videos and catwalks are constantly uploaded to Youth with millions of views. The App for uses is also new which offers the latest collection and campaigns and find out what is new.

In relation to strategic management it’s important to note the Five Forces Framework hen determining the competitive forces. If an industry has low competitiveness then there will be an expected high level of profit then in comparison to an industry with high competitiveness. H has high level of competitiveness with Ezra therefore their profit margin is close on a large scale. By using Porters Five Forces Framework we can measure 1) threat of entry 2) threat of substitutes 3) power of buyers 4) power of suppliers 5) extent of rivalry between competitors.

In regards to competitors and rivalry, the competitive rival for H is Ezra and a substitute would be somewhere like Target/Smart. Ezra would be a very dominant organization to H with its products being very similar. A low differentiation between companies is also an issue as both are assumed to be similar when spoken about with consumers. The threat of entry works in H’s advantage as they have different products which Ezra does not offer – for example the conscious collection. The threat of substitution is a big one for this industry as Ezra and H&M are very closely knitted.

Firstly being price/ performance rations. Sara’s products are slightly higher prices than H but overall the prices/performance ratio is very tight. SQ. Drawing on relevant topics in this unit, what do you consider to be H’s rare and inimitable strategic capability/sis? Explain your answer. How do you think H&M can identify and leverage or exploit its rare and inimitable strategic capability/sis to achieve or sustain its competitive advantage and respond to the critical issue that you have identified in IQ?

Upon research and further reading into the topic I would consider the fact H&M has its own range the conscious collection’ reaching an audience of those who are have the want to help the environment to be its rare and inimitable strategic capabilities. H & M, is a environmentally conscious company, which provides economical fashion products around the globe (43 countries) in order to fulfill the seven commitments to the communities. The economic crisis was really strong and it may increase the interest of the population for cheap and fashionable clothes.

Not only has H found a gap in the fashion market, but they have found an up and coming issue and were able to reach it with a positive outcome. With all the issues worldwide, H knew it needed to invest its money into the right things to keep sales up and to also bring new sales in. With H having a big role in the fashion industry, they didn’t want to come under any more negative scrutiny as this would bring a negative perception of the company. This is where the idea came across with the plan for using only sustainable materials for the release of the new range, the ‘conscious collection’.

Along with this came certain commitments which included, adopting ethical practices, improving working conditions and using natural resources responsibly. The decision to introduce the range and commitments was structured very thoroughly through its strategic capabilities as these do have the ability to contribute to a long term margin and also a competitive advantage. H&M followed ‘Tech’ with the three generic types of dynamic capabilities as this has become the standard and most common practice in industries.

The first point is ‘sensing where H has realized that there are new opportunities. No other fast fashion clothing brand has introduced an environmental friendly range at the moment in time so it was the perfect idea. Next point is ‘seizing is when H&M replaced the actual gap in the market with the line. Lastly ‘reconfiguring is basically what H are constantly doing with its update of the line. As new fashion comes in and out of season constantly, H need to keep its new line up to date.

As you can tell H has big threshold capabilities which are needed for an organization to keep up to date with the requirements in the fashion market and with other competitors. In strategic management mindset using BRIO” is important to gain competitive advantage. To begin with the product which has been introduced by H&M needs to be of value to the customers so it can generate higher revenue or lower costs to the business. So in this instance this product hadn’t been introduced to the fast fashion oral so the value of it is quite and exciting for the industry.

Therefore H&M with this product has taken advantage of its opportunities and threats, understands its value to customers and considered the cost. Next is the need of the product to have rarity. If a product is introduced which is valuable yet common throughout various competitors, then it’s very unlikely it is going to be a major source of competitive advantage. Therefore it’s important that the introduced line is something rare and will bring customers to the shop especially to view and purchase this line.

As you can tell he strategic capabilities that allows H&M to be advanced is not as straightforward and simple as suspected. In this introduction to this line H&M did keep in the mind the next step being the Inimitable capabilities. If other competitors were to introduce something along the same lines they would find it difficult and costly to intimidate or even to substitute therefore would less likely be able to match up to H&M. Lastly H&M needs to be suitably organism to support all these capabilities.

They already had the support of the formal and informal management control systems therefore they were blew to fully take advantage of the given capabilities SQ. Drawing on relevant topics in this unit, explain how H&M’s culture as suggested by the ‘spirit of H&M’ influences the current strategic position of H&M as well as its ability to respond to the strategic issue you have identified in IQ . An organizations culture is the behavior of those people within the organization and all the attachments to the meanings behind their behaviors.

It revolves around their visions, language, assumptions, understandings, beliefs, habits, norms and values. It’s basically how they do things from where they are in the organization. In any organization, culture has an influence over their strategy. Even the fact the fashion industry has a certain culture would affect the way H&M run their strategies including the different countries and cities H&M would have issues in relation to geographic based cultures due to the fact they have stores in all parts of the world.

Each city would have its moralities and the usual way to do things from their knowledge which would differ from the same shop somewhere else. It’s important for companies that run internationally to understand such differences H&M’s hilltop’s links in to the followed and believed culture. From day one H&M wanted to make fashion affordable for everyone so it was something they stuck by quite strongly. Throughout the years of passing through different managers and management styles – the company’s culture still relieved on Reeling Persons style of sticking to central values and beliefs.

Even the 7 codified core values for H&M link into the rare and inimitable strategic capability, and they are: 1) Keep it simple 2) Straight forward and open minded 3) Cost conscious 4) Constant improvement 5) Entrepreneurial spirit ) Team work 7) Belief in people Within H&M’s spirit is the amazing way they really focus on their employee’s involvement. Because H&M has this philosophy of participatory management the company is viewed as one with experimentation, trial-and-error learning, fast decision making, and willingness to take initiatives and try new ideas.

These are the pillars of the company and without these; H&M wouldn’t have the culture it has today. The active encouragement of this spirit is another key ingredient through all organization levels. This way, new things are encourages between purchasing managers and the understanding that mistakes are okay is followed through at all levels. Even managers in the front end of the business are encouraged to experiments with the interior and exterior of the shop.

Decoration, lighting, colors, clothes displays and even locating are swiftly changed depending on sales and preferences of customers. Although any new range which may be introduced must be bounded within H&M’s core ideas and values, which the conscious range clearly does. ‘ One of H&M’s major strengths are its fantastic brand imagine and the costs of purchases. H&M has established a strong culture which is self-motivating for employees by creating unity and a high skilled work place.

The company benefits from a good image from the customers and they have a strong fame everywhere in the world thanks to its huge number of outlets. Also the prices that H&M offer to its customers are really competitive thanks to the cost saving management way of the company. H&M’s environment has a very positive outcome throughout all levels of the business and this reflects solely on the complete imagine H&M perceives. The fact that employees get a say and get a chance to get involved in all levels makes it have such a constructive workforce.

H&M has lots of freedom for employees to move around through levels of the organization but this has come under some scrutiny as there is no way to point the blame if something goes wrong. This doesn’t work for everyone but for those who it does work for, it has a very motivational feel.

During this assignment we will be trying to find out the ways in which Sainsbury’s has gained, kept or lost competitive advantage. Competitive advantage is something that makes a business, like Sainsbury’s, better than its competitors such as Tesco or Asda. The ways in which Sainsbury’s may have gained, kept or lost competitive advantage is through innovation, reputation and relationships; therefore these are the three factors we will be looking into to discover whether or not they have been able to have competitive advantage within their company.

The innovation within the company will come from the introduction of new products and finding new ways of doing things within the company however, it also involves being innovative throughout the whole company and looking at how the employees think. Reputation and relationships come from the company being innovative, for example, if a company introduces new products better than other companies can then they will develop a reputation but they can also develop a reputation by keeping their prices low and appealing to a range of consumers. If a company is able to appeal to a wide range of consumers they are able to gain good relationships with customers, which is what a business needs to be successful.

A good company also needs a close relationship with employees and suppliers as without these people a company would find it difficult to be able to run. However it is not only these three aspects that we will be looking at but also how Sainsbury’s may add added value, the profit they make and their market research. We will be deciding whether or not Sainsbury’s has gained, kept or lost its competitive advantage by undertaking a number of methods to successfully decide how the company has performed. These methods will include primary research, which will involve an interview or questionnaires, and secondary research such as the Sainsbury’s website, newspaper articles or company accounts. I feel that Sainsbury’s will have lost competitive advantage however by using the research we undertake we will be able to find the answer to our question.

Research Findings

Competitive advantage is gained through good innovation, a good reputation and good relationships. Since doing research on Sainsbury’s we have discovered that they are losing their touch and customers because of mistakes they have made when it comes to innovation. However, through primary research in the form of an interview an employee of Sainsbury’s feels that they are still pleasing customers.

What innovative products have Sainsbury’s introduced?

• Nectar Card
• Using Accenture
• Internet Shopping

How do you keep a strong relationship with customers?

All customers who are signed up to Nectar Card and other clubs receive regular newsletters and money-off coupons to show them we care about their custom.

How does Sainsbury’s feel they add value to their products?

• Quality Service
• Quality Food

What market research does Sainsbury’s undertake to keep giving people what they want?

Customers are regularly subject to in store questionnaires that they can fill out to tell us what they want. This helps Sainsbury’s know how to please customers and to think how we can achieve this.

How do you cope with competition?

Sainsbury’s satisfies customers because we know what they want which is due to good market research. We also keep our prices competitively low and make sure that everything we do is of a high standard.

How are shareholders taking the slump in share prices?

Any shareholders of Sainsbury’s receive quality service from us and all of them are happy and proud to be associated with the Sainsbury’s brand.

Sainsbury’s decided to outsource their IT capability to Accenture1 believing that they would benefit from huge cost savings giving them competitive advantage on their rivals. However, four years later Sainsbury’s are losing a large percentage of their market share to rivals like Tesco1. When Accenture was first announced to be taking over Sainsbury’s IT, Sir Peter Davis, who was Chief Executive at the time, said he felt that Accenture would ‘help us achieve real competitive advantage and efficiencies quickly and cost effectively.’2 However all this new system has done has send Sainsbury’s into a slow deterioration failing to get goods onto shelves, which in turn has meant customers are unable to buy the goods they require.

This problem is affecting the impact that Sainsbury’s has on the market but they have tried to improve the situation with the introduction of the ‘Nectar Card’, which is a card that customers can use to collect points when they purchase goods and in turn the points can be used to buy goods. Internet shopping has also been introduced by Sainsbury’s where customers can buy all goods on the net and have them delivered to their door, however this is also an idea favored by Tesco, Waitrose and Asda. Tesco is market leader at the present moment with Asda following closely behind meaning that Sainsbury’s is slowly slipping and are making their first ever loss this year3.

Sainsbury’s is now trying to regain the faith of customers by making sure that any relationship they build is a good and stable one. Sainsbury’s aim to ensure that all colleagues have opportunities to develop their abilities and are well rewarded for their contribution to the success of the business. The company feels that if they meet their customers needs effectively by providing the best quality and choice to meet everyday shoppers needs they will thereby be providing shareholders with good, sustainable financial returns.

The tactics that Sainsbury’s has used to gain, keep or lose competitive advantage have all been discussed above and using this research we now have to decide whether or not the company has been successful in the ways it has used.

Discussion

Shareholders of Sainsbury’s should be disappointed this year as it is the first time they have made a loss which in turn means that all stakeholders will lose out if they decided to sell their shares. It could also have a long term effect on the company because if shareholders decided to sell shares quickly before prices slumped anymore they would be unable to sell them on because people are not going to buy shares of a failing company or any company who has had financial problems in recent years.

However if we were to look at the primary research undertaken we would see that an employee of Sainsbury’s feels that any stakeholders of Sainsbury’s, including shareholders, is happy to be with the company despite it losing money and no longer being market leader. The question asked about market share was passed by the employee but through secondary research we can see that Tesco is market leader and Sainsbury’s isn’t even in second place showing the rapid decline in peoples faith in the Sainsbury’s brand.

Sainsbury’s are trying to keep competitive advantage through innovation, reputation and relationships but during my primary research we can see that they feel they have introduced innovative products in Internet shopping, Accenture and the Nectar Card. However, many other supermarkets favour Internet shopping which means they are not a monopoly in this market and are far from leading it by looking at their overall market share. Accenture is a system they introduced but has so far failed to work and is causing problems within stores, which means that because goods are failing to get onto shelves customers are deciding to do their shopping somewhere else.

Not only has Accenture not been innovative but it has also destroyed relationships with stakeholders of Sainsbury’s because they don’t have faith in the company when it comes to stocking the goods they want and need. Research shows that Sainsbury’s reputation is falling because it seems that Sainsbury’s no longer holds a high stake of market share and has been overtaken as market leader. We can also see that the Sainsbury’s employee feels relationships with all stakeholders in great with customers receiving regular newsletters and in store questionnaires. This is showing customers that they care but they are still losing custom because of mistakes and newsletters won’t stop customers from going elsewhere if they think they’ll get a better quality of service, food and value for money.

One thing that Sainsbury’s does well is appeal to all markets: those with children, single people, the elderly and married couples. The way they are able to do this is because the products sold is the stores are items that everybody needs but then they also have ‘clubs’ that are open to different types of people, some of the examples of the clubs are Little Ones Club and Drinks Club.

They are use their innovative Nectar Card to appeal to everyone and because you can use them in different stores they appeal to a wider variety of people rather than if they were just for use at Sainsbury’s. To appeal to the public Sainsbury’s also uses celebrity chef, Jamie Oliver, to advertise its goods, which is a way of bringing in a good reputation and appealing to all markets. If customers think that a celebrity is involved with a brand name they are more likely to use it because a celebrity involved often makes the public think that a place is worthwhile.

Sainsbury’s is faced with a lot of competition and although they are not market leader at the present they feel they are trying to regain a large chunk of the market share and win customers back. As we discovered during research, Sainsbury’s are making their first ever loss this year which means that competitors are able to push further ahead in order to win over customers and make themselves market leader with a huge market share. During the interview with the Sainsbury’s employee we can see that they feel the way they feel that Sainsbury’s add value is through quality service and food. However through secondary research we found that service was poor due to Accenture as Sainsbury’s were unable to get products on shelves as they ran out.

This was due to Accenture being a failure to the company and losing them huge money. As the company’s service was poor if customers weren’t able to get the products they required it is most likely they would have gone to a competitor supermarket, which is why Sainsbury’s are no longer market leader.

Market research is often carried out in Sainsbury’s according to the interview that was undertaken with the employee. They stated that customers of the company are often subject to in store questionnaires and asked what they want, how they feel and what changes they would like to see being made. However if we were to then look at secondary research it seems unlikely that any comments made by customers are actually taken into consideration as food is still unable to get on shelves and once again this shows by the fact that Sainsbury’s are making their first ever loss this year. The employee stated that Sainsbury’s care about their customers because they say that newsletters are regularly sent out however, we cannot see that what customers think is taken into account as Sainsbury’s still seem to be running in the same poor quality way.

Conclusion

This assignment was to discover whether or not Sainsbury’s have gained, kept or lost competitive advantage. To do this we had to do a mixture of primary and secondary research into the way Sainsbury’s is run and the way the company is performing at the present moment. Once research was carried out we then discussed it and decided that there were a large number of factors that interconnected to what is felt has lost Sainsbury’s competitive advantage.

Looking at the discussion where we have analysed the research that was conducted we can see that Sainsbury’s are a slowly failing company and this decline has been mostly since the introduction of Accenture. The innovation that Sainsbury’s has had, has either been very poor for example Accenture, or has also been favoured by other companies including the current market leader, meaning that Sainsbury’s has no competitive edge on other companies. We also saw that Sainsbury’s felt that they added value to the company by quality of service and products but as we also saw in the discussion that led nowhere.

To read this assignment and the research that was carried out to go with it you would automatically feel that this company was a failing establishment that was going nowhere and was sinking. It is possible that Sainsbury’s could turn their misfortune around with help from experts who could help them appeal more to the public and reconstruct the way their stores work for example, once the contract with Accenture has run out do not renew it but until then improve all the other problems associated with failing. Sainsbury’s will not become market leader for long time, if at all, if they do make the changes that are needed but to be able to be thought of as a ‘good’ supermarket they need to change.

Overall, to answer the title question it is evident that Sainsbury’s have lost competitive advantage by ways that have been spoken about during research and the discussion and as read above we can see how it is possible for Sainsbury’s to change themselves.

Appendix

During researching into Sainsbury’s competitive advantage a telephone call was made to their head office in order for primary research to be carried out. We were transferred to their Corporate Communications Department and when they were asked about the competitive advantage they felt Sainsbury’s had gained, kept or lost, we were informed that no information could be given at this time and were directed to the Internet to look for our own research.

As the competition among the organizations increases, the need for promoting the products in an effective way is increasing. Consumers are already bombarded with loads of information and offers, but they want to choose the one that provides optimum utility to them. The paper would highlight promotional mix of an apparel company ‘Under Armour’, its integration of the marketing mix, and description of competitive advantage that it has.

Under Armour is an apparel company that offers a wide range of footwear, apparel, accessories, sports items, both for men and women. Promotional Mix Promotional mix for any product or service includes five fundamental marketing elements – advertising, personal selling, sales promotion, publicity, and public relations. When it comes to the application of these marketing tools over Under Armour, it adopts all of them except sales promotion.

Among all these 4 promotional tools, the most active one is advertising since the company believes it to be more effective and communicative. Under Armour promotes its products through advertising on television, magazines, and newspapers. It adopts Pull Strategy where spending is done on advertisements and making the customers of the products, their features, and benefits (Plank, 2005). Their main purpose of advertisement is to get the brand name in the minds of the consumers and introduce ‘new’ products to them.

Personal selling is also implemented by Under Armour where it visits schools, colleges, universities, and athlete programs where they sponsor certain events and promote their own products to the right target market. Talking about Publicity, several direct marketing techniques are used by the company where it promotes its products through e-mail marketing and SMS alerts to its users or potential customers. Moreover, social networking websites such as, Facebook, Twitter, and MySpace are also used to promote the products and new deals the company has to offer.

Related essay: Nike: Public relations

And finally, Public Relations are managed by Under Armour by issuing newsletters, press releases, annual reports, and brochures, which are delivered to the relevant organizations and other stakeholders. Therefore, all these promotional tools are in line with each other and their usage depends on the type of promotion the company wants to do. Also, seasonal variations also affect the selection of promotional tools along with the introduction of new products. Marketing Mix Marketing mix includes four fundamental elements – product, price, place, and promotion.

Under product category, the company sells its most popular and admired athletic apparel, sweat absorbent shirts, accessories, and footwear. Under Armour holds great customer value where the athletes mostly prefer its products to let them experience best gear when competing in sports. The company also provides warranties in terms of its guarantee logo and expects its products to be most appropriate in terms of quality and perfection. When it comes to pricing, it has adopted Price Skimming strategy and Prestige Pricing.

Prestige pricing strategy is directed to communicate a signal that the best quality products are sold in the market by Under Armour, which has resulted in quality perception about its products in the minds of the consumers even though the competitors sell the same quality products at lower prices. Talking about the placement, the company sells its products in retail settings that are mostly in the form of retail stores. Secondly, internet is also used to provide convenience to the customers by selling them the products online with the help of just one click.

This has also helped the company to save its costs that might incur in setting up separate physical locations or stores (BA, 2008). And finally, promotion is done through using four of the five promotional tools, where emphasis is laid more on advertisements. In short, the four Ps of marketing mix go hand in hand with each other for the company and make the overall marketing activities of the products effective. Competitive Advantage Although the company has competitive advantage in terms of its athlete clothing line, which also includes sweat absorbing shirts and those that ‘enhance performance in hot weather’ (Bylund, 2009).

Nevertheless, it does not have competitive advantage in pricing and promotion because the products are sold at higher price as compared to the competitors even though they are of the same quality. As far as the promotion is concerned, the company itself admits that its competitors such as, Nike and Adidas have greater resources in terms of finances, distribution systems, and marketing. Therefore, more advertisement and promotional campaigns are led by the competitors and Under Armour does not enjoy lavish expenditure on promotional campaigns.

Moreover, whatever deals or offers Under Armour offers, they are countered by the”Under Armour’s Distribution Strategy” competitors who then offer the same products at low prices, in bundles, and other attractive deals. Consequently, the major chunk of the market share is taken by these competitors, hence Under Armour would have to come up with new marketing and pricing strategies that entice the customers to purchase its products.

References

Essay on

Dueling Fools: Under Armour Bear. Retrieved on August 25, 2010.

From http://www.fool.com/investing/high-growth/2006/11/09/dueling-fools-under-armour-bear.aspx

Chris. P. (2008). Principles of Marketing. Retrieved on August 25, 2010. From http://www.knowthis.com/tutorials/principles-of-marketing.htm

Plank. K. A. (2005). Under Armour: Annual Report. Retrieved on August 25, 2010. From http://files.shareholder.com/downloads/UARM/0x0x36606/5d75c7b3-0d4b-4f6b-b4e8-df2a1e5a1b4e/2005AR.pdf

1.What are the challenges facing Zipcar?

Two prominent challenges that Zipcar faces currently are:
Internal organizational challenges due to Merger with Avis – A merger between 2 companies of different size, values and culture always possess some challenges along with benefits. 3 potential challenges due to this merger could be – creating cultural synergies between a large conglomerate with established business practices with a relatively small entrepreneurial organization with innovative ways of doing things, impact of change in pecking order on organization strategy & executional challenges faced by being part of a large conglomerate. Competition by large rental co.’s and niche car sharing co.’s– Zipcar faces intense competition from car sharing services introduced by large established rental car behemoths like Hertz, Enterprise, U-Haul etc. While Avis can provide infrastructure support to some extent in terms of expansion of car fleet, parking spots etc. Zipcar will have to make product/service enhancements to counter features like No Registration fees, one way rentals, Reward Points etc. Zipcar also faces competition from peer to peer services like Relayrides, Getaround etc. and service like car2go, which offer innovative, convenient and cost effective solution to meet car rental needs of consumers.

These companies might pose a big challenge at a regional level

2.What are 3 possible ways to segment market –

Three possible ways to segment the market are

•Area/location-As more and more people are shifting to urban areas where owning a car is not as attractive proposition as in suburbs/rural areas, Area-densely populated city areas, airports etc.is way to segment.

•Age-Car ownership typically varies with age. Hence age- College goers, singles (25+) etc. is an important way to segment.

•Attitude– Sharing a car requires a mindset change hence segment by attitude is important

3.Develop a marketing strategy for Zipcar

Customer- Zipcar should continue focusing on Primary customer target of young city/urban dwellers & university students and secondary customer target of Business and Government. Competitive Advantage

•Technology-Zipcar has differentiated itself from the start by using proprietary technology. It should focus on further building and enhancing the technical edge and use this edge as a source of advantage over its competitors.

•Historical customer transaction data – Most of Zipcar’s competitors do not have (or have for shorter period of time) this data b’coz of their late entry in car sharing market. Zipcar can use this data to enhance and customize its service offering.

•First Mover Advantage– While most of the competitors are recognized brands, Zipcar has a unique advantage of being the first widely recognized car sharing services brand. Zipcar should leverage this advantage by positioning itself as a though leader.

Differentiation – Convenient, Technologically Superior, Accessible and Trendy Positioning – Contemporary, youthful, technologically superior brand which resonated with core target audience of urban city dwellers/ college goer’s. Also, Zipcar should not let Avis merger influence it’s positioning.

4.What is the one marketing mix variable you would change?

Price – Reduction/Abolition of Enrollment Fee & Annual Membership Registration Fees & reduced hourly rates With close to 81,000 members, Zipcar is a leader in car sharing industry. Annual reports show growth in revenue3 year on year and a positive EPS by 2015. Also, looking at the strength & user engagement of Zipcar’s Facebook page (147,683) and Twitter (24,313) handles, one can conclude that Zipcar seems to be brand well entrenched in mind of its users. Thus, Zipcar has competitive advantage of being an industry leader, rapidly growing business model and high brand awareness. But Car sharing seems to be an industry where consumer’s especially students and urban dwellers would be price sensitive. Eventually they will choose the brand that provides car sharing service for the lowest price given various service facets like – accessibility to cars, convenience etc. are at par. Read Kingsford Charcoal case study

As of now Zipcar seems to be the only prominent service provider which charges Registration fee of $60. Also, hourly rental rates for Zipcar seem to be bit higher than Hertz on Demand. With fast growing competition in car sharing industry, it is imperative that Zipcar at least reduces/abolishes a part of its enrollment and annual registration fees. These fees might have been critical at one time to help Zipcar expand – adding car fleet, extending distribution points etc., recent acquisition by Avis should provide the necessary capital and infrastructure support to expand Zipcar’s operation at improved efficiency w/o charging consumers registration fees. Abolishing/Reducing fees will help Zipcar to avoid any price based competition with big rental companies. Also with time Zipcar should strive to offers service/product parity with features like one way rental, rentals by minutes, reward points etc. as offered by key competitors.

Exhibit 1

Source: http://green.autoblog.com
Appendix
1-http://en.wikipedia.org/wiki/Zipcar
2-http://en.wikipedia.org/wiki/Carsharing
3-NASDAQ:ZIP

Before being able to make recommendations on the Walt Disney Company based on the value they are (and are not) able to create, one must first analyze the company’s capableness and resources that provide such value. Being a member of the entertainment Industry, their primary activities revolve around the operation of theme parks that are located all over the world, as well as running media outlets, creating studio entertainment, and selling various consumer products.

With regards to the services offered by the company, not only does Disney offer world-class quality management and customer service in all of its markets, but brand loyalty and admiration by consumers across the globe make it clearly superior to its competitors, as well. On the other hand, another function, marketing and sales, is something that Disney could potentially improve upon in the future, as it is currently equivalent, at most, to its competition in this area.

Since Disney is stretched Into so many different areas of business, the capital that is necessary to become the top marketers In most or all of them Is simply too high. Therefore, In a nutshell, the company’s strategy Is to spend a little bit (relatively, of course) In each of Its primary Industries, rather than spend a lot In specific Industries. Other primary functions include logistics and operations. Being in the entertainment industry, Disney’s inbound logistics do not represent a major activity, similar to that of its competitors.

Thus, Disney’s inbound logistics are roughly equivalent to its competition. With regards to operations, Disney’s top quality management, as mentioned earlier, along with creativity and innovation in all aspects f business, give it another competitive advantage and make it superior to its competition. Finally, outbound logistics, in an industry that is driven by convincing people to go out and spend their discretionary Income on theme parks, movies, and other forms of entertainment, is not a huge Industry driver.

As a result, Idleness outbound logistics are equivalent to that of Its competitors. The secondary functions of Disney are headed by their firm’s Infrastructure. Potentially one of their top competitive advantages, Disney’s infrastructure is superior to their competitors because they have consistent values throughout their many areas of business, they have the capital (roughly $75 billion in total assets as of 2012) to support their various operations, and were able to expand further into TV, movies and other media outlets during such a short period of time during Michael Sinner’s tenure.

In addition, Disney’s capital, leading innovation, and drive to be ‘pioneers’ in every area of business in which it competes give it another advantage over its completion in the superior function of technological development. Finally, with regards to the other two secondary functions (human resource management and procurement), Disney Is relatively equivalent to its competition. Disney, along with Its competition, Is not too heavily concerned with inventory numbers, being that much of Its worth Is In Intellectual property and other non- manufacturing-related assets.

Additionally, being in so many areas of business like its employees as the rest of the industry. To summarize, I believe that Disney’s core competencies lie in the functions of operations, service, technological development, and firm infrastructure. This is because the company’s unique and inimitable features such as top-line innovation and creativity, expansive reach, and quality management all heavily contribute to the ND user’s enjoyment experience, while being able to consistently create value amongst all of Disney’s products and services.

On the other hand, logistics (both inbound and outbound), marketing and sales, procurement and HRS management do not count as core competencies in Disney’s case. The company’s inability to secure an advantage over its competition in these areas suggests that some of these functions need not be competitive advantages in order to succeed in the entertainment industry, and that some must be improved upon or outsourced if Disney wishes to remain an industry power.

With this analysis in mind, I would make the following recommendations: Disney should outsource its human resources functions in order to secure the best and brightest talents entering the industry. While this would not represent a large financial gain for the company, it would be a move in cooperation with the company’s high-innovation motive and could, in the long-term, allow for better technological development, service and operations. * From a marketing standpoint, Disney should either stop expanding into new businesses or contract less profitable to focus sales efforts (and budgeted expenditures) on the more profitable sectors.

The Smart Car was launched in 2006 in the United States with vision of making it a popular brand among lower and middle-income group. The product aimed at being an environment friendly battery operated car for two people that was affordable, durable, and stylish. The car offered gasoline powered operation in addition to the battery-operated engine. This was to ease driving in case of battery failure or some other crisis. Among other features the car offered a highly efficient miniaturized engine that was capable of achieving 80 miles per hour speed.

The low cost of manufacturing offered greater earning potential for the company and Nicholas Hayek, the chairman of Swatch and the brain behind the entire concept visualized extensive sales scope. The low cost car with features those were comparable to the high-end luxury cars in terms of security, speed, and ease of driving. These are the competitive advantage that the Daimler’s new launch by the name of Smart cars offers to its consumers. US Market for Smart Cars The Smart Cars introduced by the Daimler a year back in the United States has triggered great interest among the prospective consumers.

The fuel economy is one factor that has created interest amongst the public. The company hopes to attract the consumers on two grounds:

• Prospective consumers who have high regards for environment
• Prospective consumers who want to own the latest trendy model in town With increasing gas prices in the US, this may be the right time to present the fuel-efficient car. Speculations are high and the company is looking forward to create a market niche in the rich and educated consumer base of America.

It has already secured orders close to 90% of its production capacity and is hopeful of making a big success in the coming years. The consumers though are a little apprehensive about its security features and the stability of the vehicle. The initial reaction to the vehicle’s launch in Europe in the year 1998 was similar. The sales were poor due to concerns regarding the vehicle’s stability. The small size of the vehicle made it a subject of joke among most people. But the times proved the substance of the vehicle and its success story was repeated in United Kingdom and other countries of Europe.

The car will find similar acceptance in the market of United States mainly due to its fuel economy. With rising prices of gasoline consumers will be happy to opt for a low cost trendy car that is battery operated. Other target markets for Smart Cars Besides United States and European countries the Smart Cars will make a distinct impression in the markets of developing countries like India, China, Latin America, and Mexico. The factors that are most relevant for these growing markets are enumerated below:

• Large population base in countries like India and China offering greater market potential.
• The attractive pricing of the Smart Car – budget car that can be afforded by most people in the middle-income group.
• Suitable for high traffic and narrow roads.
• Higher cost of fuel will attract the consumers to opt for low fuel cost alternatives

These factors will trigger market demand for such cars and Smart Cars can create a meaningful and profitable presence in these countries.

Reference:

1. http://www. mcspotlight. org/campaigns/translations/trans_uk. html

2. http://query. nytimes. com/gst/fullpage. html? res=9B03E7D61F30F93BA15750C0A9659C8B63

The global automotive industry is thriving nad over the years the landscape of the trade has drastically changed. Successful companies will survive by being innovative in the way they design, develop, and deliver their products and services to the end user. It is up to the management of the firm to develop innovation, and provide strategies in order to reach its customers. In order to understand the opportunities and challenges that an individual company’s management may face, this analysis will first examine current trends of the industry, common business strategies, sources of competitive advantage, and other trends significant to competitors in the sector.

Often, a company’s survival is dependent on the creation of a competitive advantage, which is designed and implemented by management. Creative ideas and technological innovations are essential from any automobile player challenging for the status of innovation and technology leader. The global automobile industry has become very saturated. With industry overcapacity, many automobile manufacturers will either merge with other automobile companies, become acquired, or go out of business.

Introduction

Automobile companies still strive to minimize costs by pursuing economies of scale, with long term goals of maximizing efficiency while maintaining their product quality. Successful companies will survive by being innovative in the way they design, develop, and deliver their products and services to the end user. It is up to the management of the firm to develop innovation, and provide strategies in order to reach its customers. In order to understand the opportunities and challenges that an individual company’s management may face, this analysis will first examine current trends of the industry, common business strategies, sources of competitive advantage, and other trends significant to individual competitors. This paper will then provide an analysis in depth analysis of  Daimler-Chrysler

Current Industry Trends Mergers, acquisitions, and integrations have transformed the landscape of the global automobile industry. Examples include:

The merger of Chrysler and Daimler-Benz

• Volkswagen acquiring Bentley and Lamborghini.
• Toyota’s growing control over Daihatsu.
• Ford acquiring Volvo’s car business
• BMW acquiring Rolls Royce

Also Listed above are Daimler Chrysler-Benz’s main competitors.

The 1998 PricewaterhouseCoopers Global Automotive Deal Survey cites overcapacity, the pressure to increase economic profit, and the drive by Vehicle Manufactures to respond to the power shift towards consumers as all contributing to the rapid structural change in the industry. The report says that 6 to 8 global manufacturers might control the industry in the near future as small manufacturers continue to be acquired. This consolidation is the most noticeable trend in the automotive industry.

There is also a trend towards the integration of suppliers in product development systems, and the outsourcing of modular assembly to suppliers located near the vehicle manufacturers assembly operations. These changes have produced large decreases in unit cost for the global industry.

One problem burdening the industry is the excess capacity that many companies face. Worldwide excess capacity is estimated at 20 million vehicles, or 45% of current capacity. This inefficiency has cost the automobile industry billions of dollars and will continue to burden the sector over the coming years.

Another negative trend in the global automotive market is declining sales in the European sector. After years of positive growth, the European Automotive Industry is now experiencing a phase of stagnation. It is still unclear how Europe’s integration will affect this trend. . This lethargic growth has created increased competition among European Automakers. It is now more important than ever for carmakers to innovate, in order to increase quality and/or reduce cost. In addition, it has increased the need to reach out to foreign markets particularly the United States. However, for Volkswagen and BMW, exports to the United States already account for such a large part of their business they have not been as severely affected by the downturn as many of their European counterparts.

Industry Strategies Economies of scale strategies are widely used in the highly competitive automobile industry. Recall, Profit = Revenues – Costs. Therefore, these strategies reduce costs to increase their company’s profit. The three primary cost reduction strategies are

Globalization – to gain incremental volume leveraging “know-how” from other parts of the world

Consolidation – to decrease the cost base supporting relatively stable volume, usually attained through the elimination of duplication in assets, such as the number of production facilities and suppliers.

Note: In the second automotive century it is believed that this strategy will dominate.

Platform deproliferation – to provide a broad end product range across a smaller number of  design structures and as a result leveraging development and other costs for a greater volume opportunity.

Although these strategies are implemented in hope of lowered cost it is incorrect to assume that all automobile manufactures are competing solely on a low cost strategy.

Competitive Advantage – Often, a company’s survival is dependent on their creation of a competitive advantage. There are many sources of competitive advantages in the automobile industry. One such advantage is the relationship between the automobile company and the end customer. The automotive business differs from other industries in that there is a continued relationship between the buyer and the seller. Often, service conducted after the initial purchase is the deciding factor for future repurchase with the same vehicle manufacturer. (Hodgetts, Richard. and Luthans, 2006)

Low cost and product differentiation is also a source of competitive advantage used in the global automotive industry. For example, Ford Motor Company produces the Focus that competes on low price. Therefore, Ford must find the most efficient, cost-effective way of producing this automobile while still providing value to their customers. Ford’s ability to mix these factors is the key to holding a competitive advantage on competitors. Ford also produces Jaguar automobiles that compete on prestige and unsurpassed quality. To create a competitive advantage Ford must be able to differentiate their product from other high-end producers. These competitive battles based on cost and on differentiation are commonplace in the automobile industry.

Globalization – The 1998 PricewaterhouseCoopers Global Automotive Deal Survey states that “Nearly 70 percent of anticipated growth in light vehicle output between 1999 and 2006 is expected to come from outside of North America and Western Europe. The trend towards Globalization has changed the landscape of the global business environment. Automobile companies cannot ignore emerging markets, such as Russia and China. These new markets provide large, untapped customer bases allowing producers to gain further economies of scale. On the other hand, globalization will mean new entrants to compete with in their current markets. The trend of globalization has created greater competitive pressures from foreign producers, but also many new opportunities for all automotive companies.

Premium – Vehicles The automotive industry can be further broken down into car classes. These two classes are:

• Premium, sport or luxury vehicles
• Cheaper, mass produced automobiles.

The importance of premium markets is increasing substantially in the automotive industry. One reason for this growing importance of the luxury sector is their ability to withstand growing pressures on prices. One of the key differences that separate the luxury market is the relatively low price elasticities found in the luxury sector. For this reason, many new companies have entered this market. The continued entrance of new competitors has transformed a relatively small market niche into a saturated market that will weed out its weakest parts. (Hodgetts, Richard. and Luthans, 2006)

General external environment

Creative ideas and technological innovations are essential from any automobile player challenging for the status of innovation and technology leader. In addition, the automobile industry may be strongly impacted by the Internet as much as any other industry. Consumers are increasingly using information from the Internet to determine such things as features, specifications, styles, and designs of different makes and models. One day, the industry may be able to circumvent the middleman and deal directly with the purchaser, as consumers may be able to place orders directly over the Internet.(Hodgetts, Richard. and Luthans, 2006)

The global automobile industry has become very saturated. With industry overcapacity, many automobile manufacturers will either merge with other automobile companies, become acquired, or go out of business. More and more automakers from around the world will need to address global overcapacity within the automobile industry and make strategic partnerships or mergers with other industry players.

Daimler Chrysler

The merger between Daimler Chrysler-Benz resulted in fairly disappointing profits.The costs of manufacturing were too high to profit after the sales in a very competitive U.S vehicle manufacturer’s environment. By the mid-1990s Chrysler had survived near bankruptcy experiencing deep and reverse fluctuations in folowing years. The merger with Daimler-Benz has not tempered these fluctuations even though they have used strategic planning and technical resources to improve the situation. (The DaimlerChrysler Emulsion, 2007)

The turmoil that followed did not help either. The cultural problems faced by DaimlerChrysler have been numerous and caused considerable problems and delayed the integration of both organizations. Evidence of the lack of true sharing and cooperation was soon to emerge. For the first two years, Chrysler’s executives were not ready to work with their German colleagues. The two proud management teams resisted working together, were wary of change, and weren’t willing to compromise. In some sense for Americans it was a mental problem, difficult to skip that now they were working together with German company.