Market Management Sample Essay.
Category: Management
I already started with the assignment, for the strategies I chose market penetration, market development, and diversification,
I want you to write advantages and disadvantages for each of them + one more growth strategy and choose which one is the best for the company.
Requirements: in depth explanation for each strategy and the advantages and disadvantages, and short praragraph for the best strategy for the fir
Assignment 1 MGT101 (1st Term 2021-2022)
Deadline: 23/10/2021 @ 23:59
Instructions – PLEASE READ THEM CAREFULLY
- This assignment is an individual assignment.
- Due date for Assignment 1 is by the end of Week 7 (23/10/2021)
- The Assignment must be submitted only in WORD format via allocated folder.
- Assignments submitted through email will not be accepted.
- Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
- Students must mention question number clearly in their answer.
- Late submission will NOT be accepted.
- Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
- All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
Submissions without the cover page will NOT be accepted.
Assignment Purposes/Learning Outcomes:
After completion of Assignment-1 students will able to understand the
LO 1.1 State the concept of management functions, roles, skills of a manager and the different theories of management.
LO 2.2: Employ knowledge and techniques of strategic planning, problem solving, decision making and change management.
Assignment 1 (Case Study)
ARMOUR TRUERENT, LLP.
CASE SYNOPSIS
The case of Armour TrueRent, LLP. illustrates how a smaller firm can achieve market power and survive through horizontal integration. Growth, however is only the beginning of a successful strategic process. It does not ensure long-term success, as there are numerous strategic challenges for this and other firms in similar circumstances. The firm has reached a size that could attract the attention of larger competitors. This new level of competition would increase the hostility and complexity of the external environment. Due to the new larger size, the firm will also encounter internal problems in such areas as management and logistics. Armour TrueRent, LLP.
THE COMPANY
Armour TrueRent, LLP. is a small and relatively new firm. It initially was located in the Central U.S., and was incorporated over ten years ago with more than one hundred retail rental stores. These stores appealed to the desire of consumers lacking cash or credit to rent products for a short time period. The firm struggled along, fighting problems that come from small size and inadequate cash flow. Being small meant paying high interest rates for a line of credit, and lacking clout when buying additional supplies and equipment for its stores. After nine years of slow growth, Armour TrueRent, LLP. decided to change strategies. The time appeared to be ripe for faster horizontal growth. Armour TrueRent, LLP. using financing from a friendly bank, bought out a similar-sized competitor located in its competitive area for $ 20 million in cash. In addition, it purchased 51 percent of the stock of a larger rental firm in the North-Central U.S. for $ 18 million. These actions meant that in one year it had more than tripled in size and in the market it served. It then organized itself geographically, with three layers of management below the president. Store managers reported to 55 regional managers, who in turn reported to 11 regional vice-presidents. Compensation for both regional and store managers was tied to store performance. Corporate headquarters has centralized purchasing, financial planning, personnel, training, individual store evaluations and site selection.
THE INTERNAL ENVIRONMENT
STRENGTHS
The firm has an excellent MIS system that each unit of merchandise and each rental agreement. The computer at each store is connected to the main computer at corporate headquarters. Each day’s activity is compiled for stores by region. Management has access to daily, weekly and monthly data in order to make precise decisions about personnel, about merchandise, about stores, and about regions. Since all merchandise goes directly from vendors to stores, no warehouse or storage costs are incurred. Various vendors are used to help keep merchandise prices competitive. Growth rates in revenues per store have been increasing at 18 percent a year.
WEAKNESSES
The biggest weakness facing Armour TrueRent, LLP. is the inefficiencies associated with absorbing the two chains it purchased. Regional managers and store managers must learn new methods and new information-gathering guidelines. Organizational cultures are slow to change.
THE EXTERNAL ENVIRONMENT
OPPORTUNITIES
The rent-to-own industry has been consolidating for several years. The biggest problem facing the independent store or the small chain is a lack of adequate financing. Armour TrueRent, LLP. was fortunate that it found a bank to provide the cash needed for expansion. Current and future trends indicate that industry consolidation will continue. Armour TrueRent, LLP. should aggressively continue to seek acquisitions or merger partners to avoid being left out of the industry changes. If smaller firms will be squeezed out of the industry, Armour TrueRent, LLP. must pursue growth to insure survival. Current social trends appear to be growing. The U.S. continues to be an itinerant society. People move more, so they need to own less. People want to do more, but lack storage for ownership of things. Many people lack both cash and credit, so the purchase of furniture and appliances is difficult. Rentals and rent-to-own activities will continue to be a growth industry. Armour TrueRent, LLP. must take advantage of this trend to enhance per store sales and increase cash flow for repayment of bank loans.
THREATS
The rent-to-own industry is highly competitive. In 1994, the ten largest firms accounted for 37 percent of the total industry sales. The rental industry must also compete with discount and department stores for customers. Another serious threat is the growth of the credit industry. Credit cards are available to almost anyone, giving people more choices when considering a major purchase. Rent-to-own stores may lose potential customers to big discount and department stores that offer easy credit or access to their credit cards. The rent-to-own industry is heavily regulated and further legislation at the national level is being considered. Restrictions on interest rates and fees, on contract language and disclosure, and on lending in general would increase costs and further limit the profit potential of the industry. Other near term costs that are expected to increase are shipping rates, taxes, fuel/energy, and paper costs. Investors will shy away from an industry where profits are falling and firms are consolidating.
QUESTIONS:
Q1. What different strategies are available to this firm Armour TrueRent, LLP.? (Hint: More horizontal growth, Increase store sizes/activities etc. etc.) Give at least three other strategies. (2 Marks)
Q2. What are the problems and benefits associated with each strategy? (2 Marks)
Q3. What would be the best choice of action? Why? (1Mark)
Market Penetration
Market penetration strategies are utilized to develop approaches used to enhance the market dominance of a certain product and service. As a result, market penetration approaches may be utilized to assess the prospective addressable market. If the overall market is vast, newcomers joining the sector may be enticed by the prospect of gaining market share or a proportion of the total number of prospective consumers.
For instance, if a nation has 400 million individuals and 95 million of them own mobile phones, the market penetration of mobile phones is around 24%. In principle, there are 305 million additional potential mobile phone subscribers, or 76% of the populace, who are now unaddressed. The penetration figures may imply that mobile phone manufacturers have room for expansion.
The most evident benefit of this market penetration approach is that it boosts sales. The fundamental goal of this strategy, without question, is to boost sales. Therefore, when used effectively, market penetration tactics may help a company’s bottom line. On the other hand, a market penetration strategy has been demonstrated to boost market domination (Kepka, 2021). Competitors are frequently caught off a surprise by penetration pricing and have little time to react. As a result, the company may be able to take advantage of the opportunity to convert as many customers as possible.
Market penetration strategies can occasionally lead to a deterioration of a company’s brand image. When a company lowers a product’s price, it risks diluting the product’s and brand’s reputation in the eyes of buyers and generating a false impression. As a result, some buyers may believe that the firm has no choice but to lower the price or provide it at a discount owing to its declining popularity. Furthermore, market penetration might put undue strain on other areas such as procurement, distribution, and marketing. As a result, companies may not be able to cut costs as rapidly as they want, and production companies may be unable to improve process efficiency.
Market Development
Market development strategy focuses on introducing existing items into emerging markets. This approach may be implemented in various ways, including entering into new markets, alternative distribution models, unique pricing strategies, and new product attributes (“Market development strategy | nibusinessinfo.co.uk,” 2021). This strategy’s objective is to acquire new consumers for existing items. Since a firm will be attempting to penetrate new markets, this approach is considered moderately risky.
Arm & Hammer, for instance, was fortunate to acquire a new consumer base for their baking soda product by employing a market development approach. Regular customers of Arm & Hammer were inspired to develop new applications for baking soda, which enabled the business to establish a new market for its products. Therefore, baking soda was converted from a commodity used mostly for baking to a substance utilized for washing dishes and odor remover in a household.
Some of the advantages of adopting a market development strategy include gaining more clients, higher earnings, and company expansion. When used correctly, market development strategies may give certain firms a competitive advantage. Arm & Hammer, as demonstrated in the preceding example, was able to create new applications for an existing product. As a result, the company gained an advantage in terms of attracting new customers.
The main disadvantage of executing a market expansion plan is the level of risk involved. A company will use this method to enter new markets for its products and services. Entering uncharted terrain is always risky, but this technique adds the additional risk of financial loss; companies might lose a lot of money trying to break into new markets. Even though the danger is considered minor, many businesses may find this to be useless.
Product Development Strategy
Product development strategy is centered on introducing new goods into current markets. This can be accomplished by introducing new items or modifying current products to resonate with a new market. A firm can undertake product development for a myriad of purposes, including the use of technological advances, the utilization of surplus manufacturing capacity, and the protection of market dominance (Mital, 2014). Furthermore, because of the effort and money required to develop new items, this technique is moderately risky.
A notable instance of a firm that has effectively adopted a product development strategy is The Coca-Cola Company. Coca-Cola Vanilla and Fanta Iced Lemon are two new soft drinks that the business has developed after investing considerably in research and development. In addition, innovative soft drink types such as Minute Maid have been developed by the firm.
Product development may be beneficial since it helps expand a company’s client base. This technique enables organizations to acquire new consumers in current marketplaces, customers that may not have been gained previously. This approach, if effective, can result in new customer preferences, greater market dominance, increased earnings, and corporate growth.
One of the drawbacks of pursuing a product development strategy is the modest risk involved. Such risk occurs since creating new items takes money and energy. Before a company can contemplate implementing a product development strategy, it must first perform a thorough evaluation. Although helpful, this evaluation does not ensure that a new service or product will be effectively launched.
Diversification
Diversification is a strategy that includes introducing new items into emerging markets. When a marketplace becomes saturated, and earnings are restricted, this approach is frequently utilized. Complete diversification, backward diversification, and forward diversification are the three forms of diversification (“8.4 Diversification Strategies”, 2021). Furthermore, diversification is regarded as a high-risk strategy because the company will be offering a new product or service and a new market.
Virgin Media is an excellent demonstration of a firm that has succeeded in diversifying its business. Virgin Media has had progress in introducing new solutions into the travel and cellular devices sectors. The firm has expanded its marketplace beyond music production to two new areas by selling these additional items.
Diversification can have substantial advantages. An effective diversification strategy may result in greater market dominance, a bigger loyal client base, improved revenue, and corporate growth. Diversification may also help a firm establish itself as an industry leader in emerging markets. If a company can identify the main success elements, it can improve its prospects of adopting a viable diversification strategy.
While the advantages of diversity might be enormous, the disadvantages of adopting such a strategy can also be significant. Diversification is a high-risk strategy since it requires businesses to go into new territory while operating under uncertain conditions. New product development is both costly and time-consuming. Prior to actually embarking on a diversification plan, a company must have defined objectives and a realistic evaluation of the risks involved.
The most effective expansion method is Market penetration approaches flourish because they enable a business to take an existing brand to an already burgeoning market with high demand and begin capturing a larger share of the total market, robbing competitors of prospects and earnings.
References
8.4 Diversification Strategies. Open.lib.umn.edu. (2021). Retrieved 13 October 2021, from www.open.lib.umn.edu/strategicmanagement/chapter/8-4-diversification-strategies/.
Kepka, A. (2021). What is a market penetration strategy? (2021 Update) | Fundsquire. Fundsquire Canada. Retrieved 13 October 2021, from www.fundsquire.ca/market-penetration-strategy/.
Market development strategy | nibusinessinfo.co.uk. Nibusinessinfo.co.uk. (2021). Retrieved 13 October 2021, from www.nibusinessinfo.co.uk/content/market-development-strategy.
Mital, A. (2014). Product development. Elsevier Science.