Coping with the increasing power and demands of mega-distributors. Mega-retailers such as Wal-Mart, Costco, Target, Office Depot, and others are commanding a larger share of the retail marketplace. Many mega-retailers are carrying store brands that are equal in quality to national brands and lower in price, thus forcing down manufacturers’ margins. National-brand companies feel more than ever at the mercy of mega-retailers and are desperately searching for defensive and offensive strategies.
– You say that the main economic problem plaguing companies is industry overcapacity. What are the main causes of this problem? How can companies cope with it?
Almost every industry suffers from overcapacity. The world auto industry could probably produce 30% more cars without adding another factory. The same can be said for the steel industry and many chemical industries. Customers are scarce, not products. Overcapacity is the result of companies’ overoptimism about economic prospects and about their prowess in the marketplace. I have seen many companies plan for a 10% increase in sales when the total market is growing by only 3%. When this happens, the result is overcapacity and hypercompetition. Hypercompetition can only result in falling prices. The main defenses include (1) building a superior brand, (2) developing more loyal customers who will pay a higher price, (3) and acquiring or merging with other companies to rationalize the supply.
– What is the difference between a competitive market and a hypercompetitive market?
Many markets have moved from being competitive markets to becoming hypercompetitive markets. In a competitive market, a company can usually sustain its market position and competitive advantage. In a hypercompetitive market, there is hardly any sustainable competitive advantage. Rapid technological change and globalization can destroy competitive advantages overnight. The only hope is to practice continuous improvement – some even say continuous breakthroughs. When Jack Welch was CEO of General Electric, he told his people: «Change or die!» Perhaps the only advantage a company can have is an ability to change faster than its competitors.
Companies, of course, should study other companies that have mastered certain processes, whether those be product development, customer retention, or order fulfillment. Benchmarking, however, has two forms: passive, in which one company copies the practices of another; and creative, in which one company copies and improves on a process seen at another company. Creative benchmarking is about bettering the best, not just copying the best.
– You write that the customer has become the hunter. What impact does that have on marketing strategies?
Customers now have the power. With the advent of the Internet, they have great amounts of information about brands, prices, product quality, features, and service at their disposal. This is in contrast to the past, when information was largely in the hands of the sellers and the cost of acquiring information was high for the buyers. Today the buyer of a car goes on the Internet, searches for product and price information, and comes armed with the facts to wrest a good price from the seller. The sellers who have the best chance to survive and prosper are those who have found ways, in the words of Jack Welch, to «keep giving the customers more for less… while maintaining a profit.»
– How can a company survive in an environment where the markets are changing faster than the marketing?
Not all companies can survive! This is evidenced by the high rate of bankruptcy and the rapid increase in M&As. When there is too much capacity, mergers help to rationalize that capacity. The companies that will do well will be those that can create and deliver the most value to customers. The task is to assess the trajectory of customer wants accurately.
Source: www.amanet.org, 2005
Essential Vocabulary
1. globalisation n – глобализация
2. site n – место, местонахождение; производственная или строительная площадка
3. trend n – тренд, тенденция
4. preferential terms – предпочтительные, наиболее благоприятные условия
5. retention n – удержание, сохранение, задержание
retain v – нанимать, удерживать, сохранять
retained a – удержанный, сохраненный; нераспределенный (о прибыли)
6. transaction (trans) n – сделка, операция
7. mediator n – посредник, ходатай
mediation n – посредничество, ходатайство, вмешательство с целью примирения
mediate v – посредничать, ходатайствовать
8. scenario n – сценарий
9. implication n – последствие; вовлечение; причастность; значение
implicate v – впутывать, вовлекать, подразумевать
10. expenditure n – расходы, затраты, расходная часть бюджета, статья расхода
expend v – тратить, расходовать, затрачивать
expendable a – потребляемый, расходуемый; невозвратимый, одноразового применения
11. tool n – инструмент
12. sales force – сбытовики
13. set n – комплект, набор, коллекция, серия, ряд, состав; компания, круг, партия; множество; строение, конфигурация; тенденция
set v – ставить, помещать, поставить; располагаться; сажать, надевать, вставлять; направлять, приготавливать, устанавливать, определять, назначать, ставить (задачу), подавать (пример), вводить, внедрять (модель)
14. facilitator n – способствующее (сделке) лицо
facilitate v – способствовать, облегчать (в некот. контекстах давать взятку)
15. measure n – мера, система измерений, единица измерения, мерка; мероприятие
measure v – измерять, мерить, отмерять, оценивать
16.