A creative marketing solution to offset new competitors
New entrants into the market have a high likelihood of developing and altering the competitive dynamics of any industry. The threat of new competitors is significant and influential. According to Porter’s model, the threat changes the competitive atmosphere and directly affects the profitability of any given organization. If the threat is very high, it means that barriers to entry are low and the organization’s profit potential will decline. This is because more and more organizations and entrepreneurs will fight to offer the same product. As such, the organization will be compelled to redistribute sales and market shares and this may affect the price and quality of products.
Solution based on (Argument by elimination)
In creating a lasting and effective solution, it is important to first identify all the possibilities. In this case, the organization can use numerous ways to offset the threat of new entrants into the market including globalization, price reduction, improving products and targeting new markets and so forth. However, the possible returns when all these ways or rather strategies are used can produce unrealistic results. For example, globalization is a basic strategic solution but the risks and investment require may not be worth the time used and the expected returns. Therefore, the remaining possibility which seems feasible is developing new channels of distribution. A realistic market solution as reckoned by Kalyanaram and Gurumurthy(1998) to offset high competition and carry on with normal business operation is to develop new distribution channels to search for new markets or even penetrate existing markets. Focusing on the existing markets where the organization has a proper analysis and understanding of the business environment is less risky than going global. The organization can either reposition the product or service through aggressive marketing, advertising, changing the packaging and so forth. For example, when Dell Company faced severe competition from other competitive companies such as IBM, the company urged its customers to place their orders with Dell using their phones, fax or even computers. The use of direct channel transformed the approach of selling computers to the final consumers including the Wholesalers.
Reference
Kalyanaram, G., Gurumurthy, R., (1998). Market Entry Strategies: Pioneers Versus Late Arrivals. Third Quarter / Issue 12. Retrieved from: https://www.strategy- business.com/article/18881?gko=64116