How to Use Market Growth And Market Share to Develop Strategy - Assignment Example

? Introduction: Market growth refers to an increase in the demand of a company’s product over a certain period of time. Market Growth can either be slow or high. Market growth is slow if the demand of the product under consideration is not high. This may be as a result of the high prices of the product, or the product under consideration does not satisfy the various needs of the organizations customers. On the other hand, market growth can be high if the price of the product under consideration is affordable to its target customers, and the same product satisfies their needs (Grewal and Levy, 2012). Take for example, the introduction of a new technology within a given market. In the beginning, because of its high prices, the technology might appeal to a few segments of the society. However, after a period of time, when people start embracing the usefulness of the technology, and its prices decreases, then more people will start buying the product. On this basis, there is a growth in the market of the new technology under consideration. Market share refers to the percentage of the total sales that a company can make in a particular market. In calculating market share, the sales of the company, is divided by the total sales that occurred in the business in which the company engages in. Investors will calculate an organizations share of market over a specific period of time (Proctor, 2000). This time interval must be constant, that is the time period in which the company made its sales, must be equal to the time period in which the organization calculates the total sales made within the market that it operates. Investors are very concerned with the market share of their organization, and this is because a growth in an organizations market share can depict whether the organization is making a profit or loses. Companies are always on the lookout of finding methods of increasing the market share of their products. They do this through advertisements, lowering of prices, and appealing to large demographics (Grewal and Levy, 2012). Having complete understanding of the growth and share of an organizations market is a key element in the process of developing the strategies of a business organization. Knowing the market share of a business organization, will most definitely help in assessing the impact of changes in staff, products, services, prices, distribution channels, and even advertisement campaigns. Having knowledge on the growth of the organizations market will help in identifying the better strategies that the organization needs to enact in order to increase its customer base. This paper examines the strategies an organization can use to increase their market growth, and share. These strategies are vertical integration, and diversification strategies. In explaining these strategies, this paper focuses on an airline company, for example, the Emirates air line company. Strategies: Vertical Integration: One of the strategies that an organization can develop because of possessing knowledge on its growth and share is the vertical integration policy. Vertical integration refers to the expansion of a business organization into other areas that are related to its area of operation (Thorson and Duffy, 2012). Take for instance the emirates air line. The air line company might decide to buy a jet fueling company. This strategy is important to the organization because it will help it to refuel a large percentage of its refueling needs. Vertical integration is important because it helps a company to improve efficiency, and reduce the costs of its operation. For example, the transportation costs of the emirates airline will be reduced because it is the main supplier of its fuel. This in turn will increase the profitability of the organization, leading to a growth in its market share and its operations. The company might also aim at gaining control of its main competitors. For example, the competitors of the emirates airline company can be the British Airways, the Kenyan Airways, or the Saudi Arabian Airline. The company can achieve this aim by buying a controlling stake of the company’s shares, or entering into a merger agreements. However, it is important to denote that if the organization enters into a merger agreement with its competitor, it will acquire a controlling. Managers of the organization must consider many factors, before deciding who the dominant partner is (Kurtz and Boon, 2012). This includes the market share of the organization, and its asset base. Another strategy of increasing its market share is conducting aggressive marketing of its services. These marketing strategies include advertising its services through the internet, radio, television channels, newspapers and magazines. The internet has a wider audience, and chances are high that the company will achieve its objective of informing its prospective customers on the kind of services that it offers. Advertisements are not only for seeking new customers, but it can also be used to retain its existing customers (Martin and Shouten, 2012). By extensive advertisement, customers of the airline company will continue to seek its services, and this is because they are guaranteed on the high quality of the organizations services. In order for the company to achieve growth of its market, it must have a large market base. The air line company cannot achieve this if it is found only within a specific region. On this basis therefore, the company needs to seek other markets of its services. This includes going to geographic regions where its services are not present. Entering into a new market is very challenging, and this is because the company might not know how the market will respond to its products. The best strategy to counter this risk is to enter into strategic alliances with local companies. This is beneficial to the company because these companies have knowledge of their markets, as a result they will develop policies which will manage to attract customers. This process will therefore help the airline company to expand the share of its market, as a result achieving growth. The airline company can also improve the quality of services, for purposes of increasing the numbers of passengers it attracts. The company for instance can offer after sales services such as transporting the passengers from the airport, to their locations or specific destinations. This might increase the costs of the organizations operations, but it might also increase their sales. On this note, the cost benefit analysis will be in favor of introducing the service. Diversification Strategies: Under diversification strategies, there are three main methods that the company can use to increase its market share and growth. These methods are, retrenchment, liquidation and divestiture (Mooradian, Matzler, Ring, 2012). These methods are corrective actions, and there sole purpose is to move the company from one area of operation, to another. Retrenchment refers to a limited withdrawal of an organizations product, or a particular segment of the company’s market. For example, if emirates airline has its operations in England, the company decides to partially leave its operations in England, then we can denote that retrenchment has occurred. This strategy will always be used by a business organization when it needs to restructure its operations. Restructuring might occur if the airline company is experiencing losses in its English market (Martin and Shouten, 2012). To protect itself against the adverse effects of these losses, then the organization will have to partially withdraw from the market, in order to develop better strategies that will ensure they are able to make sales, and hence achieve profitability. Liquidation refers to the sale of some of the organizations operations to another firm. The airline company might decide to sale some of its business operations to other firms for purposes of raising capital, or to concentrate effectively to other segments of the market. Normally, the emirates airline will sale a section of its businesses that does not have the potential to make profits. Through liquidation, the emirates airline will have a chance to create a leaner organization, which it might be able to manage effectively and efficiently, resulting to a growth in its market, and revenue. The company might decide to continue its operations in Dubai, or even Saudi Arabia. That is markets that it fully understands the needs of customers. Divestiture on the other hand involves the sale of the some segments of the business organization that are performing well in the market. This is always a rare phenomena since most business operations will be reluctant to sale some of their profitable ventures. The same applies to emirates airline. The main advantages of these marketing strategies are that they help in removing services that are not profitable to the organization. For example, if the English market is not profitable for emirates airline, then the company will stop offering its services. This in turn will assist the organization to cut on costs, and divert its resources to other markets that are profitable. This in turn will help in increasing the profitability of the business organization (Mooradian, Matzler, Ring, 2012). The airline company can also increase its market share by offering services and products that are not related to its main area of operation that is transportation. For example, the company can decide to sale clothes, energy, or even mobile accessories. When the airline company needs to engage in this diversification strategies, it is important to carefully analyze, for instance the extent of the retrenchment, and also establish equitable and fair prices for liquidations and divestiture. The main intention of a company to engage in retrenchment is for purposes of strategizing on how to increase its market share in the given market, and achieve growth. It will always achieve this objective by conducting some research on the causes of its failure to impact the market, and carry out a further research on the needs of customers who are found in the given market (Kotler and Armstrong, 2012). When a company retrenches from a given market, it is only a strategy, since after sometimes, it will come back again. Calculating the value of a company is an important step during the process of liquidation and divestiture. The owners of a company will always want to get a maximum value for their company, and this they cannot achieve without first identifying what the value of the same company. Identification of a true value of the company will protect the company from making losses in case it sales some part of its business ventures. These strategies are however not as efficient as vertical integration strategies because they involve a reduction in an organizations presence in a particular market. Conclusion: In conclusion, most companies intend to achieve growth in its market, and also increase its market share. There are several methods that these organizations can use to achieve this objective. However, this paper has focused on two main methods, that is vertical integration strategies, and diversification strategies. Vertical integration strategies mainly concern itself with the expansion of the organization into other areas that are related to its production and supply. This paper manages to effectively identify the various methods of vertical integration strategies, and how they are useful to an organization. For example, the emirates airline seeking to supply its own jet fuel by purchasing a jet fueling company. This helps it to reduce the costs of its operations, and hence achieve profitability. Diversification strategies on the other hand involves the sale of part of the organizations ventures, for purposes of using the money gained to restructure the business organization so as it may compete effectively in its other markets. Diversification strategies normally occur when the organization is facing difficulties in capturing a given segment of a market. A company can also decide to sale some of its business ventures because of higher operational costs in a given market, and hence the need of cutting costs. It is important to denote that an organization that manages to reduce its costs, will most definitely achieve some aspects of profitability. Finally, the greatest joy of a business organization is to manage capturing a given segment of a market. Capturing these new markets by introducing new products and influencing consumption habits will create a vibrant growth for the company, and an increase in its market share. Bibliography: Grewal, D., & Levy, M. (2012). Marketing (3rd ed.). New York: McGraw-Hill/Irwin. Kotler, P., & Armstrong, G. (2012). Principles of marketing (14th ed.). Boston: Pearson Prentice Hall. Kurtz, D. L., & Boone, L. E. (2012). Principles of contemporary marketing (15th ed., Int'l. ed.). Australia: Southwestern Cengage Learning. Martin, D., & Schouten, J. (2012). Sustainable marketing. Upper Saddle River, N.J.: Pearson Prentice Hall. Mooradian, T. A., Matzler, K., & Ring, L. J. (2012). Strategic marketing. Boston, MA: Pearson Prentice Hall. Proctor, T. (2000). Strategic marketing: An introduction.. London: Routledge, an imprint of Taylor & Francis Books Ltd. Thorson, E., & Duffy, M. (2012). Advertising age: the principles of advertising and marketing communication at work. Mason, OH: South-Western Cengage Learning. Top of Form Bottom of Form Read More