Strategy for Mega Bastard Corporation - Bionic Limbs - Essay Example

Strategy for Mega Bastard Corporation - Bionic Limbs Contents Macro-environment Analysis of Bionic Limbs 2 Pestle Analysis for MBC 2 Economic Factors 2 Political Factors 3 Legal Issues 3 Basic Buyer Behaviour Models and the way Consumers Might Make Decisions 5 Basic Buyer Behaviour Model 5 Requirements of Well-Defined Market Segments 7 Market Entry plan and Market Attractiveness 7 Porter’s Five Forces 7 Level of regulation for the Market Segment 9 Research and Development 9 Position the Product for Each Target Market Segment 10 Manipulating variables of the Marketing Mix 10 Product Development 10 Pricing of the Product 10 Distribution 11 Communication 11 Conclusion 12 Introduction Successful research and development in bionic limbs making has opened a new market segment for a promising product. The inventor of the Segway and ‘Star Wars’ movie showcasing viable bionic limbs has proved that there is definitely a market for bionic limbs (mostly amputees). Mega Bastard Corporation plan to enter this market may be quite a profitable strategy considering prosthetic limbs controlled by brain signals exist. The U.S. Food and Drug Administration approved various bionic limbs after almost 8 years of research and testing. People who fancy ‘super-power’ can now have devices that they can simply control using their brain. How fancy is that? The most important factors to consider in the introduction of bionic limbs is the strategic management variable involved in product and business development. Namely; Market entry, research and development, pricing, designing the product and competition prosthetic limbs producers. MBC will most probably benefit from a market segment of people interested in comic books, super hero movies and video games. Macro-environment Analysis of Bionic Limbs The macro environment directly related to competition. DEKA is an example of prosthetic limb maker. They have made progress in making bionic arms, which basically gives MBC the advantage of differentiating their market segment to only limb/ legs bionic material. The market analysis will assume that MBC management has taken care of the approval process through the Food and Drug Administration body. Pestle Analysis for MBC Economic Factors Growth and Inflation rate MBC has two choices, either to enter the market or not to enter the bionic market. Now does not enter the bionic limbs market, then their competitors will obviously maintain the status quo and barely change the prices of bionic limbs. However, if MBC enters the market, then its potential competitors will definitely start a price war and that may affect the level of sales of bionic limbs. MBC will obviously be a credible threat to existing competitors in this monopolistic market as noted by Baines & Fill (2014). Labour Costs MBC already has the technology for making the bionic limbs, hence labour cost for the business and product development is greatly minimized and the only challenge will be for the management to identify a profitable market segment for their product. Price Fluctuation Getting into a priced contract with competitors can always help MBC avoid any price wars that may emerge after they introduce their bionic limb. This is basically done by MBC paying a premium to a specific competitor and in exchange, the competition won’t start a price war against MBC. Political Factors FDA (Food and Drug Administration) Approval/Regulation For MBC to effectively market the bionic limb, the product must be FDA approved in order to gain considerable favour even in the ‘villain’ market segment. A highly unregulated market can most likely invite illegal activities and all sort of corruption and bureaucracy in exchange for product endorsement and funding of political seats. Law Regulations Health and Safety Law-Presumably, most of MBC prospective clients of bionic limbs have health insurance. Health insurance may not offer cover or pay out claims for accidents that may occur as a result of using a non FDA approved material like MBC bionic limb. Environment Law- MBC will have to prove that the bionic limb is environmentally friendly and meets all the requirement under the environmental safety law for prosthetic material productions. Legal Issues Consumer protection and E-commerce Presumably, most of MBC prospective clients of bionic limbs have health insurance. Health insurance may not offer cover or pay out claims for accidents that may occur as a result of using a non FDA approved material. In any case if has not been FDA approved, we may assume that the market segment interested in these bionic limbs may buy them using anonymous payment methods like Bitcoin (unregulated payment method) or any other safe online payment system. Intellectual Property Law MBC obtained the technology for making bionic limbs illegally and that may lead to law suits from competitors. In order obtain a provisional patent, MBC will really have to prove that the bionic limb us non-identical and unique enough. However, it is likely that MBC may face a patent violation law suit in the future if they don’t invest in R&D to produce their own Bionic limb maker equipment. Data Protection Ensuring that consumer’s surveys and transaction remain anonymous, then MBC can be safe from the legal radar of tax revenue collector. Otherwise, if MBC sells the bionic limb using legal online systems like PayPal and online banking, then MBC be obliged to share their customer’s data with third parties and a lot of questions may arise regarding MBC operations meeting various legal requirements. On the other hand, anonymous online payment systems like Bitcoin are prone to hacking and identity theft. Discrimination Law Selling prosthetics to wealthy and healthy individuals can attract a lot of criticism from the mainstream market. Bionic limbs are supposed to be sold only to injured individuals. Selling bionic legs to healthy individuals when there are people who still need them in hospitals will make MBC come under a lot of criticism which may eventually affect profit margins and market share. Basic Buyer Behaviour Models and the way Consumers Might Make Decisions The bionic leg is an experiential product, hence its continuous sales will heavily depend on MBC management creating experiential value to its customers. Basic Buyer Behaviour Model Decision making usually proceeds in stages. Even though genuine decisions are quite complex to model, basic stage models are very helpful for analysing consumer behaviours and the marketing actions that are most probable to be successful. Shoppers will most obviously make decisions based on what they see and miss. If MBC can showcase how their bionic limb works to their target market, by either using a video/ movie advertisement or an on stage live demonstration, then MBC will have many clients demanding the bionic leg. MBC should also realize that, just like in video game sales or super hero movies show case, they will have to create personal relevance to their ‘villain’ market segment as argued by MacInnis & Folkes (2010, p899-914). A basic process for the purchase of the bionic limb would be, the consumer (villain) sees a video advert/ presentation of the bionic leg at work, the consumer likes it and goes ahead to buy it (online or at MBC stores). As a market analyst, you will focus on each stage of the process and comprehend how the customer makes the decision. As MBC, your work will be to ensure that your brand name remains in contentions throughout the consumers’ decision making process. This will help you identify the stage in which the bionic leg sale experiences a drop. The stage may be when FDA has not approved the bionic limb, consumers willing to view other varieties of prosthetic limbs or Price wars between MBC and its competitors. Alba & Hutchinson (1987, p411-454) highlight that customers’ needs come first. The mitovation behind ‘villains’ and super hero fanatics purchasing the bionic legs will depend on MBC investment in experiential value creation (make the target market feel like real heroes and villains). Requirements of Well-Defined Market Segments Market Entry plan and Market Attractiveness The choice of a market means that MBC will essentially look at the attractiveness of the bionic legs market in a particular geography. Taking into account any market entry barriers will help MBC know how intense the competition is and also help calculate the breakeven point of bionic legs sales (Dibb 1998, p.394-406). Using the Porter’s Five Forces, we can explain the major requirements of a well-defined market segment. Porter’s Five Forces Porter’s Five Forces shows five characteristics of defining the market attractiveness and segment of a specific product. If the competition is intense then it may be complex to define a profitable market segment for bionic limbs. Given that MBC is not anticipating any other firm to start selling bionic legs to healthy ‘villains’ and super hero fanatics, then market entry is justifiable for MBC. Supplier on the other hand play an important role in giving MBC sufficient raw material at an appropriate price. It may seem counter intuitive, but suppliers insert bargaining power in the entire process. They essentially determine the final price MBC will charge it customers for a bionic limb. The same goes for buyers, the have bargaining. For example, if as MBC, you get a large demand for bionic legs from a specific Comics movie producer, that movie producer may to an extent dictate the price he/she buys bionics limb. Defining a market segment for MBC won’t be really difficult considering that many firms are not producing bionic materials. Therefore the entry barriers in this case are quite low and production costs are minimal with the acquisition of bionic technology by the industrial espionage division. Defining a market segment for bionic legs will also involve MBC management identifying any availability of substitutes. Nunes & Cespedes (2003, p96-105) show that price wars can lead to clients escaping expensive products. If MBC raises its prices, customers may choose to buy a close substitute to bionic legs (most probably bionic arms). The target market for MBC is a youthful age group (18yrs to 35yrs). This age group is price sensitive and react to price elasticity of any product. Level of regulation for the Market Segment Prosthetic makers are regulated by the FDA. MBC venture into bionic limbs and selling it to healthy individuals is not a regulated market. This means, the potential of increasing market share of bionic limbs production is huge for MBC. There are so many healthy people who are fanatics of super hero movies. Research and Development Before MBC introduces the bionic limbs into the market, they can use their prototypes to conduct pilot study of their product. If a small portion of customers like the bionic leg, then the market segment for MBC can be huge. By applying a mix of product innovation and process innovation for bionic limbs will be able to keep its customers happy an engaged in the experience. R&D usually comes at a cost but helps a company increase its market share, a perfect example is Apple Incorporation. Position the Product for Each Target Market Segment Manipulating variables of the Marketing Mix Above: Positioning process for Mega Bustard Corporation. Product Development As mentioned before, the bionic limb is an experiential product and it is therefore important to note that the target market will get bored after using the bionic limb for some time. Video gamers usually look for newer versions of a game every year, so MBC can position itself in for each target market by consistently investing in the bionic limb capabilities development. MBC can make a better version of the bionic leg every two or three years they will be able to maintain their market share. Offering better quality and value to customers will be essential reducing potential competition. Pricing of the Product MBC is a new entrant in the prosthetic industry, therefore, engaging in predatory pricing will help them position themselves in the market. They have the technology (which gives them the niche and reduces marginal costs). Charging low prices (even below marginal costs) in the present competition can induce the exit of their competitors and also deter any future entrants from affecting their target market. This will work if there is incomplete market information (since there is little market data, MBC can use predatory pricing for the bionic limb product). However, it is prudent not to increase the prices after lowering them first since the market can anticipate your action (Boddy 2011, p.151-163). Distribution The distribution channel to customers should be effective as possible. After making a commitment to R&D, production and advertising of the bionic limbs, MBC will have to sell the bionic leg by using online platforms such as amazon, e-bay or Alibaba. For anonymity purposes, MBC can sell their merchandise through Bitcoin accepted websites. As Mick & Buhl (1992, p317-338) mentioned, choosing an effective medium of advertising is essential to marketing. Frazier (1999, p.226-240) argue that value chain reconfiguration can definitely help companies like MBC gain large chunks of unregulated prosthetic market. This can because incumbents/competitors may ignore MBC’s bionic product threat to the mainstream market. The bionic leg may appeal to price-sensitive buyers who tend recommend their peers to buy the product. Communication Communication is a vital aspect of marketing. Assuming the bionic leg sales is successful in the target market, there will be need for MBC to engage with their customers in order to get feedback regarding their product. Shankar (1999, p.1-15) show that communication helps in product and process innovation. By introducing a CRM (customer relation management), MBC can effectively handle customer complaints and schedule when to bring into the market a newer and improved version of the bionic leg to its target market. Conclusion The above points have clearly shown the options that MBC have in introducing their product to the market. Using standard marketing and strategic management has only proved to work in a mainstream and regulated market. MBC product will most probably survive in a non-regulated environment. A perfect counter example is non-FDA approved cancer drugs that have proved to prolong survival of cancer patients. Effective new drugs/ products can be delayed by FDA, which leads to late market entry for some companies when their competition are already established market position. Political and legal obstacles can be caused by already established corporation in an attempt to eliminate competition. Dendreon (A Pharmaceutical Firm in the US) released Provenge, an effective drugs for cancer treatment (the drug had a high efficacy level) but the FDA never approved the drugs as anticipated. As explained in Brownlie & Saren (1992, p.34-47), marketing predicaments arises when the process in interrupted by a conflicting interest. Investors lost a lot of money in the process, and the well documented marketing process for the rug had to stop. Evidently, marketing management is a costly process when dealing with approval bodies like FDA and Political bureaucracies, and there is no guarantee that your product will be approved in time for a strategic market entry as highlighted by Hansen, & Solgaard (2004, p.99-111). Dendreon become insolvent due to debt defaults and marketing halt by the FDA process. FDA approved the drug three years later after several deaths had occurred. In case MBC takes the legal route and try approve their bionic limb through FDA, it may take more than a year before they enter the bionic market. MBC will be better of selling/marketing the bionic leg in non-mainstream market segment where there is little control of business decisions and process. If the competing company beats you to the market while your product is still undergoing approval, then you will most likely make losses. References Baines, P & Fill, C (2014) Marketing, Oxford University Press, Oxford, UK MacInnis, Deborah J. & Folkes, Valerie S. (2010) The Disciplinary Status of Consumer Behavior: A Sociology of Science Perspective on Key Controversies. Journal of Consumer Research, 36(6), 899-914. Alba, Joseph & Hutchinson, J Wesley (1987) Dimensions of Consumer Expertise. Journal of Consumer Research, 13411-454. Dibb, Sally (1998) Marketing Segmentation: Strategies for Success. Marketing Intelligence and Planning, 16(7), 394-406. Brownlie, Douglas & Saren, Michael (1992.) The Four Ps of the Marketing Concept: Prescriptive, Polemical, Permanent and Problematical. European Journal of Marketing, 26(4), 34-47. Nunes, Paul F & Cespedes, Frank V (2003). The Customer has Escaped. Harvard Business Review, 81(11), 96-105. 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