Wednesday 29th, 1997
Firm O has developed a portfolio of three products in the Sonite market over the course of the Markstrat competition. During the course of the competition, Firm O has lost significant market share and worked hard to rebuild a product portfolio that returns a substantial net contribution and places it in a position of power in relation to it’s competitors.
In this paper, Firm O will provide an analysis of how it’s product portfolio has developed and how their portfolio compares in relation to their competitors in the Sonite market using the BCG model as a basis for comparison. Following this analysis, the paper will analyse the Sonite and Vodite markets and their individual segments in terms of consumer perceptions, size, growth potential. After considering these markets, the opportunities and threat that exist within these markets.
Once an analysis of these external factors has been evaluated, the paper will provide a study of the internal strengths and weaknesses of the company. This will be done on a general basis, from a financial viewpoint and the relative strength of the individual products within their product portfolio.
The paper will conclude with a presentation of Firm O’s future strategies for their products, production, pricing, promotion, distribution and resource allocation. Based on these assumptions, the Firm will provide it’s long term plans to ensure its financial well being over the coming periods. ECONOMIC ANALYSIS
1. Economic Analysis.
Based on previous periods and market study forecasts, expected inflation for the next period (9) will remain the same ( 2 % ), in addition, the GNP growth rate remain the same at 2%. Under these economic conditions, production costs, prices, advertising and sales expenses will remain relatively stable. Previous trends (see Fig 1) suggest that both inflation and GDP should remain relatively stable into the near future which allows for less volatility among the forecast variables used which should result in more accurate predictions of expected sales and expenses for future periods.
Figure 1 – Annual Growth and Inflation
The Sonite and Vodite markets are comprised of identifiable and sustainable segments, which have been individually targeted and serviced by the competing companies. As shown in Appendix 1, both markets are at varying stages of their product lifecycles and have clear segments within the larger markets which are at varying stages of their own lifecycles. As a result of this, individual products have been developed to meet the unique requirements of these segments. Because of this, separate strategies for each product in a companies portfolio mix must be developed for a company to compete successfully within a specific market segment and thus, that products contribution to the performance of the company on the whole.
The six companies that compete in the Sonite market, produce around twenty one brands. With most segments in the Sonite markets in the maturity phase of the life cycle, most of firms have chosen to enter the Vodite market which shows higher margins and growth potential, both of which translates to higher profit potential.
As shown in Appendix 1, the Sonite market has experience consistent growth over the past eight periods, from a demand of 1,171,000 units in period 1 to 2,081,000 units in period 8. While there has been substantial growth in this market, recent demand and forecast sales of 2,155,000 suggests that this market is well into its maturity. Despite the overall maturity, different segments present varying stages of development.
* BUFF SEGMENT -
The buff segment is well into decline. After having initial demand of 228,000 units, the segment now represents demand half that...
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