Executive summary
Amazing Ideas is preparing to market its sport shoes product line, the Hi-Lo Runners, in a maturing Australian market. The market is very attractive due to the continued growth despite the increasing competition from foreign manufacturers and renowned brands such as Asics, Reebok, and Adidas. Although the Australian footwear industry is declining, the new shoe models are becoming popular especially in the younger population.
The company can compete effectively because the Hi-Lo Runners it offers are well positioned with unique features and cheaper prices. The company has strengths and opportunities to exploit and avoid weakness that could disadvantage the strategy. The company will target specific market segments and exploit the opportunities arising from the high demand of Hi-Tops.
The marketing objective or the plan is to attain a 10 percent of the market share in the coming year while the financial objective in the plan is to raise profitability by 20 percent through sales. This can be realized through a marketing strategy where opportunities are the key drivers and problem solving is part of it. The 4Ps marketing mix that is to be used should align with the recommendations drawn from the competitor and product reviews. This gives an insight on the most appropriate way to win the competitive advantage desired all along.
Current marketing situation
Amazing Ideas founded a few years ago is about to enter in the Australian shoes market; is about to enter the now-mature sport shoes market. Hi-Tops or shoes transformed with a rear above the regular ankle height are increasingly becoming popular; forecasts suggest that the annual sales of such shoes will grow at a more than 50 percent for the next two years.
Therefore, competition is more intense even as Hi-Tops demand rolls out, industry consolidation, and pressures to lower prices squeeze profitability. Yet, the Australian shoes market remains substantial, with sales exceeding 2.85 million pairs of shoes annually (IBISWorld, 2011. p.1). To gain a market share in this changing environment, Amazing Ideas must carefully target specific market segments with features that carry benefits valued by each market segments.
Industry overview
The footwear industry in Australia is facing the direct consequences of globalizations and internationalization. Producers are going through a very tough operating environment. Among the many factors leading to such an environment are the dominance of low-cost foreign traders, import penetration, and tariff reductions.
These have seen the structure of the industry change spectacularly in the recent past. This industry is also facing shortages of skilled labor, competitors outsourcing production abroad, and accelerated industry reform. It is in fact a difficult task to find a low-cost shoe manufacturer based in Australia.
There are some large footwear producers that manufacture industrial and safety boots, whilst sheepskin footwear has retained substantial output levels domestically (IBISWorld, 2011. p.1). The total production by the footwear industry is expected to fall as well as the revenue from these products.
However, the emerging models will increase as a result of the changing consumer behaviors and the quality concern of the imported footwear. Therefore, the best strategy that a local producer should adopt in order to survive is that which responds to the market changes while still maintaining competitive prices on the products.
Competitor overview
Australia footwear industry comprise of more than a hundred manufacturers and suppliers of footwear and related products. These many companies have their major operations conducted in Australia and New Zealand. Among the major competitors who deal in sports shoes include Blue Heeler Boots, J. Robins & Sons Pty Ltd, Shoelastsandcomponents, Styleman, D B C Footwear manufacturers, Footwear Manufacturers Association Inc, and Global Footwear manufacturers.
These competitors either specify on a single product line or differentiate their products according to a particular market segments. However, these competitors have maintained most of their original brands with very rare changes on the features of their renowned brands.
However, the biggest threat is coming from foreign competitors especially from China, Korea, and Japan. Indeed, the Hi-Li Runners design originated from the foreign companies, though they have shown little emphasis on the design. The major focus on these competitors is low prices which is pushing the profitability of local manufacturers further down.
The Australian stable economy and tariff reductions are attracting more and more traders into the footwear market. The foreign competitors have attracted low income earners especially from rural settings and have increased their market share significantly. However, the Australian economy provides a large potential market of consumers whose purchasing decisions are driven by quality, authenticity, and style the product is given.
Consumer behavior
The Australian footwear market consists of consumers who prefer to use shoes for different activities such as leisure walking, walking to work, sporting, among other activities. Initially, many purchases were made to meet an identified problem and consumers were interested in solutions rather than features.
However, the buying behavior of the Australian people is changing and they are seeking to live a healthy and luxurious life. While most of the problems are imagined, the people are becoming more interested in new and unique feature in the shoes marketed to them.
On another dimension, Lantos (2010. p.36) maintains that consumer behavior can vary according to age demographics. In this context, young people in Australia are the most active in sports tending to be the most frequent purchasers of these products. These consumers are more sensitive to stylish models of shoes that bear unique and exotic styles or features almost resembling the pictorial models.
Indeed, the footwear industry is highly promoted by young and middle-aged people. Statistical surveys indicate that for every new model of sports shoe, at least eight out of ten youths will buy the new make. Furthermore, these consumers are influenced easily by peers into purchasing the product.
PEST analysis
PEST analysis is an essential tool used to understand the external factors that can influence any marketing strategy (Fullen & Podmoroff, 2006. p.77). Political factors affecting Amazing Ideas include government policies, tax policies, trade restrictions, tariff reductions and regulations.
Australia has continued to engage actively in enacting laws that control internal and external trading such as Fair Trading Policy and Consumer Law. Economic factors include the changing trend of sporting as an economic activity, surging economic growth rate, interest rates, and inflation rates. Such factors influence the financial ability of the consumer as well as the manufacturing costs of the products.
Social factors include increasing importance of recreational activities, population growth, age distribution, and buying behavior and patterns of the consumers. Technological factors include research and development activities, technology incentives, industrial automation, and the rate of technological change which influence the manufacturing capability.
Porter’s five-force analysis
Bangs (2002) takes Porter’s five-force analysis as an important paradigm in determining the competitive position of a business (p.67). in many markets, the relatively small capital required to set up a manufacturing facility, is a big attraction for new entrants and is the major reason we have so many companies manufacturing footwear. However, the expertise and skills necessary are scarce and this waves off some of the entrants into the market.
Currently, the stability and perceived growth of the Australian economy, infrastructure development, and the increasing financial options to the people, point to the attractiveness of this market. Also the general growth of the Asian economy pulls many companies into Asia for business and investment opportunities. Therefore, the entry of new competitors is real and the threat is high.
The bargaining power of the buyers affects the market and the higher it is the more they will influence market price reductions (Henry, 2008. p.81). Sport shoes buyers across the Australian market have a wide rage of choices indicated by the number of manufacturers and suppliers. More than a hundred manufacturers sell in the market including the famous Nike, Reebok, and Adidas brands. In addition, there are also a collection of cheap choices from the Chinese and Korean companies.
Daft (2011) explains how the threat of substitutes determine the switching costs or how the consumer considers other alternatives (p.215). Except for a small population of the Australian Aborigines, most of the people are styled. They will wear a specific kind of shoe for a specific purpose. There are no precise substitutes for sport shoes which can be a threat to footwear manufacturers.
Suppliers with more power will influence more on the prices for law materials (Warner, 2010. p.61). The suppliers in Australia have considerable bargaining power as they are not fixed to a single manufacturer. With so many shoe producers in the country, suppliers have very many options to which they can market products. This gives them a lot of power to bargain and influence on the ability of the producer to capitalize on the market.
The rivalry among the competitors is quite high due to the market dynamics experienced and the forecasted economic growth. The footwear industry is pushing towards maturity and many companies are struggling to overthrow the market leaders.
Product review
Amazing Ideas will be developing the foreseeable Hi-Tops shoe specifically tailored to the emerging need of the Australian market. The offering will entail all the famous features of a genuine Amazing Ideas product as well as the extended rear.
Steinhardt (2010. p.235) suggest that product attributes determine the unique selling proposition (USP) of a business. Therefore, it will be important to ensure the design developed in Australia is a unique selling proposition as well as a mark of quality. The Amazing Ideas Hi-Lo Runners will have a variety of features including:
- Perfectly flat soles.
- Spongy platform.
- Dirt proof material.
- Spiky laces.
- Reflective surface.
- Colored exterior.
SWOT analysis
Amazing Ideas has a number of powerful strengths which can be used to build its business in Australia, but the major weakness is the poor brand image. There is an opportunity in the increasing demand as a result of the better health initiative and the growing economy.
The major threat is the intense competition from other manufacturers and the pressure for low priced shores. The major strengths weaknesses, opportunities, and threats are summarized in the table1.
Table 1.
Strengths
Amazing Ideas can build on two important strengths:
- Robust production capabilities. Having been in the business for some time and being technologically sensitive, Amazing Ideas suggest its powerful production capabilities. This is important in maintaining the balance between supply and demand.
- Strong focus on R&D. The active involvement in research and development can ensure that the company differentiates its products uniquely through innovation. This will sustain its unique selling preposition.
Weaknesses
The late entry of Amazing Ideas into the Australian sport shoe market has resulted into some weaknesses.
- Weak brand image. Due to late entry, the brand image of Amazing Ideas is not strong among the Australian consumers. Such a weakness can be very effective since brand image is crucial in a competitive environment (Park, Jaworski & Maclnnis, 1986. p.136).
- Poor cash flows. The recent en entry into the market indicates that the company initial cost as a result of massive awareness campaign affect the cash flow. The funding must be causing an imbalance between returns and the expenses.
Opportunities
Amazing Ideas can take the advantage of two market opportunities
- Accelerating demand for sport shoes. The perceived Australian economy boom has changed the consumer behavior due to increased earnings. Furthermore, sporting is increasingly turning into an economic activity attracting many people.
- The better health initiative. The increasing cases of unhealthy conditions such as obesity have triggered many agencies into campaigning for healthy lifestyle. Recreation activities being the major activity is in turn increasing the demand for sports shoes.
Threats
Amazing Ideas faces two major threats
- Stiff competition. The opportunities arising in Australia have made foreign shoe manufacturers to increase their activities in the country. This intensifies competition especially for local manufacturers.
- Pressure for law cost shoes. The foreign low-priced shoes have made the Australian consumers to be more cost sensitive. This has strained the profitability of local manufactures as they must push their prices further down.
Market segmentation
The Australian shoes market consist a variety of consumers who have differing purposes, motives, and behaviors for purchasing. Generally, the consumers tend to seek for cheap but quality products with little emphasis on the different producers or brands. The only common aspect that describes these consumers is the needs or benefits they perceive from the products.
Therefore, our targeted consumers will be segmented according to their varying needs and use of the Hi-Lo Runners. The segments in the marketing strategy include professional runners, youths, middle-aged, children and retail businesses. These segments have varying needs as indicated in the table 2:
Table 2.
Positioning strategy
Lacourbe, Loch and Kavadias (2009. p.316) explain positioning as the act of designing a product and image so that it occupies a distinctive and meaningful place in the mind of the target consumer. Using product differentiation, the Amazing Ideas Hi-Lo runners will be positioned as the most convenient, adaptable, value-added shoe model for professional and personal use.
This marketing plan will focus on the elongated ankle lengths feature with spongy material, engraved outer surface, and fiber reinforced material differentiating the Amazing Ideas’ Hi-Tops.
Marketing objectives
Amazing Ideas is aiming for a 10 percent of the market share through increased sales in the first year of implementation. The financial objective during the first year is to have a 20 percent profitability increase through increased sales
Marketing strategy
Marketing strategy is a process that allows organizations to concentrate their resources on the opportunities to achieve a sustainable competitive advantage as well as increase sales (Ferrell & Hartline, 2010. p.1). Amazing Ideas strategy is based on positioning of the product differentiation.
The primary targets consumers are the professional runners and youths who need a comfortable, attractive, and easiness in running. The secondary target consumers are middle-aged and children who need durable and fascinating shoes respectively. The only business target in the marketing strategy is small retail business owners. This segment needs cheap and quality shoes to attract customers and make profit from them.
Product strategy
The Amazing Ideas Hi-Lo Runners will include all features mentioned in the product review part and differentiated appropriately according to the needs of the target markets. The shoes will be offered with a two months warranty in order to be more differentiated in the market.
All the shoe models will be manufactured with an emphasis on the Amazing Ideas quality mark. An important part in the product strategy is to reinforce the company’s brand image. Amazing Ideas brand and logo will be displayed in every Hi-Top model and strengthened within the marketing campaign.
Promotion strategy
The Hi-Lo Runners promotion will be implemented in different strategies. By integrating messaged in all media, the brand image will be reinforced as well as the main areas of product differentiation. Appropriate research on media consumption pattern can help the advertising agency to choose the proper media and timing to reach consumers during product introduction. After the introduction, advertising will appear to maintain brand awareness and convey differentiation messages.
Public relations efforts will also be coordinated to promote the differentiation messages. In order to encourage purchasing and attract customer attention, attractive carry-cases will be offered as a limited-time premium. We will attract and retain channel partners to drive our strategy by use of sales promotions. This communication will be carried on until the Amazing Ideas’ brand is well established.
Pricing strategy
Price is different from other marketing strategies as it produces revenue while the others produce costs (Constantinides, 2006. p.420). Australian population consists of educated and employed people whose earnings are about average. However, most of these people have become sensitive to market prices as a result of the cheap imported products.
Therefore, the Hi-Lo runners will be introduced at $100 retail price and $90 estimated wholesale price per unit. These prices will be lowered as the product line expands in the second year and be priced at a retail price below $100 per unit. This pricing is a strategy of attracting desirable channel partners and increasing the share of the market ahead of other competitors.
Conclusion
The aim of marketing is to achieve a sustainable competitive advantage that can ensure good business performance in a competitive environment. Amazing Ideas is entering a competitive market yet the good marketing plan can offer the desired competitive advantage.
The key success of this marketing is the analysis of the market which assists in identifying the best market to target, the opportunities arising, the way to differentiate the product, and the most effective positioning of the product differentiation. The marketing mix gives the insight of the various strategies to pursue in order to achieve the set objectives.
References
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Ferrell, O., C. & Hartline, M. 2010. Marketing Strategy. Boston, MA: Cengage Learning.
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Henry, A. 2008. Understanding Strategic Management. Oxford, UK: Oxford University Press.
IBISWorld, 2011. Footwear Manufacturing in Australia: market research report. Web.
Lacourbe, P., Loch, C., H. & Kavadias, S. 2009. Product positioning in a two-dimensional market space. Production & Operations Management, 18(93), pp.315-332.
Lantos, G., P. 2010. Consumer Behavior in Action: Real-Life Applications for Marketing Managers. Armonk, NY: M.E. Sharpe.
Park, C., W., Jaworski, B., J. & Maclnnis, D., J. 1986. Strategic brand concept-image management. Journal of Marketing, 50(4), pp.135-145.
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