Description
Lays v/s Bingo, Strategies Bingo used to challenge the leader i.e. Frito Lays, Promotional Wars between Bingo and Frito Lays.Playstation v/s Xbox, Strategies used by PlayStation & Xbox, CASE STUDY 3: Maruti v/s the challengers.
MARKET LEADERS AND CHALLENGERS
GROUP MEMBERS
ARPITA DESAI (104) CONNIE D’SOUZA (110) SWAPNIL KANADE (123) CHINTAN SHAH (144)
MARKETING STRATEGY PROJECT
Table of Contents
INTRODUCTION ............................................................................................................................................. 3 STRATEGIES FOR MARKET LEADERS.............................................................................................................. 4 STRATEGIES FOR MARKET CHALLENGERS: ................................................................................................... 5 . CASE STUDY 1: Lays v/s Bingo ....................................................................................................................... 6 Overview of Indian Snack Market ............................................................................................................. 6 Strategies Bingo used to challenge the leader i.e. Frito Lays ................................................................... 7 Promotional Wars between Bingo and Frito Lays .................................................................................. 10 CASE STUDY 2: Playstation v/s Xbox ........................................................................................................... 12 Overview of the international Video Game Console market: ................................................................ 12 . Strategies used by PlayStation & Xbox ................................................................................................... 13 CASE STUDY 3: Maruti v/s the challengers ................................................................................................. 17 The Launch of the Maruti 800 in 1983 .................................................................................................... 17 Maruti in the early 90s ............................................................................................................................ 18 A semblance of a challenger ................................................................................................................... 18 The real challengers ................................................................................................................................ 19 Maruti in the new millennium ................................................................................................................ 20 Analysis ................................................................................................................................................... 21 2
INTRODUCTION
An industry is fragmented into various types of firms. The fragmentation depends on the type of industry also. Some industries are highly fragmented while some have clear competitors. The strategy in each of such industries differs according to the type of competition. Market leader: In the majority of industries there is one firm that is generally recognized to be the leader. It typically has the largest market share and, by virtue of its pricing, advertising intensity, distribution coverage, technological advance and rate of new product introductions, it determines the nature, pace and bases of competition. It is this dominance that typically provides the benchmark for other companies in the industry. Challenger: Firms with a slightly smaller market share tends to be in the challenger category. They may choose to adopt an aggressive stance and attack the leader in order to gain market share. Follower: Firms with a slightly smaller market share but those who do not adopt an aggressive stance against the leader and tend to follow their strategies are termed as the followers. Market nichers: Virtually every industry has a series of small firms that survive, and indeed often prosper, by choosing to specialize in parts of the market that are too limited in size and potential to be of real interest to larger firms. A case in point is Morgan, specializing in traditional sports cars. By concentrating their efforts in this way, market nichers are able to build up specialist market knowledge and avoid expensive head?on fights with larger companies. Market leader and challenger may enter into a war of sorts and ultimately the one who has a better strategy and implemented it successfully will be the winner.
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STRATEGIES FOR MARKET LEADERS
Although a position of market leadership has undoubted attractions, in terms of both the scope that often exists to influence others and a possibly higher return on investment, leaders have all too often in the past proved to be vulnerable in the face of an attack from a challenger or when faced with the need for a major technological change. If, therefore, a market leader is to remain as the dominant company; it needs to defend its position constantly. In doing this, there are three major areas to which the marketing strategist needs to pay attention: 1. How best to expand the total market? 2. How to protect the organization’s current share of the market? 3. How to increase market share? The following strategies can be used:
Expand Market Share
•Target non ? users •Increase usage rate •Identify new uses of product
Defend existing share
•Continue refining competitive advantage •Proactive stance •Heavy advertisement •Strong customer and distribution relationships
Expansion of market share
•Heavy advertisement •Creative pricing •New product development •Geographic expansion • Mergers and Acquisitions
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STRATEGIES FOR MARKET CHALLENGERS:
Challengers develop a critical insight which helps them to challenge the leader. ? ? ? Reconfiguration Redefining the market High spending (To create brand awareness / equity, Setting up technological infrastructure)
The success or failure of attacks depends on whether the challenger:
? ? ? ?
Is able to sustain attacks over time. Attacks in a way that is damaging to the market leader. Is perceived to be different to the market leader. Is able to provide comparable product thereby offering a genuine alternative.
The various strategies that can be used are: ? ? ? ? ? ? ? ? ? ? Price cuts Innovations (Product / service) Distribution innovations Heavy advertising Market development Meaningful, clear positioning Range High Value addition Create prestige Cost reduction
Market leaders can be attacked at any time, but they are best attacked when they pose the least resistance to the challenger. This can be achieved by: Attacking the leader when it is distracted: Distractions occur during changes in senior management, times of downsizing, times of ownership changes, negative media coverage, regulatory intervention or other major incidents that occupy the leader’s attention. Attacking the leader where it is least likely to respond: The market leader may not retaliate if it does not value the territory that you are attacking or it deems it to be unimportant. This might be because the target market is too small to warrant a market leader pursuing it. A challenger may win profitable market share by collecting multiple uncontested segments in its armory. Attacking the leader when market chaos is occurring. In much the same way that leaders get distracted by internal matters, leaders can also be forced into scattering resources if too many attacks take place simultaneously. Challengers can muster support from allies to create chaos – and this enables territory to be taken from the leader. 5
CASE STUDY 1: Lays v/s Bingo Overview of Indian Snack Market
According to a study by McKinsey & Co, the Indian food market will grow two fold by 2025 with the rapidly growing Indian economy and improving lifestyles of Indians contributing in a big way to this growth. Quoting the study by McKinsey & Co, a report by the US Department of Agriculture stated "The market size for the food consumption category in India is expected to grow from US$ 155 billion in 2005 to US$ 344 billion in 2025 at a compound annual growth rate of 4.1 per cent." The Indian snacks market is worth around US$ 3 billion, with the organized segment taking half the market share, and has an annual growth rate of 15?20 per cent. The unorganized snacks market is worth US$ 1.56 billion, with a growth rate of 7?8 per cent per year. There are approximately 1,000 types of snacks and another 300 types of savouries being sold in the Indian market today. Indians in the western regions eat the maximum amount of snacks, followed by the people in northern region. "Consumers are willing to pay a premium for both value?added private and branded products, creating immense opportunities for manufacturers and retailers,' the report stated. Potato chips and potato?based items are the most popular products with more than 85 per cent share of the salty snack market, the report said. In the organized potato chips market, some of the leading players are Pepsi, Haldiram's, ITC, Britannia, Bikano, Balaji, Marico, Dabur etc. FRITO LAYS: Frito?lays is a division of PepsiCo Inc which manufactures, markets and sells a variety of corn chips, potato chips and other snack foods. ITC (Bingo): ITC Limited is a multi?business conglomerate, has diversified presence in FMCG, Hotels, Paperboards and Packaging, Agri Business and Information Technology. Bingo adopted challenger strategies of flanking and frontal attack in order to attack the market leader i.e. Frito lays
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Strategies Bingo used to challenge the leader i.e. Frito Lays
Segmentation ? Snacks category is divided into the Traditional segment (Bhujia, Chana etc) and the Western segment (potato chips, cheese balls, puffs etc) and the Finger snacks segment dominated by the Frito Lay group. ? ? The total market size could be to the tune of Rs 4,000 crore, of which Rs 2,000 would be organised, growing at 25 percent per annum. The unorganised sector could be growing faster than the organised sector. You can always see a chaat?papriwala doing brisk business every time you walk down the road. Promotion ? ITC spent nearly 40% of their media budget on digital media, because they felt this would be the best way to connect with the market. Bingo brand building was through the digital media, something unheard of, for Indian companies. In doing this two things were important. ? First was consumer insight and for that ITC invested heavily finding out what tickled the Indian consumer’s taste bud, what turned him on. ITC put a whole team of chefs in place to craft new flavours for this category. Idea was to tempt the consumer with flavours that are exotic, but not strange, somewhat different from what is available in the market. ? The second is the manner in which you launch your product, the communication/execution part and the distribution strategy. ITC evolved a completely new and modern merchandising solution for the launch which included attractive stands and other display material for Bingo at the retailer ends. The communication strategy with a heavy dose of humour has also been different and daring. ? ? Bingo launch was around the 07 World Cup. The innovative ad was telecasted on almost all channels? national, regional, sports, news and kids’ channel. The sudden media blitzkrieg left a mark on the audience mind. The objective was achieved as Bingo was in the pure impulse purchase category.
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In certain areas market share touched 50% and not less than 15% in other areas. ITC launched website www.bingeonbingo.com to target the youth and then www.petkapaap.com for its “Bingo mad Angles? Aachari Masti”.
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Viral marketing was used to create brand awareness. It also sponsored various events at colleges and a lot of happenings of channel V? targeting the youth.
Customization and SKUs ? Bingo has 16 variants (priced at Rs 5, Rs 10 and Rs 20 a pack). A good majority of these are region?inspired. Like the mustard for eastern parts and paneer tikka for North Indian market. ? But there are some generic national flavours, such as premium salt, tomato and chilly formats. The potato chips are available in many flavours Masala Chaas, Chatpata Nimbu and Paneer Tikka. ? In addition to these 4 flavours, the classic flavours of Masala, Tomato and Salted are also available. In the finger snacks segment pakoda inspired chips like Live Wires, Khakra inspired Mad Angles, and corn based chips like Tedhe Medhe. ? On the other hand, several SKUs caused problems in forecasting and stocking. Retailers were taking a small variety of each variant leading to frequent stock out situation for popular ones. Packaging and Production ? ? ? ? The packaging of the product has been slick and eye catching. Bingo is available in packets in myriad colours like orange, blue, red, yellow, green and purple. Not only do bright colours attract the attention of little children but also of adults. Snack food is an impulse buy. The bright coloured stands with the Bingo label on top make it more visible in a shop. Bingo is the most seen brand in snacks and thus increasing its chances of being bought. On the production front, the strong farm linkages of ITC (e?Choupal) ensure that only the selected grades of raw materials are used for Bingo. 8
Distribution ? The large, country wide distribution network of ITC built up over the years was a key factor in Bingo’s ubiquitous availability. In small town’s villages, one won’t find a Lays or a Haldiram but a Bingo along with the local unbranded snacks. ? It has also entered into an agreement with the Food Bazaar chain of outlets for retailing of Bingo which is not there for Frito Lays and Haldiram. Bingo was also offering a 4% to 5% higher margin than that of for Frito Lays. Overall, ITC is fast catching up Frito Lays’ national reach of 8 lacs outlets. Pricing ? Bingo learnt from a failed pricing strategy of Frito Lays. Lays increased its price from Rs 10 for 35 grams to Rs 15 for 45 grams. This affected the sales of Lays and it finally went back to the Rs 10 formula. ? Bingo priced its 16 SKUs at Rs 5, Rs 10 and Rs 20 a pack and had a consistent pricing strategy. Combing this pricing with the innovation of the product won the heart of the Indian consumer and also higher margin for channel members made them happy.
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Promotional Wars between Bingo and Frito Lays
? ?
The product launch was preceded by an online viral campaign, ‘Wait or Suffer’. The product was introduced with a television, print and outdoor campaign. The madness was also taken offline with mall activities in nine cities across India. Customer interest was retained with interactive games and product tasting sessions. This activity saw participation from 2,500 people and experienced close to 250,000 footfalls in the first four months.
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Various radio activities were done in Delhi, Mumbai and Bangalore to increase brand awareness. Bingo also ran a contest when Aerosmith was on their official tour to India. Contestants were supposed to record their favourite Aerosmith song in a local Indian language and submit their entries.
?
Since it was a youth brand, digital media was used heavily for promotions. The Bingo National Gaming Championship was one such example. The event was held in four cities and saw participation from 25,000 contenders. Bingo Remix Nights were held in clubs across the country.
? ?
A fun website, bingeonbingo.com was created to increase awareness about the brand. O&M claimed that the 360 degree campaign helped Bingo gain 12 per cent market share nationally, as opposed to their initial target of 8 percent. Bingo had 16 per cent market share in metros and a market share as high as 66 per cent in certain cities
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? ?
To pump up volumes, FritoLay is in the process of rolling out an aggressive marketing campaign led by its star endorsers, Saif Ali Khan, MS Dhoni and Juhi Chawla To maintain top of the mind recall among its customers the brand has undertaken several unique communication initiatives. An example is a campaign called "Chala Change ka Chakkar," which was an umbrella campaign for Frito Lay India’s entire product portfolio (Lay’s, Kurkure, Cheetos, Uncle Chipps, and Lehar).
?
This promotion allowed chosen consumers to live a day in the life of an Indian Bollywood celebrity (who are the brand endorsers) like Juhi Chawla or Saif Ali Khan. The idea was to generate excitement around the brand and have it stand out in the clutter of existing brands.
?
The "Kurkure Chai Time Achiever’s Award" was a contest launched by the brand where families were invited to submit interesting recipes made with Kurkure. The winning family would have the opportunity to be famous and have their photograph featured on one million Kurkure packs.
?
This direct marketing campaign was supported through television advertising, where Indian celebrity Juhi Chawla, Kurkure’s brand ambassador, announced the winners of the competition. The contest was also publicized through the websitehttp://kurkure.co.in, specifically designed to promote the contest. Using the website as a strategic tool for promotion helped the brand appeal to a young audience that spends a considerable amount of time surfing the web.
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Another novel branding initiative was a tie?up with South Western Railways in India to have trains called the "Kurkure Express." These were special trains that operated only during the holiday season. The brand was featured on reservation charts, coach indication slips, and during any announcements about the train. This outdoor media was a unique way to target families who travel by train during the holidays.
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CASE STUDY 2: Playstation v/s Xbox Overview of the international Video Game Console market:
The Video Game Console market is constantly evolving. As the market is affected by the changes of improving technology, the market players have to keep updating their products to be one step ahead of their competition. The Video game console first emerged in 1972 from computer games. The technology used for the games have evolved from cartridges to CDs to DVDs then to Blue Ray Discs. Each technological change meant a better quality product output. Console makers are taking different approaches to designing their products; some go for hardcore processing power, others focus more on online gaming.
PlayStation Sony's PlayStation was released in Japan on December 3, 1994 and in North America on September 9, 1995. Sony took what it had and marketed it off as a Sony?branded console. The PlayStation spawned a whole lineup of consoles (PlayStation: CDs; PlayStation 2 : smaller version & DVDs; PlayStation3: hard drive and ability to play Blu?ray discs) from generation to generation and has earned Sony great respect as a video game company, becoming the first video game system to sell over 100 million consoles. XBox: Microsoft's Xbox, released on November 15, 2001 in North America, was the company's first video game console. The first console to employ a hard drive right out of the box to save games, and had similar 12
hardware specifications to a low?end desktop computer at the time of its release. Xbox also made technological upgrades over time, to benefit the customer.
Strategies used by PlayStation & Xbox
Technological upgrades: ? PlayStation used CDs to store games. Sony dominated most of the software market using CD instead of cartridges. This is how Sony’s Play Station became the leader in the Video Game Console market. Sony kept up with technology and in 2004 redesigned the console into a smaller version. PS was also the first home game console to be able to play DVDs... Thus with these technological upgrade Sony’s PlayStation kept its leadership position. ? Thus to challenge the leader a new technological step up was required. Microsoft's Xbox was the first console to employ a hard drive right out of the box to save games, and had similar hardware specifications to a low?end desktop computer at the time of its release. The Xbox was the first console to include an Ethernet port and offered high speed online gaming through the Xbox LIVE service. ? Microsoft kicked off the seventh generation with the release of the Xbox 360 in 2005. It featured processing power never before seen until Sony rivaled back with its Playstation 3 one year later. It additionally played DVD's as well as continued its Xbox Live system, There are many versions of the console; the newest one is the Xbox 360 S (for Slim) announced at a press conference before E3 2010 ? Sony PlayStation 3 came with a hard drive and it is able to play Blu?ray Disc movies and games out of the box. The PlayStation 3 was the first video game console to support HDMI output out of the box, utilizing full 1080p resolution. Up to seven devices (including controllers, with tilt? sensing capabilities) connect to the console using Bluetooth. In Sony's favor, the PlayStation 3 has a technological edge over the Xbox 360, boasting next?generation Blu?ray DVD compatibility and a graphics processing unit capable of pumping out pixels at the hitherto unimaginable??for console gaming??1080p high?definition resolution level. For its part, Microsoft's console uses current?generation DVDs, with resolutions topping out at 1080i and 720p. That's still high? definition, but in a future where 1080p televisions will be the gold standard of HD performance, the PS3 wins the numbers game.
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Thus in this market one could rival the competition by being the first to introduce a new technological innovation to the market. Product need: (Online Gaming) XBox 360 and recognised the gamers need to boast about their gaming scores to the world. One way in which Xbox has ensured that progress of a user can be talked about is the XBox 360 Live with a higher cost. Both Xbox 360 models (Arcade, Elite) come with Microsoft's Xbox LIVE Silver membership, which basically allows you to create a Gamertag and message friends. If you want Netflix, Facebook, Twitter, and online multiplayer support, you'll have to upgrade to Xbox LIVE Gold, which costs. Not to be left behind the PS3 currently offers online services called PlayStation Plus including competitive multiplayer at no additional cost (though a "premium" service may be in the offing). Both Xbox Live Gold and Silver members have access to downloadable content like demos and game trailers; however, some Xbox Live Gold content becomes available to Silver members a week later. According to Sony, the PlayStation Plus "Exclusives" include "full game trial" as well as "select early demos". PlayStation Plus offers a "Full Game Trial". According to Sony, that means players can play a game for up to one hour and purchase the title to unlock trophies and continue said title. Derived demand: The demand for the games arises when the XBox or PS is launched. Similarly, when a certain collection of games is liked by the consumers, the derived demand for the console increases. A new methodology is formed to estimate the demand for video game consoles. In order to understand how vertical integration impacts console price competition, my analysis extends the empirical industrial organization literature by constructing a new methodology which allows consumer demand for video game consoles to depend upon the set of available video games rather than only the number of games. The estimation technique differs from prior research by incorporating video game heterogeneity and software competition into the indirect network effect. The XBOX 360 has a huge head on Online gaming. 1 year is an eternity in gaming. Almost all multi? platform developers have made the XBOX 360 their primary platform due to timing of release?to? market; this means the games will look and perform better on the 360. 14
Promotion strategies: Each new step further for both the consoles have to communicate well to the world. Thus creating a desire for the best that technology has to offer. Creating a buzz about the new product launches has always worked in their favour ? Microsoft's Xbox 360 had its own viral marketing campaign (via Ourcolony.net, the sanctioned source of many leaked photos preceding its launch) and rode a glitzy wave of publicity that encompassed high?profile keynote speeches and a star?studded MTV special. MTV accidentally revealing the ;launch month for the console created a lot of buzz. ? Meanwhile, aside from sporadic press releases touting the power of the company's next? generation Cell processor, we heard little to nothing from Sony and its highly anticipated PlayStation 3; fans hoping for "official" leaks of teaser images and hard specs were left disappointed. Launch buzz: (sold out) Electronics stores in Japan have sold out of PlayStation 3 consoles after thousands of gamers queued for hours in the cold to buy them. Large queues meant some shoppers were turned away even before stores opened at 0700 local time. The console officially went on sale on 11 November but Sony only made 100,000 machines available on launch day. Instead of opening at midnight, stores organised lotteries to decide who in the queue would get a long?awaited PS3. In comparison XBox 360 did not have a good launch. More than half of initial shipment remained on shelves after two days, fewer than one game sold per console. From a sellout at the Shibuya Tsutaya Shopping Center Xbox 360 launch party to stacks of unwanted systems piled up behind store counters, anecdotal evidence of the success or failure of Microsoft's latest attempt to get a foothold in Japan was everywhere this weekend. Today some actual numbers are trickling in. Time of Market Entry strategies: The Xbox 360 hit stores in time for the holidays in 2005, well in advance of the PlayStation 3's 2006 release date. Furthermore, Microsoft deviously announced that Halo 3, the latest sequel in its staggeringly popular shooter franchise, will deliberately launch on the same day as Sony's new console. 15
Pricing strategies: The prices offered by Microsoft had to be comparable to PS when it launched. Since the additional feature present in the product would definitely increase the price the availability of features is given as optional. Thus comparing base prices the Xbox 360 appears to be a more value for money option. The additional costs over the base price that are accounted for with the additional memory and online features are accepted by consumers. Competition from Nintendo Wii: (not only keeping track of each other but other competition) An Additional competitor to the gaming console market is Wii. Nintendo Wii provided the user to move about and play various games by moving about. However both Sony and Micrisoft have launched versions of PS and Xbox to combat the Wii feature uniqueness. Sony launched PS move and Microsoft launched Xbox Kinect. Nintendo really deserves some recognition here. They blazed the path in this field, educating and showing consumers why motion control deserves a spot in their living room. Millions and millions of people have used and feel in love with the Wii over the last few years and now both Microsoft and Sony are ready to steal a lot of consumers into their world. The two camps are radically different. Kinect touts full body control of up to two people at one time. Tracking is accurate and seemingly lag?free. But the games are virtual Wii?clones. It’s clear the market that Microsoft is primarily targeting even though there will be some more adult titles like Star Wars and Metal Gear Solid. Conclusion: Some have questioned whether gamers really even need a next?generation console so soon. But when the choice is between these two systems, the likely outcome is that both consoles will be tremendously successful. 16
CASE STUDY 3: Maruti v/s the challengers
Maruti is the undisputed leader in the Indian Automobile Industry. It is the leader in terms of volumes as well as revenues. It has a 45% market share in the Indian passenger car market. It has maintained this position for about 2 decades. The primary reasons for Maruti to do so are strong market positioning and strategies to defend and expand the market share. Also, with India’s economic prosperity, the overall market also expanded. To understand how Maruti has been the market leader, it is necessary to record the strategy developed and brand equity that Maruti has built over its course of existence.
The Launch of the Maruti 800 in 1983
l
Maruti Udyog Ltd. (as it was called then) was established in 1981 as a JV between the
Government of India and Suzuki Ltd. of Japan. The roots of liberalization that was to come later in 1991 were, perhaps, laid here. The Maruti 800 (old) was launched in 1983. It was launched to become a people’s car. In those days, the only other Indian cars were the Premier Padmini (Fiat 1100) and Hindustan Motor’s Ambassador. Initially, compared to these 6 seaters (and more, considering the size of families that travelled in cars during those days), Maruti 800 was looked upon with apprehensions regarding its capacity to accommodate people and whether this small car would be safe enough. These doubts were dismissed when the first users were surprised by the smoothness and briskness of the
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engine. Compared to the harsher and crankier engines, here was Maruti 800 with a very smooth and easy drive. Around the world, there have been particular models manufactured which have captured
people’s imagery for the car company and have subsequently led to building of the brand. The Volkswagen Beetle in Germany and many other countries became hugely popular as the people’s car and created the brand image for Volkswagen for generations to follow. Similarly, the Fiat 500 and the Mini Cooper became hugely popular as the people’s car in Italy and England respectively. Maruti 800 was a symbol of prosperity in ‘Free India’. When launched, cars were primarily bought by the ‘Vyaapari’ and ‘elite’ class only, who travelled in Ambassadors or Fiats and some of them had foreign cars such as the Ford Safari, Dodge, etc. Maruti was launched with the sole prerogative of becoming the commute option to the common man of India by being affordable and performance?driven at the same time.
Maruti in the early 90s
Maruti had clearly emerged as the market leader in the 90s. In the early part, it had introduced new models such as the new Maruti 800, Omni, Gypsy and in 1993, Maruti 1000, its first sedan. It had a range in its product portfolio. Still, Maruti 800 was the leading selling car by a huge margin. It had successfully introduced another compact car, Zen, in this decade, priced over a lakh higher than the 800. Maruti enjoyed monopoly in the Indian passenger car market as other players such as Hindustan Motors and Premier Automobiles Ltd. had dwindling numbers and continued to still produce outdated models such as the Padmini, Ambassador, 118NE, Contessa. Tata Motors was still a very marginal player catering to a different marginal segment through models such as Sierra and Estate.
A semblance of a challenger
In end 1995, Daewoo Motors of South Korea in a JV with DCM of India launched the Cielo. This was the first car launched as a direct result of the liberalisation policy of 1991. Cielo was packed with features such as power steering, power windows, attractive colours and car stereo. In order to counter this threat, Maruti introduced the re?jigged Esteem ’98 with features such as power steering, power windows, stereo and Body coloured bumpers to achieve parity. This was a success and Maruti never really allowed Cielo to be a threat in the sedan market. 18
The real challengers
After the Cielo, various foreign entrants entered the Indian market. With India’s growing economic prowess, the buying power of the consumer had increased. Hence, most foreign brands such as Honda, Mitsubishi, Toyota launched their cars in the then C?segment of sedan cars or tried to explore newer markets (Qualis in the MUV market). They could not compete with Maruti in the price war and did not enter the segment of compact cars. However, in end of the 90s, Hyundai and Daewoo came with models that could challenge Maruti in the compact car segment. Hyundai Santro was launched with huge fanfare and they roped in Shah Rukh Khan as their brand ambassador. The heavy media publicity helped Santro receive very good opening bookings. Santro was positioned as a roomier compact car with emphasis laid on its ‘Tallboy’ design. Daewoo launched the ‘Matiz’ as a small and cute city car. Also, Tata launched the ‘Indica’ – a spacious hatchback. Indica was also available in the Diesel variant at a very attractive price. Maruti had pre?empted this competition to a certain extent and had also, been reactive to an extent. It had added ‘Alto’ as an alternative to the now ageing Maruti 800. To take on the Santro, Maruti launched the ‘Wagon R’ tallboy hatchback.
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Maruti in the new millennium
With Santro gaining numbers in the market, Maruti had realised that it had to start leveraging its image. It started promoting its extensive service network and harping on the ‘value for money’ point through the superior mileage campaign – ‘Petrol khatam hi nahin hon da.’ In 2003, Maruti launched the ‘Swift’. Swift was heavily advertised and for the first time, media?resisting Maruti invited the media to its launch and test ride day. Maruti was serious on earning parity as far as promotions were concerned. Also, ‘Swift’ being an impressive looking and performing car, helped Maruti expand its market share.
In the 2000s, more and more competitors arose in the compact car segment. What Maruti did was something similar to the Hindustan Unilever Ltd. market share policy at the expense of cannibalization. It kept models in every price band in the compact car segment and in every price band, there were 2 or more options. The 2?3 lakh segment has Alto (the highest selling car in India), 3?4.5 lakh bracket has Zen Estillo, A?star, Wagon – R and above 4 lakh segment has Swift and Ritz. Maruti also has a competitive advantage through easy finance, pre?owned cars buy?back (Maruti True Value) and the most extensive and efficient service network. The pre?owned cars buy?back has also helped Maruti increase customer loyalty and introduced 2?wheeler customers to the Maruti brand. Maruti has innovated itself into superior engine cars with the new Kappa engines and realising the potential for diesels, has a dedicated Diesel engine manufacturing facility of upto 1 lakh units p.a. 20
Analysis
Maruti has been able to thwart the challengers and maintain its high market share through the strategy of defending the market share. It has continuously refined its product portfolio, advertised heavily and innovated itself through engine offerings. This has allowed to it maintain its competitive advantage by matching the points of parity, while leveraging its points of difference through the extensive service network and ‘value for money’ ? mileage. This constantly evolving image has helped Maruti maintain its image of the preferred car and the first car for any Indian family and a young Indian upstart, an image and trust that the customers have for Maruti since its establishment.
The challenges ahead lie in makers like Tata innovating with low cost cars such as the ‘Nano’. Maruti has indicated plans of a new lost cost car development. It can, perhaps, also promote the Alto as a better option to the Nano. For eg. Most Tata Nano booked are A/C variants which cost about Rs. 1.5 lakh and this price will rise. Most of the buyers buy through the instalment schemes. So, if a Nano has a Rs. 2000, EMI, Alto (priced at Rs. 2.75 lakh) can be promoted as a Rs 3000 – 3250 EMI car and Alto, definitely has more features and cabin space (atleast as far as appearance). Other thing is instead of allowing shifting of the two?wheeler owners to the Nano, Maruti true value dealerships can entice them to be Maruti users and with usage, they will be loyal to Maruti and buy a new Maruti as their next car. 21
doc_447747635.pdf
Lays v/s Bingo, Strategies Bingo used to challenge the leader i.e. Frito Lays, Promotional Wars between Bingo and Frito Lays.Playstation v/s Xbox, Strategies used by PlayStation & Xbox, CASE STUDY 3: Maruti v/s the challengers.
MARKET LEADERS AND CHALLENGERS
GROUP MEMBERS
ARPITA DESAI (104) CONNIE D’SOUZA (110) SWAPNIL KANADE (123) CHINTAN SHAH (144)
MARKETING STRATEGY PROJECT
Table of Contents
INTRODUCTION ............................................................................................................................................. 3 STRATEGIES FOR MARKET LEADERS.............................................................................................................. 4 STRATEGIES FOR MARKET CHALLENGERS: ................................................................................................... 5 . CASE STUDY 1: Lays v/s Bingo ....................................................................................................................... 6 Overview of Indian Snack Market ............................................................................................................. 6 Strategies Bingo used to challenge the leader i.e. Frito Lays ................................................................... 7 Promotional Wars between Bingo and Frito Lays .................................................................................. 10 CASE STUDY 2: Playstation v/s Xbox ........................................................................................................... 12 Overview of the international Video Game Console market: ................................................................ 12 . Strategies used by PlayStation & Xbox ................................................................................................... 13 CASE STUDY 3: Maruti v/s the challengers ................................................................................................. 17 The Launch of the Maruti 800 in 1983 .................................................................................................... 17 Maruti in the early 90s ............................................................................................................................ 18 A semblance of a challenger ................................................................................................................... 18 The real challengers ................................................................................................................................ 19 Maruti in the new millennium ................................................................................................................ 20 Analysis ................................................................................................................................................... 21 2
INTRODUCTION
An industry is fragmented into various types of firms. The fragmentation depends on the type of industry also. Some industries are highly fragmented while some have clear competitors. The strategy in each of such industries differs according to the type of competition. Market leader: In the majority of industries there is one firm that is generally recognized to be the leader. It typically has the largest market share and, by virtue of its pricing, advertising intensity, distribution coverage, technological advance and rate of new product introductions, it determines the nature, pace and bases of competition. It is this dominance that typically provides the benchmark for other companies in the industry. Challenger: Firms with a slightly smaller market share tends to be in the challenger category. They may choose to adopt an aggressive stance and attack the leader in order to gain market share. Follower: Firms with a slightly smaller market share but those who do not adopt an aggressive stance against the leader and tend to follow their strategies are termed as the followers. Market nichers: Virtually every industry has a series of small firms that survive, and indeed often prosper, by choosing to specialize in parts of the market that are too limited in size and potential to be of real interest to larger firms. A case in point is Morgan, specializing in traditional sports cars. By concentrating their efforts in this way, market nichers are able to build up specialist market knowledge and avoid expensive head?on fights with larger companies. Market leader and challenger may enter into a war of sorts and ultimately the one who has a better strategy and implemented it successfully will be the winner.
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STRATEGIES FOR MARKET LEADERS
Although a position of market leadership has undoubted attractions, in terms of both the scope that often exists to influence others and a possibly higher return on investment, leaders have all too often in the past proved to be vulnerable in the face of an attack from a challenger or when faced with the need for a major technological change. If, therefore, a market leader is to remain as the dominant company; it needs to defend its position constantly. In doing this, there are three major areas to which the marketing strategist needs to pay attention: 1. How best to expand the total market? 2. How to protect the organization’s current share of the market? 3. How to increase market share? The following strategies can be used:
Expand Market Share
•Target non ? users •Increase usage rate •Identify new uses of product
Defend existing share
•Continue refining competitive advantage •Proactive stance •Heavy advertisement •Strong customer and distribution relationships
Expansion of market share
•Heavy advertisement •Creative pricing •New product development •Geographic expansion • Mergers and Acquisitions
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STRATEGIES FOR MARKET CHALLENGERS:
Challengers develop a critical insight which helps them to challenge the leader. ? ? ? Reconfiguration Redefining the market High spending (To create brand awareness / equity, Setting up technological infrastructure)
The success or failure of attacks depends on whether the challenger:
? ? ? ?
Is able to sustain attacks over time. Attacks in a way that is damaging to the market leader. Is perceived to be different to the market leader. Is able to provide comparable product thereby offering a genuine alternative.
The various strategies that can be used are: ? ? ? ? ? ? ? ? ? ? Price cuts Innovations (Product / service) Distribution innovations Heavy advertising Market development Meaningful, clear positioning Range High Value addition Create prestige Cost reduction
Market leaders can be attacked at any time, but they are best attacked when they pose the least resistance to the challenger. This can be achieved by: Attacking the leader when it is distracted: Distractions occur during changes in senior management, times of downsizing, times of ownership changes, negative media coverage, regulatory intervention or other major incidents that occupy the leader’s attention. Attacking the leader where it is least likely to respond: The market leader may not retaliate if it does not value the territory that you are attacking or it deems it to be unimportant. This might be because the target market is too small to warrant a market leader pursuing it. A challenger may win profitable market share by collecting multiple uncontested segments in its armory. Attacking the leader when market chaos is occurring. In much the same way that leaders get distracted by internal matters, leaders can also be forced into scattering resources if too many attacks take place simultaneously. Challengers can muster support from allies to create chaos – and this enables territory to be taken from the leader. 5
CASE STUDY 1: Lays v/s Bingo Overview of Indian Snack Market
According to a study by McKinsey & Co, the Indian food market will grow two fold by 2025 with the rapidly growing Indian economy and improving lifestyles of Indians contributing in a big way to this growth. Quoting the study by McKinsey & Co, a report by the US Department of Agriculture stated "The market size for the food consumption category in India is expected to grow from US$ 155 billion in 2005 to US$ 344 billion in 2025 at a compound annual growth rate of 4.1 per cent." The Indian snacks market is worth around US$ 3 billion, with the organized segment taking half the market share, and has an annual growth rate of 15?20 per cent. The unorganized snacks market is worth US$ 1.56 billion, with a growth rate of 7?8 per cent per year. There are approximately 1,000 types of snacks and another 300 types of savouries being sold in the Indian market today. Indians in the western regions eat the maximum amount of snacks, followed by the people in northern region. "Consumers are willing to pay a premium for both value?added private and branded products, creating immense opportunities for manufacturers and retailers,' the report stated. Potato chips and potato?based items are the most popular products with more than 85 per cent share of the salty snack market, the report said. In the organized potato chips market, some of the leading players are Pepsi, Haldiram's, ITC, Britannia, Bikano, Balaji, Marico, Dabur etc. FRITO LAYS: Frito?lays is a division of PepsiCo Inc which manufactures, markets and sells a variety of corn chips, potato chips and other snack foods. ITC (Bingo): ITC Limited is a multi?business conglomerate, has diversified presence in FMCG, Hotels, Paperboards and Packaging, Agri Business and Information Technology. Bingo adopted challenger strategies of flanking and frontal attack in order to attack the market leader i.e. Frito lays
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Strategies Bingo used to challenge the leader i.e. Frito Lays
Segmentation ? Snacks category is divided into the Traditional segment (Bhujia, Chana etc) and the Western segment (potato chips, cheese balls, puffs etc) and the Finger snacks segment dominated by the Frito Lay group. ? ? The total market size could be to the tune of Rs 4,000 crore, of which Rs 2,000 would be organised, growing at 25 percent per annum. The unorganised sector could be growing faster than the organised sector. You can always see a chaat?papriwala doing brisk business every time you walk down the road. Promotion ? ITC spent nearly 40% of their media budget on digital media, because they felt this would be the best way to connect with the market. Bingo brand building was through the digital media, something unheard of, for Indian companies. In doing this two things were important. ? First was consumer insight and for that ITC invested heavily finding out what tickled the Indian consumer’s taste bud, what turned him on. ITC put a whole team of chefs in place to craft new flavours for this category. Idea was to tempt the consumer with flavours that are exotic, but not strange, somewhat different from what is available in the market. ? The second is the manner in which you launch your product, the communication/execution part and the distribution strategy. ITC evolved a completely new and modern merchandising solution for the launch which included attractive stands and other display material for Bingo at the retailer ends. The communication strategy with a heavy dose of humour has also been different and daring. ? ? Bingo launch was around the 07 World Cup. The innovative ad was telecasted on almost all channels? national, regional, sports, news and kids’ channel. The sudden media blitzkrieg left a mark on the audience mind. The objective was achieved as Bingo was in the pure impulse purchase category.
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In certain areas market share touched 50% and not less than 15% in other areas. ITC launched website www.bingeonbingo.com to target the youth and then www.petkapaap.com for its “Bingo mad Angles? Aachari Masti”.
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Viral marketing was used to create brand awareness. It also sponsored various events at colleges and a lot of happenings of channel V? targeting the youth.
Customization and SKUs ? Bingo has 16 variants (priced at Rs 5, Rs 10 and Rs 20 a pack). A good majority of these are region?inspired. Like the mustard for eastern parts and paneer tikka for North Indian market. ? But there are some generic national flavours, such as premium salt, tomato and chilly formats. The potato chips are available in many flavours Masala Chaas, Chatpata Nimbu and Paneer Tikka. ? In addition to these 4 flavours, the classic flavours of Masala, Tomato and Salted are also available. In the finger snacks segment pakoda inspired chips like Live Wires, Khakra inspired Mad Angles, and corn based chips like Tedhe Medhe. ? On the other hand, several SKUs caused problems in forecasting and stocking. Retailers were taking a small variety of each variant leading to frequent stock out situation for popular ones. Packaging and Production ? ? ? ? The packaging of the product has been slick and eye catching. Bingo is available in packets in myriad colours like orange, blue, red, yellow, green and purple. Not only do bright colours attract the attention of little children but also of adults. Snack food is an impulse buy. The bright coloured stands with the Bingo label on top make it more visible in a shop. Bingo is the most seen brand in snacks and thus increasing its chances of being bought. On the production front, the strong farm linkages of ITC (e?Choupal) ensure that only the selected grades of raw materials are used for Bingo. 8
Distribution ? The large, country wide distribution network of ITC built up over the years was a key factor in Bingo’s ubiquitous availability. In small town’s villages, one won’t find a Lays or a Haldiram but a Bingo along with the local unbranded snacks. ? It has also entered into an agreement with the Food Bazaar chain of outlets for retailing of Bingo which is not there for Frito Lays and Haldiram. Bingo was also offering a 4% to 5% higher margin than that of for Frito Lays. Overall, ITC is fast catching up Frito Lays’ national reach of 8 lacs outlets. Pricing ? Bingo learnt from a failed pricing strategy of Frito Lays. Lays increased its price from Rs 10 for 35 grams to Rs 15 for 45 grams. This affected the sales of Lays and it finally went back to the Rs 10 formula. ? Bingo priced its 16 SKUs at Rs 5, Rs 10 and Rs 20 a pack and had a consistent pricing strategy. Combing this pricing with the innovation of the product won the heart of the Indian consumer and also higher margin for channel members made them happy.
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Promotional Wars between Bingo and Frito Lays
? ?
The product launch was preceded by an online viral campaign, ‘Wait or Suffer’. The product was introduced with a television, print and outdoor campaign. The madness was also taken offline with mall activities in nine cities across India. Customer interest was retained with interactive games and product tasting sessions. This activity saw participation from 2,500 people and experienced close to 250,000 footfalls in the first four months.
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Various radio activities were done in Delhi, Mumbai and Bangalore to increase brand awareness. Bingo also ran a contest when Aerosmith was on their official tour to India. Contestants were supposed to record their favourite Aerosmith song in a local Indian language and submit their entries.
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Since it was a youth brand, digital media was used heavily for promotions. The Bingo National Gaming Championship was one such example. The event was held in four cities and saw participation from 25,000 contenders. Bingo Remix Nights were held in clubs across the country.
? ?
A fun website, bingeonbingo.com was created to increase awareness about the brand. O&M claimed that the 360 degree campaign helped Bingo gain 12 per cent market share nationally, as opposed to their initial target of 8 percent. Bingo had 16 per cent market share in metros and a market share as high as 66 per cent in certain cities
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? ?
To pump up volumes, FritoLay is in the process of rolling out an aggressive marketing campaign led by its star endorsers, Saif Ali Khan, MS Dhoni and Juhi Chawla To maintain top of the mind recall among its customers the brand has undertaken several unique communication initiatives. An example is a campaign called "Chala Change ka Chakkar," which was an umbrella campaign for Frito Lay India’s entire product portfolio (Lay’s, Kurkure, Cheetos, Uncle Chipps, and Lehar).
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This promotion allowed chosen consumers to live a day in the life of an Indian Bollywood celebrity (who are the brand endorsers) like Juhi Chawla or Saif Ali Khan. The idea was to generate excitement around the brand and have it stand out in the clutter of existing brands.
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The "Kurkure Chai Time Achiever’s Award" was a contest launched by the brand where families were invited to submit interesting recipes made with Kurkure. The winning family would have the opportunity to be famous and have their photograph featured on one million Kurkure packs.
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This direct marketing campaign was supported through television advertising, where Indian celebrity Juhi Chawla, Kurkure’s brand ambassador, announced the winners of the competition. The contest was also publicized through the websitehttp://kurkure.co.in, specifically designed to promote the contest. Using the website as a strategic tool for promotion helped the brand appeal to a young audience that spends a considerable amount of time surfing the web.
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Another novel branding initiative was a tie?up with South Western Railways in India to have trains called the "Kurkure Express." These were special trains that operated only during the holiday season. The brand was featured on reservation charts, coach indication slips, and during any announcements about the train. This outdoor media was a unique way to target families who travel by train during the holidays.
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CASE STUDY 2: Playstation v/s Xbox Overview of the international Video Game Console market:
The Video Game Console market is constantly evolving. As the market is affected by the changes of improving technology, the market players have to keep updating their products to be one step ahead of their competition. The Video game console first emerged in 1972 from computer games. The technology used for the games have evolved from cartridges to CDs to DVDs then to Blue Ray Discs. Each technological change meant a better quality product output. Console makers are taking different approaches to designing their products; some go for hardcore processing power, others focus more on online gaming.
PlayStation Sony's PlayStation was released in Japan on December 3, 1994 and in North America on September 9, 1995. Sony took what it had and marketed it off as a Sony?branded console. The PlayStation spawned a whole lineup of consoles (PlayStation: CDs; PlayStation 2 : smaller version & DVDs; PlayStation3: hard drive and ability to play Blu?ray discs) from generation to generation and has earned Sony great respect as a video game company, becoming the first video game system to sell over 100 million consoles. XBox: Microsoft's Xbox, released on November 15, 2001 in North America, was the company's first video game console. The first console to employ a hard drive right out of the box to save games, and had similar 12
hardware specifications to a low?end desktop computer at the time of its release. Xbox also made technological upgrades over time, to benefit the customer.
Strategies used by PlayStation & Xbox
Technological upgrades: ? PlayStation used CDs to store games. Sony dominated most of the software market using CD instead of cartridges. This is how Sony’s Play Station became the leader in the Video Game Console market. Sony kept up with technology and in 2004 redesigned the console into a smaller version. PS was also the first home game console to be able to play DVDs... Thus with these technological upgrade Sony’s PlayStation kept its leadership position. ? Thus to challenge the leader a new technological step up was required. Microsoft's Xbox was the first console to employ a hard drive right out of the box to save games, and had similar hardware specifications to a low?end desktop computer at the time of its release. The Xbox was the first console to include an Ethernet port and offered high speed online gaming through the Xbox LIVE service. ? Microsoft kicked off the seventh generation with the release of the Xbox 360 in 2005. It featured processing power never before seen until Sony rivaled back with its Playstation 3 one year later. It additionally played DVD's as well as continued its Xbox Live system, There are many versions of the console; the newest one is the Xbox 360 S (for Slim) announced at a press conference before E3 2010 ? Sony PlayStation 3 came with a hard drive and it is able to play Blu?ray Disc movies and games out of the box. The PlayStation 3 was the first video game console to support HDMI output out of the box, utilizing full 1080p resolution. Up to seven devices (including controllers, with tilt? sensing capabilities) connect to the console using Bluetooth. In Sony's favor, the PlayStation 3 has a technological edge over the Xbox 360, boasting next?generation Blu?ray DVD compatibility and a graphics processing unit capable of pumping out pixels at the hitherto unimaginable??for console gaming??1080p high?definition resolution level. For its part, Microsoft's console uses current?generation DVDs, with resolutions topping out at 1080i and 720p. That's still high? definition, but in a future where 1080p televisions will be the gold standard of HD performance, the PS3 wins the numbers game.
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Thus in this market one could rival the competition by being the first to introduce a new technological innovation to the market. Product need: (Online Gaming) XBox 360 and recognised the gamers need to boast about their gaming scores to the world. One way in which Xbox has ensured that progress of a user can be talked about is the XBox 360 Live with a higher cost. Both Xbox 360 models (Arcade, Elite) come with Microsoft's Xbox LIVE Silver membership, which basically allows you to create a Gamertag and message friends. If you want Netflix, Facebook, Twitter, and online multiplayer support, you'll have to upgrade to Xbox LIVE Gold, which costs. Not to be left behind the PS3 currently offers online services called PlayStation Plus including competitive multiplayer at no additional cost (though a "premium" service may be in the offing). Both Xbox Live Gold and Silver members have access to downloadable content like demos and game trailers; however, some Xbox Live Gold content becomes available to Silver members a week later. According to Sony, the PlayStation Plus "Exclusives" include "full game trial" as well as "select early demos". PlayStation Plus offers a "Full Game Trial". According to Sony, that means players can play a game for up to one hour and purchase the title to unlock trophies and continue said title. Derived demand: The demand for the games arises when the XBox or PS is launched. Similarly, when a certain collection of games is liked by the consumers, the derived demand for the console increases. A new methodology is formed to estimate the demand for video game consoles. In order to understand how vertical integration impacts console price competition, my analysis extends the empirical industrial organization literature by constructing a new methodology which allows consumer demand for video game consoles to depend upon the set of available video games rather than only the number of games. The estimation technique differs from prior research by incorporating video game heterogeneity and software competition into the indirect network effect. The XBOX 360 has a huge head on Online gaming. 1 year is an eternity in gaming. Almost all multi? platform developers have made the XBOX 360 their primary platform due to timing of release?to? market; this means the games will look and perform better on the 360. 14
Promotion strategies: Each new step further for both the consoles have to communicate well to the world. Thus creating a desire for the best that technology has to offer. Creating a buzz about the new product launches has always worked in their favour ? Microsoft's Xbox 360 had its own viral marketing campaign (via Ourcolony.net, the sanctioned source of many leaked photos preceding its launch) and rode a glitzy wave of publicity that encompassed high?profile keynote speeches and a star?studded MTV special. MTV accidentally revealing the ;launch month for the console created a lot of buzz. ? Meanwhile, aside from sporadic press releases touting the power of the company's next? generation Cell processor, we heard little to nothing from Sony and its highly anticipated PlayStation 3; fans hoping for "official" leaks of teaser images and hard specs were left disappointed. Launch buzz: (sold out) Electronics stores in Japan have sold out of PlayStation 3 consoles after thousands of gamers queued for hours in the cold to buy them. Large queues meant some shoppers were turned away even before stores opened at 0700 local time. The console officially went on sale on 11 November but Sony only made 100,000 machines available on launch day. Instead of opening at midnight, stores organised lotteries to decide who in the queue would get a long?awaited PS3. In comparison XBox 360 did not have a good launch. More than half of initial shipment remained on shelves after two days, fewer than one game sold per console. From a sellout at the Shibuya Tsutaya Shopping Center Xbox 360 launch party to stacks of unwanted systems piled up behind store counters, anecdotal evidence of the success or failure of Microsoft's latest attempt to get a foothold in Japan was everywhere this weekend. Today some actual numbers are trickling in. Time of Market Entry strategies: The Xbox 360 hit stores in time for the holidays in 2005, well in advance of the PlayStation 3's 2006 release date. Furthermore, Microsoft deviously announced that Halo 3, the latest sequel in its staggeringly popular shooter franchise, will deliberately launch on the same day as Sony's new console. 15
Pricing strategies: The prices offered by Microsoft had to be comparable to PS when it launched. Since the additional feature present in the product would definitely increase the price the availability of features is given as optional. Thus comparing base prices the Xbox 360 appears to be a more value for money option. The additional costs over the base price that are accounted for with the additional memory and online features are accepted by consumers. Competition from Nintendo Wii: (not only keeping track of each other but other competition) An Additional competitor to the gaming console market is Wii. Nintendo Wii provided the user to move about and play various games by moving about. However both Sony and Micrisoft have launched versions of PS and Xbox to combat the Wii feature uniqueness. Sony launched PS move and Microsoft launched Xbox Kinect. Nintendo really deserves some recognition here. They blazed the path in this field, educating and showing consumers why motion control deserves a spot in their living room. Millions and millions of people have used and feel in love with the Wii over the last few years and now both Microsoft and Sony are ready to steal a lot of consumers into their world. The two camps are radically different. Kinect touts full body control of up to two people at one time. Tracking is accurate and seemingly lag?free. But the games are virtual Wii?clones. It’s clear the market that Microsoft is primarily targeting even though there will be some more adult titles like Star Wars and Metal Gear Solid. Conclusion: Some have questioned whether gamers really even need a next?generation console so soon. But when the choice is between these two systems, the likely outcome is that both consoles will be tremendously successful. 16
CASE STUDY 3: Maruti v/s the challengers
Maruti is the undisputed leader in the Indian Automobile Industry. It is the leader in terms of volumes as well as revenues. It has a 45% market share in the Indian passenger car market. It has maintained this position for about 2 decades. The primary reasons for Maruti to do so are strong market positioning and strategies to defend and expand the market share. Also, with India’s economic prosperity, the overall market also expanded. To understand how Maruti has been the market leader, it is necessary to record the strategy developed and brand equity that Maruti has built over its course of existence.
The Launch of the Maruti 800 in 1983
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Maruti Udyog Ltd. (as it was called then) was established in 1981 as a JV between the
Government of India and Suzuki Ltd. of Japan. The roots of liberalization that was to come later in 1991 were, perhaps, laid here. The Maruti 800 (old) was launched in 1983. It was launched to become a people’s car. In those days, the only other Indian cars were the Premier Padmini (Fiat 1100) and Hindustan Motor’s Ambassador. Initially, compared to these 6 seaters (and more, considering the size of families that travelled in cars during those days), Maruti 800 was looked upon with apprehensions regarding its capacity to accommodate people and whether this small car would be safe enough. These doubts were dismissed when the first users were surprised by the smoothness and briskness of the
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engine. Compared to the harsher and crankier engines, here was Maruti 800 with a very smooth and easy drive. Around the world, there have been particular models manufactured which have captured
people’s imagery for the car company and have subsequently led to building of the brand. The Volkswagen Beetle in Germany and many other countries became hugely popular as the people’s car and created the brand image for Volkswagen for generations to follow. Similarly, the Fiat 500 and the Mini Cooper became hugely popular as the people’s car in Italy and England respectively. Maruti 800 was a symbol of prosperity in ‘Free India’. When launched, cars were primarily bought by the ‘Vyaapari’ and ‘elite’ class only, who travelled in Ambassadors or Fiats and some of them had foreign cars such as the Ford Safari, Dodge, etc. Maruti was launched with the sole prerogative of becoming the commute option to the common man of India by being affordable and performance?driven at the same time.
Maruti in the early 90s
Maruti had clearly emerged as the market leader in the 90s. In the early part, it had introduced new models such as the new Maruti 800, Omni, Gypsy and in 1993, Maruti 1000, its first sedan. It had a range in its product portfolio. Still, Maruti 800 was the leading selling car by a huge margin. It had successfully introduced another compact car, Zen, in this decade, priced over a lakh higher than the 800. Maruti enjoyed monopoly in the Indian passenger car market as other players such as Hindustan Motors and Premier Automobiles Ltd. had dwindling numbers and continued to still produce outdated models such as the Padmini, Ambassador, 118NE, Contessa. Tata Motors was still a very marginal player catering to a different marginal segment through models such as Sierra and Estate.
A semblance of a challenger
In end 1995, Daewoo Motors of South Korea in a JV with DCM of India launched the Cielo. This was the first car launched as a direct result of the liberalisation policy of 1991. Cielo was packed with features such as power steering, power windows, attractive colours and car stereo. In order to counter this threat, Maruti introduced the re?jigged Esteem ’98 with features such as power steering, power windows, stereo and Body coloured bumpers to achieve parity. This was a success and Maruti never really allowed Cielo to be a threat in the sedan market. 18
The real challengers
After the Cielo, various foreign entrants entered the Indian market. With India’s growing economic prowess, the buying power of the consumer had increased. Hence, most foreign brands such as Honda, Mitsubishi, Toyota launched their cars in the then C?segment of sedan cars or tried to explore newer markets (Qualis in the MUV market). They could not compete with Maruti in the price war and did not enter the segment of compact cars. However, in end of the 90s, Hyundai and Daewoo came with models that could challenge Maruti in the compact car segment. Hyundai Santro was launched with huge fanfare and they roped in Shah Rukh Khan as their brand ambassador. The heavy media publicity helped Santro receive very good opening bookings. Santro was positioned as a roomier compact car with emphasis laid on its ‘Tallboy’ design. Daewoo launched the ‘Matiz’ as a small and cute city car. Also, Tata launched the ‘Indica’ – a spacious hatchback. Indica was also available in the Diesel variant at a very attractive price. Maruti had pre?empted this competition to a certain extent and had also, been reactive to an extent. It had added ‘Alto’ as an alternative to the now ageing Maruti 800. To take on the Santro, Maruti launched the ‘Wagon R’ tallboy hatchback.
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Maruti in the new millennium
With Santro gaining numbers in the market, Maruti had realised that it had to start leveraging its image. It started promoting its extensive service network and harping on the ‘value for money’ point through the superior mileage campaign – ‘Petrol khatam hi nahin hon da.’ In 2003, Maruti launched the ‘Swift’. Swift was heavily advertised and for the first time, media?resisting Maruti invited the media to its launch and test ride day. Maruti was serious on earning parity as far as promotions were concerned. Also, ‘Swift’ being an impressive looking and performing car, helped Maruti expand its market share.
In the 2000s, more and more competitors arose in the compact car segment. What Maruti did was something similar to the Hindustan Unilever Ltd. market share policy at the expense of cannibalization. It kept models in every price band in the compact car segment and in every price band, there were 2 or more options. The 2?3 lakh segment has Alto (the highest selling car in India), 3?4.5 lakh bracket has Zen Estillo, A?star, Wagon – R and above 4 lakh segment has Swift and Ritz. Maruti also has a competitive advantage through easy finance, pre?owned cars buy?back (Maruti True Value) and the most extensive and efficient service network. The pre?owned cars buy?back has also helped Maruti increase customer loyalty and introduced 2?wheeler customers to the Maruti brand. Maruti has innovated itself into superior engine cars with the new Kappa engines and realising the potential for diesels, has a dedicated Diesel engine manufacturing facility of upto 1 lakh units p.a. 20
Analysis
Maruti has been able to thwart the challengers and maintain its high market share through the strategy of defending the market share. It has continuously refined its product portfolio, advertised heavily and innovated itself through engine offerings. This has allowed to it maintain its competitive advantage by matching the points of parity, while leveraging its points of difference through the extensive service network and ‘value for money’ ? mileage. This constantly evolving image has helped Maruti maintain its image of the preferred car and the first car for any Indian family and a young Indian upstart, an image and trust that the customers have for Maruti since its establishment.
The challenges ahead lie in makers like Tata innovating with low cost cars such as the ‘Nano’. Maruti has indicated plans of a new lost cost car development. It can, perhaps, also promote the Alto as a better option to the Nano. For eg. Most Tata Nano booked are A/C variants which cost about Rs. 1.5 lakh and this price will rise. Most of the buyers buy through the instalment schemes. So, if a Nano has a Rs. 2000, EMI, Alto (priced at Rs. 2.75 lakh) can be promoted as a Rs 3000 – 3250 EMI car and Alto, definitely has more features and cabin space (atleast as far as appearance). Other thing is instead of allowing shifting of the two?wheeler owners to the Nano, Maruti true value dealerships can entice them to be Maruti users and with usage, they will be loyal to Maruti and buy a new Maruti as their next car. 21
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