Michael B. Septon
Missouri Western State College
When discussing external environmental analysis in the Principles of Marketing course, I emphasize the importance of understanding competition and show how this understanding guides marketers in the formulation of intelligent marketing strategies.
Too often, students enter the principles course believing that a firm's profitability and ultimate survival is based solely on its ability to compete on the basis of price. It is imperative that they understand that customers buy for reasons other than price, that a firm that offers good value and service for the dollar can compete successfully against lower priced rivals.
The following group project draws on actual research that has been conducted into the effects that a discount retailer like Wal-Mart has had on the communities in which it competes. Retailers in those towns, in order to survive, have had to develop strategies to negate Wal-Mart's price advantage, and this project provides students with an opportunity to think about factors other than price that might be important to consumers when they decide to purchase a product.
Development a Competitive Strategy
For a business firm, an important element to be monitored in the external environment is competition. After analyzing current and potential competitors, firms must decide whether or not to compete, determine the markets in which they will compete, and design a competitive strategy.
Recently, sociologists have begun to examine the impact that the Wal-Mart chain has had on the communities within which they operate. These researchers have found that many of the smaller retailers which carried merchandise in direct competition with Wal-Mart have closed their doors because they felt that there was no way that they could compete profitably against this discounting giant; indeed, some of the studies have shown that even the hint of a new Wal-Mart store has been enough to send established retailers packing.
You are a small retailer in a business of your choice in a small community. The local Chamber of Commerce has just announced that a new Wal-Mart store will begin construction within the next three months. Assume that whatever you have chosen as your retail business will place you in direct competition with Wal-Mart.
Anybody can up and quit, but quitters never win, so quitting is not an option for you; therefore, the answer to the first question, "Should we compete?" will be an emphatic YES, WE WILL! You're going to have to develop strategies to compete profitably against Wal-Mart. Cutting prices is not a legitimate option, since they have the resources to meet or beat any price you might choose. Instead, you're going to have to find ways to improve the benefits/satisfactions that consumers receive from your retail outlet.
Break into small groups and get creative; figure out things that your firm
can do that might be difficult for a large retailer to copy successfully. There
are always ways for David to beat Goliath, and it's your job to figure some of
these out. Your personal pride and the family fortune you inherited to start
your business are at stake here, so develop some strategies that will keep
customers shopping at your store rather that at Wal-Mart.
Great Ideas For Teaching Marketing is a supplement for the Lamb, Hair, McDaniel Marketing textbooks. Feel free to use any ideas that you find. You may also want to contribute your own ideas for inclusion in future additions. Unfortunately, we do not have the resources to research individual marketing topics.
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