Suppose you are a marketer for a U.S. manufacturer of pet supplies i.e.., food, treats, boarding supplies, OTC, prescription medicines, grooming supplies and toys. The domestic market for this category is very lucrative. The industry is expected to grow from $60 billion in 2015 to $63 billion in 2016. According to the http://www.americanpetproducts.org/pubs_survey.asp , 65% of U.S. households own a pet, which equates to 79.7 million homes. Your company captures about 12% market share while Nestle as market leader has about 30% share in the U.S. market. Two top executives have proposed expanding the company by opening retail stores and marketing pets on site – puppies, kittens, rabbits, birds, fish and the like. Applying Porter’s Five-Force Factor model to analyze the potential benefits and drawbacks of making a move like this. What market or product growth strategy will you pursue and why? How would you advise your company to proceed?
Additional reference sources: http://www.americanpetproducts.org/press_industrytrends.asp
Pet supplies market is set to grow as per the market survey. A five percent increase from year to year translates to billions of dollars in revenue. With over 79 million of US households owing pets, the market is huge and open for all. The giant Nestle as the market leader garners about 30 % of market share and our company at 12 % share is not really far behind.
The proposal by two executives to expand the company base by opening retail stores and market pets on site is credible and worth implementing. However, the company should rather have both i.e. pets and pet supplies at the same retail outlet. This will ensure market for both as consumers looking for pets would invariably look for pet supplies.
To recommend the company, Porter’s Five-Force Factor can be analyzed as follows:
1. Competition in the industry
Out of the total market, Nestle occupies 30 % and our company 12 %. This leaves over 50 % of market share in the hands of other smaller companies or with unorganized sector. There is therefore ample scope for expansion and clubbing together of pets and pet supplies at same retail site will definitely improve revenue collection. Not only sales will result on account of pet sales but also for pet supplies.
2. Potential of new entrants into the industry
There may already be players in the market for this kind of venture or potential threats by copy cats. However, the market size is big enough to absorb all.
3. Power of suppliers
This is something that the company already deals with respect to supplies of raw materials for its products. No company produces everything on its own and has to depend on suppliers. The suppliers do hold power on the market and the companies with robust supply network are able to garner major share of market with product availability and can also increase prices considering the demand supply scenario. Our suppliers for pet supplies are already on board and well managed as shown by the market share figure. We will have to strengthen the back channel supplies of different kinds of pets to ensure availability at all times. The company can even take bookings for certain pets in high demand to ensure customers are not lost.
4. Power of customers
Customers are kings and that is universally accepted. To ensure loyal customer base, the company can even club together pets and pet supplies as an incentive. A few weeks of pet supplies may be added together to selected pets as an attractive offer from time to time to entice customers. Customers may be inclined to purchase from our retail outlets looking at the offers which will be a win-win situation for both.
5. Threat of substitutes
This may not be really applicable for our kind of product and offer. A customer who is fond of live pets will not be satisfied by any artificial substitute. Similarly, pet food or other supplies will remain on demand as long as live pets are in demand by the customers.
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