Strategies in Declining Product Markets
Table of Contents: 1. Introduction 2. Determining the Relative Attractiveness of the Declining Market 2.
1. Factors Affecting the Relative Attractiveness of a Declining Market 2. 2. Relative attractiveness of the Declining market for Promac Paints 3. Strategies in the Decline Phase 3.
1. Possible Strategies that can be implemented 3. 2. Strategies Promac Paints Can Consider During The Decline Phase 4. Conclusion: Why Promac Paints can be a Profitable survivor in the Paint Industry 5.
Reference List 1. Introduction
There are many reasons why a market goes into decline, such as new technologies, changing customer characteristics or preferences, and the development of substitute products. (Cant & Machado; 273) Promac Paints have successfully established itself in the building and painting market and have grown tremendously within a ten-year period. The launching of a revolutionary and inexpensive coating may possibly pose as a substantial threat to Promac Paints’ strong position in the market and may move Promac Paints into the declining stage of its product life cycle.
Because of this, Promac Paints will have to consider the relative attractiveness of the market and decide on which strategies to follow in this possible declining phase. Before an organisation considers whether to divest or liquidate, it is important to analyse a market for its relative attractiveness, since not all markets decline at the same rate or in the same manner.
(Cant ; Machado; 273) 2. Determining the Relative Attractiveness of the Declining Market 2. 1. Factors Affecting the Relative Attractiveness of a Declining Market
Promac Paints should consider three factors to help establish the attractiveness of a declining market: • Conditions of Demand This entails establishing the rate of decline which will determine whether there can be orderly withdrawal, or if quick and drastic action is needed. (Cant ; Machado; 273) • Exit barriers that affect the attractiveness of an industry Higher exit barriers will make the painting industry less attractive during the declining phase.
• The intensity of future competitive rivalry
If the remaining competitive rivalry will be intense, it may not be worthwhile to remain in the market. 2. 2. Relative attractiveness of the Declining market for Promac Paints With the introduction of a new revolutionary and inexpensive paint, quick action might be necessary due to the technological innovation. Promac paints however do have a large base of loyal customers which may help them generate profits to help prolong their survival. In essence, paint is not seen as having a specialised nature, but promac paints have managed to specialise their product offering and easily understandable packaging.
Promac paints’ customers have grown accustomed to knowing what product to choose by just looking at the colour band on the product. The exit barriers will be high for companies whose main focus and source of income is their paint products. Therefore it will definitely be a good idea for Promac to remain in business as long as possible. Businesses, like Builders warehouse, that do not focus on paint products as much and whose long-term survival is not as directly dependent on this will most probably not be as interested in remaining in the market and rather focus time and money on supplying more of their other products