To carry out a research of any significance, it has to be clear what relevant literature there is concerning the conduct of a market research, and how a comparative research can result in an increase in market share. Therefore this literature study will aim to answer the first part of the following final research question:
“Which market opportunities can lead to an increase of market share for industrial hydraulic winches in Europe and how can they be used?”
Before further deepening in the literature takes place, it is important to look back at the main purpose of this research. It is important not only create to a better understanding of the market for hydraulic winches in Europe, but also to evaluate new business opportunities.
To answer the main research question, the literature review is divided into three parts. First, models for market opportunity evaluation are discussed. Next, necessary âingredientsâ for conducting and completing the chosen model are reviewed. Finally, a research instrument will be discussed for acquiring information. This will also be an introductory part for the research methodology.
This research is conducted in order to find and evaluate new business opportunities in the European market. The aim is to evaluate the opportunities of the market and assess how well the case company can seize these opportunities. Therefore, it is essential to know the current and future situation of the marketplace and compare them with the case companyâs internal possibilities. This requires an abundance of information from various sources that have to be analysed systematically. This way none of the opportunities will be missed and simultaneously the company can gain competitive advantage.
In this literature review the guidelines defined by Webster & Watson (2002) were used. To cover of the top journals in this field search engines such as Google Scholar, Business Source Premier, Sciencedirect and LexisNexisresearch are used as information sources. The use of search options was systematic. A selection of keywords was created and the items found were selected on empirical usability and thus their relevance to the focus of the research. Then the articles were assessed on the basis of title and abstracts. The relevant reviewed articles are then judged on the content. The articles were analysed for relevant references and a citation analysis was made to establish the general validity of the articles selected.
Market versus marketing research
It is important to understand the definition of educational marketing, it was created by Kotler and Fox in 1985, and this was stated in the following form: âThe analysis, planning, implementation and control of carefully formulated programs designed to bring about voluntary exchanges of values with a target market to achieve organizational objectives (Kotler & Fox, 1985).â
When talking about the terms âmarket researchâ and âmarketing researchâ these are often used interchangeably. This is incorrect and the distinctive characteristics of each should be noted (Palmer, 2009).
â¢ Market research is about determining the characteristics of a market, for example in terms of its size, growth rates, market segments, and competitor positioning;
â¢ Marketing research is about researching the whole of a company’s marketing processes. In most organizations, such research would probably include monitoring the effectiveness of its advertising, intermediaries, and pricing position.
Usually those two terms are used together because market and marketing research can interconnect during the process of identifying product positioning.
2.1.1 Models for analysing the market
Segmentation â” Targeting â” Positioning
Also called the âstrategic marketing planningâ it is a tool for giving structure to the process starting with the mission and vision statement to the selection of target markets, it helps in determining the marketing mix and positioning for a specific product or service.
Kotler states that the organization can be seen as a value creation and delivery sequence. A strategist in the first phase “proceeds to segment the market, select the appropriate market target, and develop the offer’s value positioning. The formula – segmentation, targeting, positioning (STP) – is the essence of strategic marketing.” (Kotler, 1994, p. 93).
To start off with market segmentation, it can be said that it is an adaptive strategy. It selects a part of the market with the goal of selecting one or more market segments, with the help of marketing mixes, the organization can adapt to particular market needs.
The process of market segmentation is not only an adaptive strategy; it can also be used for selecting segments in which a firm is well suited to serve. This can be done with the use of competitive advantages and reducing the cost of adaptation in order to gain a niche. This type of market segmentation can be used for developing a competitive scope, which can have a “powerful effect on competitive advantage because it shapes the configuration of the value chain.” (Porter, 1985, p. 53).
Because of the difference in segments and structural attractiveness, Porter states that their requirement for competitive advantage brings about two crucial strategic questions: âthe determination of (a) where in an industry to compete and (b) in which segments would focus strategies be sustainable by building barriers between segments.â (Porter, 1985, p. 231)
Market segmentation is a useful tool for providing higher value to customers by developing a market mix that focuses on the needs of the selected segment. In the case of Paccar Winch it is also useful in a market with distinct sets of value preferences, or when the choice is made to create value preferences among a set of customers.
This model is used for determining the marketing mix and positioning for a specific product or service, but it lacks the tools for analysing the market. It can be used in determining a marketing mix and competitive advantage; therefore it can be helpful in a follow up research.
The Market Opportunity Analysis
A highly practical model that can be used for analysing business opportunities is the market opportunity analysis model (MOA) (Woodruff & Gardial, 1996, p. 33). It is also used by Kotler in his 14th edition, marketing management when reviewing international marketing. It consists of four analytical phases; an analysis of the macro-environment, development of a definition of end-users, an analysis of the nature and dynamics of interactions between participants in the market and finally, evaluation of the opportunity itself.
Although phases of the market opportunity analysis are clear, variables that are actually evaluated within every phase are not defined. Fortunately, the model is used in practice by Golicic et al. (2003), who conduct a MOA for a company active in air cargo operations. This research is used as an example in a number of researches it adds a lot of clarity to the model, because it shows what actual aspects are analysed of business opportunities when the model is used in practice.
Usability of the Market Opportunity Analysis
A major advantage of this method is that it is highly practical and clear; concrete steps are defined that are executable by analysts or companies. A limitation of this model is that in order to make a thorough analysis of a business opportunity, organisations will need to allocate quite some resources to the process. This can be concluded from Golicic McCarthy, & Mentzer, who analyse a business opportunity using the three researchers (Golicic, McCarthy, & Mentzer, 2003). SMEs do not always have a marketing department or product managers, making the model less suitable for them. Nonetheless, this model is interesting because it may serve as a basis for a new opportunity evaluation model. The phases that are described in the MOA are considered a good order for evaluation and can be used in the new model.
2.1.2 Research strategies and methods
The MOA Analysis method is chosen since it is in line with the company need to get a broad perspective of the market, both from a historical viewpoint as well as future trends, also a more narrow view based on specific companyâs abilities is desirable. The MOA framework meets these needs by reviewing markets by assessing the external market-potential demand, current players in the market, and the customers need along with the internal capabilities of the company to determine the feasibility of pursuing expansion of operations into the chosen markets.
Phase one; environmental analysis
The first phase, called the environmental analysis, conducts a macro analysis of the potential market opportunity. The authors are not so clear on what is exactly done in this phase, but its purpose is to help managers âlearn about how market opportunity is being shaped by economic, cultural, social, technological, governmental and natural forcesâ (Woodruff & Gardial, 1996, p. 32). This step is comparable to the often used PESTLE- or also known as the DESTEP model, which conducts a quick-scan of macro factors in the categories demographics, economics, social-cultural, technology, ecology and politics (Oostra & Slaa, 2006).
Used in strategic management (the political, economic, social, technological change, environmental and legislative framework), with its variations of PEST, PEST-E, SLEPT and others as such (Kotler and Armstrong, 2004).
It is important to note that this type of analysis is an environmental analysis, usually performed in order to reveal the factors that help or hinder marketing dynamics of products (Kotler & Armstrong, 2004).
This might seem to be a relatively insignificant step but considering the limited knowledge of the EU market that has been researched by Paccar Winch, and the latest developments in the European market, it can provide explanations to any subsequent findings in this research.
Phase two; market definition
This task involves identifying the major markets in which the product or service competes, and segmenting the market into a product-market structure. Not only does this phase establish boundaries for all subsequent analysis, it is also crucial to help to understand the organization of the market and delimit the segment(s) in, and products/services against, which the firm will compete. The opportunity is also segmented into a product-market structure. Woodruff and Gardial argue that this phase is one of the most relevant ones, since âall other MOA phases follow from itâ (Woodruff & Gardial, 1996, p. 33). The scopes of the next phases depend on this phase. For example, the competition analysis that is part of the following phase will look very different depending on what market is defined.
It is important for the quality of the research to limit the research scope.
A DESTEP method could be used to structure each segment. But factors such as a demographic and ecologic review of the segment will show irrelevant to the market attractiveness.
It often occurs that a company focuses on a large segment, where the majority of customerâs preferences lie, and neglect smaller, less typical segments because it is logical for the firm to assume that the size of the potential market segment is positively correlated to profit. An important risk to avoid in this case is the affiliated marketing term of âmajority fallacyâ. Perusing the majority segment is considered a âfallacyâ because the largest segment, where competition tends to be most intense, is not always the most profitable. Smaller segments can actually be more profitable when there is less competition.â (Kardes, Cronley, & Cline, 2014, p. 44)
For clarification the Boston Consulting Group (BCG) Growth/Share Matrix (1979) shown in Figure 10 could provide a simple method of selecting the right market for a strategically short and long term vision. The key elements in the map in bringing the company’s activities are the two dimensions of the matrix, namely (relative) market share and market growth.
The vertical axis of the Boston Matrix shows the market growth. This defines how attractive the market could be on a longer term. The horizontal axis shows the relative market share (compared to the nearest competitor).
In this way, each product / market combination (represented by a circle whose diameter
is proportional to the cash flow or revenue size) can be can be divided into four sections:
– Cash cows is where a company has high market share in a slow-growing industry
– Dogs, more charitably called pets, are units with low market share in a mature, slow-growing industry.
– Question marks (also known as problem children) are business operating in a high market growth, but having a low market share.
– Stars are units with a high market share in a fast-growing industry.
Phase three; analysing participants of the market
The third phase analyses four participants of the defined industry; end users, customers that are not end users (usually distributors), competitors and suppliers. The goal here is to âdevelop descriptive profiles to understand customers, competitors and suppliers within the markets defined in step twoâ (Golicic, McCarthy, & Mentzer, 2003). Both Woodruff & Gardial and Golicic et al. define some variables of these participants that are measured for the analysis.
The categories âcustomers and end usersâ are defined by Woodruff & Gardial as having the measurable criteria; âsought valueâ, âsatisfaction with sought valueâ, the ârelation of satisfaction to behaviourâ (meaning positive word of mouth or loyalty). Golicic et al. add ânumber of projects on a yearly basisâ and âtype and size of projectâ to the evaluated factors in this phase. Woodruff & Gardial further state that competitors may be analysed by evaluating the value delivered by competitors in order to find their strengths and weaknesses. Golicic et al. describe the name of competitors, active markets they are in, market share, competitorsâ geographical location and their activities and assets. Regarding suppliers, Woodruff & Gardial describe no factors that may be analysed, whereas Golicic et al. analyse suppliers by measuring the extent to which the supplier product range is narrow or broad and how well they meet market needs in the new opportunityâs market. Woodruff & Gardial make special mention of the distinction between customers and end users. They state that âmarket opportunity originates with end users because it is their needs that create demandâ (Woodruff & Gardial, 1996, p. 31). A supplier is of lesser importance in this research, and there has been chosen to focus this part on a brief overview of the supply methods of Paccar Winch. Customers, on the other hand, are defined as trade customers, such as retailers, distributors, wholesalers, etc.
When analysing the competitors Kotler, Keller, Brady, Goodman & Hansen state that once marketers have fixed the competitive frames of reference by defining the customer target markets and the nature of competition associated with each target, they can define the appropriate points-of-difference and points-of-parity associations for positioning (Kotler, Keller, Brady, Goodman, & Hansen, 2009). As stated, analysis is recommended to focus attention between an organizationâs internal capabilities and its external environment.
Phase four and five; forecasting demand and opportunity evaluation
The market demand forecasting and opportunity evaluation phase analyses potential future market demand and market share. Woodruff & Gardial (1996) state that evaluation of the market requires forecasting future demand of the identified markets. Revenue potential is described by the authors as one of the most important criterion for companies when judging the opportunities. In the application of this phase there is also spoken of a two-stage process entailing identification of new opportunities, such as creating new ways or means for satisfying buyer needs that are consistent with core competencies, and matching those opportunities with organizational capabilities. In this stage a SWOT (strengths, weaknesses, opportunities and threats) analysis is recommended to focus attention between an organizationâs internal capabilities and its external environment.
Matching opportunities with organizational capabilities
The SWOT analysis will be used during phase 5 of the MOA-framework. The SWOT analysis is usually applied to identify the internal and external critical points of an organization to support the best strategies to focus on the strengths, minimize weaknesses, to mitigate the threats, and take the greatest possible advantage of the available opportunities. The result of the SWOT analysis can be summarized as following:
Strengths: Attributes of the organization that are helpful to achieving the objective.
Weaknesses: Attributes of the organization that are harmful to achieving the objective.
Opportunities: External conditions that are helpful to achieving the objective.
Threats: External conditions that are harmful to achieving the objective.
Strategic options have their own place in the process of strategic analysis after the SWOT analysis is done and the strategic issues are identified. In other words, the SWOT analysis summarizes the outcomes of the internal and external analyses; it does not yet contain strategic actions. First, the strategic issues need to be identified. Strategic issues are all the matters of strategic importance that stem forth from the SWOT analysis.
Strategic issues can be derived from the lists of Strengths, Weaknesses, Opportunities, and Threats. Strategic issues can be Weaknesses that need to be addressed in order to avoid failure, Threats that need to be countered, or Opportunities that need to be captured before rivals do. Strategic issues can also stem forth from a SWOT confrontation matrix, in which Strengths and Weaknesses are listed on one axis and Opportunities and Threats on the other. All combinations of S & W on the one hand and O & T on the other are reviewed to see if failure is to be averted or success is to be created. After the issues have been defined, alternative courses of action can be formulated: the strategic options. This is largely a creative process (Van Raaij, 2002).
Another framework to analyse the level of competition within an industry and business strategy development is Porters five forces model. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of an Industry. Attractiveness in this context refers to the overall industry profitability. An “unattractive” industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching “pure competition”, in which available profits for all firms are driven to normal profit. This analysis is associated with its principal innovator Michael E. Porter of Harvard University.
One distinction between the two is that SWOT is a general, overall assessment, while Five Forces is typically focused on a single growth decision. Porter’s Five Forces is a framework used to evaluate an industry as opposed to a company. The “forces” refer to five aspects of an industry that dictate its attractiveness. The forces include power of suppliers, power of buyers, barriers to entry, competitive rivalry and availability of substitutes. By evaluating each of these elements, it is possible to determine whether or not to enter a particular industry.
A SWOT analysis on the other hand is a strategic evaluation framework used to look at a company. Once the strengths and weaknesses have been determined, the company can look beyond its own organization to evaluate opportunities and threats from the market or competitors. To summarize the SWOT results, it is useful to summarize the outcome and to process in PODâs and POPâs.
Points-of-difference (PODs) are attributes or benefits that the customers can strongly associate with a brand like Paccar Winch. The goal is to make the end user positively evaluate the winch, and to make them believe they could not find another winch to the same extent with a competitive brand. Associations that make up points-of-difference may be based on virtually any type of attribute or benefit. (Keller, 2009)
Points-of-parity (POPs), on the other hand, are factors that are not necessarily unique to the brand but may in fact be shared with other brands. In a product like a hydraulic winch the difference in the product itself can be small. These types of associations come in two basic forms: category and competitive. (Keller, 2009)
1.1.1 Interview method
The Delphi method is an attractive method for because it is a flexible research technique that allows research to explore new concepts within and also outside of the research framework. The Delphi method is a process to collect and distil the information gathered from experts when collecting information through interviews. The Delphi method is well suited as a research instrument when there is incomplete knowledge about a problem or any other field of interest. The Delphi method works especially well when the goal is to improve our understanding of problems, opportunities, solutions, or to develop forecasts.
The Delphi process has been comprehensively reviewed in many studies, Figure 12 shows a brief overview of how Skumulski, Hartman and Krann in the Journal of Information Technology Education (2007) have used the Delphi in some of their âgraduate students’ research projects.
How successful the Delphi method will be lies in the selection of participants. The results of a Delphi based interview depends on the knowledge and cooperation of the participants, a very important factor is the selected persons which will participate. In a statistically based study such as market surveys or a public opinion poll, participants are assumed to be representative of a larger population. The usage of the Delphi method requires a non-representative, knowledgeable information source. In this study the selection of these persons will be slightly simplified by using the representatives of the Paccar Winch chosen distributors. The distributors have their own customer bases with overlapping segments in which they operate. Using the Delphi method will ensure that their answers will validate each other.
The research questions have been setup with guidance from the 6 subsequent stages from Blois & Evans. These steps give directions and guidance to the required information for solving each research question.
Subsequently 2 models for analysing the market are reviewed: Segmentation Targeting Positioning of which was concluded that this model focuses on the marketing mix and positioning of a specific product or service, but it lacks the tools for analysing the market.
The other suitable model worth discussing proved to be the Market Opportunity Analysis model, A major advantage of this method seems that it is highly practical and clear; concrete steps are defined that are executable by analysts or companies. On the other hand, a limitation of this model that should not be forgotten is that in order to make a thorough analysis of a business opportunity, organisations will need to allocate quite some resources to the process.
SMEâs, and thus companies as Paccar Winch, do not always have a marketing department or many product managers with market experience, making the model less suitable for them. Nonetheless, this model is interesting because of the structure it provides in the evaluation and exploration in the market. Each phase within the model can be filled with targeted research to explore the hydraulic winch market, to define and to work towards a conclusion giving advice with a short and long term vision. The lack of market information and data can be filled by obtaining information from distributors and surveys. The Delphi method can be used in interviews as a method of validation of the results of knowledge of the panellists.
Ultimately the MOA will lead to a SWOT analysis which will serve as a strategic evaluation framework to look at the strengths weaknesses of Paccar Winch. Once the strengths and weaknesses have been determined, the company can look beyond its own organization to evaluate opportunities and threats from the market or competitors.
These opportunities can subsequently be matched with organizational capabilities by determining the POPâs and PODâs.
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