Slideshare Agnes Jumah, Advanced Marketing Strategy, Shimano Case Study

3,951 views

Published on

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
3,951
On SlideShare
0
From Embeds
0
Number of Embeds
15
Actions
Shares
0
Downloads
98
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Slideshare Agnes Jumah, Advanced Marketing Strategy, Shimano Case Study

  1. 1. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Advanced Marketing Strategy Assignment: Strategic Theme Literature Review and Shimano Case Study Part 1 – Literature Review of Different Strategic Themes Strategic Theme One: Market Orientation (MO) Papers Examined: a) The Effect of a Market Orientation on Business Profitability – Narver and Slater (1990) b) Market Orientation in the Top 200 British Charity Organisations and its Impact on their Performance – Balabanis, Stables and Phillips (1997) c) Measuring Market Orientation: Generalisation and Synthesis – Deshpande and Farley (1998) Market Orientation Definitions Narver and Slater’s definition focuses on a company’s offering, i.e. adding additional benefits to the product to make it more valuable to the buyer and/or decreasing the cost to the buyer. Through creating this “sustainable superior value” a sustainable competitive advantage can be achieved. Their definition states that a market-orientated business is constantly evaluating its offering for both existing and new customers and tries to maintain a “mutually beneficial relationship with its buyers”. They add that an MO business generates, disseminates and responds to current and future customer needs. In addition, they talk of the components: customer orientation, competitor orientation and interfunctional coordination alongside decision criteria: long-term focus and profitability. A weakness of Deshpande and Farley’s paper is that it does not explicitly outline the traditional definition of MO. Instead it puts forward a “parsimonious” definition that they base their new scale upon. When presenting a new definition, the old definition should be presented simultaneously in order for the audience to see the difference. Their definition is more accessible but neglects the competitor element. Balabanis, Stables and Phillips (1997) put forward Narver and Slater’s 1990 definition of MO and Kohli and Jaworski’s (1990). However as their paper is based on non-profits, they highlight interesting alterations that must be made, including ‘survival’ replacing ‘profitability’ and ‘rival’ replacing ‘competition’. Main Arguments of Market Orientation Authors The three papers examined tackle different areas of MO. Narver and Slater argue that ‘market orientation is an important determinant of profitability’ or that the greater a business’s MO, the greater the profitability. This was seen in the commodity SBUs that were measured and that scored above average for MO. According to their results, this was less so for non-commodity businesses. Deshpande and Farley argue that there is lack of standardisation and generalisability in marketing and so their paper focuses on comparing, analysing and synthesising three MO measurement tools – including Narver and Slater’s - with a view to providing industry with a single, standard instrument. Balabanis et al’s paper may have benefited from the marketing orientation measurement the Despande and Farley produced. In their investigation into donor-market charities, they argue that these types of non-profits have become more market orientated. They claim this positive change has been driven by compassion fatigue, increased rivalry and a decrease in the disposable income of donors. Evidence Review The robustness of Balabanis et al’s paper is questionable as some of the basic research design elements could be sturdier. The paper covers two time periods: 1989 and 1994. One of the main concerns with the data gathering is that it relies on respondent recollection. In addition the sample is based on the top 200 CAF members. The authors do not
  2. 2. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment state that they have undertaken any checks to ensure that CAF members are representative of the non-profit sector. The sample size is small (58 organisations) versus the non-profit sector of approximately 170,000 organisations. Deshpande and Farley’s argument is significant. For comparisons across the industry a single measure of MO which is empirically generalisable would be useful. However, different sectors such as the non-profit sector investigated above would require a modified instrument. Prior to synthesising their MO instrument, they rightly checked the validity, reliability and correlation of the original scales. However, like Balabanis et al their sample came from a membership body: the MSI – although data can be gathered more easily, the sample is not randomly selected. As noted earlier, their measure is based on a parsimonious definition of MO and so their unified scale although useful may be too idealistic. Narver and Slater were one of the first to create an MO tool using a sample from one corporation. The limitations of using data from the SBUs of one organisation are obvious. The responses:  may be subject to corporate culture or sector culture issues not played out in other companies or sectors  are not representative of industry  are from SBUs that operate differently to actual companies Validity testing supports Narver and Slater’s three-component (customer orientation, competitor orientation and interfunctional coordination) model of MO. Through coefficient analysis they proved their argument and found that market orientation and performance were positively associated. Strategic Theme Relevance MO was the first real school of marketing to consider the needs of the customer. Prior, the focus was on production, the product and selling. According to Deshpande and Farley it is “the pillar upon which the modern study of marketing is based”. It is relevant because not only do MO organisations react to customer needs but they also anticipate customer needs. This strategic theme takes marketing out of the marketing department and positions it as a culture. This view was supported by Narver and Slater’s paper. However more recently it is considered more a business process that determines organisational performance. The research has shown that the more market orientated an organisation is the more profitable it is likely to be (Deshpandé et al, 1993 and Jaworski and Kohli, 1993). MO advanced our thinking. In addition to including customer wants and needs, it also highlighted the importance of competitors; internal information gathering and dissemination in relation to long term objectives and profit expectations. Strategic Theme Two: Positioning a) Positioning Your Product – Aaker and Gary Shansby (1982) b) Services Positioning Through Structural Change – Shostack (1987) c) Positioning Strategies of International and Multicultural-orientated Service Brands – Blankson and Kalafatis (2006) Positioning Definitions The most explicit definition of positioning is given by the most recent paper. Blankson and Kalafatis (2006) refer to Arnott (1992) and Arnott and Easingwood’s (1994) definition: “Positioning is...the attempt to modify the tangible characteristics and the intangible perceptions of a marketing offering in relation to the competition”. Like all the other authors examined, Blankson and Kalafatis (2006) also highlight the importance of marketing communications in positioning a product or offering. Interestingly, Aaker and Gary Shansby (1982) and Shostack (1987) in their definitions indicate that there were differences in opinion of what positioning was during the 1980s. Aaker and Gary Shansby (1982) say that “Positioning means different things to different people”. Shostack (1987) briefly illustrates the difference in the thinking of
  3. 3. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment marketers of the day. Both Aaker and Gary Shansby (1982) and Shostack (1987) discuss how differently positioning strategies can be conceived. All authors relate to the external environment in their definition. Main Arguments of Positioning Authors Aaker and Gary Shansby’s (1982) paper focuses on classifying positioning strategies. Their useful categorisation has been adopted by many authors and repeated in books and papers including Fill (1995). They suggest that several positioning strategies can be utilised by attribute; price/quality; competitor, application; user and product class. All authors agree that for positioning to be of real value, consumer research should be undertaken. Shostack (1987) presents an original way of positioning service brands. He argues that by reverting services to their respective process state e.g. airline to air transportation, and breaking down the service into process steps, service marketers can strategically manage their offering’s position. A lack of empirical studies on services and positioning was one of the reasons behind the Blankson and Kalafatis paper (2006). The authors argue that without analysis of the company’s positioning strategies, its actual strategy as seen through their marketing communications and the target audience’s perception of the company’s positioning, it is unlikely that the service manager will be able to make the correct positioning decisions in the market place. Evidence Review Aaker and Shansby’s review paper has no empirical research; however they use brands as evidence and to illustrate their argument. As it is simple in its objectives: to outline the positioning strategies available, it is fairly generalisable. This may explain why it is referenced so frequently. At the time of its publication, it is likely that it added much to marketing knowledge as that era saw the introduction of the positioning school of thought. Shostack followed Aaker and Shansby with his paper a few years later. Although useful for internal service positioning mapping, blueprinting as it called, does not allow mapping of external factors such as consumer or competitor changes. To justify this, he calls blueprinting a “natural companion to market research”. Shostack gives theoretical examples of blueprinting application – real examples of it application with different types of services would be beneficial to prove that it works. Blueprinting does however provide a simple and useful template for sampling position strategies prior to implementation. Blankson and Kalafatis’ empirical study provides interesting results however there are some limitations of the research. As the authors point out themselves: the sample was neither representative of the population nor randomly selected. This therefore raises some questions about their ANOVA analysis as ANOVA requires random samples from a normal population. In addition, their study is not generalisable as it focuses on credit/charge cards in the UK. However it does add to our learning and forms a base from which others can work. Strategic Theme Relevance The positioning school of thought according to French (2009) followed the Planning School and was driven by economists. It focuses on analysing the competitive environment and what position a business should occupy. Through Porter’s Five Forces Model, companies can “understand the rules of the game” in relation to the power of suppliers and competitors and other threats such as new entrants. Organisations assume a position within their respective market in relation to their competitors based on the rigid rules of a market position. The concern with the positioning school and its models is that it assumes that markets are static when in reality the market moves and strategies should in theory be dynamic. This suggests this marketing school of thought is more relevant to established industries that are fairly slow changing such as the airline industry. The fashion or computer games industries are less likely to find this theme relevant. Strategic Theme Three: The Resource-based View (RBV) Papers Examined:
  4. 4. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment a) Firm Resources and Sustained Competitive Advantage – Barney (1991) b) Generic Capabilities: Combining Positional and Resource-based Views for Strategic Advantage – Juga (1999) c) Is the Resource-based “View” a Useful Perspective for Strategic Management Research? – Priem and Butler (2001) RBV Definitions Barney’s seminal paper does not resolutely define RBV but examines its meaning and place in relation to the positioning school of thought. Barney terms the RBV as “the impact of idiosyncratic firm attributes on a firm’s competitive position” and looks at the assumptions of the positioning school versus the assumptions of the RBV. Barney then deconstructs the RBV by defining the key concepts: firm resources, competitive advantage and sustained competitive advantage. Juga’s approach is similar. As his entire paper is dedicated to combining the two views (positional view and the RBV) when defining RBV, he also defines the classical Porter positional view. He discusses capabilities and organisational processes as separate entities where the other authors refer to the collective “resources”. Priem and Butler take a more macro view illustrating how a variety of different authors (including Barney) have defined and used RBV in their relative work. They also highlight its proliferation in strategy literature and the lack of definition of the RBV constructs. Like Barney, both Priem and Butler and Juga refer to the historical shift from the positioning school to the RBV and the assumptions of the RBV. Main Arguments of RBV Authors Barney’s paper argues that to obtain a competitive advantage it is important to analyse internal strengths and weaknesses as well as external opportunities and threats. He illustrates this thinking by putting forward a model that separates the traditional SWOT analysis into two: a resource based model and an environmental model of competitive advantage. He goes further creating a basic framework to analyse resources that may be sources of sustained competitive advantage. Contrastingly, Priem and Butler are critical of the RBV. Focusing on single business RBV, they argue that as it is currently defined it does not add significantly to our existing knowledge. Additionally, they argue that RBV cannot be considered a theory of competitive advantage as it is too vague and does not lend itself to empirical study and provides no prescriptive direction to managers. Further work in the prescriptiveness of the RBV has been conducted by Sheehan and Foss (2007). Priem and Butler suggest that to reach its potential, the RBV “must be integrated with an environmental demand model”. Like Priem and Butler, Juga’s paper attempts to combine RBV with positional views. Using three case study companies, Juga bridges the two views. He argues that competitive advantage occurs when a company can “match the classical positional views of strategy and the newer resource-based definitions”. Further empirical research in this area of combined views could create the next significant marketing school of thought. Evidence Review Both Barney and Priem and Butler’s papers are conceptual, relying on the existing literature and research. Both papers would have benefited from research (albeit difficult to do as Barney points out) in illustrating the hypotheses of the authors, relating their theories to live companies or by using companies as case studies. Though both papers draw on a broad range of literature, Barney refers extensively to his own work and mainly focuses on Porter’s literature when covering the positioning view. Priem and Butler make relevant suggestions but these are mainly based on their own opinion. By contrast, Juga’s paper with its global focus uses three companies as case studies to illustrate his conceptual discussion: that strategic advantages can come from a company’s ability to match its internal resources to external markets. What is not clear from his case companies is whether competitive advantage is sustainable.
  5. 5. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Strategic Theme Relevance Without valuable, unique resources how can a company have any chance of gaining a competitive advantage or more importantly, sustained competitive advantage? The RBV looks first at what a company can achieve better than competitors then enters markets based on the resources. This is important because the company can potentially have more control over what they are offering. It is not constantly changing to suit the market but allows the company to constantly build upon and improve its offering. What is important is ascertaining which specific rare and valuable resources result in competitive advantage. Achieving this would be difficult as: 1. The definition of resources is sometimes unclear as the literature refers to it as assets, capabilities or competencies. De Wit and Meyer (2005) state this is due to the “ambiguous definition given by early proponents.” 2. Resources are different in each organisation and each market. Research may therefore not be generalisable as it would need to examine different organisations in different markets in order to be of real value. RBV does further marketing thinking. The classical and static view is that in order to gain a competitive advantage companies must position themselves relative to the external environment. RBV is more dynamic taking into consideration an organisation’s ‘leveragable’ resources in determining which markets it should enter. Unfortunately it lacks specificity and prescriptiveness. Literature Review References Aaker, D.A. and Gary Shansby, J (1982), Positioning Your Product, pp56-62 Balabanis, G., Stables, R.E. and Phillips, H.C. (1997), Market Orientation in the Top 200 British Charity Organisations and its Impact on their Performance, European Journal of Marketing, Vol. 31 No. 8, 1997, pp. 583-603. Barney, J. (1991), Firm Resources and Sustained Competitive Advantage Journal of Management, Vol 17, No 1, 99-70 Blankson, C. and Kalafatis, S.P. (2006), Positioning Strategies of International and Multicultural-orientated Service Brands – Journal of Services Marketing, 21/6, pp435–450 Deshpande, R. and Farley, J. U. (1998), Measuring Market Orientation: Generalisation and Synthesis, Journal of Market Focused Management, 2, pp213–232 Fill, C. (1995), Marketing Communications, London: Prentice Hall French, S. (2009), Re-thinking the foundations of the strategic business process, Journal of Management Development, Vol. 28 No. 1, pp51-76 Jaworski, B. J. and Kohli, A.K. (1993), Market Orientation: Antecedents and Consequences, Journal of Marketing, Vol 57 pp53-70 Juga, J. (1999), Generic Capabilities: Combining Positional and Resource-based Views for Strategic Advantage, Journal of Strategic Marketing, 7 pp3–18 Lynn Shostack, G. (1987), Services Positioning Through Structural Change, Journal of Marketing, Vol 51, pp34-43 Narver, J.C. and Slater, S.F. (1990), The Effect of a Market Orientation on Business Profitability, Journal of Marketing, pp20-35 Porter, M,E. (1996) What is Strategy? Harvard Business Review, Vol 74, November-December Priem, R. L. and Butler, J.E. (2001), Is the Resource-based “View” a Useful Perspective for Strategic Management Research? Academy of Management, The Academy of Management Review; Jan 2001; 26, 1 Sheehan, N. T. and Foss, N. J. (2007), Enhancing the prescriptiveness of the resource-based view through Porterian activity analysis Management Decision, Vol. 45 No. 3, pp450-461
  6. 6. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Evidence of literature search
  7. 7. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment
  8. 8. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Part II – Shimano Case Study Shimano’s Current Marketing Environment In a digital age, the bike industry is relatively slow moving however there are a number of both macro and micro issues that Shimano should be responding to quicker than it currently is. A scan of the marketing environment via a SLEPT analysis highlighted several key issues for all players in the bike industry. The most important ones are highlighted below. Additional SLEPT insight can be found in the appendix. A topline SWOT analysis provided a template for understanding Shimano’s status in relation to the external environment and against Shimano’s strongest competitor SRAM. Macro Marketing Issues  Hybrid Bikes Hybrid bikes are on the rise. This is significant to Shimano for two reasons. The first reason is that the Hybrid is a mid-class bike and is one of the few bike categories to experience an increase its share of sales – up 32% from 2004 to 2002, see Case Study, Exhibit 5. This is also a market that Shimano do not currently gain much revenue from – only 20% of their bike component revenue comes from the mid-class market. Another consideration for Shimano is that the “material of choice” for Hybrid bikes is carbon-fibre whereas Shimano produces components with the more durable and heavier aluminium or titanium. This is a key offering that Shimano is not currently providing its customers. Producing carbon based components and providing these to makers of Hybrid bikes would not only add to Shimano’s portfolio but also gives them access to Campy’s customer base. Producing carbon components for Hybrid bikes as soon as possible is key as this market has been growing for the last three years.  Electric Bikes The newest innovation to take place in the bike industry is the electric bike. Producing components for this new product is an area for Shimano to explore. The high-end bike market accounts for a relatively small percentage yet this is where Shimano acquires the majority of its revenue. A BCG analysis (see appendix) shows that Shimano has no stars. If the electric bike market takes off, its components could add significantly to Shimano’s revenues. This is an opportunity that Shimano could explore this with manufacturer Giant.  Green Issues The bike industry is very much controlled by shifts in consumer trends, like their interest in the Tour de France and triathlons. Issues such as a sustainable environment may have consumers calling for bikes that are recycled or made from recyclable materials. Shimano pledges in its mission statement to preserve the environment. Using recycled materials would appeal to its target audience and is in line with its ethos. This presents Shimano with an opportunity as their core products are made from recyclable metals aluminium and titanium. Working with a manufacturer to create a ‘green’ concept bike could instigate a new market. As a new product would help balance Shimano’s portfolio, this should take place within the next year, giving Shimano a first mover advantage. With the consumers’ influence in mind, Shimano should also consider other social factors such as the aging population, obesity and growing traffic levels all of which could influence bike sales.  Market Decline As the bicycle market is at the mature stage, there is a chance that it could go into decline. This presents Shimano with a very real threat as 70% of its income is from the bicycle sector. It is unlikely that this will take place in the next year however Shimano must address its portfolio balance as soon as possible.
  9. 9. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Micro Environmental Issues Competitor Action Shimano has been good at keeping competitors at bay by product proliferation. However this can act as a double edge sword: protecting on the one hand and slowing Shimano down on the other. SRAM, the nimble market challenger is a clear threat to Shimano. It is launching its own road bike component group and can potentially supply to manufacturers faster. Speed-to-market of bike components is a real issue for frame manufacturers and something that Shimano does not perform well on – its production speed is a weakness and SRAM potential speed is a threat. This could have implications for Shimano within the next two years (2007) when SRAM launch their new component group. Other component manufacturers are also a threat to Shimano especially those with factories in China. China, a BRIC economy is fast becoming a respected manufacturer in terms of quality. Shimano could turn this into an opportunity by addressing its lead time, perhaps offering customers JIT component ordering. Campy is a slow, market follower and so this is an opportunity for Shimano to gazumping Campy’s only visible advantage, the carbon component. Both competitor actions are relevant now and could impact Shimano with immediate effect. Customers’ Buying Power Components manufacturers are in a difficult position – not only are they affected by decisions made by direct customers (frame manufacturers) but they are also affected indirectly by end user buying power. Two industry forces models (one for the bike components industry and one for the bicycle industry) highlight their plight – see appendix. Retailers keen to lower the costs of goods is an immediate problem for Shimano threatening its income over the next few months and years. This is an important factor that should be given priority as this has implications with regards to Shimano’s investment in other expensive areas such as R&D. Fostering a relationship with these two parties would be an opportunity. Shimano’s Marketing Strategy Until 2006, Shimano was able to compete purely on its high quality, technical credentials without having a marketing strategy. Porter (1996) claimed that Japanese companies rarely have a strategy and this could be the case with Shimano. On reading that Shimano staff spend months with retailers, one would imagine that this is to understand the market and align itself better to the market. On reading further, the information gathering that Shimano undertakes is more market intelligence that brings no value to the end user other than quality. As market leader, Shimano should be investing in its brand name and building loyalty from both its direct and indirect customers – especially with fresh competition in the form of SRAM. Shimano needs to become more customer focused. It is resented by some of its trade customers with end-users viewing it as a quality product rather than a quality brand. Brands are said to have ‘tribes’ and according to Thomas and Brain (2008) brands need to “embrace their crowds”. If this is true, Shimano run the very high risk of losing their ‘crowd’ to a more passionate and responsive brand. In exhibit 13, Shimano’s organisation chart has the marketing function literally on the ‘bottom rung’ of its organisation. This lack of engagement with customers could result in a misalignment of Shimano’s resources with the market which in time (one to three years) could erode its current market share. Not having a marketing strategy presents Shimano with a threat to its survival. Shimano Production It has been some time since Shimano had an innovation – this could be because the Shimano culture fosters productivity and precision rather than creativity and because it is inward rather than outward looking. Companies like Google embrace creativity giving staff 20% of their time to work on their own creative projects (Schmidt and Varian, 2006) as they believe that creativity leads to innovation.
  10. 10. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Shimano is product orientated which is perhaps the reason they have an over extended product range. Like Dyson – it has an extensive range of products which may have very little differentiation. If Shimano is over performing in terms of satisfying customer needs – ‘it could be bearing higher than necessary costs in serving its customers’ (Porter, 1998). In addition, an issue for frame manufacturers is the turnaround time of component orders. Shimano lead times can be 120 days – the result of too many products? This issue is relevant now as costs are being incurred for potentially undesirable products. Streamlining their range over the next few months could free up time to produce more, reducing lead times on their best sellers. Product Portfolio Shimano is in danger of being a ‘one trick pony’. Having examined their portfolio with the BCG Matrix and their revenue sources via a basic product life cycle model and financial accounts, it can be seen that: 1) The majority of their revenue is from a single source which is in a mature market. This is made more concerning as Hamel and Prahalad (1994) claim that “product life cycles are getting shorter”. 2) They have one question mark and no other products in the pipeline despite having a significant research and development team. With immediate effect, Shimano needs to develop further alternative revenue streams outside of the bicycle industry, particularly as it is a mature industry, highly affected by changes in consumer tastes. The strategic options available to Shimano based on these priorities are outlined in the following section. Strategic Options for Shimano Recommended Strategic Options There are a number of strategic routes available to Shimano, many of which were highlighted by Ansoff’s Growth Matrix – see appendix section. Product development or producing carbon-based components would have a two-fold benefit to Shimano. The first benefit is that it would be able to compete directly with Campy, as this is its only visible advantage over Shimano. This would give Shimano access to Campy’s customers who prefer lighter components. Secondly, Shimano could move into the growing hybrid bike arena more intensively, increasing their revenues from mid-class bikes helping them to balance their limited product portfolio – see BCG matrix. In addition to carbon-based components, Shimano needs to be seen as leading on the production of components for electric bikes – the only innovation on the horizon for the bike industry. Not moving with the times could see Shimano appear archaic and potentially lose new customers and their position as market leader as was the case with Bally, the makers of pinball machines when electronic games from Sega and Nintendo were introduced. A core priority for Shimano is streamlining its product range. This could allow them to focus on the speed-to-market of their components. SRAM and factories based in China and Taiwan are close to matching Shimano in terms of its quality. This is significant as Shimano is competing on nothing but quality which is not sustainable. According to De Wit and Meyer (2005), “competitive advantage is more vulnerable when based on only a limited number of distinct elements”. If competitors were able to match Shimano on quality and beat them on delivery speed and price, Shimano would soon see its market share eroded. Minimising the time between expenditure and payback i.e. getting the finished product to the buyer faster, is one way of leveraging resources (Hamel and Prahalad, 1996). Streamlining the product range would also help Shimano to cut production costs. As market-leader, Shimano needs to invest in raising and maintaining the profile of its brand and should also be pushing the profile of the overall industry, from engaging with governments to put exercise such as cycling on the agenda to working with all frame manufacturers to improve bike innovation beyond the component level, currently seen as “inhibited”. By initiating these industry changes, in theory and as supported by De Wit and Meyer (2005), Shimano would be the first to benefit from industry changes. In addition, Shimano needs to have a two pronged approach for direct customers and end-users:  A valued trading partner to frame manufacturers and retailers
  11. 11. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment  A lifestyle brand to the end user Analysis of the components market with the Porter’s Five Forces model shows that purchasers of components have power in the buying equation. Shimano needs to build brand loyalty and rewards such as volume discounts for its direct customers, frame manufacturers. In addition, it also needs to develop goodwill. Providing support and facilitating a positive two way relationship with manufacturers and retailers is key to maintaining the top spot. With the end-user, it is important for them to ask for Shimano by name so that retailers relay this information back to the frame manufacturer. A SLEPT analysis – see appendix - illustrated how sensitive the bike industry is to changes in societal forces. Understanding the end user is crucial. By following, reacting and predicting consumer trends Shimano would be better placed to spot gaps in the market and better match their resources to the needs of the customer. Shimano could build direct relationships with the end user via the retail environment through merchandising and in- store displays particularly in the new concept stores. This is already being achieved by Intel in computer outlets. In addition, a high-performance clothing range (produced by a clothing company licensed to use the Shimano name) could be launched to generate additional income. The continued use of celebrities to influence consumers should be retained as a core part of their strategy. Niche Shimano cycling events similar to those run by Red Bull – another RBV company – could create consumer interest and desire that would hopefully lead to action as awareness is already likely to be high. Actions like these would also change Shimano from a product brand to a lifestyle brand. To charge a premium Shimano needs to add value beyond the basic product offering. Rejected Strategic Options Other options available to Shimano but rejected include outsourcing production to China. This would involve Shimano losing their high-quality status. This strategy would not match the premium product fit neither would this suit the Shimano family, resourced based culture. Other Japanese companies such as Casio have maintained design and moved assembly to China – this works as it is not a premium product. Buying Campy could be an option; however this is a high risk strategy. Although this would give Shimano access to Campy’s customers, the cultural differences and the financial strain would be too great. Producing carbon-based components would give Shimano easier and faster access to Campy customers. Shimano could start making frames or move into retailing. Neither of these is recommended as this would be detrimental to the health of the relationship with Shimano’s direct purchasers. The same could be said of moving into the non-moving components. Bontrager is a major producer of non-moving parts but is it also owned by Trek, a major frame manufacturer and customer of Shimano’s. Shimano needs to build its relationships with its customers. Analytical Approaches The analytical approaches used were primarily from the outside in perspective. Two Porter’s Five Forces models were considered: one that focused on the bike industry and one that looked at the bike components industry. Despite Shimano’s stronghold of the high-end bike components market, it can be seen that Shimano is at the mercy of industry factors at two levels: the component and bicycle level. This highlights the importance of building relationships with different players in both markets. The BCG and Product Life Cycles show an imbalanced portfolio. SRAM are to launch a new product, without a strategy in place Shimano is in danger of being toppled. In the past, Shimano could rely on country specific advantages – a strategy is now needed if it is to maintain its market share. From the positioning point of view, Shimano doesn’t look very healthy – this is likely to be the case as the outside in perspective looks at the fit between a company and its environment which is not the view shared by Shimano. There are limitations of the Five Forces Model, the main one being that it assumes that the market is static when it is not. Additionally, it assumes that buyers are nothing but buyers and sellers are only sellers.
  12. 12. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment The Value Chain Analysis (VCA) added little in this scenario as financial details were not available to calculate the saving that would have been made. In addition, the VCA only considers savings made to the company and not how what this means to customers. Ansoff’s Matrix drew several other strategic options. Interestingly, for RBV companies the related diversification does not appear so high risk as it is based on competences in different areas and rather than entirely new products. From an RBV, Shimano appears to have many options. It is good at what it does and has the potential to move into different markets according to its competences. The issue here is whether Shimano spots the right opportunities. In addition to positioning models, SLEPT, SWOT, and the BCG matrix were utilised. Shimano’s Strategic Approach The strategy approach most appropriate for Shimano is resource based. It is already adopted by Shimano and has made them market leader – a case of “it ain’t broke, don’t try to fix it”. A Kaizen culture - which Shimano may have – of gradual changes and improvements is unlikely to favour major company changes. Additionally, RBV lends itself to the bike and fishing tackle components industry, where the organisation is committed to the development of one or two competences to stay ahead of competitors (De Wit and Meyer, 2005). The biggest challenge for Shimano of implementing the RBV as its strategy is that it needs to create a sustainable competitive advantage by creating an environment that allows its staff or “human capital” to grow. According to Afiouni (2007), this growth is expressed within people as increased knowledge and motivation and is unique to the company therefore difficult for competitors to imitate. Whether Shimano management allow this level of staff flexibility is questionable. The other challenge for Shimano is that the bike industry (and possibly the fishing tackle industry) appears to be driven by buyers. Shimano is at the stage where it must shift some of its focus from its products to its customers, developing resources or services that specifically respond to its direct and indirect customers’ needs. Increasing the number of resources that it competes on is also key for sustainable advantage. Overcoming these challenges will require Shimano leadership to drive the change process.
  13. 13. Agnes Jumah – MA Strategic Marketing Management – Advanced Marketing Strategy Assignment Bibliography Aaker, D (1991) Managing Brand Equity. New York: The Free Press Aaker, D. and McLoughlin, D. (2009) Strategic Market Management. West Sussex: John Wiley and Sons Ltd Brain, D. and Thomas, M. (2008) Crowd Surfing. London: A&C Black Publishers Ltd Hamel, G. and Prahalad, C.K. (1994) Competing for the Future. Boston: Harvard Business School Press Johnson, G., Scholes, K. and Whittington, R. Exploring Corporate Strategy. Essex: Prentice Hall References Afiouni, F. Human Resource Management and Knowledge Management: A Road Map Toward Improving Organizational Performance. Journal of American Academy of Business, Cambridge, 11(2), 124. (2007) Hamel, G. and Prahalad, C.K. The Core Competence of the Corporation, Harvard Business Review, Vol. 68, May-June 1990 Porter, M, E. What is Strategy? Harvard Business Review, Vol 74, November-December 1996 Schmidt, E. and Varian, H. Google: 10 Golden Rules, Getting the Most Out Of Knowledge Workers, Newsweek, Special edition – the knowledge revolution, Dec 2005-Feb 2006 Appendices  Porter’s Five Forces Model for the Bicycle Industry  Porter’s Five Forces Model for the Bicycle Components Industry  SLEPT Analysis  Bike Product Life Cycles  Boston Consulting Group Matrix  Value Chain Analysis  SWOT Analysis  Market Growth/Ansoff Matrix

×