The document discusses strategies for companies facing declining or hostile markets. In declining markets, lower sales lead to excess capacity and high inventory levels. There are four main strategies for declining markets: harvesting, maintenance, profitable survivor, and niche. Hostile markets have overcapacity, low margins, intense competition, and disorganized management. To succeed in hostile markets, companies can focus on reliability, large customers, cost management, expansion, covering multiple price points, and effective distribution. Both offensive and defensive strategies may be used, with defensive strategies aiming to safeguard position and offensive strategies seeking to create new growth opportunities.

1. Strategies in declining
& Hostile Markets

2. DECLINING MARKETS
 Declining markets are those that have gone from maturity - where sales stay flat or may
even climb occasionally - to multiple periods where there are decreasing sales.
 This drop in sales is the first and most obvious sign of a declining market and lower sales
quickly lead to other attributes.
 Lower sales mean excess capacity and high inventory levels. Firms were producing at
levels consistent with a mature market and when sales slowed, they are left with product.
As they slow down production, they face the costs that come with the suboptimal use of
their production facilities.

3. STRATEGIC OPTIONS IN A DECLINING
MARKET
 If a firm decides to continue operating in a declining market, they will likely need to adjust
their strategy from the one they used during the mature stage. There are four basic
strategies that can be used, obviously with some variation, to succeed in a declining market.
Harvesting
Maintenance
Profitable Survivor
Niche

4. HARVESTING STRATEGY
 A harvesting strategy is used when a firm is making good profits in the declining market,
but since the market is declining, the company uses those funds to invest in another
market. By no longer investing in the declining market, the firm is essentially conducting
a slow exit.

5. MAINTENANCE STRATEGY
 A maintenance strategy involves keeping profit margins stable, primarily by
controlling costs, and focusing on not losing current customers. Growth isn't a primary
objective in this strategy. Maintenance is all about not losing ground.

6. PROFITABLE SURVIVOR STRATEGY
 Using a profitable survivor strategy is feasible when the firm feels the market, or some
version of the market, will start to grow again in the future. A profitable survivor
focuses on surviving - gaining market share as other firms leave, even at a cost - with
the plan of being the veteran firm once the market bounces.

7. NICHE STRATEGY
 Even in a declining market, there is a segment of the market that will continue
producing demand. In a niche strategy, a firm focuses almost exclusively on this niche
market, meeting their demands almost exactly and not worrying about other market
participants.

9. HOSTILE MARKET
Markets with:
 Overcapacity
 Low margin
 Immense Competition
 Management in disarray

10.  As the popular saying goes, "behind every dark cloud there is a silver lining". This is indeed
very true for organizations operating in difficult market conditions. Hence, opportunities
should be identified and capitalized upon.
 Reliability
focus efforts on large high nett worth customers
management of costs
cover the premium
Effective distribution
Expansion
STRATEGIC OPTIONS IN A
HOSTILE MARKET

11.  Reliability is an important virtue for consumers, when disposable incomes are stretched.
Consumers are willing to invest their limited disposable income, on organizations who
pride themselves in providing products and services in a very reliable manner. Hence, tried
and tested solutions are favored over untried and untested ones.
 A second strategy is to focus efforts on large high nett worth customers. Large customers
have the ability to provide sales volumes, which are critical to drive down costs. Further,
these large sales volumes are provided by a small base of customers, which makes it
operationally efficient to service them. Large customers should be safeguarded at all costs
and relationship building is an excellent strategy to follow in this situation.

12.  Management of costs in an objective manner is essential in hostile markets. This requires
organizations to have an effective cost structure and to effectively manage same.
Investments in automation and information systems can help to reduce costs.
 Expansion of marketing operations to new geographical locations, should also be explored.
Exporting could be a first step, followed by international marketing arrangement. By
exporting excess capacity, issues can be overcome, by generating additional sales volumes.
This could also lead to greater economies of scale, resulting in lower unit costs. Export
markets could also offer prospects for higher margins, thereby addressing the concerns of
lower margins.

13.  Another strategy that can be adopted in hostile markets is to cover the premium, medium
and lower price ends of the markets. i.e. cover a broad spectrum of prices. This will ensure
that no market segments or micro-segments (niches) are left unexploited, for competitors to
capitalize on. Basically, you will need a product mix that can appeal to the different price
segments of the market.
 Effective distribution is also a key strategy to deal with difficult market conditions. New
distribution channels should be explored. Not only should new distribution channels be
developed, the width and depth of existing distribution should be expanded. All potential
sales outlets should be covered, specially if an extensive product mix is available.

14. As stated earlier, hostile markets are created by declining markets. When
operating in hostile markets, you could adopt either offensive or
defensive marketing strategies. Defensive marketing strategies would
help safeguard market position and ensure survival through unfavorable
conditions. Offensive strategies on the other hand, are aimed at
revitalizing the market, by creating growth opportunities within a logical
framework.
"When the going gets tough, the tough get going".
CONCLUSION