Competitive Strategy
A Report on the Mart Rena Company:
Introduction:
According to Michael Porter Competitive advantage exist when a company makes or creates economic rent, further he describes sustainable competitive advantage as a situation where a firm creates value in a way in which other firms cannot duplicate or imitate them.
For a firm to achieve sustainable competitive advantage there must be the following key processes:
Coordination:
Coordination is a key to an organization success, this involves coordination of processes and the sharing of resources that aids the firm to achieve high levels of competitive advantage,
Organizational learning:
This is an important part in organization, it determines how a firm will respond to market information, and how it interprets the information will determine the level of competitive advantage. Firms therefore need to develop market sensing capabilities to effectively collect information and the way to respond to this information.
Transformation:
Transformation means the continuous changing environment, the firm has to respond accordingly to the changing environment and this will help the firm to have comparative advantage.
The Mart Rena company deals with the importing and exporting of home products especially kitchen and bathroom products, the company imports designer home goods which it sells in wholesale and retail, some of the products they produce Hand Made products from material such as onyx, travertine, concrete and terrazzo the company produces sinks, counter tops, bases, lighting fixtures, taps and decorative products such as onyx lighting fixtures, this products are made with unique design and this makes it to have a competitive advantage over its competitors.
Industry analysis:
The national kitchen and bath association reported that Americans spent over 20 billion dollars on kitchen and bath products in the year 2003, in the last four years the demand for kitchen and bath products has risen strongly due to the following reasons, the increased in the number of people buying houses in the US which increases the demand for house fixtures.
Also due to the September 11th attack people have adapted the motive that houses are cocoons that provide security and protection and finally because the American baby boomers are nearing retirement age and therefore they are more concerned with the comfort of their homes.
Competitors:
The kitchen and bath industry has many competitors and Mart Rena has competitors who include Modern Stone, Digs, Ann Sacks, Kitchen And Bath, The Plumbing Express, Faucets And Sinks, Lautus, Sunshine Stones Sinks, E Bay And Tiles And Craft Company. However the major competitors include modern Stone Age Company and the Ann Sacks tile.
In the kitchen and bath industry there are no barriers to entry and therefore it assumes a free and competitive market structure, this is evident from the large number of firms that are the competitors of Mart Rena, however the kitchen and bath companies have an association named the national kitchen and bath association which regulates and controls the market including the control of unhealthy competition.
In this market the existing companies have differing designs of their products and also have differing prices, this therefore makes the products produced to be have a wide variety for consumers to choose from, the prices differ although firms like Mart Rena charge high prices for their products due to the high and unique quality of goods they offers to customers.
The supplies in these companies are mostly from other regions; the company imports its products and sell its products in both retail and wholesale, the products sold by the company are therefore not locally produced but imported goods and this makes it easier to analyze the value and quantity of goods sold in the US.
The large number of competitors means that this is a competitive market and firms are free to enter and exit the industry, however there may arise un healthy competition leading to closure of firms and therefore there is need to put up policies in the industry that restrict or hinder the free entry of firms into the industry.
Competitive position of Mart Rena:
The company accesses it customers through the internet and this helps to inform the customers about the products available and also the cost, this helps the company to gain competitive advantage over the other companies. The internet also helps them to advertise their products and create demand for their products, sales also can be transacted over the internet for customers who are overseas and this helps in increasing sales, their website is reliable in that it offers all the information required by the customer, the website is secure, private, easy to find product, easy to navigate, easy to purchase products, confirms purchases made and the website is fast, once the products are purchased the company packages the products and exports the products to its products and therefore offers after sales services.
The company offers discounts on sales and this means that the company is in a better position in the industry, the company also has a variety of high quality products and therefore customers have a wide range of products to choose from.
Therefore according to the company's report the reason why it's able to remain in business is the high quality and unique products it offers to its customers, the company sells goods produced by famous professional's example architects and designers who are well known for their high quality and appealing products they produce.
Sustainable advantages:
Sustainable competitive advantage as a situation where a firm creates value in a way in which other firms cannot duplicate or imitate them, the company practices organizational learning whereby it responds appropriately to changing business environment, the organization also achieves its competitive advantage through appropriate organization coordination in its business undertakings.
The company enjoys some sustainable advantages; these advantages include high levels of sales and a large number of customers and these results to the expansion of this company, the company is large in size and any one in the world could purchase its products through the internet, it is located in Massachusetts where anyone can easily access the store, the company has advantage over the other companies in that it has customer all over the world and it aims at expanding its company to other parts of the world in the future.
The other sustainable advantage is its suppliers, the professionals who supply goods to this company are well known across the region for their high quality and unique product they produce, this make the customers to prefer their goods because they are of high quality and appealing.
Strength, weaknesses, opportunities and threats (SWOT):
Strengths:
The company enjoys its large number of customers and a large access to potential customers all over the world, the company offers promotions to the community which leads to a positive image of the company by the customers.
The company also offers high quality products which are offered at a price which is affordable to customers, the company also has strength in that the purchase of its goods can be done through the internet for customers who are overseas and the products are transported to the customer as a sign of after sales service.
Offering sales discounts to customers and after sales services to customers is a sign of strength to the Mark Rena company, also the wide variety of goods and unique designs places the company at a high rank compared to other companies.
The company plans to participate in trade shows and this will be of great importance because it will be a step forward in advertising its products and also to inform customers on the goods they deal with, it also plans to open a show room in Massachusetts, this two strategies will help the company achieve its target market and increase its sales level.
Weaknesses:
The company offers its goods at very high price, it only targets the rich population, however this should change and the company should target the whole market and not one, also the company should open up branches all over the world and not operate on one location.
The company does not spend much of its revenue in advertising, advertising is a market tool used to persuade customers to buy products and to these companies has not undertaken any advertising efforts.
The company has not made any efforts to expand example through merging with another company in order to expand, a merger would mean an increase in capital base and an increase growth rate which would help dominate the entire market.
The company plans to establish a complex administration system by employing professionals and advisers such as designers, legal, accounting, insurance and a board of directors, this is likely to increase the administration costs which will in turn increase the cost of final goods produced, a company should always reduce its administration costs which is not the case with Mart Rena which intends to increase this costs, therefore the company will not be in a position to offer its products at competitive prices due to the high number of administrators increasing the administration cost.
Opportunities:
The company could merge with one of its major competitors in order to gain an advantage and dominate the market, the company also could expand its operation through opening up distributions stores all over the other regions, and this will make it easier for them to access the stores and also advertise their products.
Due to the fact that the company imports its products from other countries the company could open stores in these countries in order to reduce the final cost of goods which results from transportation cost and therefore they would offer their products at very competitive prices.
Advertising plays a major role in marketing products, the company should spend more on advertising as this would result in an increase in the level of sales, advertising will make it to have competitive advantage over the other companies.
The company could also produce other household goods that they presently do not produce, it deals with house fittings and therefore should check for other business opportunities such as start selling furniture since the buyers of the products it sells already need these goods, the products to be sold will be complementary goods with the presently sold goods, this will increase the level of sales.
The company has the opportunities to venture in other businesses apart from its current products, the company may start selling other products other than kitchen and bath products, this strategy may increase its revenue levels in that the company has its own royal customers who already have their brand preferences from Mark Rena.
Threats:
The company's threats is that the company could face high competition from the two major competitors namely the Modern stone age and the Ann sacks company, this companies offer their products at very competitive prices which are lower than those of the Mark Rena company and therefore the company faces a threat of losing customers.
Another threat is that the company may face high production cost that will result to high final price of its products due to the transport costs involved in importing goods, other companies may locally produce these products and therefore the company may face high competition.
The large number of companies in the industry is a threat to the company; the high profits associated with the industry may attract more companies to enter the industry resulting to high levels of competition. High competition will mean that the supply of similar goods will increase leading to low prices and the company may fail to break even.
Therefore the highest the that the company faces is competition by other firms in the industry, the firms are too many in the industry and this may mean an increase in the level of competition in the near future.
Growth strategy:
The growth strategy of this company is to expand its market through opening new stores in Spain, Finland, Russia and Estonia, this make it easier to access its companies, the company also aims at expanding the number of ware houses in order to ease delivery of the products ordered.
The company also aims at creating a brand identity through packaging; this will help build a brand preference by the customers who will eventually demand more of its product leading to growth of the company.
Mark Rena also aims at producing new products which will result to new trends example new sinks designed from concrete and terrazzo, the company will therefore experience growth in that new products means creating new demand and as a result the company will increase its sales level and revenue.
The future of the company:
The future of this company is that in the near future it will expand its operations to other countries, the company may merge with its major competitors and this will result into a high level of growth and a great advantage over other existing companies, the demand for its products will increase as the demand for houses in US and other parts of the world.
The company will become an international company in the near future and this will be as a result of expansion all over the world and it will be company well known to the whole world as a company that provides high quality products at very competitive prices.
However there is a high risk of increased competition from its rivals in the near future, firms may develop new strategies that may result to a decline in Mark Rena's market share, this may force the company to close down due to its failure to break even due to a the decline in sales level.
Conclusion:
The Mart Rena company is well established and has competitive advantage over its competitors, however the industry is has many firms and therefore competition is high, the company uses internet means of advertising and sales of goods but has not put much efforts in advertising its products, however the company experiences high sales and profit levels but it still has opportunities to expand through merging with its competitors which would act as a growth strategy.
The company should establish other branches to other regions so as to access its customers and also advertise its products, it should not plan to increase its administrators as this would result in an increase in the cost of production, this would mean that the prices of its final goods will be high, however its products are unique and of high quality and this is the reason why it is able to achieve high sales levels.
References:
Mart Rena company (2007) kitchen and bath products case study
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