The strategy will be 3 phased for the recommendation on whether it should

lower the prices by 10% or not. CASE

2. PHASE 2 and PHASE 3 : Framework for responding

Vaibhav Verma
+91-9650108604
PHASE I
KNOW Threat of New Supplier Power
YOUR Company Entrant • Long
• Low tech product Relationships
CUSTOMER The Company is operating at lowest
costs – economies of scale(ASM4)
• Low product
differentiation
with Supplier
• Low number of
COMPANY Operating at higher margin – 25%
Strong and Established dealer network.
Competitive Rivalry suppliers
• 2 Major
COMPETITION Competitors with
32% combined
Market Share,
Threat of Substitutes rest small players Buyer Power
• Substitutes like • Brand Conscious
• 50yrs worth brand coal-tar, PVC
equity solutions - but low buyer
• Tried and tested threat because of • Not much clarity
the increase in on the price
product awareness of the sensitiveness
High
customers. Asm-1
• Technologically Medium
similar (ASM3) Low
• Negligible
Customer difference in the Competition
product Market/Industry Inferences From Porters 5
Majority of the customers
are contractors which see The costs associated with Forces :
value in production would be higher
1. Usability – no economies of scale. It is easy for a new company to enter the market, but
2. Familiarity Operating at a lower margin there will be difficulty for the new entrant to gain
3. Relation with the • 10% price of 16.67% market share because of the following reasons:
dealers advantage.
• New product 1. Buyers are brand conscious.
2. There is a long term relationships between existing
players and their suppliers.(ASM-1)
3. Market is dominated by 3 major players capturing 50%
of the market share.
4. 50% of the market is acquired 20 companies – ~2.5%
for each company – projecting a greater competition
between smaller players.
PHASE II
Move to Phase III Continue with the dealer benefits, start a loyalty
This means program for the dealers in the long run for continued
There is no drop in sales there is customer and dealer satisfaction.
Observe the and no change in market On the other hand work on restructuring the
actually an
market more share, since the customer impact of organization, optimizing the processes or looking for
and don’t take is brand conscious and reduced technological advances to bring that $1 per unit back
trusts the brand(ASM6) Customer is price sensitive into the margin and P&L
any action and can move onto cheaper priced and
products if there is no product newness of
the product Yes
differentiation. (ASM 10)
in the
minds of
Review the customers
Understand Because of the
Sales figures There is a drop
3 Months in sales and the the customer relationships with
at the end of dealers and the
Observation new entrant has perceptions No
the quarter taken our
added benefits the
Period through VOC sales figures are
and evaluated customers
and dealer restored and the
if there is there is an
interactions. Customer
drop in sales increase in market
isn’t price share
sensitive
but dealers
Customers are not price are
sensitive, but have switched motivated
Evaluate the to try out newer products towards
selling new
reason and entrants
Initially Pass on some
take steps There is a drop in sales but product benefits from your
accordingly the new entrant has not Focus on Dealer management and motivate the (ASM-9 margin to the dealers.
impacted our sales. dealers to persuade the customers to continue with ASM-2)
In this case $1 per unit,
our product citing our long ongoing relationship along with the marketing
through marketing activities (ASM 10) activities.
ASM - Assumptions
PHASE III
Re-segment your customers for the 2
different products and run targeted
Customer is price marketing campaigns and sales campaigns
sensitive and can move for gaining the market shares while
onto cheaper products generating synergy with the existing
if there is no product business.
differentiation
Launch a new low-
price variant of Success
differentiated quality
Intensify the R&D and and aggressively pit it
2 STEP work on the product against the new
PROCESS differentiation for the entrant’s product with
existing product an aim of capturing
market(50%) from the
small 20 players. Failure
(ASM11)

An impact of reduced
priced and newness of Shut down the new low price variant,
the product in the lower the price of the existing product by
minds of customers 10% and operate at lower margins while
still concentrating on dealer relationships
and strengthening the brand value & trust.
ASSUMPTIONS
1. This industry operates hypothetically but in line with the actual industry with actual products and substitutes
2. The new entrant does not operate in the below mentioned or any other waterproofing supplementary industries:
• Cement
• Iron and steel
Simply because if a competitor has presence in these markets, it will have a distribution network that will be able to influence the
water proofing market through bundling of these products.

3. There is no or negligible difference in the products - thus the companies are technologically at equal standards.
4. Since the client is operating in the business for more than 50yrs now it has achieved economies of scale and is operating at lowest costs
and there is low scope of cost optimization.
5. The customer base is contractors (90%) and homeowners (10%) – since majority of them buy on the suggestions of the contractors
only.
6. Our client’s customers are not changing with change in prices – they are not associating it with quality degradation and are not
switching - high brand trust.
7. Our client is one of the cost leader of the market as the market leader only has 2% extra market share and both are operating at scale.
8. Our Client has the capital for launching the new variant, leveraging the supply chain and production facilities
9. If the customer isn’t price sensitive and the the dealer is motivated in selling the new entrant’s product – we are assuming there are
some sale promotion or dealer benefits that the new-entrant is providing – while reducing their margins which are already low at
$3/unit.
10. The Dealers equally are/aren’t motivated to sell our or the new entrants product.
11. For the new product launch, since the company is a big player in the market and has been there for long – assumptions is that it has the
required capital and can leverage the existing supply chain and production capacities to produce(at optimal costs) and sell the low-price
variant.