Page 316 - DMGT408DMGT203_Marketing Management

Unit 13: Creating Competitive Advantage

and not later. In the early stages of market decline there is some uncertainty about the future Notes
direction of demand in the market among potential buyers. The likelihood of finding a willing
buyer may not be difficult. By opting for an early exit, the firm may obtain a higher liquidation
value. Quick divestment may not be possible if the exit barriers are high. This decision also has
some risks. The firm might be wrong about future forecast of product-market.

Marketing Strategies for Competitors Who Stay in Declining Market

Strategies for declining markets include harvesting strategy, maintenance strategy, survival with
profits strategy, and niche strategy.

Harvesting Strategy: The aim of this strategy is to generate cash quickly by maximising cash
flow in a relatively short period. The company avoids any additional investment in business,
reducing marketing and other operational expenses, and in some case raising prices. The strategy
is to divest the business and some loss of sales and market share is likely to occur during the
implementation period. The efforts should be to keep the sales and market share decline as slow
as possible and steady.
This strategy works best when the business is relatively strong at the beginning of the decline
stage and still a share of current customers buy the product even with reduced marketing
support. This strategy is also appropriate when the decline is slow and steady and competitive
intensity is not likely to be very severe. The business should try improving efficiency of sales
and distribution, and reduce advertising and promotion expenses to the minimum necessary
level.

Example: A harvest strategy was chosen by Kodak for what had historically been its
most profitable product, film. As businesses and consumers moved from film to digital
photography, Kodak’s major products faced a bleak future with deteriorating revenues. To meet
this challenge, Kodak management chose to make a major push into digital photography.

Maintenance Strategy: With high level of uncertainty about future sales volumes in a declining
market, a firm having leading market share might adopt this strategy. The business continues
with its earlier strategy that succeeded during maturity stage of product-market, till the time the
future of declining market becomes more obvious. The business has to reduce either price or
increase marketing expenditure to hold market share in a declining product-market. Often this
results in reduced short-run margins and profits. This is a kind of stop-gap arrangement. When
it’s certain that market decline will continue, the business should switch to some other strategy
to gain cash flows over the remaining period of product-market life cycle.
Survival with Profits Strategy: In a declining product-market, this strategy may suit a business
with strong share position and a sustainable competitive advantage. The firm invests to gain
more product-market share and become the market leader till the remaining part of market
decline period.

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Caution The conditions suitable for this strategy include certainty of slow and gradual
decline in demand, and sustained demand continues in several pockets of the market and
is likely to continue in future for a period of time. This strategy also makes sense when a
company in declining product-market has shared facilities, programmes, or common
customer groups with other divisions in the firm.
Niche Marketer Strategies: Becoming a niche marketer is a refusal to becoming a follower. Even
when most segments in a product-market are expected to decline, a niche strategy may be a

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