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MKT631B Environmental Scan Competition in the Industry
MKT631B Environmental Scan Competition in the Industry
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Order Number |
nyuhjjjjjjr5ujthg |
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Type of Project |
ESSAY |
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Writer Level |
PHD VERIFIED |
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Format |
APA |
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Academic Sources |
10 |
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Page Count |
3-12 PAGES |
Instructions/Descriptions
Table of Contents Executive Summary 2 Introduction 5 Environmental Scan 5 Industry Situation 5 Competition in the Industry 5 Threat of New Entrants 5 Power of Suppliers 5 Power of Customers 6 Threat of Substitute Products 6 Competitive Analysis 6 Technological Forces 6 Economic Situation 7 Political and Legal Factors 7 Cultural Demographic 8 Demographic 8 Socio-cultural 8 SWOT Analysis 8 Strengths 8 Weaknesses 9 Opportunities 10 Threats 11 Market Segmentation 12 Benefit Segmentation 12 Usage Segmentation 12 Marketing Mix 12 Price 12 Product 13 Promotion 13 Placement 13 Market Research 13 Recommendations 13 Conclusion 13 References 14 Appendix 16
Tie-down straps, also known as ratchet straps, are a product used for securing heavy items including furniture, construction materials, shipping containers, and more.
The Company’s products are (1) a tie-back strap designed to keep the doors of shipping containers closed during transit made of aluminum, and (2) a bungee board designed to work in companion with multiple bungee cords simultaneously to secure shipments.
In evaluating the business environment that the Company is working in, the team evaluated the industry situation, competition, technological factors, economy, and cultural / demographic factors.
“Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine industry’s weaknesses and strengths” (Investopedia). Included in Porter’s Five Forces are
(1) Competition in the Industry,
(2) Potential of New Entrants Into the Industry,
(3) Power of Suppliers,
(4) Power of Customers, and
(5) Threat of Substitute Products.
The tie-down strap industry has many competitors with products ranging from bungee cords to cam buckle & lashing straps, ratchet straps to tarp straps, reusable twist ties to winch straps and more; Home Depot alone has 873 results for tie-down straps with roughly 30 brands represented.
According to Profshare, the “global Bungee Cord Market is estimated to reach USD 1188.01 million by 2027, growing at a CAGR of 6.1 % between 2019 and 2027.” Tie-down straps range in price from .98 USD to 11 USD per unit (Home Depot, Tie-Down Straps).
Given the amount of competition in the industry, the variety of tie-down strap products, and the low prices amongst competitors, competition is high limiting the price new products can list at and saturating the market as a whole.
Tie-down straps are made of a variety of materials including metal hooks and polyester fabric braided to increase durability, weight capacity, etc. Given the ease of access to materials for bungee straps which can be purchased via a variety of retailers and wholesalers, and the ease of putting products on the market via online marketplaces, hardware stores, etc., the barriers for new entrants is low (making threat high).
According to How Products are Made, the current bungee cord design has numerous applications and will be used for the foreseeable future; therefore, the need for new entrants is also low.
Tie-down straps and bungee hooks have two large components, (1) a metal hook / bungee hook or metal latch mechanism, and (2) a strap or bungee strap. Metal hooks, bungee hooks and metal latch mechanism are made by more than 49 retailers according to Amazon (Amazon, Bungee Hooks).
And, according to Industrial Quick Search (IQS) Manufacturer Directory, there are at least 77 elastic cord manufacturers and companies. Given the large quantity of suppliers and the low list price of the products, it can be assumed that input prices are not too high; therefore, supplier power is low and suppliers do not control the tie-down strap manufacturers in terms of price.
Customers using bungee cords tend to have similar desires: elasticity, strength, durability, water resistance, and longevity. Customers’ needs effect the materials used in bungee cords but, most bungee cords are made of similar materials.
Given the low prices of bungee cords and other ratchet straps, switching costs are extremely low making buyers’ bargaining power high. Overall, buyer power is high given the ease of switching products and the low cost of bungee cords.
Bungee cords, due to their elasticity and hooks, can pose danger to users – if a bungee cord is stretched past its limits, it may snap and fling the hook back at the user. An alternative for bungee cords is standard rope, although it has limited elasticity and can be much more difficult to use as knots must be tied to keep the material in place, it can limit the bounce back dangers posed by bungee cords.
Although there are options besides bungee cords and ratchet straps, and costs of bungee cords are low, the overall quality and functionality of bungee cords and ratchet straps are unmet by other products; therefore, threat of substitutes is moderate to low.
Tie-down straps are a fairly independent product. Although tie-down straps rely on a variety of other products to hold in place, the vast array of items a tie-down strap is useful for make the sales of tie-down straps independent from the sales of other products.
According to Zachary Painter of wraptie.net, the top 5 tie-down straps include: Fasty, Velcro®, Rok™, The Better Bungee, and Lock Straps. Of these companies, four are privately held companies with limited public financial information, while ROK a public company, recorded revenues of almost $6 Billion in 2019.
Wraptie included a comparison of the various products available by components and features including safety, ease of use, multi-functionality, scratch-ability, rust proof, elasticized, infinite adjustment, and tidy storage.
Since prices range from .98 to 11 USD per unit for tie-down strap variations and the Company’s products are $3.99 for the tie-down strap and $19.99 for the bungee board (an aluminum board that holds numerous bungee cords), the Company remains very competitive in their pricing.
According to the Company, their tie-down straps have max load capacity of 150 lbs., the average bungee cord on Home Depot has working load limit of 33 lbs.; this puts the Company at a strategic advantage over competitors and makes their product superior to that of their competitors.
Since there are many competitors in the tie-down strap industry, the Company’s products are in line with their competition in price, and the company has better max load capacities; it is safe to say that the Company is highly competitive amongst its competitors.
Currently, tie-down straps are marketed via the internet, social media, hardware stores, commercial chains, print sources, and more; although there are many channels in which these products are marketed, there are also a variety of technological factors that can both inhibit or improve the sale of the Company’s two products.
Beginning in 1990, internet marketing began to flourish and became the basic point of commercialization worldwide, initially utilized to provide information about a company’s products and services, the internet has expanded to include price comparisons, product specifications, customizations, location variety, and more.
Companies spend millions of dollars per year marketing single items via social media channels, search engines and websites to ensure their products are viewed by customers first and create a sense of customer loyalty.
The Company will need to market its two products extensively via social media, its website search engine optimization, search engines, and through large contracts amongst hardware retailers like Home Depot, Lowes, Ace Hardware and more to ensure its product rise within the tie-down strap market.
Specifically, the tie-back strap will need to be marketed to railroad companies for use in container shipping, while its bungee board will need to be marketed on a small scale to semi-truck companies, moving truck companies, etc.
In accordance with the current economic situation occurring both domestically and internationally due to COVID-19, some products are not being shipped on the same schedule as some companies have incurred hiccups to their supply chain, their shipping availability, their retailers and more with government operations in certain areas forcing companies to close their doors temporarily.
Currently, inflation is on the rise as product quantities are decreasing, prices are rising, and fear amongst the pandemic increases. To combat the inflation occurring, the United States government has cut the interest rate on loans to 0 percent to encourage citizens to draw credit which should create economic boosts (sales) and limit the depths of recession as a result of the pandemic.
Although the United States government is trying to keep the economy from reaching a full recession, a recession seems imminent as hundreds of thousands of people are laid off of their jobs, rent payments are being force delayed, shipments of traditional products are limited, and essential products are flying off shelves.
The Company may incur both positives and negatives in the current economic situation including low stock prices – less money for the company to utilize, higher prices of material inputs, limited retailer availability to sell its products, and limited foot traffic in stores. The Company’s products may be in higher demand however, as more products need to be shipped via freightliners, airways, semi-trucks, railroads, and moving trucks.
The political environment refers to the external political situation of the marketing activities of enterprises; a stable political situation allows people to live and work in peace and creates a positive environment for enterprise marketing, while political instability creates disorder that limits economic development and market stability.
Currently the COVID-19 Pandemic has led to an instable political environment with effects to foreign trade forcing enterprises to account for the everchanging environment set forth by forced shutdowns and changing company requirements.
In this case, the Company will not only deal with the political system of the United States but also that of Canada. The domestic political environment includes the following elements: political system, political parties and party systems, political groups, party and state policies, and political atmosphere.
If the Company wants to export its products, due to the U.S. export regulations, it must first use the Automated Export System (AES) to report shipments valued at $2,500+ or if it requires an export license per the Federal Government. The political atmosphere in the United States is continuously increasing the desire for products “made in the USA” which should create a positive environment for the Company’s two products.
The international political environment includes international political situation, international relations, and the domestic political environment of the target country. The international political situation and relations of the United States and Canada now, could be considered rocky as NAFTA has been suspended and the USMCA is still in deliberation which leads to shifty trade-ability amongst nations.
The Company’s products should be able to entire foreign markets; however, due to current tariff markets, it is possible that shipping costs may be increased.
Transport authorities face a number of crimes and security challenges related to the systems under their policy. These include theft of goods, attack, illegal immigration, transport of dangerous goods and drugs, and smuggling.
In addition to these challenges, accidents may occurr during transportation including tipping, vehicle crashes, product loss due to insecure shipping containers, etc.
The Company must target commercial transportation organizations including railroads, airways, freightliners, semi-trucks, moving trucks, etc. to ensure they understand the need for and the benefit of its two products as it pertains to the satisfaction of its customers as well as meet the requirements of the North American Cargo Securement Standard and to comply with provincial (Canada) and Federal (US) regulations.
Currently there are limited airlines that do commercial shipping including FedEx, DHL, USPS and other private contractors; six major railroad operators including Amtrak, BNSF, CSX Transportation, Kansas City Southern Railway, Norfolk Southern Railway, and Union Pacific Railroad; 500,000 trucking companies; and 5 major cargo shipping (boat) companies in the United States.
Shifts in societal norms and outlook can also help the Company’s marketing approach. The rise of lawsuits of shipping container slamming on employees have affected how brands develop, price, and market of the product. This can significantly help this company as a large part of its products’ portfolio of Tie-back straps.
Due to the amount of shipping related accidents from cargo ship tipping and the shifting of contents from shipping containers, product shipments have a higher need for securing product verse losing thousands if not millions in merchandise.
In June 2018, 83 shipping containers fell from a cargo ship in the Australian region, one of many incidents in which shipping containers have been lost. The Company should use prevention of product loss and accidents as a means to sell its two products including dimensions and max load capacities to further strengthen its arguments.
A SWOT Analysis is a business tool to evaluate the strengths, weaknesses, opportunities and threats that a company faces and how to improve its standing. Strengths and weaknesses are both evaluated from an internal perspective, meaning the evaluation is what the company does well and does not do well.
Opportunities and threats are both evaluated from an external perspective, meaning what are the positive and negative items that a company may face, and furthermore, how should they handle these situations.
The Company’s two products have many advantages in comparison to competitor products including strength and durability, and the Company has many strengths including its manufacturing capabilities.
The Company’s tie-back strap provides strength and durability due to its aircraft grade aluminum and can hold 150 lbs. per square inch of pressure. The tie-back strap has a unique clasp design that increases the products strength and currently has a pending patent, another strength that provides the company with protection to its intellectual property and keeps other companies from copying their design.
Not only is the product strong in its own facets, its material inputs and durability allow the product to withstand more, increases product longevity, lowers replacement costs for users, and provides a higher level of safety to users, all while complying with safety regulations which help the company from avoiding potential lawsuit and liabilities in the future.
The Company’s manufacturing capabilities for the tie-back strap is highly efficient with an expectation of producing 100,000 straps/week a major supply chain advantage. The fast production to market cycle, paired with the products low retail price of $3.99/unit allows the Company to remain highly competitive amongst the tie-down / bungee cord market.
Although the Company’s bungee board has not currently garnered any sales, the product will be the first of its kind to market and provide users with the ability to use a variety of bungee cord lengths, increase the organization of bungee cords, and improve the efficiencies of the tie-down process by speeding up the process.
Since this will be the only product of its kind, it is likely to capture market share; and since there is a patent pending on this product as well, it is unlikely another company will design a similar product for many years – leading to higher potential sales with lower risk of new entrants.
Since the Company has already secured sales of $72,000 to the Canadian National Railroad, it has proven the product works, is durable and has real applications. Having these sales secured and, on the books, allows the Company to take this information to other shipping companies including freightliners, airlines, moving trucks and semi-trucks and present a proposition to help them compete for higher product delivery rates and better safety standards against their competitors.
Additionally, since the Canadian National Railroad has a reputation for singularly working with reliable suppliers, this would in turn make the Company a reliable supplier the Company could also use this information for marketing purposes or personal selling amongst clients.
Having an in-house product development and testing team has also presented as a strength for the Company as they continue to present new innovations to new and existing customers which develops stronger brand loyalty as these companies buy-in to these new products. And, customers can present specific specifications and recommendations that would improve the Company’s product applications, creating higher potential sales opportunities.
The Company currently is facing potentially unsecured intellectual property in regard to its two products given its two pending patents, while the Company waits it must be sure to put measures in place to ensure other companies do not steal its ideas, designs, material inputs, etc.
In the United States, a patent protects a company’s product design for 20 years; since the Company has patent pending marked on its products, the Company has some protection and others are deterred from copying due to potential infringement if the patent is accepted (Up Counsel). But, if the Company does not receive the patent, they will be out an extensive amount of money and risk their designs being duplicated.
Although typical tie-down strap products have a variety of suppliers that companies can purchase material inputs from, the Company’s tie-back strap and bungee board require aircraft grade aluminum – a material that must be specifically engineered and consists of Aluminum Alloy 2014, Aluminum Alloy 2219, Aluminum Alloy 7475, and Aluminum Alloy 7178.
MKT631B Environmental Scan Competition in the Industry
Aircraft grade aluminum increases the cost of production for the bungee board, limits profits, and is only available via a few key suppliers. In addition to the acquisition process of the aluminum being more difficult and costly, users may associate aluminum as a cheap and weak material verse a metal like steel the Company will need to prove the improved strength of the product over competitors to gain market share.
And, in the case of a material shortage meaning low volumes of aluminum available the Company will be put into a predicament as their product is solely made of the high-grade aluminum; this could create a problem for brand reputation and inhibit potential sales.
Given that the Company appears primarily as a new entrant to the market, aside from their contract with the Canadian National Railroad, the Company will have little brand recognition amongst customers and therefore, will have a more difficult time getting customers to switch to its products.
Additionally, given the bungee boards debut to the market as a one-of-a-kind product, the Company must find a unique means of getting the product in front of potential customers and proving its value. In addition to limited brand recognition, the Company has not entered much onto the digital branding or digital marketing space with social media pages, a website or an application for placing orders this is one more barrier for the Company to overcome in their customer pursuit.
Cash flow could potentially be an issue for the Company given the nature of the products, tie-down straps and the bungee board should last extended periods of time. Due to the longevity of product life, this means that companies may only order once every few months or years to satisfy their needs, leading to low sales during some months and higher sales during other months for the Company.
Opportunities and threats that companies face include political, legal, economic, social, environmental, technological, cultural and competitive trends, events and other factors that may benefit a company in the future.
The merchant shipping industry is one of the highest regulated trade industries throughout the world. It was also one of the first industries to adopt safety regulations through an international standard. Since shipping is inherently an international practice, the importance for uniform regulations on matters such as construction standards, navigational rules, and standard of crew competence is vital.
This industry is principally regulated by the International Maritime Organization, the London based United Nations agency responsible for the safety of life at seas and the protection of the marine environment. The IMO has adopted a comprehensive framework of detailed regulations that is enforced, in general, very high in comparison with international rules adopted for shore-based industries.
The principal responsibility for enforcing the IMO regulations concerning ship and cargo safety is up to the flag states, who are registered through the IMO. The Company will need to ensure its products meet the IMO standards, improve the safety of the laborers and delivers product as it should be to follow these international standards.
MKT631B Environmental Scan Competition in the Industry
If the Company’s products meet the IMO’s specifications, then the company will have higher potential to sell to freightliners that are forced to comply with these regulations over other brands.
Technological development is another important factor that could contribute to the overall success of the Company. As manufacturing processes improve, the company may be able to reduce scrap, improve production time, and increase overall efficiencies leading to cost savings and potentially higher profits.
Therefore, the company should pay close attention to outside organizations and news regarding production lines, supplies and manufacturing technologies that may impact their manufacturing. As the international markets currently face uncertainty in all industries due to the COVID-19 pandemic, retailers are pushing suppliers to produce product faster to fill shelves due to consumer demand.
Due to these conditions, the Company has the opportunity to provide companies with the opportunity to secure their shipments and deliver product safely. In addition to the items stated above, the global bungee cord industry is expected to increase from 2019 to 2027 and result in over 1 Billion USD in revenues by 2027 (Profshare). The overall growth of the industry as well as required international shipping regulations should affect the Company in a positive light and lead to higher sales.
The Company may face regulation issues due to the COVID-19 Pandemic as states across the US are shutting down travel and restricting companies that can be working, as well as mailing issues as mail has proved to be delayed meaning their shipments could be delayed to their customers.
Additionally, the border between the US and Canada has been closed for non-essential travel. The Company may face issues acquiring their material inputs as some companies have shut down operations due to government regulations and won’t be in operations until the pandemic lightens up.
As the pandemic affects global trade, shipping companies will be under much scrutiny to deliver product quickly, safely and efficiently since supplies are low across the globe; this could make the Company’s products more useful but also, these companies are currently looking to keep costs low to meet the needs of manufacturers and therefore another cost to the shipping process would not be welcomed with ease.
MKT631B Environmental Scan Competition in the Industry
In addition to COVID-19 related export delays, there is also an uncertain relationship amongst the US and Canada as NAFTA has been suspended – this could lead to a delay in delivery to customers across the Canadian border.
Since many US states have implemented shutdowns that have halted the production of “non-essential” goods and have consequently also halted the acquisition of “non-essential” goods as well. Internationally, other governments have implemented similar measures while also halting or slowing non-essential imports for similar reasons and for fear of allowing the virus to spread from other countries on the surfaces of many goods.
MKT631B Environmental Scan Competition in the Industry
This will inevitably result in a significant reduction of US exports in the coming months and this is a threat to the shipping industry and economy as a whole, which could also result in a decrease in the need for the Company’s products. Other product-specific threats include the current and future values of aluminum on the commodities market.
At the end of 2019, the price of aluminum had decreased due to decreased demand in China, expectations of excess supply, and an increased number of aluminum exports from China due to their decreased domestic demand. Since the start of the year, this has decreased significantly, worsened now by the economic downturn related to COVID-19.
On January 6, 2020 the price of aluminum was $1835.84 USD per ton, and this has since steeply declined to $1531.33 USD per ton. This means that when the economy turns around from the pandemic’s effects, it is expected that the price of aluminum will eventually increase, which will serve as a major threat for the tie-back products given that they are crafted from aircraft-grade aluminum.
In addition to the issues with production, exports, and aluminum; it is possible that the Company could face scrutiny by the IMO if its products do not meet or exceed their shipping regulations or lead to a shipping accident / liability.
The Company’s tie-down strap and bungee board are most suited for businesses that ship products domestically and international via airways, waterways, roadways, and railroads. These shipping companies may be headquartered globally, and can range in size from small business (i.e., moving company) to multi-national corporation (i.e., Maersk).
MKT631B Environmental Scan Competition in the Industry
Benefit-based segmentation divides consumers by ‘the basis of their knowledge of, attitude toward, use of, or response to a product,” and is based on quality, service, economy and speed (Keller and Kotler). The businesses that will utilize the Company’s tie-down strap and bungee board will utilize the product to increase the safety of their shipments, satisfy customers with on-time and fulfilled deliveries, and protect their image by meeting federal and international shipping laws.
The Company exceeds quality expectations with its tie-down straps given their significant weight capacities; and with its bungee board’s organization and increased capacities with the use of multiple bungee cords. The Company assists customers in increasing service and speed success by securing shipments which allows those companies to deliver product on-time, with little to no damaged products, and build brand loyalty for continued business – increasing their volume of use.
MKT631B Environmental Scan Competition in the Industry
Usage-based segmentation is based on the “users or their usage—occasions, user status, usage rate, buyer-readiness stage, and loyalty status” (Keller and Kotler).
The Company’s products will likely be used an extensive number of times by its consumers given companies like Maersk, the world’s largest container shipping company, ships 12 million containers every year globally (Maersk). The Company is likely to target large corporations like Maersk in order to meet sales volumes, smaller companies are likely to follow suit as a secondary target market.
In order to secure their shipments, it is likely that consumers of the Company’s products will utilize the tie-down straps and/or bungee boards every time they ship a product; given the 17 million shipping containers globally, this could lead to extensive sales (Porter Technology). If the Company’s products increase consumers compliance with Federal and International shipping regulations, then consumer companies are likely to be highly loyal to the Company and have increased buyer-readiness.
MKT631B Environmental Scan Competition in the Industry
Primary Research
To provide the best recommendations to the Company, an internet-based survey was conducted with 10 questions. The survey included questions about potential buyers use of securing technologies during their shipping processes and transits, the material of their current securement technologies and their frequency of use. To see the full list of survey questions as well as responses from the 8 total respondents, see Appendices 1.
From the survey, it was determined that 3 companies utilize tie-down straps, of those, the products are mostly made of steel or plastic. Additionally, based on the survey our respondents are somewhat interested to not at all interested in an organizational too for bungee cords. Based on the responses we received it seems that of our respondents the products may not be ideal for the expected market.
Secondary Research
MKT631B Environmental Scan Competition in the Industry
“Maritime transport plays a vital role in the world… as 80% of world trade is carried by sea” (European Commission).
Based on both primary research and secondary research, it was determined that the tie-down straps and bungee boards should be most heavily marketed to international shipping companies that are required by the International Maritime Organization rather than all shipping companies including moving companies and big box distributors.
Marketing Mix
The Company’s product prices are very similar to that of competitors with the tie-down straps costing $3.99; this positions the company in a positive light given their cost comparisons, lower prices could leave a poor perception of materials and higher prices could limit the number of buyers.
MKT631B Environmental Scan Competition in the Industry
Additionally, the Company offers economies of scale pricing with varying prices of the tie-down strap from $3.99/unit for 0-999 units to $3.49/unit for 1,000-9,999 products, and $2.99/unit for 10,000+ units. Although the current prices for the Company are in line with competitors, it is possible that the Company will need to increase product prices to cover advertising, online sales platforms, store displays and more.
Competitors use bungee cords, ratchet straps and steel boards which are made of synthetic fibers, steel hooks, and other metals; the Company’s products are made of aluminum and plastic lighter weight products than competitors.
MKT631B Environmental Scan Competition in the Industry
Furthermore, the aluminum used by the Company is aircraft grade spun aluminum which should improve customer perception of the product and prove both strength and durability of the material. Additionally, the Company’s products have higher weight capacities than standard bungee cords which make the product more desirable amongst buyers.
Currently, the Company markets its products via direct sales to buyers, which can be seen by its first customer, Canadian National Railroad. Given the current sales position, the Company should gather assets including product samples, a pitch deck and handouts to provide potential buyers, and draft a list of potential clients to reach out to.
Additionally, the company should craft a detailed website with integrated sales to allow ease of access for buyers and increase brand awareness. The Company should also plan to use paid advertising via train cars, shipping containers, freightliners and more to increase brand awareness, product awareness, and proof of concept.
As mentioned previously, the Company should continue its direct to costumer sales and implement a detailed sales website. Although the company could consider entering business to consumer markets through big box retailers like Home Depot, Lowe’s, Ace Hardware and more; it seems the product is more suited for businesses that need to meet particular shipping standards rather than traditional shipping companies.
MKT631B Environmental Scan Competition in the Industry
Shippers and carriers can use a range of different methodologies to secure loads inside containers, boxcars, and trailers. The Federal Motor Carrier Safety Regulations (FMCSR) requires that the load be safely secured during transportation. It is therefore the responsibility of the carrier to ensure that the loads to be transported in their vehicles are properly secured so they do not pose a hazard.
MKT631B Environmental Scan Competition in the Industry
