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OzCo Boats Case Study
OzCo Boats is a family-owned boat building business based in Coffs Harbour, New South Wales. Operating since1961, OzCo designs and builds high quality, small- sized, luxury boats that are made in traditional handbuilt ways from traditional materials. Until now the business has prospered and it has built up strong reserves of cash. OzCo sell their boats to boat-yards and also direct to consumers in Australia. However, the Australian domestic market is shrinking and more and more substitutes are becoming available. In contrast, there is fast market growth overseas where trading partners are available but, despite being the category market leader in Australia, OzCo has no experience in overseas markets. OzCo has always relied on traditional methods and materials to build its boats; this was fine in the 1960s, 70s and 80s but in recent decades there has been a move to newer and more efficient technologies both in materials and manufacturing processes. With no new models for decades, OzCo has a portfolio of products in decline In the Australian market.
More worryingly, much of OzCo’s manufacturing technology is outdated and the CEO has told OzCo’s staff recently that ‘there is about to be Australian government legislation to restrict the use of some of our boat types.’ Despite having experienced and industry –respected staff, OzCo will not be able to make the technology changes fast enough before their current products become ‘illegal’ in Australia. This is not just affecting OzCo: other traditional boat-builders in Australia face possible ruin too.Indeed, some of the larger and more technologically advanced boat-builders are now looking to buy out their smaller competitors such as OzCo in order to acquire their market share, liquidate their assets and then close them down. Because of all of this, OzCo’s employees have low morale and significant staff departures are a risk (that is, OzCo’s best employees are likely to leave for other jobs if things don't improve). On the brighter side, overseas governments place fewer restrictions on the use of traditional boats and OzCo’s current products will be legal there for many years to come. More than this, the growing economies of emerging nations are generating wealthy consumers who have a passion for luxury products
Based on the case study information above you are to:
a. Provide a perceptual mapping of OzCo’s customer segments
b. Use IBISWorld and provide an insight from the industry trends
c. Perform the SWOT analysis of OzCo Boats
d. Analyse the threats and opportunities you have discovered in the SWOT analysis.
e. Based on the Ansoff’s Matrix and identified threats and opportunities, suggest a strategical alternative that OzCo Boats should pursue in the future. Provide reasons for your answer and support your recommendations with credible sources of information.
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Perceptual map of customer segments
The present report is based on the OzCo Boats which is a family-owned boat building business. It is located in New South Wales, Australia. In this section, the perceptual map of customer segments of OzCo Boats has been presented.
It has been identified that there are basically five types of customer segments: casual boaters, function-first boaters, image conscious boaters, active social boaters, and lifestyle boaters (Fowler, and Rigney 2017). The brand portfolio is assessed within each customer segment for analyzing the brand strength, perception on key customers, and existing market share. The perceptual map also helps in determining strategic intent of the company.
The industry is primarily associated with the construction or repair of small to medium size boats and vessels that hold a displacement capacity of below 50 tones. The boat building and repair service industry in Australia has faced tough competition for the past 5 years. In this context, the revenue is also expected to drop by 2.4% each year and it has reached $1.1 billion through 2018-19 (Fowler et al, 2017). Therefore, the forecast decreased by approximately 7.4% in the present year. This industry builds and repairs a wide range of boats, shipyards, cruisers, yachts, catamarans, runabouts and rowing boats. The primary income of this industry generates from the sales of the new boats, while some players of the industry are also involved in the repair service as well. The domestic demand for boatbuilding services has reduced over time in Australia. The reason for this is the delayed expenditure on boats or cancelled the purchase considering it as a non-essential commodity. Another factor for reduced demand for boats is the weak discretionary income growth. This reduction in purchase has been further reflected in the decline of the Marine Equipment Retailing Industry for the past five years. According to the report by IBISWorld, it has been identified that the industry reflects a low market share concentration for the past few years (Fowler et al, 2017). The four largest companies in this industry have contributed less than 40% of the total revenue in the present year. Riviera Australia is considered the most successful and largest player in the industry having a market share of approximately 13.2% (Ryan, Hall, and Lai 2015). Further, the report by IBISWorld states that the market share concentration remains constantly at a low level. In addition to this, 2.2% of the industry companies have employed a workforce of 20 or more numbers (Ryan et al 2015). On the contrary, 11.3% of the boat sailing or repairing companies have produced revenue of more than $2 million (Fowler et al 2017). Besides, the company associated with boat repairing services are basically non-employing sole-proprietors that are the cause of industry fragmented structure. In the given case study of OzCo boats, the company has invested in the inclusion of technology to achieve a competitive advantage. IBISWorld had also mentioned that the prime success factor required for a boat building industry includes (i) the easy access to the latest technology and protocols, (ii) producing goods according to the market demand, and (iii) closeness to key markets (Fowler et al 2017).
Threats & Opportunities analysis
OzCo boats holds threats in the Australian market from several factors. The Australian government may impose strict legislation on the boat building and repair service industry. This form of regulations will lead to the restrictions of manufacturing process as well as trading of the boats. At present, several new entrants have entered the industry who are using the latest technology in the boat building process, which will eventually impact the sales of OzCo company. Apart from this, the industry also offers several substitutes in the market which are cheaper and better quality, and hence enhances threat to the company. The boat of OzCo is relatively higher in price, which negatively affects the buying decision of customers. Thus, an increased rate of boat creates a threat to the overall sales revenue. Furthermore, the lack of competitive efficiencies with the company reduces the morale of its employees. Eventually, it will increase the rate of employee turnover and create a risk for the company.
The company has the opportunity when customers generate passion for the traditional boats as well as other luxurious marine products (Fowler, Roberts, and Graham 2015). Moreover, with the rise of the disposable income of customers, they will make a buying decision for boats and related products. Furthermore, apart from Australia, there are some other legislations of the overseas government that support the traditional models of technology and boats of OzCo and make it legal within a few more years. It is an excellent opportunity for the company to increase its international trade business. By incorporating the latest technology, it can attract new customers and move ahead of the competition Glass et al 2001). The above analysis reflects that there are more threats for the company as compared to the opportunities. Therefore, to take advantage of the opportunities, OzCo needs to mitigate its potential threats.
Strategic alternative analysis and recommendation
The Ansoff Matrix of OzCo Boats has been described as follows:
Market Penetration - This strategy is applicable to those companies which penetrate a market who is the current product is already available. The Australian market has several competitors for OzCo like Razer line custom boat builders, Riviera Australia Pty Ltd, and Alucraft Boat Builders & Designers, that offer similar products (Glass and Hayward 2001). This proposed the company offers boots cheaper price to the existing and new customers. In addition to this, it emphasizes on high-quality service to its current customers, so that they provide value to the company and continue in the long run (Valadkhani, and Smyth 2016).
Market Development - In the case study of OzCo boats, the prime objective of market development is the involvement of those consumers who are not purchasing the products. According, to Fowler et al (2015) Michael development hell the company for better targeting of new customers and thereby expanding the customer base. The strategy has the capacity to generate maximum revenue in a new market especially in the overseas area. This strategy is helpful for the company because the legislation of foreign nations does not prohibit the usage of the old traditional model.
Product Development - The product development can be done in two ways, that is, product designing and market analysis and research. In the product development strategy new product to the market. The requirement of this strategy is to utilize the maximum production capacity, handle new entrants, protect market share, and maintaining the brand image of the company.
Diversification - Diversification is the approach to increase the profitability of the company along with the sales of new products. Related diversification can be done in either of the forms; forward integration, backward, and horizontal. Orozco should also impose the diversification strategy only if it has a high ROI (Valadkhani et al 2016).
In this section, recommendations have been provided by analysing the Ansoff Matrix and identified threats and opportunities. In this context, OzCo boats should apply the strategy of ”product development”, since their product is built using the traditional method. It should incorporate new technologies to maintain a competitive edge and expand its market. It should also work on the “market development” strategy to enter new markets overseas (Fowler et al 2015). However, it needs to give employees proper training and education about the requirement of new market. In this way, it can expand the customer base through its unique and quality products. This form of globalization will bring goodwill and brand value in the home country.
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