Recommendations_for_Non-Price_Barriers_to_Entry

Abstract Big Drive Auto’s creation of a price strategy will provide fair prices and increase consumer demand for products and lower competition. The use of non-price barriers will provide a unique market strategy to prevent competitors from gaining an edge in the auto industry and prepare for any unexpected changes in the future. The use of product differentiation will provide consumers with efficient products and service after the purchase of vehicles. The advertisement of extended warranty, vehicle service and innovative products can ensure the consumer is satisfied. Recommendations for Non-Price Barriers to Entry There are a few items that Big Drive Auto can do for non-pricing strategies such as advertising, control of resources, and customer network effect to name a few. • Big Drive Auto can make it difficult for new competitors by increased advertising so that new firms find it hard to compete. Therefore, brand loyalties can be created through advertising and other marketing strategy. These strategies help Big Drive Auto gain market power that act as barriers to entry for competitors and make it difficult for them to gain consumer acceptance. • If Big Drive Auto has control of a resource essential for the automobiles, then other firms are not able to compete in the industry. For example, control over raw materials or other inputs in production process. • Getting exclusive agreements with key distributors and suppliers can also make it difficult for competitors to enter the industry. • Network effect is another good way to hinder competitors from entering the industry. For instance, when a product or service has a value that depends on the number of existing customers, then other players have hard time entering a market where the company has already captured a significant customer loyalty to the established products. • Additionally, it is unclear what the state of the economy will be in the next five years, Big Auto will also want to build in some flexibility to its’ manufacturing capacity as labor contracts. If the economy grows and demand is up, big auto will want to rapidly ramp up on production. If the economy turns sour, they will want to cut jobs and scale back production without paying large severance packages to lay off workers. According to Thaeler (2008), “the reality is that people may get branding from TV and print ads, but the long-term approach and focus is online. People go online first to research big purchases. Automakers and many of their dealers accept that the purchase process increasingly begins, and sometimes even effectively ends, on the internet.” Plus, the social network websites such as facebook, myspace and twitter are good way to advertise. Innovative strategies are key in staying competitive. Price Strategy Recommendations Big Drive Auto is responsible for the sale of cars, and other services, such as the sale of motor oil, coolant, and tires. In the motor vehicle industry, pricing strategy is important to compete in such a saturated and fickle market. Therefore, prior to constructing and appropriate pricing recommendations, Big Drive Auto must consider several key elements of the business. The considerations focus on the cost structure for short-term or long-term goals; primarily the incurred distribution, promotion, and production costs. Taking into account the competition and the palate of the consumer contributes, in creating an effective pricing strategy. In regard to the available price strategies, Big Price Auto could consider such Penetration Pricing, a technique, which sets a comparatively bargain-basement starting price in the market with superior value, with the recommended price point repeatedly below the closing market price. When product demand is extremely price elastic and, is presented with introductory challenges, then it goes without saying that the product is acceptable within the market, making product penetration perfectly suited within these situations. Another technique, Price Skimming is a market-based pricing technique, in which a high price is assigned in the short-term. Prices are assigned high to pull the least price-sensitive customers and to generate profit quickly. Although price skimming is an attractive strategy for small, highly innovative companies with new and unique products, prices can and should be lowered after the initial profit has been made. A supportive advantage with this particular pricing method is its’ contribution to building the value or reputation of a brand or firm. In addition, its’ rewarding benefits in regard to prestige products, where demand is relatively inelastic and the customers are not price sensitive. An organizations profit’s depends, largely on its own pricing strategy and that of its’ rivals (McConnell, Brue and Flynn, p. 232). Big Price Auto should base its’ prices on the current average of competing products. For Example, According to the Bureau of Statistics Data, the current average price of motor oil is $2.91 per gallon (Bureau of Labor Statistics, 2010) and therefore Big Drive Auto should select prices around or slightly below this range. Essentially a price recommendation of both penetrative and competitive pricing is the most profitable and protected pricing strategy available for the products and services Big Drive Auto provides. Strategy allows Big Drive Auto to penetrate the market at a quicker rate, while alienating the competition. Big Drive Auto executives need to be aware that the pricing strategy does have its’ drawbacks, in that it is difficult to administer. The lower price points could mean potential lost profit. Keep in mind though, If Big Drive Auto does decide to price products above the current average price, then the products will have to maintain a uniqueness that would make the additional cost worthwhile. Uniqueness in price and product give Big Drive Auto a competitive edge. Product Differentiation Big Drive Auto offers car sales and service, for the company to expand their customer base the following suggestions are developed to differentiate the products and service already offered. The suggestions relate to developing advantages for customer service, promoting sustainability, and providing repairs to recalls. By developing customer relationships from purchases to repairs Big Drive auto can differentiate their product from the competition and increase customer referrals. On the lot, the customer’s main concerns are the service before and after the sale, companies’ honesty and integrity. By offering CarFax on all pre-owned vehicles demonstrates that philosophy and helps assure the customer while promoting customer loyalty. In the Garage, by developing personal maintenance plans for vehicles sold, so that the customer receives notification that they need an oil change or new tires; while noting the brand preferred by the customer for the maintenance. Through warranties, Big Drive Auto has the advantage of drawing in existing customers; attracting new customers and increasing business. Another way Big Drive Auto can capture new loyalty is through the green consumer and selling sustainability. One way is via fuel system modifications to accommodate ethanol or other eco-friendly fuels. Eco Ultra refined motor oil as an option for vehicle maintenance and lubrication services (2010). Stress environmentally friendly waste disposal. For tires, either re-sell, retread and recycle as options to consumers. Stress that the company also manages disposal of hazardous wastes that may be generated. In addition offer hybrid vehicles as part of the inventory. Recently, there have been vehicle safety and defect recalls by Toyota and Lexus. Big Drive Auto can stand out by advertising to fix these vehicles, especially if they are part of the company’s inventory. Part of the personal maintenance plans could include service after the sales by ensuring customers are notified of potential recall events affecting their model. The company can promote safety to the customer as part of their culture. Conclusion The ability to implement the best price strategy will ensure Big Drive is successful in the automotive industry. This will allow the organization to provide the best prices and vehicles to accommodate consumer demand. Big Drive should use a price strategy to provide fair prices and acquire a huge consumer demand based on the competitor’s prices. The latest marketing strategy will ensure Big Drive has the advantage over the competition. The latest trends the competition provides the consumer should play a factor in how Big Drive accommodates the consumer. Non-Price Barriers are used to prevent the competition from gaining a competitive edge in the automotive industry. Big Drive Auto can provide popular brands such as the Honda Accord and Nissan Altima at reasonable prices. The use of the reasonable price will prevent the competition from matching these prices and will attract consumers to purchase vehicles. The use of a unique strategy to create consumer demand will ensure Big Drive will become successful over the years. The economy should remain viewed to determine whether production should increase or decrease. Big Drive’s advertisement through network sites will create a huge demand for the product. The social network sites are the best way to attract consumers because consumers are joining the sites frequently. Big Drive should remember to maintain the positive values and ethics to ensure consumers receive the best service to increase consumer demand. The use of advertising to promote Big Drive’s product differentiation will attract consumers. The ability to advertise the willingness to repair vehicles with an extended warranty will attract consumers to purchase vehicles at Big Drive Auto. Consumers are cautious about whether the vehicle he or she purchases operate efficiently. The consumer wants a vehicle that has a CarFax, legitimate warranty, and the ability to purchase an extended warranty. The use of a warranty could include free oil changes at the dealership and a reduced price repair on the vehicle up to a certain amount. References: Bureau of Labor Statistics. (2010). United States Department of Labor. Retrieved from http://data.bls.gov:8080/PDQ/servlet/SurveyOutputServlet;jsessionid=6230f2e4c5a31e664ae7 Clickmotive.com (2010) Universal Eco Ultra. Retrieved from http://assets.clickmotive.com/Customers/C/ChuckNashChevroletBuickGMC/file/UL%20Closed%20Loop%20PCMO%20ECO%20Ultra%20Presentation%20Texas%20021810.pdf McConnell, C. R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, problems, and policies (18th ed.). New York: McGraw Hill/Irwin. Thaeler, J. (2008). General Motors to Spend $1.5 Billion on Online Advertising. Retried July 8, 2010. from http://www.marketingpilgrim.com