The growth of every business unit, as said by many business analysts, lies on the marketing strategies of the company. It serves as the ‘lifeblood’ of the organization and give returns to the investment (BusinessResourceSoftware, 2007). Due to the tight competition that prevails in the market, it is necessary to have an effective and efficient marketing tactics to gain the loyalty of the customers (Porter, 1980). The most prominent type of strategy that most of the businesses applies is the lowering of their products prices relative to the existing competitors in the market. This strategy is sometimes called as the ‘cut throat’ or ‘price cutting’ tactics which enables the primary player to eliminate their competitors especially the ‘infant’ ones (Hepworth, 2005).
As for the consumers, it has already been their behavior to change their loyalty from one brand to another based on which company offers great incentives or promotions to them. This only shows that customers are the one who dictates what and when a certain product will be available in the market (Berkowitz, 1989). This is the reason why organizations are considering the ‘willingness to pay’ of their customers so as to know the price level they will going to set up, and the taste and preferences of the customers is also being considered to meet their ‘wants’ (Kaiser, 2005).
In UK, news paper industry for the past years had been on their so-called “price war” wherein the different news paper company keeps on cutting their products price in order to attract more customers. This led to the merging of one company to another and set the market price of news papers at a very low level. One company that remains as the primary newspaper player is the News International Corporation. It played significant role on the “price war” of the newspaper companies in UK. Therefore, it is of great importance to study the nature of the business and the factors that drive the said company to engage in ‘predatory pricing’. On this paper I will be going to focus mainly on the market case of the said company.
This paper aims to conduct a review regarding the marketing status of News International Corporation in their news paper publishing in UK. In addition, I will also evaluate the current marketing strategy of the company. At the end of this paper, I will give recommendations to the News International Corporation and the ways on how they will implement the suggested solution.
The Price War
It was during in the year 1992 where News Corporation observed that the demand for their news paper in the long run was of downward trend. With this, Murdoch made a decision to increase their sales. Based from their marketing history, the cutting of prices effectively increased the sales of the Suns, with this he then resulted to cutting the price of The Times by 15p. It was also the purpose of News Corporation to set their prices lower so as to attack the ‘market leader’ then- Daily Telegraph.
As for the Daily Telegraph, they have no choice but to cut also their price to compete with The Times. Daily Telegraph price was down from 48p to 20p in June 1994. On the other hand, the Independent also cut their price from 50p to 20p but easily gave up since it cannot withstand long term ‘price war’. The competition heats on until the News Corporation was forced to set their price at 20p from 30p. With this price, they still profit by 2.5p.
Based on studies, it is already the nature of consumers to easily be attracted to products with low price. They are ready to give up their loyalty just to save money as they could. Moreover, ‘price cutting’ strategy, with the inelastic price of demand form the consumers, would lead to the decrease in the profits of their competitors.
According to studies, UK’s consumer has an inelastic demand for price. This only means that even if the company changes the price of a certain good, still, there will be less effect on the ‘quantity demanded’ by the consumers. With this, it is clearly understood that engaging in ‘cutting price’ strategy will not really help the company in the long run since the companies will only set their prices lower and lower until they will end up selling their products at a lower price and generating less profits. The only way a company to be successful in this strategy is by setting a price advantage over the competitors. By doing so, you will gain you target market and uplift your sales (Moffatt, 2007).
Ansoff’s Matrix Analysis
This is used by businesses on what objectives they should implement to their company, and then later on, determining if the formulated objectives can be attained by ‘competitive exploitation’ of existing product and market opening. The main objective of this tool is to tract and narrows down the gap between the objectives of the company and the estimate until formulating a more appropriate business range. The gap that is being refer here is the gap between the questions- where are we now? and where do we want to be? This is made up of four quadrants namely: the Market Penetration Strategy, the Product Development Strategy, the Market Development Strategy and the Diversification Strategy. In general, this gives guidance to a company regarding their product and market growth strategy (Market-Modeling.co.uk, 2007).
Market Development Strategy
The companies that belong into this quadrant are those companies that try to offer their existing product to a new market. This could be done through exportation of their goods to other places or offering a variety of pricing level to different consumer groups (tutor2u.net, 2007). This is done by any company to increase the scope of their market and increase their sales return or because they failed to gain acceptance on their previous market. News International could fall under this quadrant if they will think so. If in case they will result into this quadrant it maybe because they made new markets for their newspapers, like extending their market to other nearby countries by investing into it. For a company to be successful under this quadrant, they are being advised to always conduct a market study regarding the acceptance of their product in the new market.
In this quadrant, organizations try to offer their new product to new market/s. This quadrant involves more risks because the company is uncertain if they will gain acceptance from the public and so as their product. For any business to adopt this, they should have clear idea on what they are expecting from the strategy and asses the strategy honestly. News International is neither offering new product nor new market, which is why they do not belong into this quadrant.
Product Development Strategy
A business is said to be under this quadrant if they are still serving the same market but offering new line of product to them. The company here is characterized for constantly seeking for any business ventures. Their main objective is to find other product lines in the market or improve the already existing one. If News International Corporation would fall under this quadrant, they have to innovate or discover new product that they are going to provide in the market.
Market Penetration Strategy
In this quadrant, companies try to sell the already existing product to their existing market. The main objectives of the companies that belong here are to make safe their supremacy of growth markets, to keep or increase their market share of their current product by applying various marketing communications, pricing strategy and promotions, to increase the loyalty of their customers to their brand and to drive their competitors (tutor2u.net, 2007). News international is currently belonging in this quadrant since they already fulfill the second objective and they are offering their original market with their existing product-newspaper.
Boston Matrix Analysis
Boston Matrix Analysis provides every company an analysis about their performance by examining their ‘market share’ and how rapid their share is growing. The fundamental theory in Boston Matrix is the “Product Life Cycle” concept that explains that organizational opportunities moves in a “life cycle” phases of introduction, growth, maturity and decline. Most of the businesses start by having financial problems but eventually they will gain market acceptance. As for mature businesses, they should be generating now surpluses on profits since they already known on the field where they are intro. In this case we will determine the market success of News International Corporation based from its market sales and growth rate.
Of course News International Corporation is way far on this quadrant since this company already established market stability and acceptance in to the public. Those who are just starting up or new players in the newspaper industry will be the one who falls into this quadrant. Based on the market share of News International, with 35% shares daily, I could say that the company does not have any problem with the returns on their investment given that they are already the top market share holder. The best strategy for the businesses that falls under this quadrant is to focus on to attain the Star quadrant (SCA-UK, 2007).
Under this quadrant, an organization is having a low share and low growth market. The industry of the newspaper in the UK in not on a downtrend but rather an increasing one based on the annual report made by Chairman Conrad Black of Hollinger International Inc. therefore, News International and other newspaper players will not be experiencing this type of phenomenon. If ever there will be a market downturn, it is suggested that an organization should evaluate if whether they will continue investing on this industry.
For a business to fall under this quadrant, they should be experiencing large market share but having low market growth. Although News International has the largest market share, the newspaper industry, as I have said a while ago is on continuously increasing trend. With this, it is impossible that News International will fall into this quadrant.
On this quadrant, a company has to be growing quickly and have a large share on the market. I believe News International falls under this quadrant for they have already not only a large portion of the market but the largest part of it and the growth of the newspaper market in UK today is of good status. Here are the market shares of the other newspaper players in UK in daily percentage: Trinity has a 25% market share, Northern & Shell with 14%, Daily Mail and General Trust with 19%, Telegraph Group with 7%, Guardian Media with 3% and Pearson with 1% share in the market (Magforum.com, 2007). With the above digits, it is good for the news international to develop their company by investing more on the market. Keep on investing before the market attains the Cash Cow status.
After evaluating the market status of the company, I will now propose possible alternatives for further progress of the company, and from which we are going to evaluate and pick the most appropriate one for the News International Corporation.
First, by the time the company has been recovering from the down turn of the sales, they should now start to increase the price of their newspapers little by little in such a way that they will not feel the increase in the price. Set this tactic as a long term goal so as there will be a continuation of the said tactic. This would give them increase in the profit.
The second one is the expansion of the market to other countries. This would increase the sales and capital turn over of the company. There should be a thorough research first before investing in one country. Determine the government policy to avoid being penalized and so as to be included every time they will formulate policies or strategies.
Third, try to acquire those newspaper companies that perform badly in the market. This would make you a larger player and therefore has the capability to set the price in the market. This is classified as the monopolistic competition, wherein there are only few players in the market and the larger company has the capacity to dictate what will the market price of the product since majority of the available product in the market belongs to them.
Fourth, since the newspaper industry is on an increasing trend, it is advisable for the company to invest more on the industry before the market reach its peak and become stagnant. Investing will enables the company to grow further by incurring more profits coming from the market.
Last but not the least, innovate the newspapers from time to time. Made some twist in the company’s newspaper in order to attract customers.
Evaluation of the Alternatives
Influencing the price of the newspapers to increase again would really bring the company an increase in their profits, assuming that the company did thorough study of the willingness to pay of the consumers (Horváth, 2000). By the time you increase the price gradually, competitors would also do the same so as to make up for their loss from the ‘price war’.
Expansion of the company’s market to other countries would generate additional market for the company, thus, making additional profit as well. Since the company has the control over the domestic market, it is about time for them to expand their scope aside from UK, US and Australia. Although the expansion would just be an additional cost for them, but the amount of the return later on would be greater than when the company become stagnant on its current geographic market.
Acquisition of the low performing companies would also serves as an advantage for the News International by having much influence to the market. The larger you are in the market, the greater the influence that you can apply to the market (Echaniz, 2001). This also cut cost on both organization since they will be paying less tax for they will be now treated as one business entity (Delfosse, 2007).
By investing in the market that is ‘booming’, there is a small possibility that the business will lose in the competition since the market as a whole has great demand for the newspapers. According to the endogenous growth theory, market growth happens because the consumers’ purchases products based on their willingness to pay and preferences while businesses set their prices in such a way that it will maximize their profits. With this, it is just a breeze for the company to gain high profits from further investing to the market based on the idea of ‘Returns on Investment [ROI]” (Metcalf, 2005).
The innovation of the newspaper is also important since it is already in the nature of man that we always seek for ‘something new’ something unique. Failure to do this will forced the customers to go to the side of your competitors. This is the reason why innovation is very important in every business entity.
Based from the above evaluation, I therefore suggest the fourth alternative which is the further investing in the market. Based from the Boston Matrix Model, it is very important to implement this first before anything else while the market is in good condition. This is really a great opportunity for the News International Corporation and it would be a loss if they will not going to implement this strategy right away.
The Second Best
If the above suggestion was not successful, then, the ‘second best’ alternative will be implemented and that is the extending the scope of the News International Corporation’s market to countries that offers great incentives and has a good market status. With this, the company will be able to further increase its profit and sales. This would also boost the morale of every employee for they are working to a successful and well known company.
The said two marketing tactics would be implemented by first, made a market study for other possible market ventures or newspaper lines. Then after doing so conduct a meeting with the company managers and members of the board and present the plan to them and as a group evaluate the pro’s and con’s of the strategy and made necessary adjustments to it. During the implementation of the strategy observe for possible improvement to it. Continue doing this until the condition is already of smooth sailing.
On the case of the market expansion internationally, choose a country that has policies that can be used by the company on its advantage. It is better for the company if the government is the one who offers incentives by investing to their country. Do a market study in the domestic market of the country that you chose to invest with to prepare and avoid more risk for the company.
Based from the above facts and ideas, I can therefore say that competition really made every industry boom and easily coping up with the fast changing market environment. The success of every business unit lies not only on how good the plans of the company is. But rather also based on the formulation and execution of the marketing strategy that brings customers on the side of the organization. Tight market completion only benefiting the consumers the most. They enjoy lower prices, lots of incentives, innovation and additional features to the products that would really satisfy their needs, tastes and style.
In the end, society as a whole will be benefited by the competition of the organizations.
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