The DVD players market has experienced tremendous growth in the last 5 years. The demand for DVD players has increased greatly in the same period with many households including them in the ‘must have’ list. Major players in the industry have set up to capture the largest possible market share for themselves.
The effect has been increased competition characterized by organizational strategies and counter-strategies to provide the customer with the most attractive package. Additionally other external and otherwise have had an impact on the market environment in different ways. This paper examines the different forces and their probable impact on the DVD player market. It also demonstrates how the use of a marketing model can shed light on customer decision-making process.
SUMMARY OF THE ECONOMIC COMPONENT OF THE PAPER
The price behaviour in the DVD players market has undergone a radical shift in the last 5 years. Mintel reported that the prices fell from an average £311 in 2000 to £99 in 2005. This has been due to the robustness of competition fueled by increased demand for DVD players in the UK market.
Demand has been shaped by several factors including consumer tastes, availability of substitutes, price complements, disposable income, cultural and social factors as well as future expectations. Demand ha been inversely correlated with price in that as demand increased prices decreased. On the other hand, the relationship between supply and pricing has been proportional such that an increase in price resulted in subsequent increase in supply. Supply has also been dependent on such factors as cost of production, prices of related goods, expected future prices, number of suppliers, change in technology and the goal of market players among other factors.
MACRO AND MICRO ENVIRONMENT
The Macro forces in the market include indirect forces that impact on the particular market. Several macro forces identified below will impact on the DVD player market environment. These include: –
(i) Political (government, legislation and taxation policies). Different political and government systems have different policies and regulations that govern business activities within a given state. There are measures that different governing systems put in place to either encourage foreign investment or even to protect local enterprise from external (unfair) competition. These include tax reliefs or imposition of duties. These factors will have an impact on the market environment since they set the state for all business activities within that jurisdiction.
(ii) Globalization. This phenomenon has created new opportunities as well as challenges to businesses. Many organizations are now relocating their operations to countries that provide the most favourable business environment especially cheap labour, economic stability and other attractive incentives. This allows companies to produce goods and services outside their primary market. In the technology industry like DVD players production, this kind of labour outsourcing have been successfully adopted with effects on price reduction among other benefits.
(iii) Economic trends. These include economic crises on one hand and economic boom on the other. The effects are ofcourse opposite of each other. Economic crises would include times or recession, excessive inflation, low GDP rate with effects such as retrenchment/unemployment and decrease in disposable income of households. This would in turn affect sales of DVD players adversely. The opposite scenario would also be true.
(iv) Social and cultural factors. This includes the main values and beliefs of particular community or society. If the people were quick to adopt new technologies and modern ways this would impact on the demand for DVD players.
(v) Technological factors. The rate at which technology is advancing is likely to impact on the market in that new and improved products are available every now and then. This has made consumers to modify their purchasing habits since more and more of their property is becoming outdated.
Other Macro factors include population density, education, geographical locations and age.
Definition – These include the direct forces that shape a market environment (Wikipedia 2006). They include: –
(i) Customers. These people are the backbone of the business world and the goal of any business entity is to attract, retain and satisfy customers’ needs. In the DVD player market customers’ preferences are greatly influencing the products as well as the pricing.
(ii) Competitors. Competition can be said to be one major force that influence among other things, pricing, customer relations and care. It can be safely asserted that competition drives innovation (McKenna, R. 1988). The impact of competition in the DVD player market is clear to all since in the effort of a firm to outdo the other in presenting the most attractive package, the common man has benefited in terms of quality at fair price.
(iii) Suppliers. The relationship between the supplier and the producer can provide the required competitive edge since the supplier will be guarding the interests of the producer as they supply raw materials at competitive prices and at the same time ensuring quality.
(iv) Distributors. They form the essential distribution chain and ensure that products are accessible to customers. A collapsed distribution chain would mean that customers would have difficulties in accessing the products (Hofstede, T. & Steenkamp 2002).
Other forces include employees without whom all work would stall, and the media who can ‘make or break’ an organization or their product or service.
Segmentation and Targeting
Definition – Segmentation of a market involves dividing the market into subsets or segments that have similar unique characteristics and similar needs. This is in the belief that these market segments are likely to respond in a like manner to a particular marketing strategy and can thus be targeted as a unit by use of an appropriate marketing mix (Kotler & Keller 2006).
b)> Forces affecting Segmentation and Targeting
Economic factors. Economic crisis would serve to widen the segmentation with more and more people’s demand becoming price elastic thus more and more would only go for very cheap DVD players.
Social and cultural factors. Since they include values and core beliefs such consideration as brand, loyalty and quality would come into play here and this might affect segmentation and targeting in the DVD market.
Technological force. This is also a major factor that would affect segmentation since some customers are technologically savvy and want to have the latest version of anything and this can form a basis for segmentation.
Globalization. This allows marketers to reach markets that are geographically removed from their primary markets.
Geographical factors. Markets can be segmented by virtue of their geographical location. Unique needs can exist for the people in the same locality.
Competition. The intensity of competition in a market segment would reduce its attractiveness. Lack of competition creates a monopoly. In a monopoly the market can be segmented using price discrimination, which means prices, are higher for people who can afford it and lower for people whose demand is elastic of price.
Distributors. They are used as a link between the producer and the customer. Distributors have in the past been used to segment the market by ensuring that if one is a dealer of Sony they will only sell Sony or can sell only the most well known brands at a higher price. Consider a supermarket chain like Asda. They stock all the brands of DVD players from cheap ones from China to the most sophisticated Sony and Samsung brands. This is unlike those specialty shops that only cater for a particular type of customer.
c). Marketing model and consumer decision-making process
In the DVD player market they customer will go through the need recognition phase where they become aware of the need. If the need is strong enough to prompt further action, the customer then starts to seek information about what they want to purchase. The customer will mainly seek information from family or friends, advertisement or shop attendants. After this the customer will look at the alternatives to what they are primarily interested in. For a DVD player it would most oftenly be the brand, physical appearance, features and the pricing. After being satisfied with the above procedures, the customer can then make the purchase.
Kotler and Keller, L.K. (2006). Marketing Management, Pearson Education, 12th edition.
McKenna, R. (1988) “Marketing in the age of diversity”, Harvard Business Review, volume 66,
Wikipedia, the free encyclopedia. Market. (2006). en.wikipedia.org/wiki/Market. Retrieved 0on
Hofstede, T. and Steenkamp (2002). “International market segmentation: issues and perspectives”, Intern. Journal. Of Market Research, volume 19, pp 137-189.