East Central Ohio Freight

Marketing Environment Analysis

 Competitive Structure of the Trucking
Industry…
• Very big industry—255 USD billion annually
• Very high number of both customers and huge number
of competitors (more than 320000 trucking companies
in the USA)
• This leads to a “fragmented” market
– No individual player (either customer or supplier) can
influence the market.
– This kind of competition is called “monoploistic” competition
• Similar products, differentiated brands
• So, each player has to define its own “market”…
 What is a Market?
Benefits

Values

♥ The Company
Attributes
 Therefore…..
• Each player has specialized in some combo of
“Value, Benefits, Product”
– This process is called Segmentation, Targeting and
Positioning.
• Typically, TL (Full truck load) is more fragmented
than (LTL) due to the aggregation and disaggregation
process…additional investment required.
• VLTL is in-between TL and LTL….basically Hub and
Spoke….
 What are the Factors that impact the
Trucking Industry….
Economic Social/
1. Economy is slowing…leading to the 1. Smaller Loads
crash of 2008 2. More Valuable Loads
2. But different industries have different 3. More Fragmented loads
conditions
3. Employment decreasing in
Manufacturing sector

Technological Legal
1. Technological changes are driving 1. Not Applicable
towards smaller and lighter vehicles

1. Smaller Players will be getting out

2. Temporary Cash Flow Problems
3. Favouring the Hub-and-Spoke Model (LTL and VLTL)
 Buyer Behavior….
• Who makes the shipping/decision?
– Depends on the organization, but generally a “Distribution Manager”
Sometimes also called the logistics manager”.
– Very busy life—no room for errors and “complaint” handling
• What would be their major concerns?
– Security, Timing, Reliability, and cost
• What happens on the receiving end?
– Security, Timing, Reliability and cost
• What concerns might the receivers have?
– Information incase something went wrong
• What are implications incase something goes wrong?
– Very Serious implication…..
 What is a Product?
Peace of Mind
All the augmentations and
transformations that a product
Potential Product might ultimately undergo in the
future

Additional product attributes,

Augmented Product benefits, or related services that
distinguish the product from
competitors

Attributes and Characteristics that

Expected Product buyers normally expect and agree
to when they purchase a product

Basic Version of the product

Generic Product containing only those elements
absolutely necessary to function.
No distinguishing features.

The Fundamental Need or Want

CORE BENEFIT that consumers satisfy by
A Trucking Service consuming the product or service
 Analytical Tools
• Mapping Company Strengths / Weakness with
Environment Characteristics
– BCG Matrix
– GE Matrix
– Ansoff Matrix
– SWOT Analysis
 Boston Consultancy Group Model
• Relative Market Share
– Company Market Share/Highest Market Share (or
2nd Highest Market Share if the Company is the
leader)
– Market Growth Rate– Negative
 BCG Matrix

VLTL

Stars Question Marks

Market Growth Rate

Cash Cows Dogs

Relative Market Share

 General Electric Model
• Market Attractiveness
• Company Strength
• Method
– List the core attractiveness features with
weightage
– Rank the environment on these features
– Multiply the rank with the weightage to get the
coordinates for both Market Attractiveness and
Company Strengths for the SBU
 Market Attractiveness…
Parameter Explanation Rating
Growth Negative—Manufacturing Down 4
Size Huge: ECOFs current markets are 25-30% of 9
their Business. Overall Industry could be
almost 100 billion USD
Geographic Low. Especially Ohio: Manufacturing Down 3
Advantage
Degree of Huge 3
Completion
Barriers to entry Low: Anybody with two trucks and a 8
customer can enter the business
Profitability Good 6
Differentiability Low 3
Relationships Mixed: While VLTL may allow new 5
customers , but trucking customers are
consolidating
Conclusion Moderately Positive 5.1
 Company Strength
Parameter Explanation Rating
Customer Base Positive 8
Size Medium 5
Expertise and Capacity Good—Purchase of Cincinnati and Indianapolis location 7
Assets OK, but need investment of 250000 USD 5
Financial Strength Not known, however since not mentioned can be 8
assumed to be good
Managerial Skills Medium: Family owned business; need more people 5
Location- Logistics Excellent: Check the interstate highway map 10
Location-Customers Poor: Cambridge Economy not doing well 2
Relationships Positive. Good relationship with independent operators 8
and good connections with brokers
Operations Negative: Larger Players have the advantage of larger 2
loads
Conclusion Moderately Positive; ECOF knows how to run such a 6
business, but would need to create substantial differential
advantage
 GE Matrix

Invest Invest Analyze

HOLD
Market Attractiveness

Invest Divest

MILK Milk
Divest

SBU Strength
 Ansoff Matrix
Growth Marketing Strategy
Most companies (ASDA, British Airways, IBM etc) want to grow
There are several alternative growth strategies proposed by Ansoff

Market Strategies on vertical axis

Market Penetration Strategy

Market Development Strategy

Product Strategies on horizontal axis

Product Development Strategy

Product Diversification Strategy
0
 Ansoff Matrix
Current New Growth Marketing Strategy
Products Products

Market Product
Penetration Development
Current Strategy Strategy
Markets

Market Product
Development Diversification
New Strategy Strategy
Markets
 Ansoff Matrix
Market Penetration Strategy
Expanding sales from existing products in existing markets
Strategies: heavy promotions, PR, price discounts etc

Market Development Strategy

Entering new markets with existing products
Strategies: introductory offers, trial brochures, radio etc

Product Development Strategy

Launching new products in existing markets
Strategies: developing new products, additional features of existing products
Introductory promotion of new products etc

Product Diversification Strategy

Launching new products in new markets
Strategies: developing new products, additional features of existing products
Introductory promotion of new products etc
 Ansoff Matrix
Current New Growth Marketing Strategy
Products Products

Market Product
Penetration Development
Current Strategy Strategy
Markets

Market Product
Development Diversification
New Strategy Strategy
Markets
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

Bargaining Rivalry Among Bargaining

Power of Competing Firms in Power of Buyers
Suppliers Industry

Threat of
Substitute
Products
 Power of Buyers
• High in the short term
– Large number of sellers
– More choice of Transportation types as well as
supplier
– Power is shifting from suppliers to buyers
 Power of Suppliers
• Moderate to High
– Fuel, Drivers, and equipment
– Very important to treat drivers well, else they
would become competitors
– Fuel cost may increase costs
 Barriers to entry
• Very low
– That is why it is easy for drivers to become
competitors
 Availability of Substitutes
• Low
– The flexibility of trucking almost precludes any
substitutes. Infact, VLTL increases this flexibility
even further.
 Rivalry
• Very High
– 10 LTL Carriers in Cambridge
– 50 within easy distance
– The VLTL has fewer competitors, but nevertheless,
since entry barriers are low, success will increase
competition.
 Porter’s five forces conclusion
• Profitability is low
• The strategy is Focus
 Porter’s Typology

Cost Leadership

Differentiation

Narrow Broad Focus

Focus
 Breakeven Analysis
• See note
– The Company is working in the worst economic
scenario
• Under worst circumstance the company would want a
40% increase
• What it is aiming is a 20% increase which is a more
average scenario
• So, can they survive if the market goes down?
 So, finally…
• What is to be done?
 Invest in Cambridge VLTL
• Pros
– 10% more margin
– Adds a new product line
(augmented product)
– Creates more work for
brokers
– Known business
– Increased presence
– Taking advantage of a
new trend in the industry
—1st mover
• Cons
– Additional investment of
250000 USD
– Incremental labour cost
– Risky economic scenario; can
backfire
– Can one player influence the
market?
– Low barriers to entry; any
advantage of being the 1st
mover can be wiped out
– Fuel cost increase can wipe
out any gains
 Remain where you are
• Pros
– Avoid all negatives
– Sticking to what you do
best
– Volatile industry; need to
look for an investment
that would provide
stability
– Focus
• Cons
– Missed opportunity
– Loss of business
– Lose brokers
– Under Utilization of
assets
 Wait, investigate further….
• Pros • Cons
– Market Conditions – When market conditions
changing rapidly stabilize, you may have
– So, wait and watch missed the boat. Better
invest now and take
– Estimate demand more
advantage when the
accurately
markets are better
– Begin the process – Costs might be lower
without investment during a bad market
condition; so enter
quickly and establish
yourself
Strategic Market Planning Process
Marketing Mix
Strategy and
Performance Plan

Portfolio Analysis and

Strategic Market Plan

Business Competitive
Market Attractiveness
Performance Advantage

Share Position Market Forces Differentiation

Sales Growth Competitive Intensity Cost
Profitability Market Access Marketing
 Factors That Shape Market Attractiveness
• Market Forces
– Market Size
– Growth Rate
– Buyer Power
• Competitive Intensity
– Number of Competitors
– Price Rivalry
– Ease of Entry/Exit
• Market Access
– Customer Familiarity
– Channel Access
– Sales Requirements
Determinants of Competitive Advantage
• Differentiation Advantage
– Product Quality
– Service Quality
– Brand Image
• Cost Advantage
– Unit Cost
– Transaction Cost
– Marketing Expenses
• Marketing Advantage
– Market Share
– Brand Awareness
– Distribution