Advise Jessie Wright on the accuracy of her comments. Is “theory for the birds” or is Wright misinterpreting the theory. Your answer should explain why each firm is currently realizing the results they are. (see Appendix for Data and Assumptions)
Customer analysis: who buys what, where, when and how, and the basis of segmentation
Competitor analysis: Porter’s Five Forces
Competitive Rivalry is intense. ACE differentiates itself on having a highly educated Ph.D., consultant team that provides the utmost professional service, and charges a premium price for its service. ACE’s three market segments value these attributes differently, and ACE’s solutions do not meet the needs of all segments.
Supplier Power is high. BEATER has cut costs by mixing its orientation, training and experience. This allows them to tap in to the price conscious market of Segment A and offer a minimal service at low cost and build value-add assistance on how their recommendations should be implemented and build customer loyalty with the “relationship” buyer of Segment C. BEATER holds an average 49% market share across all three segments compared to ACE’s 21% market share.
Buyer Power is also intense. Customers with the highest price sensitivity (Segment A) weigh quality of service across all five decision criteria relatively equally. With all else equal, they choose BEATER as the lowest cost provider, resulting in BEATER’s 60% market share of Segment A. Even customers with low price sensitivity (Segment C) value BEATER’s Ease of Implementation over ACE’s Professionalism and Staff Qualifications, resulting in BEATER taking 50% market share in Segment C.
Threat of Substitution to ACE’s market share of 40% in Segment C is threatened and will continue to be weakened by substitution. Whilst Segment C values ACE’s professionalism, BEATER is providing a better, value-add service for its customers’ needs and will continue to be a strong competitor in this segment.
Threat of New Entry with CHASE achieving economies of scale to allow it to deliver reports faster than any of its competitors. It continues to be a strong player in Segment B and may be able to improve its share of Segment A through further efficiencies quicker than ACE.
Ace
Beater
Chase
Segment A
6.9
6.8
6.9
Segment A has high price sensitivity.
Ace’s differentiating factors are Professionalism and Staff Qualifications.
Whilst Professionalism is important for this segment, it places greater weight on Quality of Billing Services.
Ace, Beater, and Chase are weighted equally on Quality of Billing Services.
All else equal, lowest cost wins.
Beater dominates Segment A with lowest price/cost and that is reflected in its 60% market share of Segment A. Ace holds the lowest market share at 10%.
Segment B
6.9
7
8
Segment B has medium price sensitivity.
Ace’s differentiating factors are Professionalism and Staff Qualifications.
Whilst Professionalism has importance for this segment, Staff Qualifications do not even factor.
The greatest need for Segment B is Rapid Response – which is Chase’s differentiating factor.
Chase holds 50% share of Segment B, with Beater holding another 40%. Ace holds the lowest share at 10%.
Segment C
6.9
7.45
6.3
Segment C has lowest price sensitivity.
Segment C highly values Ease of Implementation (60%) and
Beater differentiates its business on Ease of Implementation.
As a result, Beater 50% share of Segment C, with Ace holding another 40%. Chase holds the lowest share at 10%.
In framing a response to the current situation, Wright needs to understand what each firm should be doing in terms of their focal market segment, product/service design and overall value proposition (i.e. positioning) over the long term (i.e .everything is variable). Assuming that each firm is rational and that each is limited to offering only one basic consulting “product”:
What should Chase Consulting do? Be specific
Chase Consulting’s focal market segment is Segment B, holding 50% market share.
Segment B has medium price sensitivity, and places significant value (50% weighted) on Rapid Response, Chase’s performance differentiator (10 performance rating). Segment B also values Professionalism (30%), but places low or no value on Ease of Implementation (10%), Quality of Billing Services (10%), and Staff Qualifications (0%).
To maintain its competitive advantage in the Segment B market, Chase will likely take four actions to create a new value for its Segment B customers.
Reduce: decrease the size of its consulting staff; streamline processes to further increase response times
Eliminate: the requirement for PhD-level education
Create: implement a public relations campaign to raise awareness of its service for Segment B.
Raise: diversify qualifications to include project management, quality assurance, business processes; establish training programs for support staff to increase the quality of professionalism
Chase Consulting Value proposition
Part One: What We Do
For price-sensitive businesses
Who want to move from talking to recommendations quickly
Our service is a professional approach based on industry best practices
That features tried and trusted methodology to complex problem-solving
As measured by businesses like yours that rely on us every day.
Part Two: Why We Will Win
Unlike Ace Consulting and Beater Consulting
Our service provides quality results at a fraction of time of our competitors
As supported by a team of diverse skills
And protected by equipment
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