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One of these trend is "commoditization" in many markets.
A commodity market is characterized by perceived
product equality in the eyes of customers
resulting in a high readiness to substitute
one product for another. Research increasingly
suggests that
consumers are less loyal to specific brands. There
is evidence that more and more decisions
are being taken at the point of purchase and if
there is a gap on
the shelf where preferred brand is missing,
the another brand will take place in consumer's
basket.
Another
trend is consolidation of demand. The customers
are tending to grow in size but at same time
becoming fewer in number. The retail
grocery industry is a good example in that in most
northern European
countries where a handful of large retailers
account for over 50 per cent of all sales in any
one country. This tendency to the concentration of
buying power is being accelerated as a result of
global mergers and acquisitions. The impact of
these trends is that these more powerful customers
are becoming more demanding in terms of their
service requirements from suppliers.
At
the same time customers shows tendency to reduce their
supplier base. In other words they want to do
business with fewer suppliers, in order to
simplify their operations. The successful
companies in the coming years will be those that
recognize these trends and seek to establish
strategies based upon establishing closer
relationships with key accounts.
Such strategies will focus upon seeking innovative
ways to create more value for these
customers.
This transition from volume-based growth to
value-based growth will require a much greater
focus of the company on managing the core processes that we
referred to earlier. The competitive model of the
past relied
heavily on product
innovation. This
will have to be increasingly replaced
by process
innovation.
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