Abstract
AgLocal is a three-year-old software company that is headquartered in Kansas City in Missouri. It offers a platform where meat farmers and consumers can meet virtually and transact successfully without necessarily using the wholesalers or retailers. Through this forum, this firm earns revenue from firms that wish to use the website for advertising its products. However, to increase the scope of income from an advertisement, it will need to expand its operations beyond this small region. The expansion plan will need effective strategies that will help it overcome market challenges.
Introduction
Starting an innovating and successful business is one of the biggest challenges that business entities face on the current global market. According to Butler (2004), most of the new business entities do not live to see their first anniversaries because of the inability of their owners to make them sustainable. In some cases, the investors are always impatient to wait long enough to see the benefits of their investments. Small businesses are the worst affected by this failure at their early stages of developments. However, some small business entities have managed to overcome these initial challenges to emerge as successful mid-sized firms after a short period. This happens if the owner of the business has a clear concept, vision, and strategies to be used to achieve success in the market. AgLocal’s is one such new firm that has just made an entry into the market. In this paper, the researcher will analyze this firm to determine its business concept, vision, and market strategies that it intends to use to penetrate the highly competitive software market.
Concept and Vision
AgLocal is a new business that targets software market. Software is meant to bridge the gap between the producers and consumers of meat products within Kansan City. The company has been in the market for the last three years and has been experiencing gradual growth. The concept in this new business entity is to create a platform where meat customers and producers can meet and conduct businesses. It is a virtual market that benefits both the sellers and buyers of meat products. The chief executive officer of this firm, Mr Naithan Jones, came up with this idea after seeing the struggle that the small suppliers and buyers of meat products undergo when purchasing or selling this product. The small suppliers were forced to convince retailers to buy their products. However, most of the large retailers avoided their products because of unreliability. This affected their business because they had to look for other, more expensive alternatives. For this reason, some of them opted out of this business. On the other hand, buyers of meat products in this city were concerned about the time that products spent in the freezers at the retail outlet.
Some of the meat consumers prefer that the product does not go through refrigeration. However, this may not be possible given the time it takes from the slaughterhouses to the time a consumer will come for the product. Mr Naithan Jones saw an opportunity in addressing this problem. Using this application-, which can be used with a Smartphone or personal computers- a farmer can directly reach out to the customers instead of going through the long chain that they were using before. Similarly, the customers who were concerned about the time that the products take in the shelves can now take their products directly from the farmers. The vision of this firm is to be the preferred platform where buyers and sellers of all food products can meet in a virtual market setting and conduct a successful business transaction without necessarily going to the brick-and-mortar stores. The chief executive officer of this firm seeks to be a giant online retail store such as Amazon.com or China’s Alibaba.com.
Market Analysis
When planning to make a market entry, it is always necessary to conduct a market analysis to understand some of the forces that a firm will have to deal with to achieve success. According to Kahan (2013), it is important to use an effective market analysis model to understand the forces that a firm has to deal with as it seeks to penetrate the market. PESTEL Analysis will help in defining forces that AgLocal should be ready to face as it moves to its fourth year in the market with an ambitious plan of expanding its customer base. The political environment within which AgLocal has been operating is varied. As mentioned, AgLocal is operating within the market in Kansas City. The political environment in this city is very stable. Since the firm started its operations three years ago, it has not experienced any serious political instability that may pose serious threats to its operations. The democracy and level of civilization in this city and the entire country eliminates the possibility that this region could suffer from civil strife in a new future.
Several challenges have marred the economic environment in the recent past. The United States, the only market for AgLocal ‘s products, was affected by the 2008 economic recession that reduced the purchasing power of the customers. Although this firm was founded several years after this recession, the economy is yet to recover from this shock fully. The management of this firm must find strategies that it can use to counter such economic shocks because they are realities that one cannot determine when they can strike. The social environment for this firm in this city has been largely favourable to its operations. There is a consistent rise in the size of the middle class in this region. These customers find the products offered by this firm very relevant because they have limited time to visit brick-and-mortar stores. The application offers them the best solution in solving their problem of limited time.
The technological environment has offered AgLocal a rare opportunity to develop sophisticated products that meet the needs of its target market. According to Kahan (2013), firms dealing with software fully rely on technology. They take advantage of the changes in technology to create unique applications such as that which this firm has created. However, the emerging technologies have also made it easy for the rival firms to copy some of the products manufactured by this firm. This makes the level of competition in the market very stiff as firms find themselves selling similar products.
The product that AgLocal offers in the market may not be affected by the on-going environmental campaigns in many cities within the United States. However, the management of this firm may take advantage of this campaign to convince the market that its products are environmentally friendly, and therefore, offers a solution to the problem of environmental pollution. Legally, the management will need to be keen to ensure that its products do not infringe into other firm’s intellectual property. This city, and the entire country, has strict copyright laws that spell out stiff penalties for those who are found guilty of stealing the intellectual property of others.
Customers and Customer Development
As AgLocal plans to expand its operations beyond the city of Kansas, it is important to conduct a comprehensive analysis of its targeted customers. According to Kahan (2013), customers can generally be classified as low class, middle class, and high-class consumers. The main target market for the products of this company is the middle class. The high class is another major market, only that it has fewer people. Customers who use AgLocal products are individuals in the middle class who have limited time to pass through the shops. However, they still have to purchase these products despite their limited time. These are the target groups that will use this software in their phones or Smartphone to help them when marketing online purchases.
As it expands its operations, AgLocal can consider targeting the rich members of society. According to Khanh (2011), customers in the high class give a lot of emphasis on the quality of the products. Their decision may not necessarily be influenced by the price of the product. They are always willing to pay high prices for the products they purchase as long as they are assured of the quality of the products. This is an important fact that the management must be aware of as it seeks to incorporate this new group of customers into its portfolio of customers. The management must realize that these people are willing to pay a little more for the products they buy when they are assured that the quality is high. For this reason, the software must have an added value that will make it superior to that of other existing companies.
Customer environment analysis can be done on a geographic basis. The customers in the United States are always keen on accessing new products as soon as they arrive in the market. There are cases where some customers would pay for new products in advance before they are released into the market because they trust in the company. This firm may need to find a way of winning the trust of the customers in the market where it is currently operating to get such overwhelming support from them. As Butler (2004) notes, developing a base of loyal customers is not a simple process. It involves a lot of sacrifices and strategies that will make the market appreciate that this firm’s products are superior to those from other firms.
Competition and Positioning
To formulate an appropriate strategy to penetrate the market, it is important to evaluate the market competition. AgLocal is facing stiff competition from numerous software firms in the local market. The main competitor of this firm is the Amazon.com that has diversified its product lines to include foodstuff that this firm has specialized on within this city. Another big market competitor is the Alibaba.com that has taken the American market by storm. It has been keenly following the trends taken by Amazon.com, the fact that has enabled it develops almost similar products in this market. Another source of competition that this firm will have to deal with is the individual stores that use their website to create online stores where they can reach out to the online customers. Large retailers such as Wal-Mart have a strong online presence that may inhibit the expansion plans or this firm. Farmers who do not use technology in selling their products will use alternative methods to reach out to the customers, reducing the market size for this firm.
Business Model and Go-to-Market Philosophy
AgLocal decision to expand its market coverage is a timely idea that may help achieve sustainability in its operation. However, the management must know that in so doing, challenges in the environment will be increased. To manage these challenges, it may be necessary to develop a model that will help in the expansion project. the Seven-Question model below will be very appropriate for this firm in its expansion program
This model proposes seven fundamental questions that the management of AgLocal should ask itself as it expands to the new market. The first question will be how the firm plans to engage the market. The management will need to define how it will reach out to the target audience. This may involve the use of social and mass media platforms. The firm should then define how it plans to make money out of its new initiatives. For the process to be sustainable, there must be a steady flow of income. This firm will be providing a platform for the producers and consumers to meet and do business. The firm will not earn anything from such a transaction. However, it can benefit from the advertisements when the site becomes popular.
The management will need to determine if it is selling its products directly or if it will rely on channels. For this firm, it will be dealing directly with the customers. Its customers are firms and advertising agencies who want to reach out to the audience that visits this website regularly. The fourth question in this model is for a firm to specify whether it is offering services or manufacturing products. Although AgLocal will be developing software to facilitate their online activities, the firm is offering services to its clients. Firms and advertising agencies only need the services offered by this firm to reach out to their target audience.
The fifth question may be very challenging because the firm will need to explain how it fits into the new market that it has just entered. To answer this question, this firm will need to analyze the position of the competitors in the market. After doing this, it will be easy to identify the gap that these existing firms have left and explain whether it is coming to fill this gap. The firm will also need to explain its relevance in the market, especially if its products are readily available at other firms. In the sixth question, the firm will need to determine if it is disruptive in the market or not. In this case, the management will need to explain if the operations of the firm in the new market will create a substantive shock to the existing firms or it will take a passive role in its first days of market entrance. This question will help the firm define the competitive strategies that it will use against market rivals. For instance, if AgLocal decides to take a disruptive approach, then it must be ready to face an equally aggressive response from the existing players as they try to protect their market share from the new entrant.
Potential Opportunities
According to Kahan (2013), before making an entry into a new market, a firm should determine the potential opportunities in the market. This scholar says that it can be a costly affair if a firm makes an entry into a market without understanding the opportunities first. For AgLocal, the market opportunity has been identified. The firm has identified the small-scale farmers who find wholesalers an attractive channel of selling their products. It has also identified the middle-class members of this society who spend most of their time at work, and therefore, have limited time to visit retail outlets to make their purchases. The firm has then identified a platform that will successfully bring these two groups together. This is a step towards achieving success. The next step will be to identify the potential of the clients who will be willing to pay to reach out to the people who will be using this website as their market. This may include the local or even regional agro vets interested in reaching out to the farmers. They may also include automobile shops seeking to sell their tractors or trucks to the farmers. Other firms interested in the public, in general, will also find this forum beneficial and worth paying for to reach out to a specific group of people.
Purpose and Objectives
The firm should define its purpose and objectives in the market. The objectives must include how it intends to meet the unique needs of the target population and how its operational activities will earn its income to make it a sustainable firm. The following are some of the objectives that will define its operations in the market.
- To provide a platform where farmers and consumers can meet to sell and buy fresh products without going through retailers.
- To enable small scale farmers to access the market without following the bureaucracies they were subjected to by some of the wholesalers
- To enable farmers to create an environment where farmers and suppliers of farm inputs can meet and engage in a successful business transaction
Conclusion
AgLocal is an upcoming business entity that offers a platform where farmers and consumers can engage in business without relying on wholesalers or retailers. Since its inception three years ago, its focus has been on the city of Kansas. However, the time has come for this firm to expand its operations beyond this firm. For this to happen, the firm will need to develop an effective strategy that will enable it to scan the environment, identify opportunities and threats, and develop strategies that can be used to manage these weaknesses as it capitalizes on the opportunities. The firm must be ready to face market competition with effective marketing strategies.
References
Butler, J. E. (2004). Opportunity identification and entrepreneurial behavior. Greenwich: Information Age Pub.
Kahan, S. (2013). Getting innovation right: How leaders leverage inflection points to drive success. New York: Cengage
Khanh, P.-G. (2011). Radical innovation and open innovation: Creating new growth opportunities for business: illumination with a case study in the LED industry. Hamburg: Diplomica-Verl.