Kudler Option Differentiating Between Market Structures Table

KUDLER

Option

Differentiating Between Market Structures Table

Compare the four market structures by filling in the table.

Perfect competition

Monopoly

Monopolistic competition

Oligopoly

Example organization

Grocery stores

Utility companies

Cable companies

Automobile companies

Goods or services produced by the organization

Indistinguishable from others unique

Very unique

Fairly unique

Barriers to entry nonexistent

Virtually insurmountable high

Relatively high

Number of organizations many few

A small group

Price elasticity of demand

Highly elastic none

Relatively inelastic

Relatively inelastic

Is there a presence of economic profits?

negligible yes yes

Kudler Fine Foods Virtual Organization:

The firm's strategic plan and marketing overview

Kudler Fine Foods is a purveyor of fine, gourmet and all-natural foods. It has a relatively small array of stores in the state of California. All stores offer products to customers that desire something out of the ordinary in their food selections. Kudler stocks wines, cheeses, and specialty items as well as fresh produce for 'foodies.' Kudler also has an online component. It currently adopts a differentiated market strategy -- it offers uniquely wholesome products to its consumers rather than competes on price alone. It also offers a wide array of international goods. This enables it to capitalize both upon the trend towards more 'organic' eating, as well as the appetite for more exotic foodstuffs. Both locavores that desire to eat California-grown fruit as well as serious wine aficionados in search of German wines can be satisfied at Kudler. But the firm faces a wide array of competitors in all the fields in which it sells goods and services and may be insufficiently differentiated to establish a unique market niche.

Food is an extremely difficult industry in which to compete, because customer 'buy-in' is relatively low. An upturn in price or a downturn in the economy and salaries can cause consumers to scurry to purchase other items from competitors. Also, because Kudler does not compete strictly on price, it must offer a high level of quality to consumers to justify their purchases of higher-end Kudler items. Price is extremely elastic -- consumers can easily vary their shopping habits, based upon the price of items, and can often stop at different stores to ensure that they find the best price or level of quality. For example, "when Roberta Mand needs groceries, she has a world of choices in her own backyard. For regular shopping, she goes to her neighborhood Kroger Co. store. But for steaks, she prefers the Costco Wholesale Corp. store. For a pecan-encrusted tilapia to take home for dinner, she's off to The Fresh Market. And if she's hankering for sushi, she hits the Wild Oats Markets Inc. store a couple of minutes away" (Food fight, 2009, Associated Press).

This is a clear 'negative' for Kudler in the sense that consumers can easily shift their buying habits, even if they stop at Kudler for an attractive deal one week. Also, Kudler must keep its prices competitive with grocery stores offering comparable quality. Even though Kudler may not be competing on a price strategy and offering the lowest prices possible for all items, it is still in competition with, for example, Whole Foods, in the market for organic bananas. Consumers also have a far wider array of venues where they can purchase groceries than ever before. Even Target is selling higher-end groceries today, and Wal-Mart has a large section of organic foods. The threat of seemingly limitless competition means that Kudler must create a core base of consumers that are uniquely loyal to its array of products.

Whole Foods has adopted this strategy by becoming 'the' organic grocery store of choice all over the nation. Through its acquisition of Wild Oats, it has limited its competition within its unique market niche. It offers a number of specialty products that consumers can only find at Whole Foods, thus 'justifying' regular consumer patronage. Far from competing on price, Whole Foods has garnered the nickname 'Whole Paycheck' because of its high prices. Its prices are high because all products, even wines and cleaning supplies are organic and/or environmentally friendly.

Kudler cannot mimic Whole Foods precisely, but it must have a clear mission and intention that distinguishes itself as a seller. This may be stressing its international component as well as the fact its food is so fresh. It may stress the convenience of Internet shopping for some specialty items. Or it may create arrangements with suppliers that ensure consumers specifically go to Kudler to find their favorite foods products.

Above all, Kudler must have a philosophy beyond a vague sense that its products are healthy and tasty. In a near-perfectly competitive market, differentiation is the only way that it can thrive, effectively changing the parameters of the market where it operates. Many products are healthy and good for you on the market today. But what additional value is conveyed by the Kudler name? For example, Whole Foods, in defending its choice to sell only organic, sustainably-raised meat at a premium, cites the passionate philosophy of its founder: "I read a dozen books about how animals are raised in this country," said its CEO John Mackey, "going all the way back to Peter Singer's Animal Liberation in 1975. The more I read, the more I was interested in it. I said, Damn, these people are right. This is terrible" (Fishman 2007). While taking surveys of customers is important, this is not a substitute for a strategy of differentiation. Kudler must ensure that its customers are satisfied, but customers do not always know what they want and Kudler must anticipate those wants.

While Whole Foods, Trader Joe's, and local businesses offer organic foods and some international foods, Kudler's clear market advantage is in the international segment of its products, which contain many unique imported wines and cheeses. Offering exclusively versions of these goods that are also marketed as healthy for the consumer can give it a distinct advantage. Unlike Whole Foods, Kudler is not 'boxed into' only offering organics, so it can offer some cheaper items for customers who 'mix and match' their purchases, as well as healthy, local products that may not meet strict federal organic standards.