Avoid being a morsel in the food chain 14 December, 2007Posted by varoom in Marketing Plans.
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If you are starting a small business with a new product or service which adds in to existing supply chain and you plan to sell it to some pretty large customers in an existing market you should carefully analyse the supply chain. Entering into this pipeline of companies, making up the various suppliers to that market and the major customers, is critical because it behaves like a food chain.
Analysing the food chain will tell you about the practises and behaviours of the major players, who the big players are, who the major customers are and if there are intermediate suppliers.
Large suppliers try to avoid having someone new in the way between themselves and their major customers making it hard to successfully operate in between a big supplier and a big customer. Because of this tendency to protect their customer relationships you need to have a clear strategy when entering the market.
Another factor is the risk tolerance of major customers. Some will not consider smaller, early stage, companies due to the risk this brings, the weakness in resourcing for support, future stability, continuity of supply, credibility and many others.
What operating mode should you consider when entering a new market? How can you mitigate against the incumbents behaviours ?
One approach is a partnership with a major player in the supply chain. In one agreement you can avoid being a problem for a supplier in the pipeline and also build credibility with customers by being associated with a known supplier.
Another mechanism is to adopt a disruptive approach. Enter the market deliberately to cause a breakdown in the existing pipeline and force players to change their approach. To do this you need a disruptive product or service which compels the market to take it seriously. Not all products can do this and you need to consider, carefully, which approach is feasible.
In conclusion, when you enter the marketplace not everyone will welcome you but adopting the right market entry can make a big difference.