Kingo looked for strategic locations for parking the company’s trucks, such as parking lots that had great visibility. In addition, the company also advertised on buses and about “90 per cent of its marketing budget went towards coupons on print media, which served the dual purpose of attracting customers and promoting the company name” (Jimenez, 2017). Although his business was going successful, it was short lived. Based on Porter’s general strategy, it appears that Junk Van is utilizing a narrow cost focus strategy in a declining industry. As mentioned, after obtaining a growth rate of 2.5%, the waste collection industry declined to a 0.6% growth rate by 2009 (Jiminez, 2017). Considering the competition, such as 1- 800-Got-Junk, Kingo’s main goal was to grow his business by making it a franchise. Although his business appeared to grow, several factors influenced a halt to the growth. It is important to consider the idea that Kingo established all communication as electronic, including distributing delivery information for drivers via email, which was often found inefficient. Further, Kingo allotted a large portion of his budget to marketing with the desire to find the most inexpensive IT system to meet operational requirements. His goal of having low overhead seems fair, but his budgets for marketing and IT systems appear to be antithetical.
A narrow cost focus strategy indicates that a company has a smaller target market with goods and services kept at a low cost. Because of the audience reached and keeping up with the prices of the competition, Junk Van appears to have taken on this cost strategy. Since the company is facing franchises like 1-800-Got-Junk, the prices asked for Junk Van’s services may not be able to withstand rival businesses; plus, the marketing strategy does not reach a desired audience size. Lastly, due to an inefficient IT system, existing customers are often disappointed with the services provided, making the company’s market and client base even smaller. Rather, Junk Van should approach a broad differentiation strategy. This indicates a business that does not offer the cheapest services, but has services that are perceived as having higher value. With that, customers are more likely to utilize those services more frequently. Because the company functions mainly via electronic communication, a more efficient IT system should be established. By doing so, Junk Van would be able to provide a more positive customer experience while establishing a larger market that distinguishes them from competition. Although this would require an investment in a sufficient IT system, the company would deem long-term benefits and potentially dominate its market.
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- Spring '17
- Rashmi Jain
- Porter generic strategies, Marcus Kingo, Kingo