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RV Market in Hostility

The RV market is in hostility. A hostile market sees low returns on investment, even for the industry leaders. One of the largest players in the market, Fleetwood Enterprises, has seen five straight years of losses. Another leader, Winnebago Industries, while still profitable, has seen four consecutive years of falling sales. This hostility has been caused by a rapid and deep fall-off in demand.

Once an industry enters hostility, it will usually witness a “flight to quality” where customers migrate away from weaker competitors toward those offering a better value proposition. (See the Perspective “Success Under Fire: The Policies to Prosper in Hostile Times” in StrategyStreet.com/Tools/Perspectives).

Few companies, even the largest, perform well in hostile markets. For every Toyota there are several companies like GM, Ford and Chrysler. Many of the policies that make a company successful in normal times get in the way during hostility. In fact, some of the rules for success seem downright counter-intuitive. Briefly, there are five rules that seem to be patterns for companies who succeed in hostile markets:

  1. Strive for a good mix of both large and medium-sized customers. Ignore demands of small customers.
  2. Cover a broad spectrum of price points. Avoid over-reliance on the high or low price points.
  3. Differentiate your product and company on the basis of Reliability. Unique product Features are less valuable.
  4. Turn price into a commodity. Seek payback in sales volume, not in price.
  5. Emphasize productivity and economies of scale in the cost structure, but remember that good value for the customer comes first. You can’t cut unit costs without customers buying the units.

For more description of these patterns and their implications, see “Staying Alive in a Hostile Market” in the Tools/Perspectives section of StrategyStreet.com.

Posted 6/9/08

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