Xiameter
1. What factors, internal or external, were responsible for Dow Corning’s poor performance between 1995 and 2001 as show in case Exhibit 3?
Externally, Market was changing. Down Corning kept on losing customers to low-price suppliers. 1) Big global and regional rivals were increasing their efficiency of supply chain to provide lower cost to the customers. 2) Small local players with no R&D costs and low overhead were offering a range of commodity silicone products to bulk customers at low price. 3) The commoditization trend was also denting Dow Conning’s financial performance.
Internally, Dow Corning didn’t change its business and marketing strategies accordingly. 1) Dow corning’s traditional strengths were in innovative products, strong customer relationship and services. They are losing the customers who seek for low price and the number of this segment is increasing. 2) They missed a segment of the customers who buy a big volume but did not need Dow Corning’s services as a total package. 3) They segment the business by end-user application which didn’t fully address the emerging shifts in customer’s needs.
2. What did the new segmentation reveal about customers beyond that which the company knew already? In what ways was the needs-based segmentation scheme an improvement over the previous and traditional end-user segmentation?
The new segmentation revealed that 1) Different segment customers may have different needs on services and needs different resources to support the service; 2) There’s a segment called “price seeker”. They want low price. Service is not important to them.
The difference between the new and old segmentation are that the new segmentation focus on the factors which affect the customers purchasing decisions. And it revealed a new market trend and new needs of the customer beyond the functional needs of the products.
3. Given Xiameter’s performance to date, and recent changes in the competitive scene, is the moment ripe to make changes in the business model? More specifically: a) Is a price seeker-focused “Dare to compare” value proposition still valid? Or, should Xiameter drop its low-price positioning and compete on other benefits including product quality, simplicity, reliability, etc.? Xiameter positioned itself as a web-based provider of quality products at market driven price and on time delivery without other tech service to those customers who seek for low price, purchase large quantities and require no services. Its products included 350 common silicon products.
Currently, the competitors offer on-line services which include full range of products, on time delivery, without minimum purchasing quantity requirement and on line discussions with specialists to the customers.
The risks it will bring to Xiameter are that 1) they offer more products choices to the customers; 2) no minimum purchasing quantity; 3) real time delivery. 4) More convenient when there’s a specialist to be on line. It may increase some costs though, however, as long as they can reach an economic scale and increase their supply chain efficiency, they can be a threat to both Xiameter and Dow Corning brand.
As Xiameter was targeting on the segment who seek for low price, it will be risk for Xiameter to change its value proposition at this moment to product quality, simplicity and reliability only. In that way, Xiameter will be hardly differentiate itself from the competitors and may cannibalize Dow Corning’s business.
b) Should Xiameter “let the customers decide” by expanding its limited range of products to include all other Down Corning silicones and, possibly, complementary non-silicone compounds from third parties? To provide more product choice is consistent with Xiameter’s value proposition. However it has its own risk and benefit too. Dow Corning group may need to do a customer’s segmentation one more time like 5 years before to define the new trend of customers’ needs on services and products and purchasing habits to
decide whether the next move of Xiameter and Dow Corning. If the web based purchase is the major trend, and are more profitable, Down Corning group may consider consolidating its all silicon business on Xiameter’s on line platform and under Dow Corning’s brand and provide competitive services to compete with the other competitors.
