Low-End Markets

Question 1

Low-end mkts definition

Answer 1

Market that is usually associated with low-quality, low-prices products/services. Any market typically has low-end, mainstream/mass, and high-end segments

Question 2

Low end mkt general examples

Answer 2

Generic medications, low-cost/discount airlines, budget headphones, generic store product offerings(?)

Question 3

Low-end mkt characteristics

Answer 3

• margins are typically slim
• customer segments are likely quite price sensitive; they value low price and convenience
• key success factors are likely low price and developed/optimized distribution as low end mkts are typically volume-driven
• market size is likely far larger than the corresponding high end market

Question 4

Low end mkt competitive landscape

Answer 4

• Comp landscape is likely consolidated given this is a volume-driven business;
• firms often grow in organically (through M&A) to gain economies of scale and thus get more price flexibility (and potentially decrease prices further to squeeze small players out of the market)

Question 5

Low end mkt example: euro low cost airline has been facing declining profitability, what should they do to improve margins?

Answer 5

Low-cost airline industry:
- margins are likely low (probs single digits)
- target price-sensitive customer segments whose major purchasing decision-making criterium is the lowest price
- it’s a volume game and thus competitive landscape is likely consolidated
- key competitive advantages are offering the lowest price possible and developed distribution