Abstract
<p><em>Porter equates high market share with cost leadership strategy which is based on the idea of competing on a price lower than that of the competition. However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more critical to long-term competitive position and profitability than any other factor. So, a superior option is to offer better quality vs. the competition.</em></p><p><em>In most consumer markets a business seeking market share leadership should cater to the middle class by competing in the mid-price segment: and offering better quality than that of the competition at a somewhat higher price. </em></p><p><em>Quality, however, is a complex concept consumers generally find difficult to understand. So, they often use relative price and a brand’s reputation as a symbol of quality.</em></p><p><em>The U.S. Beer market is one of the most complex industries. It has two product-segments: Lager and Ale, with lager being the overwhelmingly dominant segment. Also, it has three market groups: Traditional, Imports, and Craft. </em></p><p><em>We have focused most of our statistical analysis on the lager segment. First, we tested the hypothesis that a market leader is likely to compete in the mid-price segment. Second, the price tag of the market leader is going to be somewhat higher than that of the nearest competition. Employing U.S. retail sales data for 2008 and 2007, we used cluster analysis based on unit price of 12-packs and six-packs (Note 1). The results strongly supported both hypothesis for both years—and for both packs. </em></p><p><em>We have proposed an alcohol-based system for classifying beer: Low vs. High. This proposal is based on the premise that alcohol and calories are closely tied to each other. We performed bivariate correlation on 50 popular lager and ale brands, and the results were significant at the 0.01 level.</em></p><p><em>Finally, we discovered five strategic groups in this market</em>.</p>
Highlights
This work follows in the footsteps of the study of U.S Men’s Shaving Cream Market (Datta, 2012)
It is based on the idea—according to the PIMS database research—that it is customer-perceived quality that is vital to long-term competitive position and profitability
Results of Cluster Analysis of the Lager Segment 7.1 The 12-Pack (Note 7) Lager Segment 2008 To keep the number of brands to a manageable size, we did not consider those with total beer sales of less than $1million
Summary
This work follows in the footsteps of the study of U.S Men’s Shaving Cream Market (Datta, 2012). That research is based on the premise that the road to market share leadership does not lie in lower price grounded in cost leadership strategy, as Porter (1980) suggests Rather, it is based on the idea—according to the PIMS database research—that it is customer-perceived quality that is vital to long-term competitive position and profitability. 1.1 Strategic Importance of Price Positioning The second step is to position the brand at a price that is somewhat higher than that of the closest competition in the mid-price segment This is required for two reasons: (1) to promote an image of quality; and (2) to make sure that the strategy is profitable and sustainable (Datta, 2012, 2010a, 2010b). Consumers often use relative price—and a brands’ reputation—as a symbol of quality (Datta, 2012, 2010b)
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