Q1. Step-by-Step explanation
Dow Corning is an international company that deals with inorganic chemicals. The company
produces silicon-based components such as gum, specialty polymers, rubbers, and fluids.
Between 1995 and 2005, the company experienced poor performance due to the following
internal and external factors.
external factors
marketing changes-between this period, there were many marketing changes as companies
restructure their ways of doing business and selling their final products at lower prices
(Okawa et al., 2017). However, down corning was stuck to traditional marketing methods
and thus kept on losing its customers to those companies who sold their products at
comparatively lower prices. Secondly, small and medium enterprises started to offer a wide
range of silicon products at relatively low prices. Because they did not incur research and
development cost and other overhead expenses, they became much competitive. Lastly,
the Down corning was rendered financially incapacitated due to the commoditization trend.
Internal factors.
Internally the company failed to restructure its marketing and business strategies
accordingly. Traditionally the company was doing well because it involved itself in
developing innovative products, and they kept on enhancing their relationships with their
customers. However, other organizations prioritized bettering their products during this
period and sold them at relatively low prices. Thus most Down corning customers shifted to
these different companies to purchase low price products. Secondly, the company did not
have a large customer base, particularly those making a bulk purchase, and most of these
customers did not like the services at Down corning. Lastly, the company segmented its
operations into end-user applications that did not address the changing needs of the
customers.
Reference
Okawa, T., Iimura, T., Inagaki, S., Mizukami, M., Suto, M., Furukawa, H., ... & Tomasik, A.
C. (2017). U.S. Patent No. 9,598,576. Washington, DC: U.S. Patent and Trademark Office.
Q1. What factors, internal or external, were responsible for Dow Corning’s poor performance between
1995 and 2001 as shown in Case Exhibit 3?
From the year 1995 to 2001 sales of Dow Corning remained to fluctuate and started to decline sharply
from 2000 onwards and reached below $2,450 million levels in 2001, and consequently, the company
faced losses. The poor performance was the result of external market conditions, and internal inabilities
to respond to the market conditions. The company’s reputation was seriously damaged when Dow
Corning faced 9,000 lawsuits claims in 2000 for leaking silicone breast implants and agreed to pay $ 4.4
Billion against the lawsuit. Also, Dow Corning’s marketing strategies were not responding to the change
happening in late 1990s. There was a dramatic shift in consumer behavior, and consumers were
becoming price-sensitive and focus was drifting to other substitute offerings; therefore, resulting in
falling market share and declining sales volumes.
External conditions were also getting harsh as large rivals were investing-in to get an edge from Dow
Corning and directed their efforts to enhance supply chain and avail yield from the economies of scales.
As far as small players are concerned, they were challenging Dow Corning on price and the real blow
was a result of Commoditization trend in Do-it-Yourself (DIY) segment
Q2. What did the new segmentation reveal about customers beyond that which the company knew
already; in what ways was the needs-based segmentation an improvement over the traditional end-user
segmentation?
Past segmentation did not serve the drifting trends in the market as consumers were clubbed on the
basis of industry. Previous segmentation lacks true representation of consumer needs, and after
research and consumer surveys, four need-based segments were formed that already exist across all six
industries. These four need-based segments were categorized as Innovative Solution (to assess
emerging trends, and serve unfulfilled needs of the consumers), Proven Solution (to provide a solution
to those customers that prefer to use products that are well established in market), Cost-effective
Solution (Consumers that are willing to pay a premium to reduce their finished product cost), and Price
Seekers (segment that is price sensitive and requires assurance of timely delivery).
The need-based segmentation had an edge over the previous industry-based segmentation as it serves
the requirements of consumers and it helps to identify where efforts need to be made to achieve
desired results, and thus facilitates to understand rising trends in consumer needs. In need-based
segmentation, consumers are categorized and their needs are fulfilled as per their business
requirement. The latter segmentation is a true representation of consumer needs as it assisted to
unbundle services and product offerings, to serve consumers in the best possible manner by minimizing
cost and managing capacity more effectively.
Q3. Trace the development of Xiameter from its beginning: what were, in your opinion, the key
decisions that shaped its successful business model and marketing strategy?
Establishing Xiameter was a conscious decision taken by the management that was a result of
tremendous labor and research. Efforts were made to analyze declining profitability and shrinking global
market share, and different task forces were formed to study the challenges faced by the Dow Corning.
After conducting research, it was concluded to establish a new brand that would flourish under the
umbrella of Dow Corning, to maximize leverage from the reputation of parent label, by catering needs of
the price-sensitive segment.
Xiameter's success was a result of the segregation of the “price seekers” segment from Dow Corning and
establishing an entity to serve price-sensitive customers by incorporating a web-based selling model.
The final decision was based on the results of calculated risk and the upside potential Xiameter held.
Incorporation of Xiameter not only gave a first-mover advantage to Dow Corning but also boosts sales to
reach the mark of $3,850 million by 2005. It is estimated the Xiameter contributes 30% to the
accumulated sales of Dow Corning and expected to grow further as low-price / no-frills strategy remains.
The unbundling of services from products, “dual-brand strategy” and “meeting customers need exactly”
proved helpful for the Xiameter’s success, and for the sustainable business growth.