U.K. Printers! The threat from online batching
In recent times we have witnessed an increase in the customer preference of choosing online batch printing services, as opposed to the more traditional method of using local or national print firms in order to source their required products. The reasons for this appear to be purely financial.
On the surface it seems that the consumer is being offered a product that is cheaper and possibly quicker to obtain using the online batching method. Although, when we delve a little deeper into how and why this is happening the picture is a little murkier.
One example of a firm that has obtained a noticeable market share has its headquarters in Wurzburg, Germany and operates in at least fifteen countries. The firm has created an annual turnover of over £280million; however, it is operating at a loss, in the U.K. print market at least. The reason it is able to do this is because a powerful parent company is providing financial support which makes the operation sustainable.
One explanation as to why a firm would adopt this strategy is that it is creating a loss leader. This means that online batch printing is just one part of a larger business that is also selling other related or non-related products. It is a total sum of many parts that is overall profitable. The printing may be just a ‘loss leader` necessary to attract customers to other products and services.
Another reason why a firm may operate at a loss is to achieve Market Penetration. The strategy may be to entice customers into using a different method of obtaining goods and services. In the print industry this might be using the internet as an alternative to using traditional methods of orders and transactions which would be contacting a local print manufacturer. Cultivating personal contact and service, using local businesses and achieving repeat business helps maintain a healthy local economy. However, many consumers might choose low cost as the only factor in their decision making. This may be short sighted, by cultivating a strong personal relationship with local suppliers invaluable benefits can ensue in the way of customer service and satisfaction. Flexibility and trust can result in mutually beneficial arrangements especially regarding repeat transactions and developing strong supplier-buyer relationship confidence.
When a foreign company or multinational corporation penetrates the market of a specific industry such as printing there can be negative consequences for the host country. A Multinational Corporation (MNC) is an organisation that owns or controls production of goods or services in two or more countries other than their own home country. Therefore, when a MNC is a German organisation operating a service of online batched print products in the U.K. at a loss, in order to gain market share, the U.K. economy may not benefit from any capital investment made. This is because the revenues generated through its sales will be transferred back to Germany. It is a process known as the decapitalisation of local economies.
The threat to small and medium sized printing businesses in the U.K. manifests itself in aggressive price-cutting tactics from MNCs with powerful parent companies that are willing to incur losses in order to gain market share. They are looking to offset these initial losses by enticing customers to purchase other related or unrelated products through the internet. By investing in expensive, cutting edge Multidomain Master Data Management (MDM) solutions a MNC can expand by supporting multiple languages and currencies through highly efficient data storage. This can all be managed through a company H.Q. in Germany. As a marketing strategy this has proven to be successful, it is also true that progress has been made in efficient production and product development techniques.
This is clearly to the detriment of local printers here in the U.K… This example of globalisation through online batch printing processes is gathering pace and the MNCs that provide this service are increasing their market share. To some this may be an example of evolving technologies and business strategies revolutionising an industry which will benefit the consumer with lower prices and increased speed of delivery, from the point of order by the consumer. However, the potential dangers cannot be ignored. If small and medium sized printing businesses in the U.K. are forced to exit the industry because they do not have the financial resources to operate at a loss during a sustained price war then the industry may become monopolised, to an extent at least.
Blog by Simon Jones