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Answer: The BCG Growth-Share Matrix The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growthshare". Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability. BCG Growth-Share Matrix
This framework assumes that an increase in relative market share will result in an increase in the generation of cash. This assumption often is true because of the experience curve; increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage. A second assumption is that a growing market requires investment in assets to increase capacity and therefore results in the consumption of cash. Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption. Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firm's other business units that were at a more mature stage and generating
significant cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born. The four categories are:
Dogs - Dogs have low market share and a low growth rate and thus neither generate
nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture.
Question marks - Question marks are growing rapidly and thus consume large
amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash comsumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.
Stars - Stars generate large amounts of cash because of their strong relative market
share, but also consume large amounts of cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation.
Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is
greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. Because the cash cow generates a relatively stable cash flow, its value can be determined with reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow analysis. Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined soley by whether it had become the market leader during the period of high growth.
While originally developed as a model for resource allocation among the various business units in a corporation, the growth-share matrix also can be used for resource allocation among products within a single business unit. Its simplicity is its strength - the relative positions of the firm's entire business portfolio can be displayed in a single diagram. Limitations: The growth-share matrix once was used widely, but has since faded from popularity as more comprehensive models have been developed. Some of its weaknesses are:
Market growth rate is only one factor in industry attractiveness, and relative market
share is only one factor in competitive advantage. The growth-share matrix overlooks many other factors in these two important determinants of profitability.
The framework assumes that each business unit is independent of the others. In some
cases, a business unit that is a "dog" may be helping other business units gain a competitive advantage.
The matrix depends heavily upon the breadth of the definition of the market. A
business unit may dominate its small niche, but have very low market share in the overall industry. In such a case, the definition of the market can make the difference between a dog and a cash cow. While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporation's business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units. 2. Describe the marketing mix for Pepsi. Answer: Marketing Mix Marketing Mix is the set of marketing tools that the firm uses to pursue its marketing objectives. Marketing mix has a classification for these marketing tools. These marketing are classified and called as the Four Ps i.e. Product, Price, Place and Promotion. The most basic marketing tool is product which includes product design, quality, features, branding, and packaging. A critical marketing tool is price i.e. the amount of money that customers pay for the product. It also includes discounts, allowances, credit terms and payment period.
Place is another key marketing mix tool. And it includes various activities the company undertakes to make the product accessible and available to the customer. Some factors that decide the place are transport facilities, channels of distribution, coverage area, etc. Promotion is the fourth marketing mix tool which includes all the activities that the company undertakes to communicate and promote its product to target market. Promotion includes sales promotion, advertising, sales force, public relations, direct marketing, etc The Pepsi-Cola drink contains basic ingredients found in most other similar drinks including carbonated water, high fructose corn syrup, sugar, colorings, phosphoric acid, caffeine, citric acid and natural flavors. The caffeine free Pepsi-Cola contains the same ingredients but no caffeine. Some of the different and varied brands of Pepsi are as follows: 1. All Sport 2. Aquafina 3. Caffeine-Free Pepsi 4. Crystal Pepsi 5. Diet Pepsi 6. Gatorade 7. Izze 8. Jazz 9. Josta 10. Kas 11. Manzanita Sol 12. Mirinda 13. Mountain Dew 14. Mountain Dew AMP 15. Mountain Dew LiveWire 16. Mountain Dew MDX 17. Mug Root Beer Pepsi – Price 18. Pepsi 19. Pepsi Blue 20. Pepsi Cappuccino 21. Pepsi Max 22. Pepsi ONE 23. Pepsi Samba 24. Pepsi Tarik 25. Pepsi Twist 26. Propel Fitness Water 27. Sierra Mist 28. Slice 29. SoBe 30. Storm 31. Teem 32. Tropicana Products 33. Tropicana Twister
Pepsi again decides it price on the basis of competition. The best think about the company Pepsi is that it is very flexible and it can come down with the price very quickly. The company is renowned to bring the price down even up to half if needed. But this risk taking attitude has also earned Pepsi losses. Though lowering the price would attract the customers but it would not help them cover up the cost incurred in production hence causing them losses. This was the situation earlier but now Pepsi is a full-fledged and growing company. It has covered all its losses and is now growing at a rapid rate. Pepsi – Place Pepsi again has spread worldwide. Pepsi when entering a new market does not go in alone but it looks for partners and mergers. Till now Pepsi has collaborated with companies like Quaker Oats, Frito-lays, Lipton, Starbucks, etc. Pepsi like Coke has spread all over the world. It is because of this worldwide spread that now it is coming up with Advertisements which can be broadcasted in the different nations in the world. The recent example with would be the Pepsi advertisements having David Beckham as it brand ambassador. Promotion Promotion is one of the four aspects of marketing. Promotion comprises four subcategories: 1. 2. 3. 4. Advertising Personal selling Sales promotion Publicity and public relations
Pepsi started with its blind taste tests known as the Pepsi Challenge. The challenge is designed to be a direct response to critics who allege that Coca-Cola and Pepsi-Cola are identical drinks, with no meaningful differences. The challenge takes the form of a taste test. At malls, shopping centers and other public locations, a Pepsi representative sets up a table with two blank cups, one containing Pepsi and one with Coke. Shoppers are encouraged to taste both
colas, and then select which drink they prefer. Then the representative reveals the two bottles so the taster can see whether they preferred Coke or Pepsi. If Pepsi is revealed, the shopper is given a small prize. Also ad-campaigns are put up on the television by both the players. The following statistic just tells of much of share of ads on TV are captured by these players. 3. Choose any well-known company and study the micro environment and macro environment for the same. Answer: Micro Environment of Pepsi The Company PepsiCo Supplier Haidiri Beverages Private Limited, Pakistan Marketing Intermediaries The Haidiri Beverages Group was set up in 1979 and is Pepsi's sole selling agent for District Rawalpindi and Islamabad. It is based in the CDA Industrial Triangle, Kahuta Road, Islamabad. It manages the supply for several wholesalers, retailers, restaurants, hotels and other such food outlets. In order to achieve the projected sales targets effectively, the organization ensures a comprehensive strategic alignment with the overall Pepsi Cola’s business strategy. Customers Pepsi customers are mostly young group between the ages of 14 to 30. Competitors •
Coca Cola RC Cola Red Bull Nestle Water
Publics There are a lots of public are included. Such as channels, investment houses, radio stations, newspapers, minority groups, general public etc and also internal publics include workers, board of directors, managers and so on. GEO, ARY, STAR ONE etc.
Sunday Magazine, Fashion Magazine, Newsletters etc. Radio and Newspapers. PepsiCo organizing Meetings, Seminars, Exhibitions for the awareness of the local public Macro Environment of Pepsi Demographic Forces Age: The potential customers of Pepsi would be of age group of 14 - 30 years. Income: As for the income levels, Pepsi targets the middle class to the upper class. Economical Forces When the economy of the consumer is low and the expenses becomes high so that consumers move towards another product which is lower in price than the PepsiCo product. Natural Forces Due to any disaster, earthquake and some shortage by the marketers or suppliers so it’s affected their product and market. Technology Forces There is huge investment from the government to develop the infrastructure, opportunities and the creation of new products such as new advanced formulas, new technological factors changed so that it is very much effected by their product. Political and Legal Pakistan is a politically stable economy; as a result foreign investors are attracted to Pakistan as diversification strategies. The Pakistani government is on a regular effort improving business relations with trade and investment partners in US and Asia. Cultural Forces Due to Islamic Cultural values people prefer to use products made from Halal ingredients. 4. Write a short note on consumer buying behavior. Answer: Buying Behavior is the decision processes and acts of people involved in buying and using products. Need to understand: Why consumers make the purchases that they make? What factors influence consumer purchases? The changing factors in our society. Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:
Buyers reactions to a firms marketing strategy has a great impact on the firms success. The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy. Marketers can better predict how consumers will respond to marketing strategies. Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next. The 6 stages are: Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes. Information search-Internal search, memory. External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is Chinese food Indian food Burger king Klondike kates etc Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc.
Purchase--May differ from decision, time lapse between 4 & 5, product availability. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a chinese meal instead. Types of Consumer Buying Behavior Types of consumer buying behavior are determined by: Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation. Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others. High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk: Personal risk Social risk Economic risk The four type of consumer buying behavior are: Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc. Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand. Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of economic/performance/psychological risk. Examples include cars, homes, computers, education. Spend alot of time seeking information and deciding. Information from the companies MM; friends and relatives, store personnel etc. Go through all six stages of the buying process. Impulse buying, no conscious planning. The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next. For example:
Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making. A consumer, making a purchase decision will be affected by the following three factors: • • • Personal Psychological Social
The marketer must be aware of these factors in order to develop an appropriate MM for its target market. Return to Contents List Personal Unique to a particular person. Demographic Factors. Sex, Race, Age etc. Who in the family is responsible for the decision making. Young people purchase things for different reasons than older people. Handout...From choices to checkout... Highlights the differences between male and female shoppers in the supermarket. Return to Contents List • • Psychological factors Psychological factors include:
Motives-A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal. Actions are effected by a set of motives, not just one. If marketers can identify motives then they can better develop a marketing mix. MASLOW hierarchy of needs!! Physiological Safety Love and Belonging Esteem Self Actualization Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases.
Handout...Nutrament Debunked... Nutrament, a product marketed by Bristol-Myers Squibb originally was targeted at consumers that needed to receive additional energy from their drinks after exercise etc., a fitness drink. It was therefore targeted at consumers whose needs were for either love and Belonging or esteem. The product was not selling well, and was almost terminated. Upon extensive research it was determined that the product did sell well in inner-city convenience stores. It was determined that the consumers for the product were actually drug addicts who couldn't not digest a regular meal. They would purchase Nutrament as a substitute for a meal. Their motivation to purchase was completely different to the motivation that B-MS had originally thought. These consumers were at the Physiological level of the hierarchy. BM-S therefore had to redesign its MM to better meet the needs of this target market. Motives often operate at a subconscious level therefore are difficult to measure. Perception-What do you see?? Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. IE we chose what info we pay attention to, organize it and interpret it. Information inputs are the sensations received through sight, taste, hearing, smell and touch. Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an event, satisfies current needs, intensity of input changes (sharp price drop). Selective Distortion-Changing/twisting current received information, inconsistent with beliefs. Advertisers that use comparative advertisements (pitching one product against another), have to be very careful that consumers do not distort the facts and perceive that the advertisement was for the competitor. A current example...MCI and AT&T...do you ever get confused? Selective Retention-Remember inputs that support beliefs, forgets those that don't. Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30 minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can't be expected to be aware of all these inputs, and certainly will not retain many. Interpreting information is based on what is already familiar, on knowledge that is stored in the memory. Handout...South Africa wine.... Problems marketing wine from South Africa. Consumers have strong perceptions of the country, and hence its products.
Ability and Knowledge-Need to understand individuals capacity to learn. Learning, changes in a person's behavior caused by information and experience. Therefore to change consumers' behavior about your product, need to give them new information re: product...free sample etc. South Africa...open bottle of wine and pour it!! Also educate american consumers about changes in SA. Need to sell a whole new country. When making buying decisions, buyers must process information. Knowledge is the familiarity with the product and expertise. Inexperience buyers often use prices as an indicator of quality more than those who have knowledge of a product. Non-alcoholic Beer example: consumers chose the most expensive six-pack, because they assume that the greater price indicates greater quality. Learning is the process through which a relatively permanent change in behavior results from the consequences of past behavior. Attitudes-Knowledge and positive and negative feelings about an object or activity-maybe tangible or intangible, living or non- living.....Drive perceptions Individual learns attitudes through experience and interaction with other people. Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's marketing strategy. Handout...Oldsmobile..... Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as discovered by class exercise) need to disassociate Aurora from the Oldsmobile name. Exxon Valdez-nearly 20,000 credit cards were returned or cut-up after the tragic oil spill. Honda "You meet the nicest people on a Honda", dispel the unsavory image of a motorbike rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondas market returning to hard core. To change this they have a new slogan "Come ride with us". Attitudes and attitude change are influenced by consumers personality and lifestyle. Consumers screen information that conflicts with their attitudes. Distort information to make it consistent and selectively retain information that reinforces our attitudes. IE brand loyalty. There is a difference between attitude and intention to buy (ability to buy). Personality-all the internal traits and behaviors that make a person unique, uniqueness arrives from a person's heredity and personal experience. Examples include:
• • • • • • • • • • • •
Workaholism Compulsiveness Self confidence Friendliness Adaptability Ambitiousness Dogmatism Authoritarianism Introversion Extroversion Aggressiveness Competitiveness.
Traits effect the way people behave. Marketers try to match the store image to the perceived image of their customers. There is a weak association between personality and Buying Behavior, this may be due to unreliable measures. Nike ads. Consumers buy products that are consistent with their self concept. Lifestyles-Recent US trends in lifestyles are a shift towards personal independence and individualism and a preference for a healthy, natural lifestyle. Lifestyles are the consistent patterns people follow in their lives. EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable in US until 1920's. Now an assault by the American Academy of Dermatology. 5. Company A has homogeneous consumer preferences in the market; Company B sells different variants of soaps, while Company C is a small firm with constrained resources. What do you think is the most suitable market coverage strategy for the all the three companies. Answer: One of the most important decisions that a company makes is what market coverage strategy to use for a brand. In analyzing any one product, the first thing to consider is the market. In case of company A, market is too broad to segment effectively (since it homogeneous consumer preferences), so it makes sense to narrow the market to what can be called a focus market, in this case the consumer preferences for market. In a sense, the focus
market rules out products that are not substitutes. For example, a marketing analysis for Gatorade (which has about a 90% market share) should not exclude water since that is a substitute for a sports drink and a possible source of new sales. Otherwise the analysis would be stuck with a market definition of sports drinks and thus virtually no practical way of increasing sales. Consumer segmentation variables include demographics (e.g., age, gender and family life cycle), psychographics (e.g., self concept and lifestyle), usage rate (e.g., heavy and light users) and benefits sought. In this case benefits sought may be batteries for normal vs. high-drain devices. Company “A” has three basic choices for market coverage strategy: Undifferentiated—ignore segmentation variables and go after the whole market with one brand. Differentiated—operate in all or several segments of the market and design separate brands for each. Concentrated—operate in one or only a few segments of the larger market following a niche strategy with one brand. A way of telling what market coverage strategy a company is using is the number of separately-branded products that it offers in any one market. Gap could have regional variation in product assortments (say for different climates), but if there was only one Gap name, the market coverage strategy would be undifferentiated. Once a company chooses a market coverage strategy for a brand it knows its target market. A concentrated market coverage strategy leads to one target market as does an undifferentiated market coverage strategy. A differentiated market coverage strategy leads to as many target markets as there are brands. A company must be sure to avoid the trap of defining a target market by who is in that market before analyzing the needs and wants of the target market. That's why we say that what the market is comes first, and then the choice of a market coverage strategy. For company B, which sells different variant of soap, the growth is not as high as there is expansion in the market for soaps. The cash cows for HLL include Lifebouy, Lux, Liril, Rexona and Breeze. The company's premium soap include Dove, Pears. The company has come up with a new product offering i.e. Fair & Lovely soap. The strategy for 2006-07 would be to increase the market share from existing 63% to 70%. The strategic changes taking 4 P's into consideration would be:
Product: I would continue with the existing portfolio of the products and would concentrate on coming with new fragrances on different soaps than launching new soaps. I would position Dove and Lux International soap very urban rich women who are extra conscious for their complexion. Pears, Lux International would be positioned for the urban and rural rich. For the consuming urban class, Liril, Rexona, Pears and Lifebouy International would be positioned. I would also come up with 40gm packaging for different products. I will also be thinking of extending popular brands of cosmetics in the soap segment by that decision would be based on the popularity and acceptance of that particular brand (Brand Extension). Price: I would be try to customize the packaging of various products on the basis of price points. e.g. I will come up with the pricing of Rs 5, Rs 10 and Rs 15 for different products. I would try to experiment it with the products positioned for consuming class. Promotion: For promotion, apart from continuing the existing strategy of concentrating on T.V. channels, I would try to focus on the promotional campaign in rural sector. I would also concentrate on promoting through radio and sponsoring the programs e.g. 'Krishi Darshan' and 'Aap ka Swasthaya' programs that have greater number of audience. The advertising for them would have a pastoral and cultural looks. Place: As the marketing channels of the company are already established I would try to increase the penetration in the rural sector to the extreme remote areas which are not touched till now. I would try to reduce the delivery time of the products by choosing and increasing the strategic locations of warehouses. In case of company ‘C’, which is small firm, which constrained resources, It is often argued that governments should promote SMEs because of their greater economic benefits compared to large firms-in terms of job creation, efficiency, and growth. Share of Firms and Employment. In most developing countries, microenterprises and smallscale enterprises account for the majority of firms and a large share of employment. In Ecuador, for exarnple, firms with fewer than 50 employees accounted for 99 percent of firms and 55 percent of employment in 1980; in Bangladesh, enterprises with fewer than 100 workers accounted for 99 percent of enterprises and 58 percent of employment in 1986. Labor Intensity. Small firms employ a large share of the labor force in many developing countries, but are they more labor demanding than large firms (for a given scale of production)? Many analysts argue that, within industries, SMEs are more labor intensive than large firms. However, the evidence suggests that enterprise scale is an unreliable guide to labor intensity: many small firms are in fact more capital-intensive than larger firms in the same industry.! Labor intensity exhibits more variation across industries than among firm-size
groups within industries-leading some authors to suggest that efforts to make economic growth more labor-demanding should focus on altering the pattern of demands in favor of labor-intensive industries rather than on supply-side efforts to change the size distribution of firms. Job Creation. Apart from labor intensity, it is often argued that SMEs are important for employment growth, i.e., job creation. Here again, the evidence does not support the conventional wisdom. While gross job creation rates are substantially higher for small firms, so are gross destruction rates. This is because small firms exhibit high birthrates and high death rates, and many small firms fail to grow. In developed countries, net job creation rates i(gross job creation less gross job destruction) do not exhibit a systematic relationship to firm size.3 For example, in the United States between 1973 and 1988, despite a widespread belief to the contrary, small manufacturing firms did not consistently create more jobs on a net basis (after allowing for jobs eliminated and 4 firms that went out of business) than large firms. There is some evidence that the same conclusion holds for developing economies. Efficiency. Measures of enterprise efficiency (e.g., labor productivity or total factor productivity) vary greatly 'both within and across industries. Firm size may be associated with some other factors that are correlated with efficiency, such as management skill and technology, and the effects of the policy environment. Wages and Benefits. While there are many exceptions to the basic pattern, the weight of evidence suggests that larger employers offer better jobs in terms of wages, fringe benefits, working conditions, and opportunities for skills enhancement, as well as. Social, Political, and Equity Justifications. SMEs are often said to contribute to a more equal distribution of income or wealth. To the extent that SME owners and workers are in the lower half of the income distribution, promoting the growth of SMEs may lead to a more equitable distribution of income. It is often argued that SME promotion is justified on grounds of the job-creating prowess of SMEs or of their greater efficiency and growth. Attempts are often made to draw a causal link between SMEs and poverty alleviation so as to justify policies and subsidies in favor of SMEs. But the empirical evidence supporting many of these claims is very mixed, making it difficult to justify SME promotion on the basis of inherent economic benefits of smallness. 6. Describe various bases for positioning the product with example. Answer: Three bases of positioning can be distinguished Functional (solve problem, provide benefits to customers)
Symbolic (Self-image enhancement, ego identification, belongingness and social Experiential (provide sensory stimulation; provide cognitive stimulation) Identify competing products Identify the attributes, also called dimensions that define the product ‘space’ Collect information from a sample of customers about their perceptions of each Collect information from a sample of customers about their perceptions of each Determine the share of mind of each product Determine the current location of each product in the product space Determine the target market’s preferred combination of attributes. These are called: an Examine the fit between: the positions of competing products, the position of your Select the optimum position Three positioning strategies
meaningfulness, affective fulfillment)
Steps in product positioning process
• • •
product on the relevant attributes
product on the relevant attributes
• • •
product and the position of the ideal vector
Reverse Positioning: This method removes ‘sacred product attributes. Simultaneously nes attributes are added that would typically be found only in highly augmented product. For example IKEA is not delivering to your home the products which you have bought, and it offers no sales consultancy. Breakaway positioning: This method associates the product with a radically different category. By manipulating the cues of consumers of how they perceive and categorize a product, a firm can change how they perceive and categorize a product; a firm can change how consumers frame a product. Stealth Positioning: This variant gradually interests consumers for a new offering, by hiding the products true nature. For example Sony’s AIBO robot was positioned as a lovable pet. This shifted consumer’s attention away from its major limitations as a household aide. It apparently even turned elderly people into early technology adopters.
ASSIGNMENT Subject code: MB0030 Set 2 SUBJECT NAME: MARKETING MANAGEMENT Answer the following questions. 1. Write a short note on product life cycle. Answer: The product life cycle goes through many phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas product life cycle management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view. To say that a product has a life cycle is to assert four things: 1) that products have a limited life, 2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, 3) profits rise and fall at different stages of product life cycle, and 4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage. The different stages in a product life cycle are: 1.Market introduction stage I:* costs are high II:* slow sales volumes to start III:* little or no competition - competitive manufacturers watch for acceptance/segment growth losses IV:* demand has to be created V:* customers have to be prompted to try the product VI: makes no money at this stage 2.Growth stage I:* costs reduced due to economies of scale II:* sales volume increases significantly III:* profitability begins to rise IV:* public awareness increases V:* competition begins to increase with a few new players in establishing market
VI:* increased competition leads to price decreases 3.Mature stage I:* Costs are lowered as a result of production volumes increasing and experience curve effects II:* sales volume peaks and market saturation is reached III:* increase in competitors entering the market IV:* prices tend to drop due to the proliferation of competing products V:* brand differentiation and feature diversification is emphasized to maintain or increase market share VI:* Industrial profits go down 4.Saturation and decline stage I:* costs become counter-optimal II:* sales volume decline or stabilize III:* prices, profitability diminish IV:* profit becomes more a challenge of production/distribution efficiency than increased sales Request for Deviation In the process of building a product following defined procedure, an RFD is a request for authorization, granted prior to the manufacture of an item, to depart from a particular performance or design requirement of a specification, drawing or other document, for a specific number of units or a specific period of time. Market Identification A "micro-market" can be used to describe a Walkman, more portable, as well as individually and privately recordable; and then Compact Discs ("CDs") brought increased capacity and CD-R offered individual private recording...and so the process goes. The below section on the "technology lifecycle" is a most appropriate concept in this context.[clarification needed] Most of the context is not in English so you may need a translator.[clarification needed] In short, termination is not always the end of the cycle; it can be the end of a micro-entrant within the grander scope of a macro-environment. The auto industry, fast-food industry, petrochemical industry, are just a few that demonstrate a macro-environment that overall has not terminated even while micro-entrants over time have come and gone. It is claimed that every product has a life cycle. It is launched, it grows, and at some point, may die. A fair comment is that - at least in the short term - not all products or services die.
Jeans may die, but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate, probably will not. Even though its validity is questionable, it can offer a useful 'model' for managers to keep at the back of their mind. Indeed, if their products are in the introductory or growth phases, or in that of decline, it perhaps should be at the front of their mind; for the predominant features of these phases may be those revolving around such life and death. Between these two extremes, it is salutary for them to have that vision of mortality in front of them. However, the most important aspect of product life-cycles is that, even under normal conditions, to all practical intents and purposes they often do not exist (hence, there needs to be more emphasis on model/reality mappings). In most markets the majority of the major brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity. In the criticism of the product life cycle, Dhalla & Yuspeh state: The PLC is a dependent variable which is determined by market actions; it is not an independent variable to which companies should adapt their marketing programs. Marketing management itself can alter the shape and duration of a brand's life cycle. Thus, the life cycle may be useful as a description, but not as a predictor; and usually should be firmly under the control of the marketer. The important point is that in many markets the product or brand life cycle is significantly longer than the planning cycle of the organisations involved. Thus, it offers little practical value for most marketers. Even if the PLC (and the related PLM support) exists for them, their plans will be based just upon that piece of the curve where they currently reside (most probably in the 'mature' stage); and their view of that part of it will almost certainly be 'linear' (and limited), and will not encompass the whole range from growth to decline. 2. Explain various categories of brand sponsorship with example. Answer: Sponsorship plays a significant role in the planning and execution of any brand promotion. Sponsors consider return on investment (ROI) when measuring the value of sponsorships. And the most important elements include awareness and financial benefits. For the Taste of Chicago 2007, a total of 69 sponsors across 12 different sponsorship categories supported the event. Christine Jacob, senior manager of corporate sponsorships in the Mayor’s Office of Special Events in Chicago, supports numerous programs throughout the year. But for the Taste, her goal is to identify sponsors and secure/negotiate terms early to help maximize the event's total
revenue. Sponsorship categories at the Taste include the following: Presenting ($750,000) Family Village ($125,000) 3rd of July ($125,000) Official Credit Card ($90,000) Taste Stage ($90,000) Concert: 1 per night (customized) Gourmet Dining Pavilion ($50,000) Dining Pavilion ($40,000) Participating ($30,000) On-Site: 10 days ($25,000) On-Site: 1 day ($5,000) Media: in-kind value ($120,000) Of course, sponsors are savvy and measure the benefits of participating in a community festival against their own business objectives. For example, some sponsors use the Taste as an opportunity to brand themselves with some of the entertainment options to expand their visibility with event attendees. The result: Humana Senior Pavilion, Dominick’s Cooking Corner, Gallo Wine Pavilion (part of Gourmet Dining). How to Secure Sponsors Because the Taste of Chicago is an established annual event, sponsorship renewals typically begin in September for the following year with contract commitments by December. “We’re fortunate that Taste is what it is,” Jacob explains. “People call us – which is great. It’s a marketer’s dream to be part of Taste.” When the programming committee for the Taste meets each year in the fall, they consider new programming areas and that’s when the sponsorship team begins to integrate these ideas into the their platform. In 2007, the Taste included three new areas: Goin’ Green Pavillion, Sports Pavilion, and a International Pavilion. If a sponsor isn’t identified, the category is simply sponsored by the city, and the benefits are measured and used to find a sponsor for the following year (as long as the for the next year. If sponsors do not commit by year end or drops out for any reason, it’s time for the sponsorship team to pursue new sponsors. “That could mean cold calls and pitches,” Jacobs explains. “For example, if an automotive
sponsor drops out, we’ll approach another automotive sponsor who we’ve worked with in the past.” For those approaching sponsorship for the first time or those who are holding a previous organized event that is now annualized, Jacobs offers the following tips: Even if you’re not successful, try to secure a first year sponsor. Sponsorships must be identified as part of the initial planning phase. Brainstorm program elements early to allow maximum time to secure sponsors. Identify the value of each category; reinforce the benefits of a previously held program and its sponsorship levels. Create a fact sheet for each property/individual sponsorship category. Offer higher level sponsors the right of first refusal. Majority of sponsors are either participatin or onsite. Many Renew all sponsorships at least six months prior to the event. Secure new/replacement sponsors at least three months prior to the event. Hold weekly or regular meetings to communicate sponsor status and renewals. Common Elements in a Sponsorship Package Sponsors consider return on investment (ROI) when measuring the value of sponsorships. And the most important elements include awareness and financial benefits. Nevertheless, event planners who organize community events such as a food festival will determine sponsorship levels and direct benefits from the organizer to help support those ROI objectives. Depending on the sponsorship level, visibility included in the Taste may include any portion or all of the following: Signage/banner opportunities (stage, railing, towers, street pole, etc.) Corporate logo on main stage Category exclusivity Promotional tent Advertisement in program materials Status level on event brochure Corporate logo on event advertisements Corporate logo at ticket windows Mentions in radio advertising Priority seating tickets Use of corporate hospitality tents Main stage presentations Main stage mentions
Opportunity to bring inflatable for increased visibility Corporate press releases with event press kits Parking and delivery permits Invitations to press preview party Opportunity to distribute pre-approved sample items Benefits of Sponsorship While “cash” may seem like the most obvious reason to secure sponsors, many other benefits exist for incorporating sponsorship categories into a community food festival, according to Jacob: Concert sponsorship helps bring top name artists. Corporate sponsorships enhance programming. The Value of In-Kind Offers To be sure, sponsoring an established event like the Taste is beneficial to both sponsor and organizer, so in-kind offers can sometimes be viewed as cash. Some examples that Jacob suggests include the following: Media sponsors to provide TV, radio and print advertising. Radio sponsors to offset talent expenses. Airline sponsors to provide seats for out of town entertainment. Hotels to provide complimentary guest rooms for entertainment. Another important factor when identifying sponsors for a family event: “We do not have any ‘sin’ categories. We avoid tobacco and sex related sponsors,” Jacob says. “And because this is a food festival, no food sampling is allowed.” For anyone who is considering an event like this for the first time, Jacob recommends doing a lot of research, and suggests that planners consider using an experienced firm to find out how other people do it. 3. Explain the product mix pricing strategies with example. Answer: Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product
and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors: • • • • • Fixed and variable costs. Competition Company objectives Proposed positioning strategies. Target group and willingness to pay.
Types of Pricing Strategies An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve. Penetration pricing: Where the organisation sets a low price to increase sales and market share. Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Competition pricing: Setting a price in comparison with competitors. Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits. Bundle Pricing: The organisation bundles a group of products at a reduced price. Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200 Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, Porsche etc. Optional pricing: The organization sells optional extras along with the product to maximize its turnover. This strategy is used commonly within the car
4. What are various logistics functions? Describe in brief. Answer: It is important to recognize that the various logistic functions come together to form the totality of logistics support. A NATO logistician of one discipline will often work with a staff officer of another discipline and, as a very minimum, will have to appreciate the other's responsibilities and problems. For example, logistic planning originates in national, NATO or MNC policy guidance and has to be coordinated with all the staff branches concerned, whether they be operational, administrative or logistic, military or civil. Materiel Function of Logistics Production or acquisition logistics covers materiel, from the first phase of the life cycle to its final disposal from the inventory. The first part of the cycle, from specification, design and production is clearly a function of production logistics. Reception of the equipment into service, its distribution and storage, repair, maintenance and disposal are clearly a consumer logistic task. However, the initial design of the equipment which is part of production logistics
has to take account of the consumer aspects of repair and maintenance, and therefore involves both disciplines. Supply Function of Logistics Supply covers all materiel and items used in the equipment, support and maintenance of military forces (classes of supply are listed at Annex A). The supply function includes the determination of stock levels, provisioning, distribution and replenishment. Maintenance and Repair Function of Logistics Maintenance means all actions to retain the materiel in or restore it to a specified condition. The operational effectiveness of land, naval and air forces will depend to a great extent on a high standard of preventive maintenance, in peacetime, of the equipment and associated materiel in use. Repair includes all measures taken to restore materiel to a serviceable condition in the shortest possible time. Battle Damage Repair (BDR) is an important element in maintaining materiel availability during operations. It is designed to restore damaged materiel to a battleworthy condition, irrespective of the cause of the failure, as quickly as possible. Damage assessment has to be done rapidly and must not always require the use of automated test equipment or sophisticated tools. The considerations are primarily aimed at limiting the damage, determining the cause of the damage, establishing a plan for damage repair, and minimizing the risk to equipment and operators. Once the operational mission has been accomplished, BDR must be followed by specialized maintenance or repair to restore the equipment to fully serviceable condition. Service Function of Logistics The provision of manpower and skills in support of combat troops or logistic activities includes a wide range of services such as combat resupply, map distribution, labour resources, postal and courier services, canteen, laundry and bathing facilities, burials, etc. These services may be provided either to one's own national forces or to those of another nation and their effectiveness depends on close cooperation between operational, logistic and civil planning staffs.
Explosive Ordnance Disposal (EOD) Function of Logistics EOD involves the investigation, detection, location, marking, initial identification and reporting of suspected unexploded ordnance, followed by the on-site evaluation, rendering safe, recovery and final disposal of unexploded explosive ordnance. It may also include explosive ordnance which has become hazardous by damage or deterioration. The NATO EOD Technical Information Centre (EODTIC) holds records of all past and present ammunition and explosives, and provides an immediate advisory service on EOD problems. Movement and Transportation Function of Logistics It is a requirement that a flexible capability exists to move forces in a timely manner within and between theatres to undertake the full spectrum of Alliance roles and missions. It also applies to the logistic support necessary to mount and sustain operations. Engineering Function of Logistics The area of logistic engineering, while not exclusively a logistic function will require close coordination with logistics as the mission is very closely aligned with logistics in terms of facilitating the logistic mission of opening lines of communication and constructing support facilities. The engineering mission bridges the gap from logistics to operations and is closely related to the ultimate success of both. The acquisition, construction and operation of facilities forms the basis for the NISP. This is the term generally used in NATO for installations and facilities for the support of military forces. Medical Function of Logistics This function entails the provision of an efficient medical support system to treat and evacuate sick, injured and wounded personnel, minimise man days lost due to injury and illness, and return casualties to duty. An effective medical support system is thus considered a potential force multiplier. Though medical support is normally a national responsibility, planning must be flexible and consider coordinated multinational approaches to medical support. The degree of multinationality will vary depending on the circumstances of the mission, and be dependent
upon the willingness of nations to participate in any aspect of integrated medical support. Contracting Function of Logistics Contracting has become increasingly important to the conduct of operations, particularly when operating beyond NATO's area of responsibility. It is a significant tool that may be employed to gain fast access to in-country resources by procuring the supplies and services that the NATO Commander requires. Budget and Finance Function of Logistics The areas of budget and finance impact virtually every aspect of logistic operations. The funding and budget policies to pay for deployment and sustainment and redeployment are unique. While nations are generally expected to finance their own operations. 5. What is IMC? Describe the communication development process in brief. Answer: A management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, and direct marketing work together as a unified force, rather than permitting each to work in isolation. It aims to ensure consistency of message and the complementary use of media. The concept includes online and offline marketing channels. Online marketing channels include any emarketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, micro-blogging, RSS, podcast, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relations, industry relations, billboard, radio, and television. A company develops its integrated marketing communication programme using all the elements of the marketing mix (product, price, place, and promotion). Integrated marketing communication is integration of all marketing tools, approaches, and resources within a company which maximizes impact on consumer mind and which results into maximum profit at minimum cost. Generally marketing starts from "Marketing Mix". Promotion is one element of Marketing Mix. Promotional activities include Advertising(by
using different medium), sales promotion (sales and trades promotion), and personal selling activities. It also includes internet marketing, sponsorship marketing, direct marketing, database marketing and public relations. And integration of all these promotional tools along with other components of marketing mix to gain edge over competitor is called Integrated Marketing Communication. Reasons for the Growing Importance of IMC Several shifts in the advertising and media industry have caused IMC to develop into a primary strategy for marketers: From media advertising to multiple forms of communication. From mass media to more specialized (niche) media, which are centered around specific target audiences. From a manufacturer-dominated market to a retailer-dominated, consumer-controlled market. From general-focus advertising and marketing to data-based marketing. From low agency accountability to greater agency accountability, particularly in advertising. From traditional compensation to performance-based compensation (increased sales or benefits to the company). From limited Internet access to 24/7 Internet availability and access to goods and services. Selecting the Most Effective Communications Elements The goal of selecting the elements of proposed integrated marketing communications is to create a campaign that is effective and consistent across media platforms. Some marketers may want only ads with the greatest breadth of appeal: the executions that, when combined, provide the greatest number of attention-getting, branded, and motivational moments. Others may only want ads with the greatest depth of appeal: the ads with the greatest number of
attention-getting, branded, and motivational points within each. Although integrated marketing communications is more than just an advertising campaign, the bulk of marketing dollars is spent on the creation and distribution of advertisements. Hence, the bulk of the research budget is also spent on these elements of the campaign. Once the key marketing pieces have been tested, the researched elements can then be applied to other contact points: letterhead, packaging, logistics, customer service training, and more, to complete the IMC cycle. 6. What are alternative approaches to marketing while going international? Study Pepsi’s international marketing strategy. Answer: Markets and marketing are becoming ever more international in their nature and managers around the world ignore this fact at their peril. To achieve sustainable growth in markets that are becoming increasingly global, or merely to survive in domestic markets that are increasingly attacked by international players, it is essential that organisations understand the complexity and diversity of international marketing and that their managers develop the skills, aptitudes and knowledge necessary to compete effectively around the globe. A company must learn how to enter foreign markets and increase their global competitiveness. Firms that do venture abroad find the international marketplace far different from the domestic one. Market sizes, buyer behavior and marketing practices all vary, meaning that international marketers must carefully evaluate all market segments in which they expect to compete. Whether to compete globally is a strategic decision (strategic intent) that will fundamentally affect the firm, including its operations and its management. For many companies, the decision to globalize remains an important and difficult one (global strategy and action). Typically, there are many issues behind a company`s decision to begin to compete in foreign markets. For some firms, going abroad is the result of a deliberate policy decision (exploiting market potential and growth); for others, it is a reaction to a specific business opportunity (global financial turmoil, etc.) or a competitive challenge (pressuring competitors). But, a decision of this magnitude is always a strategic proactive decision rather than simply a reaction (learning how to business abroad). Reasons for global expansion are mentioned
below: a) Opportunistic global market development (diversifying markets) b) Following customers abroad (customer satisfaction) c) Pursuing geographic diversification (climate, topography, space, etc.) d) Exploiting different economic growth rates (gaining scale and scope) e) Exploiting product life cycle differences (technology) f) Pursuing potential abroad g) Globalizing for defensive reasons h) Pursuing a global logic or imperative (new markets and profits) Moreover, there can be several reasons to be mentioned including comparative advantage, economic trends, demographic conditions, competition at home, the stage in the product life cycle, tax structures and peace. To succeed in global marketing companies need to look carefully at their geographic expansion. To some extent, a firm makes a conscious decision about its extent of globalization by choosing a posture that may range from entirely domestic without any international involvement (domestic focus) to a global reach where the company devotes its entire marketing strategy to global competition. In the development of an international marketing strategy, the firm may decide to be domestic-only, home-country, host-country or regional/global-oriented. Each level of globalization will profoundly change the way a company competes and will require different strategies with respect to marketing programs, planning, organization and control of the international marketing effort. An industry in which firm competes is also important in applying different strategies. For example, when a firm which competes in the pharmaeutical industry which is heavily globalized, it has to set its own strategies to deal with global competitors. (constant innovation) Tracking the development of the large global corporations today reveals a recurring, sequential pattern of expansion. The first step is to understand the international marketing environment, particularly the international trade system. Second, the company must consider what proportion of foreign to total sales to seek, whether to do business in a few or many countries and what types of countries to enter. The third step is to decide on which particular markets to enter and this calls for evaluating the probable rate of return on investment against
the level of risk (market differences). Then, the company has to decide how to enter each attractive market. Many companies start as indirect or direct export exporters and then move to licensing, joint-ventures and finally direct investment; this company evolution has been called the internationalization process. Companies must next decide on the extent to which their products, promotion, price and distribution should be adapted to individual foreign markets. Finally, the company must develop an effective organization for pursuing international marketing. Most firms start with an export department and graduate to an international division. A few become global companies which means that top management plans and organizes on a global basis (organization history). Typically, these companies began their business development phase by entrenching themselves first in their domestic markets. Often, international development did not occur until maturity was reached domestically. After that phase, these firms began to turn into companies with some international business, usually on an export basis. But, this process may vary dramatically with the size of the domestic market. Pepsi’s international marketing strategy When the "You're in the Pepsi Generation" advertising campaign launched in 1963, it may have been the first time a brand was marketed primarily with an association to its consumers' aspirational attitudes. A decidedly youth-oriented strategy, The newest campaign slogan, introduced this year, is "More Happy," which definitely coincides with one concrete example of "more" in the packaging of Pepsi products today—more designs. Many more. At least 35 distinct design ideas will grace the packaging of Pepsi's cans and bottles this year alone, and this design strategy may continue indefinitely. Though not "generational" in word, the campaign certainly has a youth-oriented feel with package designs, advertising, and websites that are fun and playful. PepsiCo worked closely with Peter Arnell and Arnell Group, based in New York City, to devise a comprehensive new strategy that would connect with Pepsi's core consumers. Arnell reinvented the Pepsi package as a meaningful and appealing communications tool for the latest generation of youth that are not overwhelmed by media, music, or digital distractions. Pepsi actually asked their loyal consumers what brand elements would have to remain so that
they would be intuitively reassured that their favorite drinks were not changing and the brand they trusted was still essentially the same. Their answer was direct and consistent. Pepsilovers needed to see three elements for sure—the Pepsi "globe," the iconic Pepsi blue, and the familiar tilted Pepsi capital letters. The most recent logo design had the Pepsi wordmark on top of and slightly overlapping the iconic Pepsi red-white-and-blue "globe." On the previous can design, the wordmark wrapped halfway around the can, and the globe was off-center. The new cans and bottles have unbundled the word and globe, making the newly centered globe more of the hero, and the smaller Pepsi wordmark less prominent. Television ad campaigns are reinforcing the globe-centric approach by featuring a bouldersized Pepsi globe in various settings careening to and fro like a pinball. In the ads and on the front of most of the new packages is the reassuring tag line: "Same Pepsi inside, new look outside." Miller explains that it is customary and important to reassure consumers for at least six months in situations like this. Today's youth as demanding authenticity from the products they come into contact with in their day-to-day experiences. The new Pepsi design strategy is versatile because it can be authentic and stay current, and it could also make introducing special seasonal or regional designs more intriguing and less disruptive. "This is a new way of using packaging as media," explains Miller. "The consumer is looking for more variety and expecting more from their brands. They want to have a dialogue with their favorite brands.”
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