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WELCOME TO THE PRESENTATION

ON
MARKET APPRAISAL: MARKET FORECASTING
TOOLS;
DEMAND/SUPPLY ANALYSIS &
FORECAST;
MARKETING SET-UP AND
ORGANISATION

By K. Ramkrishna, General
Manager
Industrial Development Bank of
India
August 25,
2004

INSTALLED
CAPACITY
CAPACITY
UTILISATION

DEPRECIATION

REPAYMENT
SCHEDULE

PRICES OF INPUTS
& OUTPUTS

PROFITABILITY
CONSUMPTION
NORMS

INTEREST

MANPOWER COST
REPAIRS &
MAINTENANCE

SELLING &
ADMINISTRATION
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INTRODUCTION TO COMMERCIAL APPRAISAL


MOST CELEBRATED CHIEF EXECUTIVES DURING
1980S IN THE US CORPORATE WORLD

Bill Gates
Bert Roberts
Ross Perot
Sam Walton
Mike Harper
Fred Turner
Michael Eisner
John Smale
Robert Goizueta
Roger Smith

Microsoft
MCI
Perot Systems
Wal Mart
Con Agro
McDonalds
Walt Disney
Procter & Gamble
Coca Cola
General Motors
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MARKET RESEARCH
MODELLING OF THE FUTURE AS AGAINST
ANALYSING THE PAST
ANALYSIS OF COMPETITIVE ADVANTAGES
PRICE WILL MATTER MORE & BRAND WILL
MATTER LESS
WIDENING CHOICE DUE TO E-COMMERCE,
BESIDES GLOBALISATION
SIMULATING, PREDICTING & MAPPING
CONSUMER BEHAVIOUR
E-COMMERCE A WAY OF LIFE
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MARKET RESEARCH
(Contd.)
ROLE OF PRODUCT, PACKAGING & PRICES IN
CONSUMER BUYING DECISIONS
CONSUMER WILL SEARCH FOR COMPARABLE
PRICE OFFERINGS ON THE NET
AVAILABILITY OF SEARCH ENGINES THAT CAN
TRACK COMPARABLY PRICED PRODUCTS IN THE
CYBER SPACE
COMMODITISATION OF SERVICES & NEED FOR
VALUE ADDITION
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ISSUES BEFORE WTO


MAINTAINABLILTY OF QUANTITATIVE
RESTRICTIONS ON IMPORTS & EXPORTS
OPENING UP OF AGRICULTURAL & SERVICE
SECTORS
INTELLUCTUAL PROPERTY RIGHTS
ANTI-DUMPING & SUBSIDY MEASURES
NEW FORMS OF NON-TARIFF MEASURES VIZ.,
ENVIRONMENTAL & SOCIAL CLAUSES
SPECIAL & DIFFERENTIAL TREATMENT
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WTO DYNAMICS
WILL IMPACT EVERY INDUSTRY & EVERY ASPECT
OF EVERY INDUSTRY
NEO-DARWINISM - GLOBALISE OR PERISH
GLOBALLY COMPETITIVE INDUSTRY - CRUCIAL
AGREEMENTS BINDING ON ALL MEMBERS
DECISION BY CONSENSUS - ONE MEMBER ONE
VOTE
FAILURE OF SEATTLE MEET
LIMITED INFLUENCE OF DEVELOPING ECONOMIES
ON DECISION MAKING
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FOCUS OF INDUSTRIAL
POLICY
PRE-LIBERALISATION :
EXPORT ORIENTATION & IMPORT SUBSTITUTION
EMPLOYMENT ORIENTATION
BACKWARD AREA DEVELOPMENT
SMALL SCALE INDUSTRY
SUBSTANTIALLY INWARD LOOKING POLICY
LEADING TO SUBSISTENCE ON AGRICULTURAL
SECTOR & PSU DOMINATED PUBLIC SECTOR

FOCUS OF INDUSTRIAL
POLICYContd.)
POST-LIBERALISATION :
COMMERCIAL ASPECTS ARE THE MAIN
CONSIDERATION.
INVESTMENT DECISIONS DRIVEN BY
COMMERCIAL & GLOBAL
COMPETITIVENESS CONSIDERATIONS.

INTRODUCTION TO COMMERCIAL
APPRAISAL (Contd.)
WHAT IS MARKET APPRAISAL

FUTURE DEMAND SUPPLY SCENARIO


PRICE FOR EXAMINING VIABILITY
PRICES OF CRITICAL INPUTS
EXTENT OF COMPETITION FROM DOMESTIC AND
INTERNATIONAL SECTORS
COMPETITIVENESS OF THE UNIT UNDER REVIEW AND
THE INDUSTRY
MARKETING STRATEGIES
PERFORMANCE OF MAJOR AND ASSISTED UNITS IN THE
INDUSTRY
INHERENT THREATS
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INTRODUCTION TO
COMMERCIAL APPRAISAL
(Contd.)
WHAT IS A MARKET ?
AN INSTITUTIONAL ARRANGEMENT
PRODUCT
SELLERS AND BUYERS
QUANTITY
PRICE
METHOD AND MODE OF TRANSFER
SETTLEMENTS
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INTRODUCTION TO COMMERCIAL
APPRAISAL (CONTD.)
DEFINITION OF MARKET DEMAND

Market Demand for a product class is the total volume


which would be bought by a defined customer group in a
defined location in a defined time period under defined
environmental conditions and marketing effort and at a
given price.

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INTRODUCTION TO COMMERCIAL
APPRAISAL (Contd.)
WHAT DO WE DO IN MARKET APPRAISAL
PRODUCT, END-USE & ITS POSITION ON THE PRODUCT
LIFE CYCLE
MARKET STRUCTURE, CAPACITY, PRODUCTION, MAJOR
PLAYERS
MARKETING STRATEGIES
GLOBAL SCENARIO
COMPETITIVENESS OF DOMESTIC INDUSTRY
PRICING & PRICE MOVEMENTS
PERFORMANCE OF MAJOR & ASSISTED UNITS IN THE
INDUSTRY
FUTURE SCENARIO, MARKET SIZE, PRICING &
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STRATEGIES

STRUCTURE OF A
MARKET STUDY
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BASIC STRUCTURE OF A MARKET STUDY

INTRODUCTION
PRODUCTS AND THEIR APPLICATIONS
MARKET STRUCTURE
GLOBAL SCENARIO
COMPETITIVENESS OF DOMESTIC INDUSTRY
PERFORMANCE OF MAJOR AND ASSISTED UNITS

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BASIC STRUCTURE OF A MARKET STUDY


(Contd.)

FUTURE OUTLOOK
DEMAND-SUPPLY BALANCE
SWOT ANALYSIS
PROSPECTS FOR THE UNIT
CONCLUSION

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PRODUCTS AND
THEIR
APPLICATIONS
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PRODUCTS AND THEIR APPLICATIONS


CHEMICAL COMPOSITION
TECHNICAL SPECIFICATION
NORMS OF CONSUMPTION OF THE PROPOSED
PRODUCT IN VARIOUS END-USE APPLICATIONS
COMPLIMENTARY AND SUBSTITUTE PRODUCTS
STATUS OF THE PRODUCT IN THE PRODUCT LIFE
CYCLE.

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MARKET
STRUCTURE

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MARKET STRUCTURE

AGGREGATE INSTALLED CAPACITY


EFFECTIVE CAPACITY
CAPACITIES OF MAJOR UNITS
ESTIMATES OF CAPACITIES IN THE SMALL
SCALE SECTOR
TRENDS IN CAPACITY CREATION

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MARKET STRUCTURE(CONTD.)
BASIS OF INSTALLED CAPACITY

SECTIONAL CAPACITIES
RESIDENT, REACTION & CYCLE TIME
INPUT, PROCESS, THROUGHPUT, TRAFFIC & OUTPUT
ENVISAGED PRODUCT CHARACTERISTICS & MIX
GUARANTEED NORMS OF CONSUMPTION OF RAW
MATERIALS, INPUTS, CONSUMABLES, POWER &
UTILITIES
INSTALLED CAPACITIES IN GENERAL ARE NOT
ADDITIVE
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MARKET STRUCTURE (Contd.)


TRENDS IN PRODUCTION
TRENDS IN PRODUCTION IN RESPECT OF MAJOR
UNITS
TRENDS IN CAPACITY UTILISATION
REASONS FOR POOR CAPACITY UTILISATION
MARKET SHARES OF MAJOR UNITS

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MARKET STRUCTURE (Contd.)


TRENDS IN IMPORT, EXPORT AND APPARENT
DOMESTIC CONSUMPTION
COMPOUND ANNUAL AVERAGE RATE OF
GROWTH (CARG)
TRENDS IN DOMESTIC AND INTERNATIONAL
PRICES
REASONS FOR PRICE FLUCTUATIONS
TAKEOVERS, MERGERS, CONSOLIDATIONS AND
STRATEGIC ALLIANCES
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MARKET STRUCTURE
(CONTD.)
MARKETING STRATEGIES OF MAJOR PLAYERS

PRODUCT DIFFERENTIATION
MARKET SEGMENTATION
MARKET DIFFERENTIATION
PRICE DIFFERENTIATION
MARKET SKIMMING AND PENETRATION
RE-CONFIGURING THE SUPPLY CHAIN

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MARKET STRUCTURE
(CONTD.)
MARKETING STRATEGIES OF MAJOR PLAYERS
(CONTD.)

DIRECT & NETWORK MARKETING


PROMOTION AND ADVERTISING
PRICE WAR
TAKEOVERS, MERGERS AND CONSOLIDATIONS
AGGRESSIVE AND DEFENSIVE STRATEGIES
KILL COMPETITION
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MARKET STRUCTURE (Contd.)


GLOBAL SCENARIO :
TRENDS IN GLOBAL CAPACITY, PRODUCTION
AND PRICES
MAJOR PLAYERS AND THEIR MARKETING
STRATEGIES
TAKEOVERS, MERGERS, CONSOLIDATIONS,
CLOSURES AND STRATEGIC ALLIANCES

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MARKET STRUCTURE (Contd.)


VARIATIONS IN TECHNOLOGIES AND PROCESSES
GLOBAL SHARES IN PRODUCTION, IMPORT AND
EXPORT
TARIFF AND NON-TARIFF BARRIERS
LONG TERM FORECASTS

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MARKET STRUCTURE (Contd.)


COMPETITIVE STRATEGIES :
MACRO VS. MICRO LEVEL COMPETITIVENESS
DIVERSIFICATION VS. FOCUS ON CORE COMPETENCIES
SELF SUFFICIENCY VS. COMPARATIVE ADVANTAGE
SWADESHI VS. VIDESHI
MAKE OR BUY & OUTSOURCING DECISIONS
RECRUITMENT & TRAINING
DOWNSIZING , RETRENCHMENT & EXIT ROUTE

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MARKET STRUCTURE (Contd.)

COMPETITIVENESS OF DOMESTIC INDUSTRY IN


TERMS OF (Contd.) :
TECHNOLOGY AND PROCESS
COST OF THE PROJECT
COST OF PRODUCTION/SERVICES
SCALES OF OPERATION
TECHNICAL MANPOWER AND ORGANISATION
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MARKET STRUCTURE (Contd.)


MEASURES TO IMPROVE COMPETITIVENESS
JOB WORK AND OUT SOURCING
VALUE ENGINEERING
TOTAL QUALITY MANAGEMENT
JUST IN TIME INVENTORY
KAISAN BENCH MARKING
ENTERPRISE RESOURCE PLANNING
EMPLOYEE EMPOWERMENT

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MARKET STRUCTURE (Contd.)


MARKETING MANAGEMENT CONSISTS OF FOUR
DISTINCT AND WELL-DEFINED ACTIVITIES
1. Analysis: Of market opportunity and specifying marketing
objectives.
2. Planning: Devising ways and means of achieving the
marketing objectives and in particular specifying the
Marketing Mix/Strategy and designing a marketing
organisation.
3. Organisation: Creation of an appropriate organisational
structure and assembling the necessary manpower to
implement the marketing plan.
4. Control: Designing of a suitable control system for
monitoring the marketing process and for taking corrective
action, when the actual results deviate from the expectations.
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INTRODUCTION TO
COMMERCIAL
APPRAISAL
FUTURE OUTLOOK

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FUTURE OUTLOOK

ENVIRONMENT FORECAST
DEMAND PROJECTIONS
SUPPLY PROJECTIONS
DEMAND-SUPPLY BALANCE
MARKETING STRATEGIES

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ENVIRONMENT
FORECAST

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ENVIRONMENT FORECAST
FORECASTING STAGES
Forecast of
Environment

Industry Forecast

Company Sales
Forecast
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ENVIRONMENT, FORECAST
& MARKETING STRATEGY

Environment

Forecast

Strategy

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ENVIRONMENT FORECAST (Contd.)


ITEMS OF FUTURE PROJECTION
Gross National Product
Sectoral Incomes - Agriculture, Industry. Services, Exports,
Imports
Money Supply, Prices and Interest Rates
Governments Finances and Availability of Resources for
Investment
Availability of Long Term Resources through FDI, Multilateral
Term Lending Institutions, Foreign Aid etc.
Availability of major inputs like Power, Coal, Steel, Cement, key
Non-Ferrous Metals and Infrastructural Facilities like Rail and
Road Transport, Port Facilities, Air Cargo Facilities, etc
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ENVIRONMENT FORECAST (Contd.)


Governments Policies

Monetary Policy
Fiscal Policy and Taxation
Policies for Subsidies and Incentives
Interest Rate Policy
Export and Import Policy
Policy for Industrial/Infrastructure Development
Policy for Foreign Collaboration
Policy for Development

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ENVIRONMENT FORECAST (Contd.)


Governments Policies (Contd.)

Policy for Foreign Investments


Policy for Development of Capital Markets
Policy for Import of Technology
Policies for Development of Indigenous Technologies and
R&D
Labour Policies
Policy for Restructuring of Industry and Rehabilitation
Policies for domestic joint ventures abroad

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ENVIRONMENT FORECAST (Contd.)


Competitive Environment
Cost Structure of Domestic Industry and of similar industries in
other countries and likely future trends.
Comparison of technologies, types of products made and
processes employed in the country with those of other countries and
expected future trends.
Availability of uptodate technologies, know-how, processes etc.
Availability of state of the art machinery/capital goods within the
country and abroad.
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ENVIRONMENT FORECAST (CONTD.)


Competitive Environment (Contd.)
Product Improvement, New Product Development,
Development of New Markets, Degree of Customer
Orientation.
Extent of use of efficiency enhancing techniques like Value
Engineering, Just in Time Inventory (JIT), Kaisan Bench
Marking, Re-engineering, Employee empowering, etc.

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ENVIRONMENT FORECAST (CONTD.)


Other Aspects
Privatisation
Human Resources Development
Coordinated Approach to Development
Centre State Relations
Formation of Trade Blocks
Non-Tariff Barriers to Exports from the country in markets like
USA and Europe.

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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST : WHAT PEOPLE SAY
WHAT PEOPLE DO
WHAT PEOPLE HAVE DONE

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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.) :
WHAT PEOPLE SAY :

SURVEY OF BUYER'S INTENTIONS


SALES FORCE COMPOSITE METHOD
JURY OF THE EXECUTIVE OPINION METHOD
EXPERT OPINION METHOD
END USE METHOD
DELPHI TECHNIQUE
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.) :
WHAT PEOPLE DO :

TEST MARKETING
FACTOR ANALYSIS
CLUSTER ANALYSIS
PRINCIPAL COMPONENT ANALYSIS
DISCRIMINANT ANALYSIS
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.) :WHAT PEOPLE HAVE DONE : TREND METHODS LINEAR TREND : y=A+B*t
LOG LINEAR TREND : y=A*B^t EQUIVALENT TO
LOG y = LOG A+B*LOGt
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.) :WHAT PEOPLE HAVE DONE (Contd.) : SEMI-LOG LINEAR TREND : y=A*t^B EQUIVALENT
TO
LOGy= LOG A+t*LOGB
QUADRATIC TREND : y=A*t^2 + B*t+C
SINUSOIDAL TREND :
y = A*COS(SQ.ROOTm)*t+B*SIN(SQ.ROOTm)*t+C
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FUTURE OUTLOOK (CONTD.)


TIME SERIES ANALYSIS
Components

Long Term

Secular
(Trend
Component)

Short Term

Cyclical

Seasonal

Irregular or
Erratic

Regular
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.)
WHAT PEOPLE HAVE DONE (Contd.)
EXPONENTIAL SMOOTHING MODELS
REGRESSION MODELS :

SIMPLE : y=A+B*x
MULTIPLE : y=A+B1*x1+B2*x2+.....Bn*xn
LOG FORM
NON-LOG FORM
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.)
EXAMPLE OF MULTIPLE REGRESSION ANALYSIS:
y= +sumj*xj(j 1..n), a linear postulate
y=fertiliser consumption in million tonnes
x1=food grain production target in million tonnes
x2=gross cropped area in million hectares
x3=gross area under irrigation in million hectares
x4=price of fertiliser per tonne
x5=gross domestic product of agricultural sector

in million rupees a lagged variable


x6=rainfall index, dummy variable
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.)

EXAMPLE OF MULTIPLE REGRESSION ANALYSIS:

ORDINARY LEAST SQ.METHOD OF ESTIMATION


BEST LINEAR UNBIASED ESTIMATERS
LAND & DUMMY VARIABLES
AUTO CO-RELATION
MULTI-COLINEARITY
HETROSCADASTICITY
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FUTURE OUTLOOK (Contd.)


TECHNIQUES OF DEMAND FORECAST (Contd.)
WHAT PEOPLE HAVE DONE (Contd.)
ECONOMETRIC MODELS : SIMULTANEOUS EQUATION
AUTO REGRESSIVE
ADAPTIVE FILTERING MODELS
INPUT-OUTPUT MODELS
HISTORICAL ANALOGY METHOD
GEOGRAPHICAL ANALOGY METHOD
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FUTURE OUTLOOK (Contd.)


SUPPLY FORECAST :
EXISTING CAPACITY
CAPACITIES IN PIPELINE
AGGREGATE FUTURE CAPACITY

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FUTURE OUTLOOK (Contd.)


DEMAND-SUPPLY BALANCE :

DEMAND FORECAST
REQUIRED CAPACITY
ANTICIPATED CAPACITY
CAPACITY GAP

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MARKETING STRATEGY

CONCEPTS PRACTICE

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MARKETING STRATEGY

Marketing strategy is an ever evolving design


or a blue print consisting of a package of
inputs like product design and quality, styling,
price, packaging, sales organisation, sales
promotion and advertising, distribution
network/channels, after sales service etc. and is
meant for achieving certain pre-determined
marketing and corporate objectives.
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MARKETING STRATEGY (CONTD.)


ELEMENTS OF MARKETING STRATEGIES
The four basic Ps of Marketing are:
Product
Price
Place
Promotion
Details of Individual Elements are:
Product Quality, Design, Specifications
Product Prices by Markets/Customers
Market Segmentation and Product Differentiation
Product Positioning
Advertising/Sales Promotion
Distribution Network/Channels
After Sales Service
Overall Customer Orientation - High - Medium - Low
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MARKETING STRATEGY (CONTD.)


MARKET SEGMENTATION
Markets are segmented in order to facilitate concentration of
marketing effort in the most profitable, attractive segments of
a given larger market. Segmentation prevents dissipation of
marketing effort over the entire market and facilitates
effective marketing of a companys product through
concentration of marketing effort in the target markets.
Markets can be segmented on the basis of several criteria
viz. Prices, income levels of target customers, geographical
regions, education, age, sex, etc.
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MARKETING STRATEGY (CONTD.)


MARKET SEGMENTATION (Contd.)
Market Segmentation is the process of identifying sub
sets of buyers with different product requirements and
different buying needs and desires.
Segmenting the market is the process of grouping
individuals/buyers/buyer organizations or agencies
into separate entities, whose expected reactions to
marketing efforts of a producer will be similar, during
a specified time period.
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MARKETING STRATEGY (CONTD.)


PRODUCT DIFFERENTIATION
Even within the same product class, manufacturers
endeavour to differentiate their respective products from
those of other manufacturers to secure a distinctive
position for the goods manufactured by them in the
market place. In fact product differentiation could be an
important element of companys marketing strategy in
respect of products especially like consumer durables.

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MARKETING STRATEGY (CONTD.)


PRODUCT POSITIONING
A proper/suitable combination of
product differentiation and market segmentation leads
to effective product positioning. The strategy of
positioning aims at offering the differentiated product
to that segment of the overall market, which is in need
of the differentiated product.

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MARKETING STRATEGY (CONTD.)


CRITERIA FOR MARKET
SEGMENTATION
Market Segmentation to be meaningful and effective
should satisfy five basis principles.
-

Divisibility
Measurability
Substantiality
Accessibility
Responsiveness
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MARKETING STRATEGY (CONTD.)


CLASSIFICATION OF MARKETS, PRICE
QUALITY RELATIONSHIP
High

Quality
ECONOMY

L
o
w

PREMIUM

SUB-STANDARD OR
LOW PRICE LOW
QUALITY

Price
HIT & RUN

Low

H
i
g
h

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MARKETING STRATEGY (CONTD.)


BCGs BCG
HIGH
Market

STAR
H
I
G
H

QUESTION
MARK

Market Share

CASH COW

DOG

L
O
W

Growth

LOW
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MARKETING STRATEGY (Contd.)


WHY MARKETING STRATEGY
IS SO IMPORTANT
Examples
(1) P&G
(2) Sakura
(3) IBM
(4) Nike
(5) LCVs
(6) JDB & OECD
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FUTURE OUTLOOK (Contd.)


PROSPECTS FOR THE UNIT
ANALYSIS OF STRENGTHS, WEAKNESSES,
OPPORTUNITIES AND THREATS
PERCEIVED COMMERCIAL RISK
CONCLUSIONS

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THANKS FOR PARTICIPATION IN THE


PRESENTATION MARKET APPRAISAL,
MARKET FORECASTING TOOLS,
DEMAND/SUPPLY ANALYSIS & FORECAST
FOR ANY CLARIFICATIONS,
KINDLY GET IN TOUCH WITH
K. RAMKRISHNA, GENERAL MANAGER
MARKET RESEARCH DEPARTMENT
INDUSTRIAL DEVELOPMENT BANK OF
INDIA
MUMBAI
PH : 91-22-22161761
FAX : 91-22-22155763
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E-MAIL : k.ramkrishna@idbi.co.in