ANSOFF’S MATRIX

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This well known marketing tool was first published in the Harvard Business Review (1957)
in an article called 'Strategies for Diversification'. It is used by marketers who have
objectives for growth. Ansoff's matrix offers strategic choices to achieve the objectives.
There are four main categories for selection.

Market Penetration
Here we market our existing products to our existing customers. This means increasing our
revenue by, for example, promoting the product, repositioning the brand, and so on.
However, the product is not altered and we do not seek any new customers.
Market Development
Here we market our existing product range in a new market. This means that the product
remains the same, but it is marketed to a new audience. Exporting the product, or
marketing it in a new region, are examples of market development.
Product Development
This is a new product to be marketed to our existing customers. Here we develop and
innovate new product offerings to replace existing ones. Such products are then
marketed to our existing customers. This often happens with the auto markets where
existing models are updated or replaced and then marketed to existing customers.
Diversification
This is where we market completely new products to new customers. There are two types
of diversification, namely related and unrelated diversification. Related diversification
means that we remain in a market or industry with which we are familiar. For example, a
soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated
diversification is where we have no previous industry or market experience. For example a
soup manufacturer invests in the rail business.
Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for
growth.

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BOSTON MATRIX ( B CG ):
Like Ansoff's matrix, the Boston Matrix is a well known tool for the marketing manager. It
was developed by the large US consulting group and is an approach to product portfolio
planning. It has two controlling aspect namely relative market share (meaning relative to
your competition) and market growth.
You would look at each individual product in your range (or portfolio) and place it onto the
matrix. You would do this for every product in the range. You can then plot the products of
your rivals to give relative market share.

This is simplistic in many ways and the matrix has some understandable limitations that
will be considered later. Each cell has its own name as follows.
Dogs.
These are products with a low share of a low growth market. These are the canine version
of 'real turkeys!'. They do not generate cash for the company, they tend to absorb it. Get rid
of these products.
Cash Cows.
These are products with a high share of a slow growth market. Cash Cows generate more
than is invested in them. So keep them in your portfolio of products for the time being.
Problem Children.
These are products with a low share of a high growth market. They consume resources and
generate little in return. They absorb most money as you attempt to increase market share.
Stars.
These are products that are in high growth markets with a relatively high share of that
market. Stars tend to generate high amounts of income. Keep and build your stars.
Look for some kind of balance within your portfolio. Try not to have any Dogs. Cash Cows,
Problem Children and Stars need to be kept in a kind of equilibrium. The funds generated
by your Cash Cows is used to turn problem children into Stars, which may eventually
become Cash Cows. Some of the Problem Children will become Dogs, and this means that
you will need a larger contribution from the successful products to compensate for the
failures.

Bowman's Strategy Clock
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perceived added value to a 'particular segment' warranting a premium price.increased price/standard. only feasible in a monopoly situation. Bowman and D. Option two . likely to be segment specific. higher margins if competitors do not value follow/risk of losing market share.The Strategy Clock: Bowman's Competitive Strategy Options The 'Strategy Clock' is based upon the work of Cliff Bowman (see C. Option three .low value/standard price.increased price/low values. low cost base and reinvestment in low price and differentiation. There are six core strategic options: Option one .low price/low added value. yielding market share benefits.Irwin .focussed differentiation. It's another suitable way to analyze a company's competitive position in comparison to the offerings of competitors. Option five . Option eight . As with Porter's Generic Strategies.Differentiation. Bowman considers competitive advantage in relation to cost advantage or differentiation advantage. Option seven . Option six .Hybrid. risk of price war and low margins/need to be a 'cost leader'. 3|Page . Faulkner 'Competitve and Corporate Strategy . (a)without a price premium: perceived added value by user. Option four .low price. (b)with a price premium: perceived added value sufficient to to bear price premium.1996).

Core Competences Marketing and Core Competences A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer.loss of market share. Honda and Canon. Such competences give an organization access to a wide variety of markets. Core competences are interesting from a traditional marketing point of view since it could be argued that they take a product or production orientation rather than a market orientation. 4|Page . For example. So if needs are being met better than the competition. markets where customers perceive a benefit from the product. the core competences give a business a competitive advantage in a number of markets. If you focus on production techniques and skills then aren't you looking at your business from an internal point of view? The answer is yes. it is difficult for competitors to imitate Microsoft's core competences. Customers perceive many benefits in relation to Microsoft's products. there is an argument that core competences are indeed market-oriented. Hamel and Prahalad (1990) refer to a number of organizations and their products to support their concept including NEC. Provides potential access to a wide variety of markets. However. Should be difficult for competitors to imitate. Should make a significant contribution to the perceived customer benefits of the end product. There are at least three tests of a core competence. For a variety of reasons including unique skills. Three tests of core competence. Microsoft has expertise in many IT-based innovations and technologies.

g.g. business or SBU (Strategic Business Unit) rather than a single product or range of products. Dell would analyse the market for Business Computers i. Threshold competences and scarce resources may not provide access to a variety of markets.When trying to identify a core competence.e. In summary there are core competences and scarce resources. it is often easy to mistake them for scarce or unique resources i. Also often skills and production technologies do not amount to a core competence or resource because they do not comply with one or more of the three tests. a factory or offices . but tends to focus on the single. stand alone. In order to be competitive an organization needs material resources such as premises. the power of suppliers. Will competitors retaliate? 5|Page . The high or low cost of entry e. the benefits associated with bulk purchasing. They are the thresholds that the organization must achieve to remain competitive.e. Do our competitors have the distribution channels sewn up? Cost advantages not related to the size of the company e.g. This is depicted in the diagram above. resources rather than skills or production technologies. and competitive rivalry. Then an organization needs to achieve the right balance between Human Resources. Intangible resources. Material resources tend to be the most straightforward to achieve. training and recruitment. The threat of entry. For example. In fact they drive competitive advantage. may not be so significant to customers and may be less difficult to imitate.g. including core competences are the most difficult and challenging to achieve. the power of buyers. one of its SBUs. Five forces analsysis looks at five key areas namely the threat of entry. Five Forces Analysis IT helps the marketer to contrast a competitive environment. the threat of substitutes. and threshold competences and threshold resources.depending on the nature of business of course. It has similarities with other tools for environmental audit. Economies of scale e. This state is more difficult to achieve. personal contacts or knowledge that larger companies do not own or learning curve effects. such as PEST analysis. how much will it cost for the latest technology? Ease of access to distribution channels e.

The Champagne brand cannot be copied. by sales and so on. GAP ANALYSIS: Gap analysis is a very useful tool for helping marketing managers to decide upon marketing strategies and tactics. from one fleet supplier of trucks to another. and suppliers and buyers in the market attempt to control. Power is high where the brand is powerful e.g. The cost of switching between suppliers is low e.g. Where the switching costs are high e. The first step is to decide upon how you are going to judge the gap over time. Where there is generic substitution (competing for the currency in your pocket) e. If there are a large number of undifferentiated. For example. cigarettes. The upper line is where you want to be. The threat of substitutes Where there is product-for-product substitution e. The power of buyers. Brewers buying bars. better toothpaste reduces the need for dentists. Customers are fragmented (not in clusters) so that they have little bargaining power e. email for fax Where there is substitution of need e.g. There is a possibility of the supplier integrating forward e. Gas/Petrol stations in remote places. There's a straightforward structure to follow.g. Then you simply ask two questions where are we now? and where do we want to be? The difference between the two is the GAP . Switching from one software supplier to another. The power of suppliers. Microsoft. Competitive Rivalry This is most likely to be high where entry is likely.g.g.this is how you are going to get there.g. We could always do without e. The power of suppliers tends to be a reversal of the power of buyers. This is why it is always seen in the center of the diagram.g. The lower line is where you'll be if you do nothing. small suppliers e. Take a look at the diagram below.g.g.g. Again. will new laws be introduced that will weaken our competitive position? How important is differentiation? e. there is the threat of substitute products. This is high where there a few. What is Gap Analysis? 6|Page . This desensitises the influence of the environment.g.Government action e.g. This will help you to write SMART objectives. the large grocery chains. by profit. small farming businesses supplying the large grocery chains. large players in a market e. Cadillac. by market share. Pizza Hut. Video suppliers compete with travel companies. the simple tools are the most effective.

If you are writing strategy. 7|Page . The diagram below uses Ansoff's matrix to bridge the gap using strategies: Strategic Gap Analysis.Your next step is to close the gap. you will go on to write tactics see the lesson on marketing plans. Firstly decide whether you view from a strategic or an operational/tactical perspective.

You can close the gap by using tactical approaches. That is to say you change price. PEST Analysis 8|Page . So effectively. or promotion to move from where you are today (or in fact any or all of the elements of the marketing mix). Tactical Gap Analysis. The marketing mix is ideal for this. you modify the mix so that you get to where you want to be.and that's gap analysis. This is how you close the gap by deciding upon strategies and tactics .

g. and so on. etc.What are attitudes to foreign products and services? 3. Political Factors.What is the dominant religion? 2.Will government policy influence laws that regulate or tax your business? 3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita. or others? Economic Factors.What is the government's position on marketing ethics? 4. It is very important that such factors are considered. etc. wages and finance. Does the government have a view on culture and religion? 6.How much time do consumers have for leisure? 5. Sociocultural Factors. The micro-environment e. These are known as PEST factors. Interest rates. Marketers need to consider the state of a trading economy in the short and long-terms. The social and cultural influences on business vary from country to country. The organization's marketing environment is made up of: 1. 2. NAFTA. our competitors.How stable is the political environment? 2. The political arena has a huge influence upon the regulation of businesses. The macro-environment e.Does language impact upon the diffusion of products onto markets? 4. environmental analysis should be continuous and feed all aspects of planning. The internal environment e. 3. and Technological forces. our external customers. suppliers. agents and distributors. In fact. Is the government involved in trading agreements such as EU. Factors include: 1. ASEAN. 2.It is very important that an organization considers its environment before beginning the marketing process. office technology. and the spending power of consumers and other businesses. The level of inflation Employment level per capita.g. You must consider issues such as: 1.g. You need to look at: 1. Political (and legal) forces. What is the government's policy on the economy? 5. This is especially true when planning for international marketing. 3. Economic forces. Sociocultural forces.What are the roles of men and women within society? 9|Page . staff (or internal customers).

Porter in his book. The chain consists of a series of activities that create and build value. 10 | P a g e . Consider the following points: 1. new generation mobile telephones. They are stored until they are needed on the production/assembly line. etc? Value Chain Analysis The value chain is a systematic approach to examining the development of competitive advantage.g. etc? 3. and is a major driver of globalization. etc? 4. flight tickets. auctions. books via the Internet. Customer Relationship Management (CRM).Does technology offer companies a new way to communicate with consumers e.How is distribution changed by new technologies e. E.g. The 'margin' depicted in the diagram is the same as added value. Goods are moved around the organisation. banners. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2. The organisation is split into 'primary activities' and 'support activities. Technology is vital for competitive advantage. They culminate in the total value delivered by an organisation.Do the population have a strong/weak opinion on green issues? Technological Factors.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking. Competitive Advantage (1980). Inbound Logistics. It was created by M.How long are the population living? Are the older generations wealthy? 7.' Primary Activities.6. Here goods are received from a company's suppliers.

Service. or the final tune for a new car's engine. lean manufacturing.Operations. packing of books/videos/games by an online retailer. Firm Infrastructure. services and materials. and many other technological developments. This function is responsible for all purchasing of goods. retailers or the final consumer. Outbound Logistics. Human Resource Management (HRM). complaints handling. Customer Relationship Management (CRM). and rewards and remuneration. Balance scorecard 11 | P a g e . It includes the Management Information System (MIS). This is where goods are manufactured or assembled. This activity includes and is driven by corporate or strategic planning. and other mechanisms for planning and control such as the accounting department. In true customer orientated fashion. This could include production technology. training and so on. The mission and objectives of the organisation would be driving force behind the HRM strategy. Technology Development. Support Activities. The aim is to secure the lowest possible price for purchases of the highest possible quality. Technology is an important source of competitive advantage. Internet marketing activities. This includes all areas of service such as installation. training and development. Employees are an expensive and vital resource. after-sales service. An organisation would manage recruitment and selection. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. Procurement. and ePurchasing (using IT and web-based technologies to achieve procurement aims). This area focuses strongly upon marketing communications and the promotions mix. Marketing and Sales. The goods are now finished. and they need to be sent along the supply chain to wholesalers. Individual operations could include room service in an hotel. at this stage the organisation prepares the offering to meet the needs of targeted customers. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations).

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Black box model ENVIRONMENTAL FACTORS Marketing Stimuli Product Price Place Promotion Environmental Stimuli Economic Technical Political Cultural 13 | P a g e BUYER'S BLACK BOX Buyer Characteristics Decision Process Attitudes Motivation Perceptions Personality Lifestyle Problem recognition Information search Alternative evaluation Purchase decision Post-purchase behavior BUYER'S RESPONSE Product choice Brand choice Dealer choice Purchase timing Purchase amount .

DECLINING DEMAND: Consumers begin to buy the product less frequently or not at all. monthly. Wants when they are directed to specific objects that might satisfy the need. 14 | P a g e . UNWHOLESOME DEMAND: Consumers may be attracted to the products that have undesirable social consequences. donation from another party called prospect. Marketer: Someone who seeks response. a purchase. NONEXISTENT DEMAND: Consumers may be unaware or uninterested in the product. distributing and promoting the offering. vote. process and activities that recognize the breadth and interdependence of today’s marketing environment. It is an organizational fn and a set of processes for creating communicating and delivering value to customers and managing customer relationships in ways that benefit organization and its stakeholders. keeping and growing customers through creating. Marketing environment: The actors engaged in producing. delivering and communicating superior value. It is a societal process by which individuals and groups obtain what they need and want through creating and offering and freely exchanging process and services of value with others. NEGATIVE DEMAND: Consumers dislike the product and may even pay a price to avoid it. Real needs: Unstated needs: Delight needs: Secret needs Value proposition: The whole cluster of benefits the company promises to deliver. attention. Holistic Marketing: Development. Demands are wants for specific products backed by an ability to pay.Chapter 1. IRREGULAR DEMAND: Consumer purchases vary on a seasonal. LATENT DEMAND: Consumers may share a strong need that may not be satisfied by an existing product. weekly daily or even on hourly basis. Needs are basic human requirements.Defining marketing for 21st Century Marketing: It is about identifying and meeting human and social needs. FULL DEMAND: Consumers are adequately buying all the products put into the marketplace. OVERFULL DEMAND: More consumers would like to buy the product than can be satisfied. Marketing Management: It is the art and science of choosing target markets and getting. Stated needs: The customer wants an inexpensive car. design and implementation of marketing programs.

performance and innovative features. which would create advanced and high-level innovation.Quality. Customer Value triad: QSP. Production concept: Consumers will prefer products that are widely available and inexpensive. Proactive market orientation: When the focus is on customer’s latent needs. Competition: Includes all the actual and potential rival offerings and substitutes a buyer might consider. such as insurance and encyclopedias. Relationship marketing: aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. delivering and communicating superior customer value to your chosen target markets. It is used when the company has overcapacity. Reactive market orientation: Understanding and meeting customer’s expressed needs. It is with unsought gods. Marketing concept: the key to achieving organizational goals is being more effective than competitors in creating. if left alone won’t buy enough of organization’s products. Holistic Marketing 15 | P a g e . Selling concept: Consumers and businesses. Product concept: Consumers favor those products that are available with superior quality. goods that buyers do not think of buying.Value: reflects the sum of perceived tangible and intangible benefits and costs to customers. service and price. Satisfaction: reflects a person’s judgements of a product performance or outcome in relationship to expectations.

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Core competencies: Areas of special technical and production expertise. 4 Organizational levels: 1. delivering customer value. Define value segment or customers and their needs 2. stability. collaborator’s resource space.physical versus knowledge based capabilities. freedom and change. creating customer value. Value-defining process such as market research and company analysis 2. Central Role of Strategic Planning: Understanding customer value. Corporate Level Planning 17 | P a g e . Define the value network that will deliver the promised service OR 1. Strategic MP: Lays out the target markets and value proposition the firm will offer based on the analysis of the best market opportunities. technology development. Collaborator’s resource space: Includes horizontal partnerships with partners chosen for their ability to exploit market related opportunities. Marketing Plan (MP): Central instrument for directing and coordinating marketing effort. operations or converting them into final products.Chapter 2.Developing Marketing Strategies and Plans 3V’s approach to Marketing: 1. Value-developing process such as new-product development. Company’s competence space: In terms of breadth-broad versus focused scope of business and depth. Value exploration: Customer’s cognitive space. outbound logistics or shipping out final products. utilizing core competencies from its business domain and selecting and managing business partners with its collaborative networks. including product features. hrm. company’s competence space. Value-delivering process such as advertising and managing distribution Value Chain as per Michael Porter: Primary activities such as inbound logistics or bringing material into business. with partners who can serve the firm’s value creation. and vertical partnerships. Tactical MP: Specifies the marketing tactics. marketing them. which includes sales and service. sourcing strategy and vendor selection 3. merchandising. Customer’s cognitive space: reflects existing and latent needs and includes dimensions such as need for participation. Support activities include procurement. firm infrastructure. Value Creation: Includes identifying new customer benefits from customer’s view. sales channel and service. Define the value proposition 3. It operates at two levels: Strategic MP and Tactical MP. capturing customer value and sustaining customer value. pricing. promotion.

Defining Corporate mission 2. Assessing growth opportunities Business Unit Planning: 1. Goal Formulation 4.2. Division Level Planning 3.Efficient 18 | P a g e . compatible technology strategy.r. Business Mission 2. According to Porter. Strategic group: Firms pursuing same strategy directed to same target market. Product Level Planning Strategic Planning.t magnitude and time. Strategy Formulation 5. Establishing SBU’s 3. The business should have marketing strategy. Implementation & Control Process: Planning Corporate Division Business Unit Product Implementing Organizing Implementing Controlling Measuring results Diagnosing results Taking appropriate action Corporate & Division Planning: 1. Program Formulation 6. Porter’s Generic Strategies: Overall Cost Leadership. To do right thing – Effective To do things right . Goals indicate what a business unit wants to achieve. Implementation 7. Strategy Formulation: It is a game plan for achieving the goals. F/b & Control: Acc to Peter Drucker. Goal Formulation: Goals are objectives that are specific w. Focus: It has focus on one or more narrow market segments. Assigning resources to each SBU 4. Cost is usually lesser than their competitors. Differentiation: It is achieved in terms of performance. Business unit Level Planning 4. SWOT Analysis 3. Strategy is the creation of unique and valuable position involving a different set of activities. sourcing strategy. Differentiation & Focus. Overall Cost Leadership: Lower production & distribution cost. stress on company’s major policies and procedures. quality. and define major competitive spheres in which the company will operate. F/b & control Mission: Mission statements focus on limited number of goals.

Strategy. Microenvironment: Customers. Technological. Demographic environment: Marketers must be aware of population characteristics. Fag: Unpredictable. NCAER. intermediaries. equipment and procedures to gather. Demographics. RFM: Purchase Recency. Product Planning: Marketing Plan: A written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives. timely and accurate information to marketing decision makers. Frequency and Monetary value. 4P’s. Data warehousing and Data mining. economical and political changes that are slow to form and once in place.Indian). Marketing intelligence activities and Marketing research. Sales information system. Activity Based Cost (ABC): Determines whether each marketing program is likely to produce sufficient results to justify its cost. competitors. Readership Surveys (NRS . marketing whitebook. staff and shared values are software of success. Macroenvironment: Political. Acc to Mckinsey. Social.Partner relationship management: Ability to manage partnerships to keep the strategic alliance thriving. CMIE. Internal company records: Order to payment cycle. sort. they influence us for sometime b/n 5 to 7 yrs or longer. Economical. Target Market Financial Projections – Break-even analysis Implementation controls Chapter 3 Gathering Information & Scanning the environment Marketing Information System (MIS): Consists of people. Databases. literacy and education levels. economical and political significance. analyze and distribute needed. the age mix of population. short-lived and without social.National & IRS . skills. Executive Summary & Table of contents SWOT Analysis Marketing Strategy – Mission. Secondary data source: Statistical outline of India. Market Intelligence System (MIS): Set of procedures and sources managers use to obtain everyday information about developments in its marketing environment. suppliers. Trend: Direction or sequence of events that has momentum and durability. It relies on Internal company records. system and structure are hardware of success AND Style. 19 | P a g e . Megatrends: “Large” social. Carpet Bombing: Mailing of every new offer to every customer in its database.

(Green marketing programs) Technological environment: marketers should take into account the accelerating pace of technology. habits and behavior.Economic environment: marketers need to focus on income distribution. debt and credit availability. Political-Legal environment: Marketers must work within many regulating laws. varying R&D budgets. Natural environment: Marketers must be aware of the public’s increased concern about the health of the environment. business practices and with various special interest groups. languages. 20 | P a g e . level of savings. customs that shape the values and attitudes of consumer preferences. opportunities for innovation. Socio-cultural environment: Marketers must understand influence of religion. increased governmental regulation brought about by technological change.

Local marketing: Marketing programs tailored to the needs and wants of local customer groups in trading areas. the market has no natural segments. religion. Niche marketing: A narrowly defined customer group seeking a distinctive mix of benefits. gender. generation. mass distribution & mass promotion of one product for all buyers. nationality and social class. Homogenous preferences: When all consumers have roughly the same preference. Psychographic. Psychographic segmentation: Psychographics is the science of using psychology and demographics to better understand consumers. states. education. 21 | P a g e . customized marketing. Diffused preferences: Vary greatly in their preferences. family life cycle. family size. Flexible market offering: Consists of 2 parts . race. countries or cities. neighborhoods and individual stores. Demographic. Demographic segmentation: Division of markets on the basis of variables such as age. income. regions.Chapter 8 Identifying Market Segments & Targets Mass Marketing: The seller engages in mass production.Naked solution containing the product and service elements that all segment members value & Discretionary options that some segment members value. occupation. Market Segment: Consists of group of customers who share a similar set of needs and wants. Clustered preferences: When natural segments emerge from groups of consumers with shared preferences. one-to-one marketing Basis for segmenting Markets: Geographic. Geographic segmentation: Division of markets into different geographical units such as nations. Individual marketing: segment of one.

Makers: Practical. Survivors: Elderly. down-to-earth who like to work with their hands. goal-oriented people who focus on career and family. Innovators Thinkers Achievers Experiencers Successful. conventional and traditional people with concrete beliefs. sophisticated. satisfied and reflective people who are motivated by ideal and who value order. They spend comparatively high income on fashion. self-sufficient people.SRIC-BI VALS (Values & Lifestyle) framework. impulsive people who seek variety and excitement. enthusiastic and impulsive ppl The four groups with lower resources are: Believers: Conservative. They prefer familiar products and are loyal to established brands. (Psychographic study) Innovators Primary Motivation High Resources High innovation Ideals Achievement Self-expression Thinkers Achievers Experiencers Believers Strivers Makers Low Resources Low innovation Survivors Consumer Motivation (Horizontal dimension) & Consumer Resources (Vertical dimension) The four groups with higher resources are: Innovators: Successful. They favor products that emulate the purchases of those with great material wealth. sophisticated “take charge” people with high self-esteem. enthusiastic. take charge ppl Mature. knowledge and responsibility. Achievers: Successful. They are loyal to their favorite brands. Strivers: Trendy and fun-loving people who are resource constrained. satisfied and reflective ppl (ideals) Successful. goal-oriented ppl Young. functionality and value in products. niche-market oriented products & services. Experiencers: Young. They seek products with functional or practical purpose. entertainment and socializing. Purchases often reflect cultivated tastes for relatively upscale. They seek durability. passive people who are concerned about change. Thinkers: Mature. They favor premium products that demonstrate success to their peers. 22 | P a g e .

Threat of suppliers’ growing bargaining power Share of market: The competitor’s share of target market. 23 | P a g e . Create uncontested market space 2. Share of mind: “Name the first company that comes to your mind in this industry” Share of heart: “Name the company from which you would prefer to buy the product. Compete in existing market space 2. Threat of new entrants – most attractive segment has high entry & low exit barriers 3. Red ocean strategy: 1. Threat of intense segment rivalry – segment unattractive if it contains numerous strong & aggressive competitors 2.” Companies that make steady gains in mind share and heart share will inevitably make gains in market share and profitability. passive ppl concerned about change Chapter 9 Dealing with Competition Porter’s Five Forces Model (Five forces determining Segment Structural Attractiveness) 1. Make the competition irrelevant 3. Create and capture new demand 4. self-sufficient ppl Elderly. Align the whole system of company’s activities in pursuit of differentiation or low cost. Threat of buyers’ growing bargaining power – segment unattractive if buyers possess strong bargaining power 5. Break the value/cost trade off 5. Threat of substitute products – segment unattractive when there are actual/potential substitutes for product (placing limit on prices) 4. down-to-earth. Exploit existing demand 4. Beat the competition 3.Believers Strivers Makers Survivors Conservative. traditional and conventional ppl Trendy and fun-loving ppl with resource constrained Practical. Blue ocean strategy: 1. Make the value/cost trade off 5. Align the whole system of company’s activities with its strategic choice of differentiation or low cost.

The McKinsey 7S model can be applied to elements of a team or a project as well. Examine the likely effects of future changes within a company. regardless of how you decide to define the scope of the areas you study. some combine these perspectives. Some approaches look at internal factors. for example to help you: • • • • Improve the performance of a company. Align departments and processes during a merger or acquisition. The 7S model can be used in a wide variety of situations where an alignment perspective is useful. The alignment issues apply. Developed in the early 1980s by Tom Peters and Robert Waterman. the issue comes down to which factors to study. and there are many different answers. Determine how best to implement a proposed strategy. others look at external ones. While some models of organizational effectiveness go in and out of fashion.The McKinsey 7S Framework Ensuring that all parts of your organization work in harmony How do you go about analyzing how well your organization is positioned to achieve its intended objective? This is a question that has been asked for many years. one that has persisted is the McKinsey 7S framework. Ultimately. The Seven Elements The McKinsey 7S model involves seven interdependent factors which are categorized as either "hard" or "soft" elements: Hard Elements Soft Elements Strategy Shared Values Structure Skills Systems Style Staff Types of retailers 1. the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. two consultants working at the McKinsey & Company consulting firm. Specialty Stores 24 | P a g e . and others look for congruence between various aspects of the organization being studied.

appliances. 7 days a week & carrying a limited line of high-turnover convenience products at slightly higher prices with take-out sandwiches. which sell at prices lower than regular outlets & include sales of seconds etc. clothing etc. Supermarket Relatively large. Off price Retailer Factory outlets etc. low-cost. Assortment includes furniture. Full service wholesalers (stockist) 2. Catalog showroom  Broad selection of high-markup. but style/scope of operation is different. 3. self-service operation 4. Limited service wholesalers Both sell to retailers. Superstore About 35000 sq. soft drinks (7/11) 5. Concept originated in France (Carrefour).  Brokers & agents: Do not take title to goods & perform only a few functions. check cashing etc (e.g. Convenience Store Relatively small store located near residential area. There is bulk display & minimum handling by store personnel. high-volume.  Franchiser provides franchisees with a system for doing business. hypermarket)  Hypermarkets Range between 80000 & 220000 sq. coffee. 1. ft & combine supermarket. 25 | P a g e . ft of retailing space aimed at meeting consumer’s total need for routine items + services such as laundry.Narrow product lines with deep assortment (Body Shop) 2. discount & warehouse retailing. shoe repair. Brokers bring buyer & seller together & assist in negotiations. fast-moving. brand-name goods at discount prices. with discounts for customers willing to carry heavy items out of the store. Facilitate buying/selling for which they earn a commission on the transaction amount. 2 types are: 1. low-margin. 7. open long hours. You order through a catalog & then pick up the goods at a merchandise pickup area in the store  Best example : Burlington’s Franchising  Franchiser owns a trade or service mark & licenses it to franchisees in return for royalty payments.  Franchisee pays for the right to be part of the system. (real estate). with each line operated as a separate department. Do not carry inventory or get involved in financing etc. * Best example – Big Mac Major wholesaler types Merchant wholesalers: Independently owned businesses that take title to the merchandise they handle (distributors). Discount Store Standard merchandise sold at lower prices with lower margins & higher volumes (WalMart 6. Department Store Several product lines.

and the incumbant firms would lose those customers. the segments must respond differently to the different marketing mixes. 3. Substantial: the segments should be sufficiently large to justify the resources required to target them. Requirements of Market Segments In addition to having different needs. 26 | P a g e .2. If firms ignored the differing customer needs. But different customers have different needs. Market Segmentation Market segmentation is the identification of portions of the market that are different from one another. Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. purchasing in toto or on part/commission basis. another firm likely would enter the market with a product that serves a specific group. 4. The first step in target marketing is to identify different market segments and their needs. and mass communication. Mass marketing allows economies of scale to be realized through mass production. Compaq setting up own branch offices to sell direct to end-user/customer. Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them with the same offering. for segments to be practical they should be evaluated against the following criteria: • • • • Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified. Miscellaneous wholesalers: Agricultural wholesalers. Agents represent either buyer or seller on more permanent basis. The drawback of mass marketing is that customer needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. and it rarely is possible to satisfy all customers by treating them alike. auction companies etc. 5. Manufacturer/retailer branch/office: Wholesaling conducted by seller/buyer themselves & not through independent wholesalers. Formal agreement with producers for selling. Segmentation allows the firm to better satisfy the needs of its potential customers. Accessible: the segments must be reachable through communication and distribution channels. mass distribution. The Need for Market Segmentation The marketing concept calls for understanding customers and satisfying their needs better than the competition. Unique needs: to justify separate offerings.

etc. suburban. married with no children (DINKS: Double Income. that is. or solitary survivor. Some of these categories have several stages. full-nest I. or even neighborhood Size of metropolitan area: segmented according to size of population Population density: often classified as urban. • • • • Region: by continent. For example. family lifecycle often is expressed as bachelor. or rural Climate: according to weather patterns common to certain geographic regions Demographic Segmentation Some demographic segmentation variables include: • • • • • • • • • • • • Age Gender Family size Family lifecycle Generation: baby-boomers. • • • • Geographic Demographic Psychographic Behavioralistic Geographic Segmentation The following are some examples of geographic variables often used in segmentation. as similar as possible within the segment. Income Occupation Education Ethnicity Nationality Religion Social class Many of these variables have standard categories for their values. state. full-nest. Bases for Segmentation in Consumer Markets Consumer markets can be segmented on the following customer characteristics. 27 | P a g e . for example.• Durable: the segments should be relatively stable to minimize the cost of frequent changes. country. or III depending on the age of the children. No Kids). empty-nest. and as different as possible between segments. A good market segmentation will result in segment members that are internally homogenous and externally heterogeneous. Generation X. II.

They evaluate offerings in more detail. as well as resellers. Readiness to buy Occasions: holidays and events that stimulate purchases Behavioral segmentation has the advantage of using variables that are closely related to the product itself. interests. industrial customers tend to be fewer in number and purchase larger quantities. Industrial markets might be segmented on characteristics such as: • • • Location Company type Behavioral characteristics Location In industrial markets. Some behavioralistic variables include: • • • • • • Benefits sought Usage rate Brand loyalty User status: potential. 28 | P a g e . Many of the consumer market segmentation variables can be applied to industrial markets. regular.Psychographic Segmentation Psychographic segmentation groups customers according to their lifestyle. customer location may be important in some cases. Some psychographic variables include: • • • • • Activities Interests Opinions Attitudes Values Behavioralistic Segmentation Behavioral segmentation is based on actual customer behavior toward products. governments. Activities. These characteristics apply to organizations such as manufacturers and service providers. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio. and institutions. It is a fairly direct starting point for market segmentation. etc. and the decision process usually involves more than one person. Bases for Segmentation in Industrial Markets In contrast to consumers. first-time. and opinions (AIO) surveys are one tool for measuring lifestyle.

Purchase procedure: sealed bids. 29 | P a g e . In some industries firms tend to cluster together geographically and therefore may have similar needs within a region. Such behavioral characteristics may include: • • • Usage rate Buying status: potential. negotiations. patterns of purchase behavior can be a basis for segmentation. Company Type Business customers can be classified according to type as follows: • • • • Company size Industry Decision making unit Purchase Criteria Behavioral Characteristics In industrial markets. etc. etc. first-time.so distance from the vendor may be critical. regular.

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