ANSOFF’S MATRIX

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

markets where customers perceive a benefit from the product. Honda and Canon. 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. So if needs are being met better than the competition. Customers perceive many benefits in relation to Microsoft's products. Provides potential access to a wide variety of markets. 4|Page . 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. Microsoft has expertise in many IT-based innovations and technologies. For a variety of reasons including unique skills. For example. Hamel and Prahalad (1990) refer to a number of organizations and their products to support their concept including NEC. Such competences give an organization access to a wide variety of markets. Should be difficult for competitors to imitate. Should make a significant contribution to the perceived customer benefits of the end product. However. Three tests of core competence.loss of market share. 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. the core competences give a business a competitive advantage in a number of markets. it is difficult for competitors to imitate Microsoft's core competences. There are at least three tests of a core competence. there is an argument that core competences are indeed market-oriented.

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

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

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. The diagram below uses Ansoff's matrix to bridge the gap using strategies: Strategic Gap Analysis.Your next step is to close the gap. 7|Page . If you are writing strategy.

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

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

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

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

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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 .

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

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

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

The business should have marketing strategy. Assigning resources to each SBU 4. Goal Formulation 4. F/b & control Mission: Mission statements focus on limited number of goals. Business Mission 2. Goals indicate what a business unit wants to achieve. Implementation 7. Goal Formulation: Goals are objectives that are specific w. Porter’s Generic Strategies: Overall Cost Leadership. Assessing growth opportunities Business Unit Planning: 1.r. Strategy Formulation 5. Focus: It has focus on one or more narrow market segments. Differentiation: It is achieved in terms of performance. Defining Corporate mission 2. Division Level Planning 3. Strategy is the creation of unique and valuable position involving a different set of activities. According to Porter. and define major competitive spheres in which the company will operate.t magnitude and time. Strategy Formulation: It is a game plan for achieving the goals. stress on company’s major policies and procedures. Differentiation & Focus. To do right thing – Effective To do things right . SWOT Analysis 3.2. Overall Cost Leadership: Lower production & distribution cost. Product Level Planning Strategic Planning. Business unit Level Planning 4. Program Formulation 6. Cost is usually lesser than their competitors. Strategic group: Firms pursuing same strategy directed to same target market. compatible technology strategy.Efficient 18 | P a g e . Establishing SBU’s 3. quality. Implementation & Control Process: Planning Corporate Division Business Unit Product Implementing Organizing Implementing Controlling Measuring results Diagnosing results Taking appropriate action Corporate & Division Planning: 1. F/b & Control: Acc to Peter Drucker. sourcing strategy.

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

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

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

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

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

Specialty Stores 24 | P a g e . Examine the likely effects of future changes within a company. the issue comes down to which factors to study. Some approaches look at internal factors. regardless of how you decide to define the scope of the areas you study. two consultants working at the McKinsey & Company consulting firm. some combine these perspectives. The alignment issues apply. Developed in the early 1980s by Tom Peters and Robert Waterman. one that has persisted is the McKinsey 7S framework. The 7S model can be used in a wide variety of situations where an alignment perspective is useful. 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. for example to help you: • • • • Improve the performance of a company. While some models of organizational effectiveness go in and out of fashion. 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. others look at external ones. Align departments and processes during a merger or acquisition. and others look for congruence between various aspects of the organization being studied. and there are many different answers. The McKinsey 7S model can be applied to elements of a team or a project as well.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. Ultimately. Determine how best to implement a proposed strategy.

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

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

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

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

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. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region. first-time. regular. etc. etc.so distance from the vendor may be critical. negotiations. patterns of purchase behavior can be a basis for segmentation. Purchase procedure: sealed bids. 29 | P a g e . Such behavioral characteristics may include: • • • Usage rate Buying status: potential.