Chapter

Building competitive
advantage

McGraw-Hill/Irwin
Entrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Industry Analysis

 Provides sufficient knowledge of the environment that can affect

marketing strategy decision making.
 Begins with broadest-based assessment.
 Proceeds to local market analysis.
 Information can be gathered through:
 Secondary sources.
 Market research initiatives.

 Benefits:
 Entrepreneur can understand competitors’ strengths and weaknesses.
 Swort analysis
Competitor Analysis

 Document current strategies of primary competitors.

 Information can be utilized to formulate the market
positioning strategy.
 This analysis:
 Enlightens entrepreneurs.
 Provides a solid basis for marketing decision making.
Marketing Research
for the New Venture
 Defining the purpose or objectives
 Make a list of the information that will be needed to
prepare the marketing plan.
 Gathering data from secondary sources
 Trade magazines
 Newspaper articles
 Libraries

 Government agencies
 Internet
Marketing Research
for the New Venture )
 Gathering information from primary sources
 Data collection procedures: Observation, networking, interviewing,
focus groups, and experimentation.
 Data collection instrument: Questionnaire.

 Analyzing and interpreting the results

 Can be hand-tabulated or entered on a computer.
 Results should be evaluated and interpreted in response to the
research objectives
 Data can be cross-tabulated in order to provide more focused
results.
Understanding the Marketing Plan

 Marketing plan: written statement of marketing

objectives, strategies, and activities to be followed in
business plan.

 Designed to provide answers to three basic questions:

 Where have we been?
 Where do we want to go (in the short term)?
 How do we get there?
Characteristics of the Marketing Plan

 A marketing plan should:

 Provide a strategy.
 Be based on facts/assumptions.
 Describe an organization for implementation.
 Provide for short-term and long-term continuity.
 Be simple and short.
 Be flexible.
 Specify criteria for control.
The Marketing System

External
Environment
Economy
Culture
Technology
Demand
Legal considerations
Raw materials
Competition
Market- Marketing Purchase
Entrepreneur strategies decisions
planning
decisions directed to of
customers customers

Internal
environment
Financial resources
Suppliers
Goals and objectives
Management team
Factors Affecting the Marketing System

 Marketing system: interacting internal and external factors

that affect venture’s ability to provide goods and services
to meet customer needs.
 Internal variables that affect the marketing plan:
 Financial resources
 Management team
 Suppliers

 Company mission
The Marketing Mix

 Combination of product, price, promotion, and distribution

and other marketing activities needed to meet marketing
objectives.
Marketing Mix Variable Critical Decisions
Quality of components or materials, style, features, options,
Product brand name, packaging, sizes, service availability, and
warranties.
Quality image, list price, quantity, discounts, allowances for
Price quick payment, credit terms, and payment period.

Use of wholesalers and/or retailers, type of wholesalers or

Channels of distribution retailers, how many, length of channel, geographic coverage,
inventory, and transportation.

Media alternatives, message, media budget, role of personal

Promotion selling, sales promotion (displays, coupons, etc.), and media
interest in publicity.
Steps in Preparing the Marketing Plan

 Define the business situation.

 Define the target market: opportunities and threats.
 Consider strengths and weaknesses.
 Establish goals and objectives.
 Define marketing strategy and action programs.
Defining the Business Situation

 Situation analysis: describes past and present business

achievements of new venture.
 Information for a new venture:
 Describe how the product or service was developed.
 Why it was developed.
 Information after a new venture has started up:
 Present market conditions.
 Performance of the company’s goods and services.
 Future opportunities or prospects.
Defining the Target Market

 Target market: specific group of potential customers

toward which venture aims its marketing plan.
 Knowledge of this provides a basis for determining the
appropriate marketing action strategy.

 Market segmentation: process of dividing a market into

definable and measurable groups for purposes of targeting
marketing strategy.
 Allows the entrepreneur to more effectively respond to
the needs of more homogeneous consumers.
Process of Segmenting and Targeting (1 of 2)

 Decide on general market or industry to pursue.

 Divide market into smaller groups based on:
 Characteristics of the customer
Geographic

Demographic

Psychographic

 Buying situation
Desired benefits (e.g., product features)
Usage (e.g., rate of use)
Buying conditions
Awareness of buying intention
Process of Segmenting and Targeting (2 of 2)

 Select segment or segments to target.

 Developa marketing plan integrating

product, price, distribution, and promotion.
Establishing Goals and Objectives

 Establish realistic and specific goals and objectives.

 Marketing goals and objectives respond to the question:
“Where do we want to go?”.
 Not all goals are quantifiable.
 Number of goals or objectives can be limited to between
six and eight.
 Goals should represent key areas to ensure marketing
success.
Defining Marketing Strategy and Action
Programs (1 of 2)
 Specific activities outlined to meet the venture’s business plan goals and
objectives.

 Product or service
 May consider more than the physical characteristics.
 Packaging, brand name, price, warranty, image, service, delivery time, features,
style, and even the Web site.
 Pricing
 Costs
 Margins or markups
 Competition
Defining Marketing Strategy and Action
Programs (2 of 2)
 Distribution
 Provides utility to the consumer.
 Must also be consistent with other marketing mix variables.

 Promotion
 Entrepreneur needs to inform potential consumers about the product’s availability
or to educate the consumer
 Methods include: print, radio, or television, Internet, direct mail, trade magazines,
or newspapers.
Major Considerations in Channel Selection

 <<Insert Table 8.7>>

Marketing Strategy: Consumer versus
Business-to-Business Markets
 Business-to-business markets
 Selling of products or services to another business.
 Usually aims at selling a large volume in one transaction.
 Involves a more direct channel of distribution
 Use trade magazine advertising, direct sales, and trade shows.
 Consumer markets
 Involve sales to households for personal consumption.
 Marketing mix for both is the same.
 Techniques and strategies within the mix of these factors vary significantly.
Budgeting and Implementation

 Budgeting
 Costs are reasonably clear if the entrepreneur has followed the procedure of
detailing the strategy and action programs.
 If assumptions are necessary, they should be clearly stated.
 Useful in preparing the financial plan.
 Implementation
 The plan is meant to be a commitment by the entrepreneur to a specific strategy.
 Entrepreneur should ensure coordination and implementation of the plan.
Monitoring the Progress of
Marketing Actions (1 of 2)
 Involves tracking specific results of the marketing effort.
 Depends on specific goals and objectives outlined in the marketing plan.

 Entrepreneur should be prepared for contingencies.

 Minor adjustments in the plan occur normally.
 Significant changes indicate a poorly prepared plan.
Monitoring the Progress of
Marketing Actions (2 of 2)
 Weaknesses in market planning due to:

 Poor analysis of the market and competitive strategy.

 Unrealistic goals and objectives.
 Poor implementation of the outlined plan actions.
 Unforeseen hazards like weather or war.