Marketing Strategy

‡ Facilitator Anoop R Ohri (PGDM IIM Lucknow) ‡ Course Marketing Strategy ‡ External Evaluation 70 (End Term) ‡ Internal Evaluation 30
Quiz Case Analysis Class Participation

‡ Objective Industry Perspective

Defining Marketing
‡ Marketing ± The process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers in a dynamic environment ± The concept of value ± Need ‡ Customers ± The purchasers of organizations products; the focal point of all marketing activities

Value-Driven Marketing
‡ Value
± A customer s subjective assessment of benefits relative to the costs in determining the worth of a product
‡ Customer value = customer benefits customer costs

± Customer benefits
‡ Anything desired by the customer that is received in an exchange

± Customer costs
‡ Anything a customer gives up in an exchange for benefits
± Monetary price of the benefit ± Search costs (time and effort) to locate the product ± Risks associated with the exchange

Marketing Focuses on Customers
‡ Target Market
± A specific group of customers on whom an organization focuses its marketing efforts
‡ ‡ ‡ ‡ Large or small customer groups Single or multiple product markets Single or multiple products Local to global markets

Distribution. promotion. Promotion.Marketing Deals with Products. and Price ‡ The Marketing Mix ± Four marketing activities product. distribution. and pricing that a firm can control to meet the needs of customers within its target market Product Distribution Promotion Pricing Target Market .

BSNL. Railways? ‡ Selling vs. 37 (2007) ‡ What about MTNL. . Marketing Orientation (the inverted organisation pyramid) . ‡ Hindustan Motors. distribution.Marketing as it was in India.. Premier ± Since Independence ± Did they make cars for customers? ± 2 vs. ‡ The Nirma story ± No advertising initially ± Price sensitivity.

toilets and seating Online Ticketing Loyalty program Price? The China perception Innovation 2nd largest home appliance brand Study of lifestyles and usage ‡ Haier & Lenovo .Some companies in India today.. ‡ The PVR Story ± ± ± ± ± ± ± ± Refreshments.

service standards. product quality. utensils. price.innovation (last mile < 1 ton) ± ± ± ± ± Small vehicle Low cost & maintenance Driver safety Social status 4 wheeler Service garages ‡ HUL .understanding customer ‡ Tata Ace . veg meals.‡ The Nokia range .distribution experts ‡ ICICI technology adoption ‡ Mc Donalds . .Indian sensitivities (beef. delivery).

‡ And Pizza Hut ± Entered India in 1996 ± Product Indianization ± 100% veg restaurant Gujarat. not price ± Singing and dance.. eggless salad dressings ± Quality standards & affordability value.experience ± Customer Maniac concept . Jain menu Mumbai.

women power Aspirational poor .. 97% women. Yunus) ± 5 member groups.Grameen Bank (Md. Barista The entry of global brands mass to luxury Competition = innovation.age. price reduction The growing purchasing power Demographics.Major changes in India ‡ ‡ ‡ ‡ ‡ ‡ ‡ Deregulation The focus on experience PVR. 2% NPA ‡ Growing middle class (EMI) .

videos. styles. games. Taj. job search. CNG. hotels.Tata. Infosys. Lokpal ± Chat. upload art.. Ranbaxy. music. blogs. yoga ‡ Indian global brands. LN Mittal.‡ Retail story ‡ Information & Awareness ‡ Communities Gang of Girls (2006). buildings ‡ Technology disintermediation . tips. Bharat Forge ‡ Green products refrigerators.

What is Strategy? .

‡ Have you heard of the strategic time-out in IPL?

³In terms of the three key players (competitors, customers, company) strategy is defined as the way in which a corporation endeavors to differentiate itself positively from its competitors, using its relative corporate strengths to better satisfy customer needs.´ -Kenichi Ohmae ³The Mind of the Strategist´

³Strategy is a framework which guides those choices that determine the nature and direction of an organization.´ -Benjamin B. Tregoe & John W. Zimmerman ³Top Management Strategy´

³Strategy is the creation of a unique and valuable position, involving a different set of activities.´ -Michael Porter ³What is Strategy?´ Harvard Business Review

³Four dimensions define a business strategy: the productmarket investment strategy, the customer value proposition, assets and competencies, and functional strategies and programs. The first specifies where to compete, and the remaining three indicate how to compete to win.´ -David Aaker ³Strategic Market Management´

± To achieve objective ± Using own resources ± Better than competitors ± Given environment factors .‡ Strategy ± A plan.

Components of Strategic Marketing .

The Marketing Environment .

‡ What all constitutes the marketing environment? .

Economic Forces ‡ Business Cycle ± A pattern of economic fluctuations Positive Economic Indicators Prosperity Recession Recovery Depression Time .

wages and total disposable income are very low. and there is a lack of consumer confidence Economy is moving out of recession or depression towards prosperity Depression Recovery . consumer and business spending decline Unemployment extremely high.Economic Forces (cont d) Stages in the Business Cycle Prosperity Recession Low unemployment and high total income create high buying power Rising unemployment reduces total buying power.

. durables (19992009). clothes. more spending on eating out.Income ‡ Spending More ‡ Need more exclusivity ‡ Decreased savings. personal care.

automobiles. education.Age ‡ Impacts product categories purchased ‡ Entertainment. ‡ Airtel prepaid @ 5 ‡ Levis Sykes ‡ Titan Fastrack ‡ Scooty Pep ‡ MTV & V Hinglish ‡ Do the Dew . Mobiles. baby products. fast food.

‡ Also a sizable absolute no. of greying population ± Leisure class ± Health and insurance products ± Pharma ± Travel industry .

2G ± Governments are potentially large customers ± Political officials can assist in securing foreign markets ± Taxes .Political Forces ‡ Reasons for Maintaining Relations with Elected Officials and Politicians ± To influence the creation of laws and regulations affecting industries and specific businesses .

Legal and Regulatory Forces ‡ Procompetitive Legislation (Antitrust Laws. MRTP) v Protectionism ± Preserve competition ± Prevent restraint of trade and monopolizing of markets ± Prevent illegal competitive trade practices .

Such payments to PC makers. Otellini. I am tired of losing business.D. This was judged by your team to be more than sufficient to compensate for the competitive issues. Intel. Cuomo s lawsuit. Dell s namesake company was getting pounded.D. Dell that Intel had paid Dell more than $1 billion in the last year.D. he wrote. while Mr. Dell threatened to switch to A. a much smaller chip maker. popular and powerful chips from Advanced Micro Devices. along with other aggressive business tactics. According to Mr. Dell wrote. Otellini said in a later e-mail message to a colleague that Dell was the best friend money can buy. Mr.In 2005.M. Andrew M. We are losing the hearts. Paul S. Otellini reminded Mr. Dell had stuck loyally with slower chips from Intel.M. has for years used large rebates and co-marketing arrangements to talk Dell and other manufacturers into sticking with its products rather than increasing their businesswith A.M. His competitors were selling personal computers and servers built on cheap. In an e-mail note to Intel s chief executive. minds and wallets of our best customers. Mr. the world s largest chip maker. Mr.. Cuomo s case the first antitrust charges against the company in the United States in more than a decade follows similar actions by regulators in Europe and Asia. are at the heart of the antirust lawsuit filed against Intel on Wednesday by New York s attorney general. Cuomo. and Mr. . Michael S. Dell delayed buying A. Mr. chips.

the cases against it have picked up steam in recent years because of developments in the chip industry.M.M. s products in performance.. based in Santa Clara.. The company has spent the last five years defending itself against antitrust allegations. which the company is appealing.45 billion fine for antitrust violations. A. is no stranger to antitrust controversy. It took Intel about four years to come up with chips that matched or surpassed A. Intel s longtime nemesis. In 2003. in Federal District Court in Delaware and a continuing investigation by the Federal Trade Commission. .D.D. While A.Intel.D. Although Intel has faced various antitrust claims for two decades. did well both in sales and market share gains during that period. The chips were good enough to lift A.M. from the PC market into the higher-profit server computer market for the first time and begin selling to Hewlett-Packard. first in Asia and then in Europe.M.D.B. Calif. I.M. Intel also faces a four-year-old antitrust lawsuit filed by A. the company s top executives have long argued that it could have sold far more products had Intel not used strong-arm tactics to blunt its advantage.M. and Sun Microsystems. In May. began selling a new line of chips widely regarded as superior in design and performance to Intel s products.D. the European Commission hit Intel with a record $1.

making them reluctant to make a meaningful shift to A..D.M. Over all.M. In addition. or Dell.D.The major complaints surrounding Intel concern its use of rebates and marketing dollars to keep customers.D.M.-based computers from a company like H. the lawsuit contends that if businesses were close to buying A. the lawsuit said. The New York suit argues that Intel executives threatened to take away such incentives from customers if they did more business with A.P. Intel would jump in to help the computer makers sell Intel-based machines at a large discount. . the hardware makers often became dependent on Intel s incentives to keep their computer businesses profitable.

Legal and Regulatory Forces (cont d) ‡ Consumer Protection Legislation ± Adulterated and mislabeled food and drugs Green Dot.. MRP ± Deceptive trade practices and the sale of hazardous products .Cigarettes ± The invasion of personal privacy and the misuse of personal information by firms DND .

‡ Parle suffering? ± Maharashtra FDA ± Pineapple and orange cream biscuits ± Ambiguous laws .

"We have set up a committee specifically to examine claims made by Hindustan Unilever and see how scientific they are. The company says that each serving of Amaze provides the right type of brain nutrients. Karnataka and Andhra Pradesh. Amaze is being test-marketed in Tamil Nadu. . We believe that we have satisfied the government authorities as we have answered all the queries raised"." Food Safety and Standards Authority chairman PI Suvrathan told TOI. in the right combination. The multinational's claims are being investigated by a committee set up by the Food Safety and Standards Authority to study whether the company violated certain regulatory provisions relating to misleading or deceptive food claims. adding "after which we will have a detailed procedure in place on misleading advertisements on food and beverages". giving children 33% of their required nutrients for mental development. The company has submitted data which the committee will examine and give its report by December. Hindustan Unilever launched Kissan Amaze in February last year a specifically designed brainfood for school going children. When contacted a HUL spokesperson said: "We had received a communication from government about two months back and in response to that we had submitted to the government all the research work and all technical inputs to satisfy the concerned authorities that our claim is fully justified. global consumer goods giant Hindustan Unilever is under government lens for making tall claims on its malted beverage Kissan Amaze' by declaring that it gives 33% key brain nutrients required by children daily.In a first-ever instance.

former deputy director general Indian Council of Medical Research. will look into such claims relating to brain development to establish whether these are supported by scientific evidence. Several food and consumer goods companies are airing advertisements or printing labels that promise health. wellness with a whole lot of nutrients. and whether such claims can be allowed without advertisements. The committee will also study whether these claims have an adverse impact or discourage healthy eating habits of children. and which may exploit consumers' lack of experience or knowledge. There should be no false or misleading representation concerning the usefulness of food in advertisements and food labels. Committee will make recommendations regarding supporting evidence required for food claims. The company's product may also be tested by scientists and experts. HUL and many such companies will now be investigated under Food Safety and Standards Act which says that advertising and communication in food and beverages sector should not be misleading or deceptive. Most consumers are misguided and confused by such claims and have no ways of knowing whether these are actually true.‡ The five-member committee headed by Vasantha Muthuswamy. .

Consumer Protection Act ‡ 1986 ‡ 6 rights ± Safety ± Information ± Choice ± Representation ± Redressal ± Education .

Technological Forces ‡ Technology ± The application of knowledge and tools to solve problems and perform tasks more efficiently ‡ Impact of Technology ± Dynamic means constant change ± Reach refers to how technology quickly moves through society ± The self-sustaining nature of technology as the catalyst for even faster development .

.. such as the effect of the credit card and Internet shopping on the retailing industry . Papa Jones Pizza ‡ Alters or virtually destroys existing industries. such as multimedia. such as the effect of e-mail on regular mail and even fax.Impact of Technological Change ‡ Launches entirely new industries.Archies ‡ Stimulates other markets and industries.mobile banking. digital communications and electronic commerce .

beliefs. norms. and lifestyles ‡ Demographic Diversity and Characteristics ± Increasing proportion of younger consumers ± Rising number of single adults ± Increasingly multicultural society .Sociocultural Forces ‡ Sociocultural Forces ± The influences in a society and its culture(s) that change people s attitudes. customs.

Social and Cultural Environment ‡ Not all cultural facets explicit ‡ Natural tendency towards ethnocentricity ‡ Understanding Culture Value Competitive Advantage .

‡ Role of women in Middle East v Sweden (& Kerela) ‡ Tea is British. Coffee American habit ‡ Whirlpool tough stains in India ‡ Thanda matlab ‡ Whirlpool .usage in Punjab ‡ Cadbury Temptation Kashmir ad ‡ Haigan Daez ‡ IKEA .

‡ Natural Environment Natural Disasters. Social Concerns .

Natural Environment ‡ ‡ ‡ ‡ ‡ ‡ Shortage of raw materials Increased energy costs Anti-pollution pressures Governmental protections Mr. J Ramesh Coke in Kerala Euro II norms .

‡ ‡ ‡ ‡ Japan El-Nino SARS chicken @ 10 Toyota ± Greenest global brand ± Prius ± Gas and electric engines .

‡ And the Reva ± ± ± ± ± ± ± ± ± ± Electric car (2001) 80-20 JV 10 patents 90% indigenous ingredients Thomas Elva Edison award in 2003 for innovation in technology European Economic Community certificate Homologation Export to 17 countries Priced at $ 5500 Cheap to drive (50 p/km) Low maintenance .

Implementing. and Controlling Marketing Strategies .Planning.

and a marketing plan . corporate strategy. marketing strategy. marketing objectives.Understanding the Strategic Planning Process ‡ Strategic Planning ± The process of establishing an organizational mission and formulating goals.

a division of Thomson Learning. Second Edition. Ferrell. Reproduced with permission of South-Western. Copyright © 2002. and George Lucas. C. . Michael Hartline. by O. Jr.Components of Strategic Planning Source: Figure adapted from Marketing Strategy.

Marketing Strategy and Marketing Plan ‡ Marketing Strategy ± A plan of action for identifying and analyzing a target market and developing a marketing mix to meet the needs of that market ‡ Marketing Plan ± A written document that specifies the activities to be performed to implement and control an organization s marketing activities .

which sometimes give it an advantage over its competition ‡ Financial and human resources ‡ Reputation. and brand names . goodwill.Assessing Organizational Resources and Opportunities ‡ Core Competencies ± Things a firm does extremely well (strengths).

Assessing Organizational Resources and Opportunities (cont d) ‡ Market Opportunity ± A combination of circumstances and timing that permits an organization to reach a target market ‡ Core competencies are matched to opportunities ‡ Strategic windows temporary periods of optimal fit between the key requirements of a market and the particular capabilities of a firm .

Assessing Organizational Resources and Opportunities (cont d) ‡ Competitive Advantage ± The result of a company s matching a core competency (superior skill or resources) to opportunities in the marketplace ‡ Manufacturing skills ‡ Technical skills ‡ Marketing skills .

SWOT Analysis ‡ An assessment of the organization s strengths. weaknesses. opportunities. and threats ± ± ± ± Strengths competitive advantages or core competencies Weaknesses limitations on competitive capability Opportunities favorable conditions in the environment Threats conditions or barriers to reaching objectives .

p. Piercy. 371. Copyright © 1992. with permission from Elsevier Science. .The Four-Cell SWOT Matrix Source: Reproduced from Nigel F. Market-Led Strategic Change.

Establishing an Organizational Mission and Goals ‡ Mission Statement ± Mission statement answers two questions: ‡ Who are our customers? ‡ What is our core competency? .

Mission v Vision? ‡ Mission explains organization s reason for existence (what business are we in) ‡ Vision statement looks at what the organization wants to become .

aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company . It operates world-wide as the flag carrier of the Republic of Singapore.Examples of Corporate Mission SINGAPORE AIRLINES is engaged in air transportation and related businesses.

by treating employees in ways that create extraordinary customer service and shareholder value .Examples of Corporate Mission (cont d) MARRIOTT S Mission Statement: We are committed to being the best lodging and food service company in the world.

Wal-Mart .

.Vision Statement To become the worldwide leader in retailing.

We are dedicated in recruiting. electronics. We will continue to offer scholarships to deserving high-school graduates (8) in hopes of providing students with a well-deserved education. groceries. and children s apparel. The Wal-Mart team is devoted to everything that Wal-Mart has accomplished as a universal competitor (3). men s. . rewarding.Mission Statement Our first responsibility is to provide all consumers (1) the best products and services with guaranteed satisfaction under one roof. but also with the concept of one-stop shopping. jewelry. and providing equal opportunity for all individuals (7). ladies . providing clean environments to work in. We will continue to offer the highest quality products at the lowest price (6) to strive to be the best in the retail industry (5). Consumers have been conveniently provided not only with the use of online shopping (4) to show without ever leaving home. Wal-Mart provides a wide array of products like toys. and hard goods (2) at reasonable prices. and retaining employees of good moral standing (9) providing benefits for excellent performance.

Dell Computer Corporation .

. Whatever changes the future may bring our vision Dell Vision will be our guiding force.Vision Statement It's the way we do business. It's the way we interact with the community. and the global business climate. It's the way we interpret the world around us our customers' needs the future of technology.

Dell employs only the best employees (9) to meet customer expectations of: y y y y y y y y Highest quality Leading technology (4) Competitive pricing Individual and company accountability (6) Best-in-class service and support (7) Flexible customization capability Superior corporate citizenship (8) Financial stability (5) .Mission Statement Dell's mission is to be the most successful computer company (2) in the world (3) by servicing individuals and businesses (1).

Levels of Market Strategic Planning .

Corporate Strategy ‡ A strategy that determines the means for utilizing resources in the various functional areas to reach the organization s goals ± Determines the scope of the business ± Guides its resource deployment ± Identifies its competitive advantages ± Provides overall coordination of functional areas .

Corporate Strategy (cont d) ‡ Issues Influencing Corporate Strategy Development ± Corporate culture ± Competition ± Differentiation ± Diversification ± Interrelationships among business units ± Environment concerns and social issues .

product line.Business-Unit Strategy ‡ Strategic Business Unit (SBU) ± A division. or other profit center within a parent company .

Business-Unit Strategy (cont d) ‡ Market-Growth/Market-Share Matrix ± A strategic planning tool based on the philosophy that a product s market growth rate and market share are important in determining marketing strategy ± Factors determining SBU/product s position within a matrix ‡ Product-market growth rate ‡ Relative market share .

© 1970.Growth-Share Matrix Developed by the Boston Consulting Group Source: ³The BCG Portfolio Matrix´ from the Product Portfolio Matrix. Reproduced by permission. The Boston Consulting Group. .

dominant market share ± generates surplus resources for allocation to other SBUs ‡ Dog low/declining market.Business-Unit Strategy (cont d) ‡ Market-Growth/Market-Share Matrix (cont d) ± BCG Classification ‡ Star high growth market. low market share ± represents a high-risk/cost opportunity requiring a large commitment of resources to build market share . subordinate market share ± has diminished prospects and represents a drain on the portfolio ‡ Question mark high growth market. dominant market share ± requires additional resources for continued growth ‡ Cash cow low growth.

Characteristics of Strategic Marketing ‡ Emphasis on long term ‡ Varying roles of different products/markets (PLC) ‡ SBUs ‡ Closeness to finance ‡ Focus on sustainable advantage .

Strategic Marketing Process Process whereby an organization allocates it marketing mix resources to reach its target markets. Planning Implementation Evaluation .

7. 6. 3. 5. 4. Where are we Situation Analysis (SWOT) Objective The Plan (BCG Matrix) How? Target market .1. 2.(Ansoff Matrix) STP Ps Implementation Evaluation & Control .

distribution. pricing. ‡ recognizing changes occurring in the market. ‡ Creating the Marketing Mix ‡ Analyze customer needs. and promotion ‡ Maintain strategic consistency and flexibility in marketing mix decisions . and behavior ‡ Have the skills and resources required for product design.Marketing Strategy ‡ Target Market Selection ± Defining/understanding the target market by ‡ focusing on specific profitable customer groups/market segments. preferences.

SETTING STRATEGIC DIRECTIONS ‡ A Look Around: Where Are We Now?  Identify your Customers  Competencies-identify what you do best ‡ Competitive Advantage-your unique strength  Competitors-identify the biggest threats .

Planning Phase Situation Analysis ‡ This is a complete analysis of the firm s situation which assesses internal strengths and weaknesses and external threats and opportunities (SWOT) ‡ Internal analysis (controllable factors) assess the firm itself to identify strengths and weaknesses ‡ External analysis (uncontrollable factors) assess the firm s external environment to identify opportunities and threats .

‡ Possible Strengths: ± Name recognition ± Proprietary technology ± Cost advantages ± Skilled employees ± Loyal Customers .Strengths ‡ A STRENGTH is something a company is good at doing or a characteristic that gives it an important capability.

Weaknesses ‡ A WEAKNESS is something a company lacks or does poorly (in comparison to others) or a condition that places it at a disadvantage ‡ Possible Weaknesses: ± Poor market image ± Obsolete facilities ± Internal operating problems ± Poor marketing skills .

you can identify gaps in performance. ‡ By examining weaknesses. vulnerabilities. you can discover untapped potential or identify distinct competencies that helped you succeed in the past. . and erroneous assumptions about existing strategies.Strengths and Weakness form a basis for INTERNAL analysis ‡ By examining strengths.

Opportunities ‡ An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment. ‡ Possible Opportunities: ± Emerging customer needs ± Quality Improvements ± Expanding global markets ± Vertical Integration .

‡ Possible Threats: ± New entry by competitors ± Changing demographics/shifting demand ± Emergence of cheaper technologies ± Regulatory requirements .Threats ‡ A THREAT is a factor in your company s external environment that poses a danger to its well-being.

you can discover untapped markets. . and create a defensive posture aimed at preserving your competitive position. or identify potential avenues for diversification. you can identify unfavorable market shifts or changes in technology. ‡ By examining threats.Opportunities and Threats form a basis for EXTERNAL analysis ‡ By examining opportunities. and new products or technologies.

SWOT Analysis GOOD NOW Maintain & build BAD NOW Remedy or stop GOOD FUTURE Prioritize & optimize BAD FUTURE Intercept and counter .

‡ Do a SWOT on ± Vodafone India ± Kingfisher Airlines ± Apple India ± Pepsi India .

SETTING STRATEGIC DIRECTIONS ‡ Growth Strategies: Where Do We Want to Go?  Business Portfolio Analysis (BCG Matrix) ‡ Market Growth Rate-vertical axis ‡ Relative Market Share-horizontal axis .

The Boston Box .

as market growth starts to trail off.a market leader in a growth market.holds a weak market share in a low growth market. Question mark . Star .high market growth with low share.Boston Box Dog . . stars can become cash cows. Cash cow .

The Boston Matrix ‡ Implications: COST ‡ Dogs: Are they worth persevering with? How much are they costing? Could they be revived in some way? How much would it cost to continue to support such products? ± How much would it cost to remove from the market? ± ± ± ± .

The Boston Matrix ‡ Implications: COST BENEFIT ‡ Problem Children: ± What are the chances of these products securing a hold in the market? ± How much will it cost to promote them to a stronger position? ± Is it worth it? .

The Boston Matrix ‡ Implications: PLC ‡ Stars: ± Huge potential ± May have been expensive to develop ± Worth spending money to promote ± Consider the extent of their product life cycle in decision making .

The Boston Matrix ‡ Implications: CATEGORY? ‡ Cash Cows: ± Cheap to promote ± Generate large amounts of cash use for further R&D? ± Costs of developing and promoting have largely gone ± Need to monitor their performance the long term? ± At the maturity stage of the PLC? .

.. ± Maruti Suzuki ± ITC ± Bajaj Motorcycles ± Nokia .‡ How about the BCG for .

GE matrix .

.

SETTING STRATEGIC DIRECTIONS ‡ Growth Strategies: How Do We Get There?  Market-Product Analysis ± Ansoff Matrix ‡ Market Penetration.same product. new market ‡ Product Development-new product. same market ‡ Diversification new product.same product. new market . same market ‡ Market Development.

Four market-product strategies: alternative ways to expand sales revenues for Ben & Jerry¶s .

Alternative Growth Strategies Present Products I. product refinement Expand the product line Develop a new generation product Develop new products for same market III.1 . Growth in existing product markets Present Markets Increase market share Increase product usage Increase the frequency used Increase the quantity used Find new applications for current users New Products II. Vertical Integration Strategies Vertical Integration Forward integration Backward integration Figure 13. Product Development Add product features. Market Development New Markets Expand geographically Target new segments V. Diversification involving new products and new markets Related Unrelated IV.

g.g..g. shampoo. low fat sugar.Growth in Existing Product Markets ‡ Increasing Market Share ± Deliver solid value to create customer satisfaction and loyalty ‡ Increasing Product Usage (less threatening to competitors) ± Provide Reminder Communications e.. microwaveable containers. toothpaste ± Make the Use Easier . Value Meals ± Reduce Undesirable Consequences of Frequent Use e.g. sodium foods ‡ Revitalize the Brand ‡ New Applications for Existing Product Users .. 3 glasses of milk per day.. reminder e-mails ± Position for Regular or Frequent Use e. Frequency Programs..g. prepared foods ± Provide Incentives e.e.

2. and service for existing offering. .Product Development for the Existing Market ‡ ‡ Line Extensions Developing New-Generation Products ± Incumbent s Curse 1. Even if new technology is successful may be making investment just to maintain same level of sales and profits Need to improve costs. quality. which leaves little time to explore new technologies.

g.Market Development Using Existing Products ‡ Expanding Geographically ‡ Expanding into New Market Segments ± ± ± ± Usage e.g. intensify distribution Age e.... nonusers Distribution Channel e.g. J&J Baby Shampoo Application-defined market chewing gum ‡ Evaluating Market Expansion Alternatives ± Is the market attractive? ± Do the resources and will exist to make the necessary commitment in the face of uncertainties? ± Can the business be adapted to the new market? ± Can the assets and competencies that are at the heart of the business success be transferred into the new business environment? .

Diversification ‡ The strategy of entering product markets different from those the firm is currently engaged. ‡ Related Diversification new business shares meaningful commonalities with the core business. Involves exporting or exchanging assets and competencies ‡ Unrelated Diversification lacks shared commonalities. . Financially motivated: to generate larger. less uncertain or more stable profit streams.

Related Diversification Can Involve Sharing of: ‡ ‡ ‡ ‡ ‡ ‡ ‡ Customers Sales Force or Channel of Distribution Brand Name and its Image Facilities R&D Staff and Operating Systems Marketing and Marketing Research .

and Excess Capacity Identify Business Plans that will Leverage Assets and Competencies Implement the Business Plans Figure 14.Leveraging Assets and Competencies Three Steps to Take In Evaluating Related Diversification Assess Assets.1 . Competencies.

Sony.. Does the brand add value to the offering in the new product class? 1. Does the brand fit the new product context? 1. Virgin 1.g. IBM. Will the extension enhance the brand name and image? .Related Diversification Exporting or Exchanging Assets and Competencies Brand Name e. Disney.

e..g. but implementation barriers make it unattainable . Daimler-Benz & Chrysler .The Mirage of Synergy ‡ Potential synergy exists.

Unrelated Diversification ‡ Entering Business Areas with High ROI Prospects ‡ Obtaining a Bargain Price for a Business ‡ The Potential to Refocus a Firm ‡ Reducing Risk ‡ Tax Implications .

‡ Performance of Diversified Firms ± McKinsey Study from 1990 to 2009 shareholder returns (n = 412 of Fortune 500) ‡ Focused ‡ Moderately Diversified ‡ Diversified 8% 13% 4% . ± Managing the new business may be difficult. ± The new business may be over valued.Unrelated Diversification ‡ Risks of Unrelated Diversification ± Attention may be diverted from the core business.

Vertical Integration Strategies ‡ Access to Supply or Demand ‡ Entry into a Profitable Business Area .

.Risks ‡ Risks of Managing a Different Business e.g. exclusive dealing agreements. . strategic alliances. long-term contracts.. joint ventures.Vertical Integration Strategies . Pizza Hut ‡ Reduction in Strategic Flexibility raises exit barriers ‡ Alternatives to Integration e.g. Pepsico with KFC. Taco Bell. etc.

Planning Phase Marketing Objectives ‡ Specific levels of performance desired for a product or product line to be achieved by a given date. sales. profit ‡ Should be measureable. specific. attainable. ‡ Stated in terms of market share. and consistent with organizational objectives .

‡ Market segmentation is used to identify target markets. ‡ Why focus on the needs of a subgroup of a market rather than the entire market? .Planning Phase Target Market ‡ One or more specific groups of potential consumers toward which an organization directs its marketing program.

Planning Phase: Product Positioning ‡ The process where marketers try to create a product image or identity in the minds of their target market relative to competitive products. .

Planning Phase: Marketing Mix Program
‡ Product good, service, or idea to satisfy the consumer s needs. ‡ Price what is exchanged for the product. ‡ Promotion means of communication between the seller and buyer. ‡ Place means of getting the product to the consumer ‡ Marketing mix decisions are based on the needs of the target market and the positioning strategy.

Implementation Phase
‡ Process of putting the marketing plan into action. ‡ Involves great attention to detail

Implementing Marketing Strategies
‡ Marketing Implementation
± The process of putting marketing strategies into action

‡ Intended Strategy
± The strategy that the company decides on during the planning phase

‡ Realized Strategy
± The strategy that actually takes place

Intended Strategy

Implementation

Realized Strategy

Organizing Marketing Activities
‡ Centralized Organization
± A structure in which top management delegates little authority to levels below it

‡ Decentralized Organization
± A structure in which decision-making authority is delegated as far down the chain of command as possible

Evaluation
‡ Involves measuring the results of the actions from the implementation phase and comparing them with goals set in the planning phase. sales analysis market share analysis expense to sales analysis profit analysis

The Marketing Control Process .

Controlling Marketing Activities ‡ Marketing Control Process ± Establishing performance standards and trying to match actual performance to those standards ‡ Establishing Performance Standards ± Expected levels of performance ‡ Taking Corrective Action ± Improve actual performance ± Reduce or change the performance standards ± Do both .

Controlling Marketing Activities (cont d) ‡ Problems in Controlling Marketing Activities ± Lack of the information required to control activities ± Uncontrollable influence of market environment changes on marketing activities ± Time lag that occurs between marketing campaigns and their results delays corrective actions .

Market/Submarket Analysis .

To Invest or Not to Invest? ‡ Market (submarket) attractiveness to current or potential participants is the market s profit potential as measured by the long-term ROI. ‡ Firm s strengths and weaknesses compared to those of the competitor? .

Questions to Help Structure a Market Analysis ‡ Size and Growth What are the important and potentially important submarkets? What are their size and growth characteristics? What submarkets are declining or will soon decline? How fast? What are the driving forces behind the trends? ± Actual and potential market and submarket size ‡ Total Sales Level? ‡ Is There a Niche to Fill? .

) ± Identify Driving Forces Behind Market Dynamics to Predict Market Sales ± Forecasting Growth ‡ Use Historical Data Cautiously ± Demographics ± Sales of Related Equipment ± Experience of Analogous Industries .Questions to Help Structure a Market Analysis ‡ Size and Growth (cont.

Questions to Help Structure a Market Analysis ‡ Size and Growth (cont.) ± Detecting Maturity and Decline ‡ Price pressure caused by overcapacity and the lack of product differentiation ‡ Buyer sophistication and knowledge ‡ Substitute products or technologies ‡ Saturation ‡ No growth sources ‡ Customer disinterest .

and at times may necessitate conducting primary research (e. asking potential customers about their consumption habits) to estimate the necessary pieces of the formula.Forecasting Break Down Approach ± Maximum Market Potential: ‡ This approach requires information about consumption in terms of average amount consumed per target customer. but the result is worthwhile. p=price for an average unit of the product in question.. and the total number of consumers. ‡ It requires information searching.g. average price paid per unit. ‡ This method can be tailored to the specific product and sales area in question. and q=quantity purchased by the average buyer during the time period in question . where: Q=total market potential. ‡ The formula is as follows: Q=n x p x q. n=number of buyers in the specific market.

Subjective Methods of Sales Forecasting ‡ User expectations buyer indicates intention to purchase ‡ Sales force composite sales force opinions (build up approach) ‡ Jury of executive opinion . and these are compared anonymously and iteratively .key experts or management opinions ‡ Delphi technique each participant prepares an estimate.

Objective Methods of Sales Forecasting ‡ Market test place product in select areas ‡ Time series analysis relies on historical data to develop predictions for the future ‡ Statistical demand analysis attempts to make a comparison to determine the relationship between sales and factors that influence sales .

The Product Life Cycle Market Introduction Market Growth Market Maturity Sales Decline Total Industry Revenue Total Industry Profit Time .

Questions to Help Structure a Market Analysis ‡ Profitability For each major submarket consider the following: Is this a business area in which the average firm will make money? How intense is the competition among existing firms? Evaluate the threats from potential entrants and substitute products. What is the bargaining power of suppliers and customers? How attractive/profitable are the market and its submarkets both now and in the future? Figure 5.1 .

and competencies needed to compete successfully? How will these change in the future? How can the assets and competencies of competitors be neutralized by strategies? Figure 5.1 . What is driving it? 2. Is it broadly based? ‡ Key Success Factors What are the key success factors. Fad? 1. assets. How accessible is it in the mainstream? 3.Questions to Help Structure a Market Analysis ‡ Cost Structure What are the major cost and value-added components for various types of competitors? ‡ Distribution Systems What are the alternative channels of distribution? How are they changing? Who has the power in the channel? Is that likely to shift? ‡ Market Trends What are the trends in the market? ± Trend or.

.Strategic Uncertainties ‡ Focus on specific unknown elements that will affect the outcome of strategic decisions. ‡ Most strategic decisions will be driven by a set of these strategic uncertainties. ‡ On what does that depend? will usually generate additional strategic uncertainties.

Strategic Uncertainties Performance improvements? What will the future demand? Competitive technological developments? Financial capacity of health care industry? .

Strategic Uncertainties
‡ Impact:
± The extent to which it involves trends or events that will impact existing or potential businesses. ± The importance of the involved businesses. ± The number of involved businesses.

‡ Immediacy:
± The probability that the involved trends or events will occur. ± The time frame of the trends or events. ± The reaction time likely to be available, compared with the time required to develop and implement appropriate strategy.

Strategic Uncertainties Categories
Immediacy
Low Monitor and analyze;contingent strategies considered High Analyze In-depth; develop strategy

Impact

Low

High

Monitor

Monitor and analyze

Figure 6.2

Scenario Analysis
‡ Scenarios
± What strategic uncertainties are worth being the basis of a scenario analysis?

Scenario Analysis
Identify Scenarios Relate Scenarios to Existing or Proposed Strategies Estimate Scenario Probabilities

Figure 6.3

Strategic Uncertainties vs. Strategic Decisions Strategic Uncertainties
‡ Will a major firm enter? ‡ Will a technology be replaced? ‡ Will the dollar strengthen against another currency? ‡ Will computer-based operations be feasible with current technology? ‡ How sensitive is the market to price?

Strategic Decisions
‡ Investment in a product market ‡ Investment in a technology ‡ Commitment to off-shore manufacturing ‡ Investment in a new system

‡ A strategy of maintaining price parity

Porter s Diamond-National Advantage ‡ Why some nations are more competitive than others ‡ Why some industries are more competitive than others in particular countries ‡ National home base of an organization plays an important role in its achieving global competitiveness ‡ According to Porter there are four determinants of home base advantage. .

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infrastructure. like skilled labor.Factor Conditions ‡ The situation in a country regarding production factors. which are subsequently built upon. which are relevant for competition in particular industries. etc.BPO Industry in India . ± Human Resources ± Material Resources ± Knowledge Resources ± Capital Resources ± Infrastructure ‡ These factors often provide initial advantages..

Demand Conditions ‡ The state of home demand for products and services produced in a country ± Mixture (Mix of customer needs & wants) ± Scope & growth rate ± Mechanisms that transmit domestic preferences to foreign markets ‡ A country can achieve national advantages in an industry or market segment. if home demand provides clearer and earlier signals of demand trends to domestic suppliers than to foreign competitors ‡ Fast Food Industry in India .

‡ Competitive supplying industries will reinforce innovation and internationalization in industries at later stages in the value system. ‡ Related industries are those that can use and coordinate particular activities in the value chain together. or that are concerned with complementary products ‡ Indian Auto Component Industry .Related & Supporting Industries ‡ Existence or non-existence of internationally competitive supplying industries and supporting industries.

It stubbornly refused to reform its inflexible labour laws. and aims to export 300. . What s more. In a terrible global recession. and should cross the million mark within five years. with adverse effects on productivity and wages relative to Asian competitors. the Figo. Of other big Asian exporters. How then did this sector become world class? In the early 1990s. low-productivity country producing third-rate cars like the Ambassador and Premier. Hyundai has long made India an export hub for small cars. The small size of the Indian car market created serious scale diseconomies. But India never aimed at an undervalued exchange rate to pile up large trade surpluses rather. Indeed. India looks like exporting half a million cars in 2009-10. auto production was freed for investment by any domestic and foreign investor. Foreign investors came only because car imports were virtually banned. while China s fell by 60%. India has overtaken China as a car exporter this year.800. This underlines a remarkable new development. Indian exports in this period went up 18%. Korea s exports have fallen 31% and Thailand s 43%. Maruti-Suzuki comes second in exports. India s interest rates were always among the highest in Asia. India is the only country with zooming exports. it aimed to keep the real effective exchange rate unchanged from 1993 onward. Analysts say China has become a great auto exporter because of huge subsidies.000 India-made cars this year. Nissan is about to build a new factory in India specifically for exports. India s triumph was completely unplanned. exporting 201. Ford Motors announced that India would be a global manufacturing hub for its new small car. No planning document ever envisioned or planned for beating China.138 cars in January-July against China s 164. with Tata.‡ This week. No Indian strategic vision targeted special provisions or subsidies to the auto sector. Indian planners as well as foreign investors regarded India as a low-skilled. Mahindra and others well behind. the sector for years suffered exceptionally high excise duties and sales tax. an undervalued exchange rate and dirt-cheap credit. What accounts for India s success? Visionary planning? Long-term strategy? No.

Soon. Bharat Forge. every auto company and parts maker in India focused on using cheap skills to constantly produce better and cheaper parts and vehicles. was among the first to realize that India s big advantage was not cheap labour but cheap skills. He decided to build an ultra-cheap car (that might compete with Tata s Nano) in collaboration with Bajaj Auto. To their surprise. Indian consumers are very price-sensitive. But Ghosn decided the new car should be designed by Bajaj Auto. and started a dialogue with auto ancillary manufacturers on constant design changes. and could make improvements quickly and cheaply. But Bharat Forge found it could do the entire sequence in just one month. when the Ambassador and Premier faced little competition. Auto companies compete by constantly producing new models with improved features like fuel efficiency. But MNCs brought in competition. the global partner usually does the R&D and the Indian partner the low-cost production. making the world sit up. For new auto components. testing.‡ Critics from both the Right and Left criticized the new auto policy. only engineers. India s auto parts companies had rarely been asked for innovative changes during the old licence-permit raj. they found that Indian engineers had considerable skills. which had never produced a car before. the world s cheapest car. and final manufacture. high-cost industry behind high tariff walls. and soon made Bharat Forge the second biggest auto forging company in the world. Bajaj Auto once relied on know-how from Kawasaki for motor-cycles. Nobody foresaw what fierce competition would do. Why? Because Ghosn felt it was easier to upgrade from a two-wheeler than downgrade from a standard sedan to produce an ultra-cheap car . Maruti Suzuki made India a global hub for R&D. And Tata Motors created the Nano. Free-marketers complained that foreigners were being wooed to create an inefficient. Leftists claimed foreigners would decimate the industry. This yielded a huge rise in innovation and productivity. In such partnerships. prototype. global giants like Delphi and Visteon typically took three months to go from concept to design. The ultimate compliment to India s design skills came from Carlos Ghosn of Renault-Nissan. but soon found that its own R&D produced far better bikes for Indian conditions. which makes auto forgings like crankshafts and axles. removal of glitches. so design changes to reduce costs are also vital. The company decided to have no blue collar workers at all.

and that determine the characteristics of domestic competition ‡ Italian v German companies ‡ Dell v Compaq v Apple v IBM ‡ Advantages are created through the cultural orientations of factors like management structures.Firm Strategy. or interactions between companies ‡ Typical corporate objectives in relation to patterns of commitment among workforce are of special importance . working morale. Structure & Rivalry ‡ The conditions in a country that determine how companies are established. are organized and are managed.

and commerce regulator .Other Factors ‡ Capital markets and attitudes toward investments are important components of the national environments ‡ Chance events are occurrences that are beyond control. policymaker. they create major discontinuities ‡ Government is also an influence on determinants by virtue of its roles as a consumer.

‡ Assessing Corporate Capabilities and Resources .

‡ Resources based view of strategic marketing ± What are we good at ± To develop a distinct advantage ‡ Superior performance is measured by ± Financial indicators (share. return ratios) ± Customer satisfaction surveys . profits.

databases) ± Intangible (people. money. culture) . r&d. brand. technology.‡ Resources can be: ± Tangible (physical assets.

‡ Use less capital (e.g.Financial Performance Sales and Profitability ‡ Sales and Market Share ‡ Profitability ± ROA = (profits/sales) X (sales/assets) ‡ Measuring Performance: Shareholder Value Analysis ± Ways to increase shareholder value: ‡ Earn more profit by reducing costs or increasing revenue without using more capital.. . ‡ Invest in high-return products. JIT to reduce inventory costs). ‡ Reduce the cost of capital by increasing the debt to equity ratio or by buying back stock to reduce the cost of equity.

1 .Performance Measures Reflecting Long-Term Profitability Customer Satisfaction/ Brand Loyalty Product/Service Quality Brand/Firm Associations Relative Cost New Product Activity Manager/Employee Capability and Performance Current Performance Long Term Profits Figure 7.

Relative Performance .Strategic Implications More Change Design Manufacturing/Systems Ignore Inferior Value Analysis De-emphasize Upgrade Expensive Value Analysis Raise prices Promote Cost Reduction Our Component is Superior Value Analysis Emphasize/promote Leave it alone Less Expensive Figure 7.2 .Relative Cost vs.

it is called core competence .‡ Capabilities ± What a firm can do well ± Also called competence ± If the capability helps the firm do better than others.

Finance. 6 sigma . corporate philosophy ± Functional Mktg.‡ Type of capabilities ± Strategic values. HR ± Operational order processing.

. that is Strategically Valuable Valuable Rare Costly to Imitate Nonsubstitutable .. it must be: What a firm Does.Core Competencies For a strategic capability to be a Core Competency.

that is Strategically Valuable Capabilities that either help a firm to exploit opportunities to create value for customers or to neutralize threats in the environment Capabilities that are possessed by few.. current or potential competitors Rare Costly to Imitate Capabilities that other firms cannot develop easily. if any.. such as firm-specific knowledge or trust-based relationships Nonsubstitutable . usually due to unique historical conditions.Core Competencies Core Competencies must be: Valuable What a firm Does. causal ambiguity or social complexity Capabilities that do not have strategic equivalents.

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Primary Activities .

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Inbound Logistics Primary Activities .

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Primary Activities Operations Inbound Logistics .

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Operations Primary Activities Outbound Logistics Inbound Logistics .

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Operations Outbound Logistics Inbound Logistics Primary Activities Marketing & Sales .

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Operations Outbound Logistics Primary Activities Marketing & Sales Inbound Logistics Service .

Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Procurement Procurement Operations Outbound Logistics Marketing & Sales Inbound Logistics Primary Activities Service .

Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value

Support Activities

Technological Development Procurement Operations Outbound Logistics Marketing & Sales Inbound Logistics Service

Primary Activities

Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value

Support Activities

Human Resource Management Technological Development Procurement Operations Outbound Logistics Marketing & Sales Inbound Logistics Service

Primary Activities

Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value

Firm Infrastructure
Support Activities

Human Resource Management Technological Development Procurement Operations Outbound Logistics Marketing & Sales Inbound Logistics Service

Primary Activities

Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value

Firm Infrastructure
Support Activities

Human Resource Management Technological Development Procurement Operations Outbound Logistics Marketing & Sales Inbound Logistics Service

Primary Activities

McKinsey s Seven S Framework

etc). Systems: formal and informal procedures that govern everyday activity. . areas of expertise and responsibility (and how they inter-relate). Structure: the basic organization of the company. through to the systems at the point of contact with the customer (retail systems.THE HARD S s management can directly influence Strategy: the direction and scope of the company over the long term. covering everything from management information systems. its departments. online systems. call center systems. reporting lines.

THE SOFT S s more difficult to influence Skills: the capabilities and competencies that exist within the company. . What it does best. trained and motivated. Staff: the company's people resources and how the are developed. Ultimately they guide employees towards 'valued' behavior. Shared values: the values and beliefs of the company. Style: the leadership approach of top management and the company's overall operating approach.

‡ All seven S s need to be aligned and mutually reinforcing ‡ Creates competence ‡ Also helps identify weak link .

‡ Competition .

. Read the background. Sensodyne Competitive Strategy H2 2011-12 .Lets do an exercise. Brand Team Colgate. Pepsodent.

Competition .

.MUL & Honda Firms that provide very different products that solve the same problem or satisfy the same basic customer need. Deccan Firms that compete for the limited financial resources of the same customers«stationary and cutlery Generic competitors Total budget competitors .Competitive Forces Types of Competition Competition Other organizations that market products that are similar to a marketer¶s products in same geographic area.Skype..

personal care . differentiated products. no barriers.airlines Pure competition many competitors. few substitutes. low differentiation biscuits...Different competitive structures Monopoly no competition. high barriers to entry. reasonable barriers.railways Oligopoly few competitors.

Barriers to Entry and Exit Government Policy Licencing Regime Labour Laws Initial Cost Strong Brands presence Customer service Technology .

global access. brand symbols Search Engines for articles and financials Databases Directories People Poaching Intermediaries Government Reports Trade associations. magazines.Obtaining Information on Competitors Competitor s Website Strategic vision Values and culture Portfolio of businesses clue to priorities and strategies Assets such as plants. and meetings Technical meetings and Journals Marketing Research .

Industry Analysis: Forces Influencing Competition Industry group of firms that produce products that are competitors/close substitutes for one another Five forces influence competition in an industry described by Michael Porter .

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Competitive Rivalry Entry is likely Commodity products or equally strong brands Competitors are in balance There is slow market growth Global customers increase competition There are high fixed costs in an industry Markets are undifferentiated There may be high exit barriers .

Indian Auto Industry .

Buyer power Buyers = manufacturers and retailers. not consumers Buyers seek to pay the lowest possible price Buyers have leverage over suppliers when They purchase in large quantities (enhances supplier dependence on buyer) Suppliers products are commodities There are many small operators in the supplying industry There are alternative sources of supply Components or materials are a high percentage of cost to the buyer leading to shopping around Switching costs are low There is a threat of backward integration Organized retail .

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and say what they want.We do not quibble or argue with anyone¶s right to sing what they want. to print what they want. But we reserve the right to sell what we want. ²Wal-Mart¶s response to the accusation that it is using its financial power to dictate what is appropriate music and art .

they can raise prices high enough to affect the profitability of their customers Leverage accrues when There is a concentration of suppliers Switching costs are high The supplier brand is powerful Critical Inputs Few substitutes Integration forward by the supplier is possible Customers are fragmented and bargaining power low OPEC .Supplier power When suppliers have leverage.

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mobiles for land based telephones Doing without .no communication Volvo.Threat of substitutes Availability of substitute products places limits on the prices market leaders can charge High prices induce buyers to switch to the substitute Substitutes take different forms: Substitution of need Generic substitution . Skype .

Financial Services .The threat of entry New entrants mean downward pressure on prices and reduced profitability Dependent on barriers to entry such as following. being low: Capital requirements of entry Level of Innovation & tech Access to distribution channels Cost advantages Expected retaliation competitor response Legislation or government action Airlines.

Competitive Advantage Achieved when there is a match between a firm s distinctive competencies and the factors critical for success within its industry Two ways to achieve competitive advantage Low-cost strategy Product differentiation .

Generic Strategies for Creating Competitive Advantage Broad market strategies Cost leadership low price Product differentiation premium price Narrow market strategies Cost focus low price Focused differentiation premium price .

Aravind Eye . Amul.Cost Leadership Based on a firm s position as the industry s low-cost producer Must construct the most efficient facilities Must obtain the largest market share so that its per unit cost is the lowest in the industry Works only if barriers exist that prevent competitors from achieving the same low costs Japanese Electronics.

Product Differentiation Product that has an actual or perceived uniqueness in a broad market has a differentiation advantage Extremely effective for defending market position Extremely effective for obtaining above-average financial returns. unique products command a premium price Caterpillar construction equipment .

Cost Focus Firm s lower cost position enables it to offer a narrow target market and lower prices than the competition Deccan/Jet Lite Sustainability is the central issue for this strategy Works if competitors define their target market more broadly Works if competitors cannot define the segment even more narrowly .

Focused Differentiation The product has actual uniqueness but it also has a very narrow target market Results from a better understanding of customers wants and desires Ex: High-end audio equipment .

competitive advantage is nearly always relative..However . not absolute Can t go on forever .

Creating Sustainable Competitive Advantage .

The assets and competencies of an organization represent the most sustainable element of a business strategy.Sustainable Competitive Advantage SCA is an element (or combination of elements) of the business strategy that provides a meaningful advantage over both existing and future competitors. sustainable and substantial. An SCA needs to be supported and enhanced over time. An SCA needs to be meaningful. . because these are usually difficult to copy or counter.

Creating sustainable Competitive Advantage via Strategic Intent Building layers of advantage Searching for loose bricks Changing the rules of engagement Collaborating .

Building Layers of Advantage A company faces less risk if it has a wide portfolio of advantages Successful companies build portfolios by establishing layers of advantage on top of one another Illustrates how a company can move along the value chain to strengthen competitive advantage .

they invested in marketing channels and Japanese brand-name recognition. added layers of competitive advantage of quality and reliability Next. they built factories large enough to serve the world market. competitive advantage = low labor costs Next. sold under many brand names.Japanese TV industry: 1970s largest producer of black-and-white sets and becoming world leading in color sets. new layer of competitive advantage of global brand franchise Led to the introduction of new products such as VCRs and photocopiers and to the establishment of regional manufacturing to adapt products to local market needs .

Latin America Honda v Harley Davidson in US . Southeast Asia.Searching for Loose Bricks Search for opportunities in the defensive walls of competitors whose attention is narrowly focused Focused on a market segment Focused on a geographic area to the exclusion of others Acer in Middle East.

Changing the Rules of Engagement Refuse to play by the rules set by industry leaders Ex: Xerox and Canon Xerox employed a huge direct sales force. Canon sold machines . Canon chose to use product dealers Xerox built a wide range of copiers. Canon standardized machines and components Xerox leased machines.

joint ventures.Collaborating Use the know-how developed by other companies Licensing agreements. or partnerships .

Competitor Types Leader Challenger Follower Nicher .

new customers Protect and increase its market share Create barriers to entry cost.advertising Innovation . goodwill. service. opinion leaders Financial muscle . distribution.Strategy for market leader Expand market more usage (replacement indicator battery. toothbrush).

weak areas (geography or segments) Docomo. P&G) Flanking blind side.Strategy of Challenger Attack frontal challenge (Vodafone. Woodland Guerrilla warfare .advertising . LG Sampoorna.

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Strategy for Follower Laid back No challenge Ability to replicate quickly speed to market Low cost ability (with lower quality) .

Strategy for Nicher Smaller companies Or with extremely focused expertise Finding ignored segments (Anchor. higher margins Customization Risk limited market (Zippo) be ready to diversify! . Wagh Bakri) Needs indepth knowledge of segment Low volume.

‡ Customer Buying Behaviour .

evaluating.Consumer Behavior The behavior that consumers display in searching for. purchasing. using. . and disposing of products and services that they expect will satisfy their needs.

. ‡ ‡ ‡ ‡ ‡ Search Purchase Use Evaluate Dispose .Five Processes.

A blow up of the definition Consumer Behaviour reflects: the totality of decision Whether What Why How When Where How much/ How often/ How long Disposition Ideas Usage Time Acquisition Services about the consumption of an offering Products Information gatherer Influencer Decider Purchaser User Weeks Months Years by decision making units over time Hours Days Marketing strategies and Tactics .

for household use. for the use of a family member. Consumption is key . or for a friend.Personal Consumer The individual who buys goods and services for his or her own use.

Organizational Consumer A business. or other institution (profit or nonprofit) that buys the goods. government agency. and/or equipment necessary for the organization to function. services. Can be raw materials. capital goods or accessories .

‡ Why study CB? .

g. Christmas as a Global Holiday. Envy.g. Happiness. Materialism ‡ Why Else? ± An Increasingly Significant Part of Human Behaviour ± Understanding Our Own Consumption . Jackie Chan. Fast Food. Music ± How does Marketing Affect Consumers?--e. Nike ± Understanding Consumer Culture around the World--e.Why study Consumer Behaviour? ‡ (Micro) Marketing Implications ± Marketing Concept/Consumer Primacy ± Market Segmentation..g. Targeting and Positioning (S-T-P) ± Influencing Product/Service Choices ‡ (Macro) Societal Implications ± Understanding Popular Culture--e...

With changing lifestyles. Have you noticed the popularity of a tatkal ticket? Customers want instant Noodles . They prefer a Pizza brand for its half hour guaranteed home delivery. Customers prefer convenience they prefer net-banking and book tickets online rather than through travel agent. . instant Coffee and ready to eat products.‡ Nowadays. There is a strong need to feel empowered . Do you recall how the multiplexes charge a premium on the promise of a better experience? Customers are not willing to wait and want instant gratification. brands can no longer afford to ignore the experiential dimension. aspirations. What explains the popularity of a Facebook or a Twitter or a GPS? Customers feel empowered with the easy access to information that these internet and mobile platforms provide at a press of a button. customers are demanding a better experience and willing to pay a premium. global travel and media exposure.

. tendency to consume and in its ability to influence larger household decisions. working women. The rising purchasing power coupled with an increasing propensity to consume has led to the emergence of a new class of consumers. Indeed an exciting time for retailers and marketers. especially. credit availability. Gone are the days when people felt guilty about spending. The power of youth today is evident in its large numbers. easy accessibility and convenience and a potentially strong rural consumer market will fuel this growth in the near future. As per Ernst & Young analysis. Not only are people today indulging in buying more. they are spending significantly on themselves. growing number of nuclear families. India s population is also urbanising at a rapid pace with the urban Indian population projected to increase from 28% to 40% of the total population by 2020. among the middle class. A key aspect driving the sector s growth is favourable population demographics 50% of the population is less than 25 years. increasing consumer base in urban areas.‡ Rising disposable incomes. in the last decade the number of upper middle class and high income households has grown by a staggering 270% from 30 million households to 81 million households.

consumers are also looking at the value equation in every purchase. The second aspect is related to the need to change products frequently in order to appear modern or contemporary. never mind if the products do not last as long. they might fret about brand value erosion due to such schemes. They see it as being able to buy more than one. This spending power has not necessarily translated into higher value of purchases. More and more consumers want products that are unique so that they make a statement of being different. At the same time. contemporariness and of course. Marketers are looking closely at the changing buying behavior of the Indian youth. On one hand is the increasing discretionary income (Rs 3. This also ties in with the fact that the new generation is a generation of spendthrifts as against the old generation of thrifts .000 per month) but on the other hand is the typical Indian need of value for money . value equation. Whilst as marketers.‡ The spending pattern of Indian consumers presents a great paradox to today s marketers and retailers.800 Rs 7. This brings forth the question of how retailers and marketers should address this great opportunity without losing sight of the mass market that India offers. young consumers see it in a completely different light. Industry leaders are foxed by the success of some brands that are perpetually on sale. . This is probably the reason why they buy products that are well priced but buy them more frequently. There are three aspects that influence today s purchase decisions uniqueness.

They have thus satisfied all the 3 aspects of purchasing. This is also precisely the reason why the gadgets market in India is seeing a 50% plus growth. This phenomenon can not be explained by discounting alone but also due to the fact that it allowed consumers to buy more number of clothes. All this fits into the need to be unique and contemporary as they can wear different types of clothes and change more often. This could be attributed to handset manufacturers launching more and more right-priced models aimed at various segments hence encouraging consumers to buy more mobile phones and change them more often. that they had to hire extra security to manage the crowds. So. which is slated to increase in the near future. consumers are buying keeping their discretionary income in mind rather than the number of units that they need.‡ It lets them change their wardrobe more often and this is value for them. unlike in the past. A good success story of understanding and leveraging this phenomenon is the Indian mobile handset industry which is well underway to becoming the largest mobile handset market in the world. A recent 40% sale by a garment brand generated 8 times the daily sales in its stores. . so much so.

Why? ‡ Abundance of choice ‡ Commoditization ‡ Insecurity ‡ Availability of information ‡ Time scarcity ‡ Entitlement .Consumers Are Less Loyal .

Impact of Digital Technologies ‡ Consumers have more power and access to information ‡ Marketers can gather more information about consumers ‡ The exchange between marketer and customers is interactive and instantaneous and goes beyond the PC. ‡ Marketers must offer more products and services .

‡ Innovator s dilemma ± Staying committed to a current. profitable technology ± Failing to provide adequate levels of investment to new and possibly risky technologies ± Company is responding to the needs of established customers .

Digital Age ‡ ‡ ‡ ‡ Intra Network Supply Chain Internet Evolution of Intermediaries ‡ Brick & Mortar ‡ Click : Rediff ‡ Click & Mortar : Wal Mart. Ferns & Petals .

The Online Consumer. ‡ WAS Young Affluent Aware ‡ NOW More mainstream now Controls interaction ..

What? ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Computer software & hardware Books Music Bookings Food & Wine! Flowers Electronics Clothing Financial services Job search Politics Art of Living! .Marketing .

middleman Audience segmentation Reach small companies can reach vast audience .Advantages ‡ ‡ ‡ ‡ ‡ ‡ ‡ Global products Convenience for all Vast Information Few hassles Lower cost .

Evolving Marketing Channels Advertisements online Email Search Engines Social networks Forums blogs Affiliate Marketing Own Website .

Email ‡ Classic Viral Marketing ‡ Hotmail / Yahoo / and many more .

Search Engines ‡ Next to Email as Primary Internet Application ‡ Search Engine Optimization ‡ Google Intelligent search .

Social Networks ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Community with common interest Classic example Facebook 500 M users MySpace 300 Million users LinkedIn Business/working professionals Picture based Trusted Great for small entrepreneurs Viral Marketing ‡ You Tube / Metacafe Online Video Advertising ‡ Viewer attention. cost effective .

caller IDs.Twitter ‡ Search Engine friendly .Blogging ‡ Increasing immunity spam filters. pop up blockers ‡ Consumers increasingly refer to Blogs for information. reviews and discussion ‡ Thought leadership .

released last week. multitude of firms across industries have discovered the potential of social media in a variety of business functions. Almost all of those 33 million users belong to the middleclass. says a recent report by digital market research firm comScore. from addressing consumer grievances and receiving consumer feedback to brand building and market research. Today.‡ Over the last one year. which is driving the booming Indian consumer market. Use of social media in India grew 43% in one year to 33 million users in July. also said that has overtaken Orkut as the most popular network here. social media networks such as Facebook. social media offers endless possibilities. . The report. And most marketers seem to be making the best out of it. Orkut and Twitter accessed by 8% of the country s Internet users are among a marketer s best tools to interact with and respond to consumers. making the country the seventh largest market for social media. Clearly.

executive director of KPMG. The more agile companies have moved from viewing the redressal process as a compliance process to seeing it as an opportunity to enhance the brand image through a quick. He believes consumer grievance redressal. painless process.‡ The Influence of social media is phenomenal. says Ramesh Srinivas. It gives a higher SEC. say analysts. Twitter and blogs instantaneously transmit unedited. educated audience which is well networked and quick to shares ideas and opinions. . Online mediums like Facebook. if delayed. can generate bad mouth. These consumers are aware of their rights and are willing to exercise them. which travels faster on social medium. candid opinions and companies have realized that quick redressal of consumer complaints is a competitive advantage . he says.

Capital Foods. Within 20 minutes. Shoppers Stop and Café Coffee Day. confirmed that it absolutely does not use any GM food. managing director of Capital Foods. about the use of Genetically Modified (GM) food on its Twitter page. There s a complete buy-in by the top management on this project and we directly respond to a lot of queries primarily through smart phones on social networking sites. And firms such as Kingfisher. a consumer and a Greenpeace activist queried Capital Foods. he says. social media is a great way to establish their consumer-centric credentials. The challenges in doing this is the company should be prepared to be naked or absolutely transparent and has to be very nimble-footed to respond. For companies that are not shy to own up their mistakes. are using Facebook and Twitter to acknowledge and respond to complaints and are earning praise. Ajaay Gupta. . Gupta says that Capital Foods respond to any customer comment praise.‡ Today. A few weeks back. complaint or feedback within 45 minutes. A similar issue had become a worldwide controversy for another global food company when it failed to respond to a query for days. the maker of Ching s Secret range of Chinese food ingredients. most large retailers have in-house customer grievance section to resolve any concerns.

. they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole.Societal Marketing Concept Marketers adhere to principles of social responsibility in the marketing of their goods and services. that is.

Research in 2008 by Cone. . and that 38 per cent have bought a product associated with a cause. such as fair trade goods. up from 66 per cent in 1993. Rather than try to make products that can be marketed as ethical in their own right. ‡ Marketing people say consumers are increasingly trying to do good as they spend. whereby people are turning to the internet to give their consciences a boost without doing anything more onerous than clicking a mouse a few times.. The fad for online competitions to award the handouts also appeals to another trend. compared with 20 per cent in 1993. so-called slacktivism . found that 79 per cent of consumers would switch to a brand associated with a good cause. a brand consultancy. firms are increasingly trying to take an ordinary product and boost its moral credentials with what one marketing guru calls embedded generosity .Consider this.

" said Ramesh Surianarayanan. US.4 billion euros on fair trade products in 2009. so has the consciousness. consumers spent 3. Fairtrade-labelled products and toiletries are gaining popularity in countries like the UK. We have seen an increase in demand for ethical cosmetics. expats and globe-trotting professionals currently drive demand. France. And even local cosmetics companies are seeking to obtain 'fairtrade' certifications for their products. encourages sustainable practices and invests in social projects such as securing the rights of marginalized producers and workers. Fairtrade guarantees minimum price to farmers." said Sangeeta Kamath. The global umbrella body for fairtrade. "We are exploring the possibility of fairtrade certification for some of our newly launched products. Fairtrade Labelling Organizations International (FLO).‡ Fairtrade cosmetics are beginning to make headway in India. "Just like consumers' buying habits have changed over the decades. apparels. Italy. director of R&D in Himalaya Drug Company. issues fairtrade certification to companies trading in such fairtrade products. Canada. Germany and Denmark. a 15% increase over the previous year. But pricing in such products remain a challenge. MD of Lush in India. . As per FLO estimates. In India. Himalaya Drug Company is planning to introduce fairtrade products. and coffee.

Consumer Behavior Is Interdisciplinary ‡ Psychology individuals ‡ Sociology groups ‡ Social psychology how individuals behave on groups ‡ Anthropology study of humanity ‡ Economics .

‡ The case of GSK s Horlicks ‡ P&G Vicks ‡ New Coke (1985) .

A Simplified Model of Consumer Decision Making .

Consumer Decision-Making Process Problem Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Evaluation .

Possible Influences on the Process FIGURE 9.1 .

‡ P&G .Dryel dry clean garments .

limited or routine buying .‡ Problem Recognition need may be internal or external (cues) ‡ Information Search can be internal (previous experience and learning) or external ‡ Evaluation of Alternatives can be extensive.

large no. some info search ‡ Extended extensive information search. high involvement .Types of Decisions ‡ Habitual low involvement ‡ Limited evaluation of limited alternatives. of alternatives considered.

marketers (whether it be of branded jewelry or a small-scale industry manufacturing and distributing snacks to the local outlet) need to view the categories from the view point of the consumer. the mindscape of the consumer extends beyond the positioning of brands. tea. The underlying behavior of consumers is primarily responsible for the generic competition that may not have existed a few decades back when categories were not competing with one another. Three aspects emerge from these two scenarios: *In low-priced and variety-ridden. But in several categories of fast-moving goods. fast-moving categories. Enquiries with the sales person in the vicinity revealed that such snacks had a specific segment of consumers (not large in number) who repeatedly bought the brand and the category. In another location of another city I had come across a street vendor having lemon juice. Market segments in these categories may not stick to specific categories during purchase occasions (meaning that the categories are likely to be substitutable) *Brands over a period of time need to enlarge the band of consumers in categories that are low involvement in nature ( in simple terms bought without much deliberation) CONSUMER MINDSCAPE Brand positioning is a concept that has a perpetual appeal. soft drinks and tetrapacked drinks. Given the proliferation of substitutable categories and the clutter of brands to gain the attention of consumers. a store brand snack. . Cadbury s low-priced variants and Kurkure close to a traditional snack with variants. Tropicana may have a health benefit to be perceived as a part of the breakfast and Boost may have the proposition of secret of success aided by appropriate celebrities. Aliva brand probably positioned between a biscuit and a snack with the health proposition and Britannia milk biscuits with the health proposition. brands need to address generic competition in the consumers mindscape (how categories compete with one another for the share of a consumer s wallet). Haldiram snacks. And the important fact was that most of the stock-keeping units offered by several categories competing with the traditional branded snack offering were much lower in price (perhaps explaining the small consumer base that exhibits loyalty to the brand/category in the case of branded snacks). Good Day biscuits with the promise of pista goodness. lemon tea. Pepsi may stand for fun. The vendor was in fact addressing what the marketing literature calls generic competition. I found a branded traditional snack (marked as low fat ) in one of the shelves.‡ ///While going around a departmental store. In the example of the branded snack provided at the beginning of the article. the branded offering costing Rs 25 per pack was surrounded by Marie Gold (that does not have trans fat.

CONSUMPTION PATTERNS Brands need to have a clear focus based on the consumption patterns of consumers. consumers sensitivity towards prices also need to be taken into account (as only a small cross section of consumers would be able to afford several categories in several consumption occasions). it will also enable the brand to compete in retail outlets where consumers do not get lured by the promotional offerings of large brands (typically in a modern retail outlet). Conceptual insights provide directions to marketing strategies: they also reflect the power of simplicity in a marketing world that is increasingly getting complex. This would not only ensure that the offering has a higher probability and higher frequency of getting into the consideration set of consumers. Since most of these categories are aimed at the mass market. Consumer behavior provides insights that are vital to generic competition. Most consumers in every purchase situation or consumption situation are likely have a trade off on the value of the offering bought in this context the trade-off between price. symbolic appeal (eating/sharing with friends) and the health proposition that is getting increasingly being used by several categories. This is just a figurative example to reflect the complexities associated with generic competition. The branded snack probably would do better if it is able to identify localities where consumers stick to a small spectrum of choice when it comes to generic competition associated with the offering.‡ Today s housewife in an urban context has the choice of choosing Horlicks or Bournvita or Complan (traditional milk additives) or a healthy and filling evening snack or a vitamin-filled soup made out of natural ingredients or a glass of pure juice or a local brand of ragi mixed with several nutritive ingredients or Kellogg s for children. taste. .

did I make the right decision? ± Especially if a friend praises another brand ± Or you see an ad highlighting very useful benefits of another brand ± Or someone criticizes the satisfaction level of your brand ± Or if the choice between brands was very close . before use .‡ Post purchase.

may lead to non-use. return ‡ Actual Performance Matches Expectations ± Neutral Feeling ‡ Actual Performance Exceeds Expectations ± Positive Disconfirmation of Expectations ‡ Performance is Below Expectations ± Negative Disconfirmation of Expectations .Outcomes of Postpurchase Evaluation ‡ If there is doubt.

Postpurchase Consumer Behaviour .

‡ Ever heard the story of sour grapes? .

or high cost ± individual s tendency to experience anxiety ± Unknown product/brand . and the magnitude of dissonance. is a function of the: ± degree of commitment and/or whether the decision can be revoked ± importance of the decision to the consumer ± difficulty of choosing among the alternatives.Postpurchase Dissonance ‡ Some purchases are followed by postpurchase dissonance ‡ Probability of postpurchase dissonance.

Purchase Evaluation ‡ Evaluation of a purchase is influenced by: ± expectations ± perceived performance ± Purchase experience .

products or stores (boycott) ± Legal action ± Complaint to company ± Warning friends and colleagues Which one is most preferred by company? .Dissatisfaction Responses ‡ Possible outcomes of a negative purchase evaluation: ± Taking no action ± Switching brands.

Actions Taken by Consumers in Response to Product Dissatisfaction .

‡ Implementation & Control .

‡ We have looked at: ± Internal competencies ± Competitors ± Environment ± Customers .

The Separation of Planning and Implementation Exhibit 11.2 .

‡ Implementation begins with: ± STP ± 4 Ps .

The Implementation Process Activities to be implemented How implementation will be done Responsibility for implementation Time and location of implementation .

Improving Implementation Skilled Implementers Effective Communications Organizational Design Improving Implementation Internal Marketing Incentives .

Internal Marketing Strategy Plan Internal Marketing Program External Marketing Program Internal Marketing Program: Targeted at key groups in the company. and other influencers External Marketing Program Targeted at key customers. segments and niches. alliance partner companies. and other external influencers .

‡ The key to successful Marketing Strategy implementation: ± Organization ‡ Of people ‡ And resources .

Decentralization ‡ Organizing departments ± Function ± Product ± Territory ‡ Assign Responsibilities ± JD ± TATs ± Gantt Charts .Organizing people ‡ Selection and Training ‡ Communicate goals and values ‡ Delegation of authority ± Centralization v.

Gantt chart for scheduling the term project .

Organizing resources ‡ Obtaining factors of production ‡ Utilization ± JIT ± EOQ ± 6 Sigma ± Schedules .

The implementation process was mismanaged. The implementation was inappropriate for the strategy. Substantial changes in the environment between development and implementation. .Evaluating and Controlling Marketing Activities ‡ Four possible causes of differences between the intended strategy and the realized strategy: ± ± ± ± The marketing strategy was inappropriate or unrealistic.

and metrics Obtain and analyze information Assess performance and take necessary action . measures..How? Conduct strategic marketing audit Select performance criteria.Strategic Marketing Evaluation and Control .

Strategic Marketing Audit Corporate Mission and Objectives Marketing Strategy (for each planning unit) Marketing Program Activities Implementation and Management .

Performance Criteria and Information Needs ‡ Selecting performance criteria and measures ‡ Marketing metrics ‡ Obtain and analyze information .

Marketing Metrics External market metrics Financial measures Sales value/volume Marketing investment Profit Brand equity Relative satisfaction Commitment Relative perceived quality Relative price Availability Internal Market metrics Innovation health and employee alignment and commitment Strategy Culture Outcomes .

Performance Assessment and Action ‡ Opportunities and performance gaps ‡ Determining normal and abnormal variability ‡ Deciding what actions to take .

6 .A Framework for Marketing Control ‡ Formal Controls (Initiated by Management) ± Input Controls ± Process Controls ± Output Controls ‡ Informal Controls (Initiated by Employees) ± Employee Self-control ± Social Control ± Cultural Control From Exhibit 11.

selecting. and training employees ± Resource allocation decisions ‡ Process Controls (during implementation) ± Commitment to the strategy ± System for evaluating and compensating employees ‡ Output Controls (after implementation) ± Performance standards ± Marketing audits .Formal Marketing Controls ‡ Input Controls (prior to implementation) ± Recruiting.

rituals . organizational commitment ‡ Social Control (small group control) ± Shared values. social and behavioral norms in groups ‡ Cultural Control (organizational norms) ± Organizational culture. stories.Informal Marketing Controls ‡ Employee Self-Control (personal expectations) ± Job satisfaction.

environment issues ‡ Distribution .Growing strength of retailers ‡ Demographics and shift of purchasing power ‡ ‡ ‡ ‡ . lower differentiation Global privatization and competition Shorter PLC Emergence of new barriers technology. human exploitation.Future of Strategic Marketing Increasing competition.

‡ Examine the marketing strategy adopted by Titan watches for all its sub-brands please give details for each sub-brand. . evaluate the effectiveness of each of its strategies.

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