8/26/2015 [email protected], +255-784-455 4991 strategic marketing topics 1. trends &...

04/19/2304/19/[email protected], [email protected],

+255-784-455 499+255-784-455 499 11

STRATEGIC MARKETINGSTRATEGIC MARKETINGTOPICSTOPICS

1.1. Trends & OverviewTrends & Overview2.2. Pilot LecturePilot Lecture3.3. Macroenvironment Factors (+ SLEEPTIN)Macroenvironment Factors (+ SLEEPTIN)4.4. Customer’s AnalysisCustomer’s Analysis5.5. Industry Analysis: competitors & Markets Industry Analysis: competitors & Markets

(Porter’s Five Forces Framework).(Porter’s Five Forces Framework).6.6. Internal Vs. External AnalysisInternal Vs. External Analysis7.7. Managing the Marketing StrategyManaging the Marketing Strategy8.8. Market Driven Strategy (A case of South Market Driven Strategy (A case of South

West Airline)West Airline)


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Topics Continue …Topics Continue …

9. Porter’s Generic Strategies9. Porter’s Generic Strategies

10. Pricing Strategies and Selling 10. Pricing Strategies and Selling ProcessProcess

11. Product Decisions (Ansoff’s Matrix)11. Product Decisions (Ansoff’s Matrix)

12. Any current issues in Strategic 12. Any current issues in Strategic Marketing, in Tanzanian Business Marketing, in Tanzanian Business Environment.Environment.


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DETAILED PPT SLIDESDETAILED PPT SLIDESBy By

Prof. Elisante Gabriel (MCIM)Prof. Elisante Gabriel (MCIM)

PhD (Finland), MSc (UK), PgD (CIM), ADBA, PhD (Finland), MSc (UK), PgD (CIM), ADBA,

Mech. Eng. (MTC)Mech. Eng. (MTC)

[email protected] [email protected]

Tel. +255-784-455499Tel. +255-784-455499

www.olegabriel.comwww.olegabriel.com


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TRENDS & OVERVIEWTRENDS & OVERVIEWWhat is Strategic Marketing What is Strategic Marketing

Mgt?Mgt?• This is a system approach of facilitating This is a system approach of facilitating

the timely exchange of values within the the timely exchange of values within the business relations while coping with a business relations while coping with a network of complexities (Gabriel, 2006)network of complexities (Gabriel, 2006)

• It is imperative for strategists to It is imperative for strategists to understand that the heterogeneity of understand that the heterogeneity of customers should be managed carefully customers should be managed carefully while striving for SCAwhile striving for SCA


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SIX COMMANDMENTS OF SIX COMMANDMENTS OF STRATEGIC MARKETING (By STRATEGIC MARKETING (By

Gabriel E. ,2003)Gabriel E. ,2003)• Create Superior performanceCreate Superior performance

• Sustain Superior performanceSustain Superior performance

• Understand your core business (Value NW)Understand your core business (Value NW)

• Know your Competitor as you know Know your Competitor as you know yourselfyourself

• Make sure you are sophisticatedMake sure you are sophisticated

• Understand your Internal and External Understand your Internal and External Target market and react to the feedback Target market and react to the feedback


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(A): BASIC CONCEPTS(A): BASIC CONCEPTS

• What is Marketing ?What is Marketing ?

This is a This is a social and managerial process social and managerial process by by which individuals and groups obtain their which individuals and groups obtain their needs through creating and exchanging needs through creating and exchanging products and values with others.products and values with others.

There is always a consideration connected There is always a consideration connected to this exchange, which can be in a to this exchange, which can be in a material/kind form.material/kind form.


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WHAT IS BUSINESS?WHAT IS BUSINESS?

This is a specific activity for specific This is a specific activity for specific objectives, for specific people, to be objectives, for specific people, to be performed by specific people within a performed by specific people within a specified period of TIME.specified period of TIME.


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Business ScopeBusiness Scope

• Business is beyond just Business is beyond just Creating, Creating, Promoting, and delivering goods & Promoting, and delivering goods & Services Services to consumers and Business.to consumers and Business.

• Nowadays, Marketers are involved in Nowadays, Marketers are involved in marketing ten types of entities:marketing ten types of entities:– goods, services, experiences, events, goods, services, experiences, events,

persons, places, properties, persons, places, properties, organizations, information, organizations, information, and and ideas.ideas.


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What is Management ?What is Management ?

• This is an art of coping with complexitiesThis is an art of coping with complexities

• If compared to Leadership, they differ in If compared to Leadership, they differ in the sense that leadership tends to cope the sense that leadership tends to cope with changes.with changes.

• Leadership can either be: Leadership can either be: Autocratic, Autocratic, Bureaucratic or ParticipatoryBureaucratic or Participatory

• Sometimes a combination is the way Sometimes a combination is the way forward: forward: ‘no one is superior to another’‘no one is superior to another’


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Why studying Strategic Why studying Strategic Marketing Management ?Marketing Management ?• Changes in Market structureChanges in Market structure

• CompetitionCompetition

• Cultural dynamicsCultural dynamics

• Micro & Macro FactorsMicro & Macro Factors

• Impact of TechnologyImpact of Technology

• Marginal Propensity to Save/ConsumeMarginal Propensity to Save/Consume

• Changes in Buyers’ Behavior Changes in Buyers’ Behavior

• HeterogeinityHeterogeinity


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Generic philosophies Generic philosophies (Concepts) in Marketing(Concepts) in Marketing

• The Production Concept (the oldest)The Production Concept (the oldest)• Consumers will prefer products that are Consumers will prefer products that are

widely available and affordablewidely available and affordable

• The Product Concept:The Product Concept:Consumers will favour those products that Consumers will favour those products that

offer the most quality, performance, or offer the most quality, performance, or innovative features (Fallacy & Myopia)innovative features (Fallacy & Myopia)

eg: GM:…how can they know …until they eg: GM:…how can they know …until they see?..see?..


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Selling ConceptSelling Concept

• Consumers and business if left alone, Consumers and business if left alone, will normally buy a small quantity of will normally buy a small quantity of Organization’s products. For this very Organization’s products. For this very reason, the Organization must undertake reason, the Organization must undertake an aggressive selling and promotion an aggressive selling and promotion efforteffort

• - - Buying inertia (resistance)Buying inertia (resistance)

• - The battery for effective selling to - The battery for effective selling to stimulate more buyingstimulate more buying


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The Marketing ConceptThe Marketing Concept

• The Organizational goals could be The Organizational goals could be achieved if the Company will be more achieved if the Company will be more effective than competitors in effective than competitors in creating, creating, delivering, delivering, andand communicating communicating customer customer value to its chosen target marketsvalue to its chosen target markets

• - Start and end with the customer- Start and end with the customer

• - Love the customer not the product- Love the customer not the product

• - Profits through customer - Profits through customer satisfactionsatisfaction


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Four Pillars of the Marketing Four Pillars of the Marketing ConceptConcept

• Target MarketTarget Market

• Customer needsCustomer needs

• Integrated MarketingIntegrated Marketing

• ProfitabilityProfitability


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Selling Vs Marketing Selling Vs Marketing ConceptConcept• Theodore Levitt of Harvard University Theodore Levitt of Harvard University

gave this perceptive contrast:gave this perceptive contrast:

• Selling focuses on the needs of the seller; Selling focuses on the needs of the seller; Marketing on the needs of the buyer. Marketing on the needs of the buyer. Selling is preoccupied with the seller’s Selling is preoccupied with the seller’s need to convert his product in to cash; need to convert his product in to cash; Marketing with the idea of satisfying the Marketing with the idea of satisfying the needs of the customer using synergyneeds of the customer using synergy


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Societal Marketing ConceptSocietal Marketing Concept

• The Organization should determine the The Organization should determine the needs and interests of target markets needs and interests of target markets and serve them while maintaining and serve them while maintaining Consumer’s and society well-beingConsumer’s and society well-being

This philosophy considers the aspects of; This philosophy considers the aspects of; environment, resources, demographic environment, resources, demographic factors,Worldwide economic problems, factors,Worldwide economic problems, neglected Socialneglected Social services, etcservices, etc


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TWO ADDITIONAL TWO ADDITIONAL CONCEPTSCONCEPTS

• Relationship MarketingRelationship Marketing

There is a need to maintain a good There is a need to maintain a good relationship with your customers relationship with your customers than just saving them with than just saving them with products. Mutual relationship products. Mutual relationship will increase success in business will increase success in business than transactional.than transactional.


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……………………..

• One-to-one MarketingOne-to-one Marketing

With the power of TECHNOLOGY in the With the power of TECHNOLOGY in the market, marketer can now serve ‘him’ market, marketer can now serve ‘him’ and not ‘them’. A customer can be served and not ‘them’. A customer can be served exactly according to his demand and exactly according to his demand and convenience (eg UPS & FEDEX). Find convenience (eg UPS & FEDEX). Find More customers for products and more More customers for products and more products for customers (Ref. Don products for customers (Ref. Don Pepper’s Video Cassette) Pepper’s Video Cassette)


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Analytical ModelsAnalytical Models

• BCG: Boston Consulting Group (USA)BCG: Boston Consulting Group (USA)

This model has been developed by students This model has been developed by students of Boston College in USA. The Company of Boston College in USA. The Company classifies all its classifies all its SBUsSBUs according to the according to the growth-Share Matrix. The BCG Matrix has growth-Share Matrix. The BCG Matrix has two axes. The vertical one represents two axes. The vertical one represents Market Growth rate (Market Growth rate (market attractivenessmarket attractiveness) ) whereas the Horizontal one represents whereas the Horizontal one represents Relative Market share (Relative Market share (Market strengthMarket strength))


+255-784-455 499+255-784-455 499 2020

Components of BCGComponents of BCG

• Problem Children/ Question MarksProblem Children/ Question Marks

These are low-share SBUs in high Growth These are low-share SBUs in high Growth Markets. Management should think with Markets. Management should think with due care, which SBU to build and which to due care, which SBU to build and which to phase outphase out

• StarsStars

These are both of High Growth rate and These are both of High Growth rate and Market share. They should be held Market share. They should be held carefullycarefully


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Cash CowsCash Cows

These are of Low-growth with high Market These are of Low-growth with high Market share. They need less investment to share. They need less investment to retain them in the Market. The retain them in the Market. The Management should harvest cash from Management should harvest cash from these SBUs and pay for bills and support these SBUs and pay for bills and support other SBUsother SBUs

• Dogs Dogs

These SBUs are of Low-growth and Low These SBUs are of Low-growth and Low Market-share. Low cash generationMarket-share. Low cash generation


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PROBLEM PROBLEM CHILDCHILD

(Build)

STARSTAR

(Hold)

CASH COWCASH COW

(Harvest)

DOGDOG

(Divest)

BCG MODELBCG MODEL

M

arke

t Gro

wth

Rat

e

LO

W

HIG

H

HIGH LOWHIGH LOW Relative Market Share (% Competitor)


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Micro & Macro EnvironmentMicro & Macro Environment

• MicroMicro

This is an internal environment. It entails This is an internal environment. It entails dynamic forces within the industry. These dynamic forces within the industry. These factors include: factors include: Vendors, Competitors, Vendors, Competitors, Customers Customers

• MacroMacro

This is the general environment, which This is the general environment, which sometimes is referred as external. It sometimes is referred as external. It includes the following factors; (SLEEP-TIN)includes the following factors; (SLEEP-TIN)


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SWOT AnalysisSWOT Analysis

• SW = Strength and Weakness (INTERNAL)SW = Strength and Weakness (INTERNAL)

• OT = Opportunities and Threats (EXTERNAL)OT = Opportunities and Threats (EXTERNAL)

This analysis is also useful in assessing the This analysis is also useful in assessing the position of a product or SBU/SBA/SME. The position of a product or SBU/SBA/SME. The internal assessment deals with the internal assessment deals with the Organizational capability of the SBU, Organizational capability of the SBU, including managerial competence. OTincluding managerial competence. OT deals deals with external variables (Eg. Mobile Vs Ear with external variables (Eg. Mobile Vs Ear disease, Alcohol/Pork Vs Faith) disease, Alcohol/Pork Vs Faith)


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SYNERGY SYNERGY

• This is a concept in Marketing This is a concept in Marketing management, which outlines that, management, which outlines that, system approach is more effective for system approach is more effective for higher performance. The concept claims higher performance. The concept claims that, the result of the combined efforts that, the result of the combined efforts of individuals (as a system) is greater of individuals (as a system) is greater than when they perform the same than when they perform the same separately.separately.

• Mathematically: 1+1 > 2.Mathematically: 1+1 > 2. (TEAM WORK)(TEAM WORK)


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Customer Vs ConsumerCustomer Vs Consumer

• CustomerCustomer

This is the one whom you interact with for This is the one whom you interact with for the service encounter, Moment of truth, the service encounter, Moment of truth, Closing the sale. This can be an individual Closing the sale. This can be an individual or an Organization (Eg Wholesalers are or an Organization (Eg Wholesalers are ………….)………….)

• ConsumerConsumer

The one who uses/consumes the product in The one who uses/consumes the product in the real sense (Eg a of a bar of chocolate) the real sense (Eg a of a bar of chocolate)


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TYPES OF CUSTOMERSTYPES OF CUSTOMERS

Customers can be categorized in different Customers can be categorized in different forms. They can;forms. They can;

• Person Vs Non-Person = Consumer Vs Person Vs Non-Person = Consumer Vs Organizational/Industrial/InstitutionalOrganizational/Industrial/Institutional

• New Vs ExistingNew Vs Existing

In Consumer Market, for instance, In Consumer Market, for instance, Individuals can represent nine types of Individuals can represent nine types of customers. These to include; Snobbish, customers. These to include; Snobbish, timid, nervous, . timid, nervous, .

Finally

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MODULE 2 MODULE 2 PILOT LECTURE ONPILOT LECTURE ON

STRATEGIC MARKETINGSTRATEGIC MARKETING

…………………………………………………………………………………………………………....


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OBJECTIVESOBJECTIVES

• The Primary objective is to acquire a The Primary objective is to acquire a strategic knowledge about the strategic knowledge about the dynamics of the marketsdynamics of the markets

• To enable participants to make To enable participants to make strategic choices among the strategic choices among the available optionsavailable options

• To enable participants to improve To enable participants to improve their decision making process for their decision making process for business growth and survival.business growth and survival.


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The Concept & TrendsThe Concept & Trends

• What is Strategic Marketing What is Strategic Marketing Management?Management?

• Characteristics of markets and structuresCharacteristics of markets and structures• Why studying Strategic Marketing Why studying Strategic Marketing

Management?Management?• Challenges facing Strategists in the Challenges facing Strategists in the

marketing fieldmarketing field• How does ‘Strategic Marketing’ differs How does ‘Strategic Marketing’ differs

from ‘Marketing’?from ‘Marketing’?


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An OverviewAn Overview

• External Analysis (Outside the firm)External Analysis (Outside the firm)

• Internal analysis (Strengths & Internal analysis (Strengths & Weaknesses). Any impact on Weaknesses). Any impact on strategy?strategy?

• Mission Statement (Espirit de corp) Mission Statement (Espirit de corp) and Shared sense of mission for and Shared sense of mission for synergy.synergy.

• Strategic Choices Vs. General choicesStrategic Choices Vs. General choices


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Competitors AnalysisCompetitors Analysis

• Knowing your competitors as you Knowing your competitors as you know yourselfknow yourself

• Analysis of competitors: Strengths & Analysis of competitors: Strengths & WeaknessesWeaknesses

• Is there any ‘loose brick’ in the value Is there any ‘loose brick’ in the value chain of your competitor? Make sure chain of your competitor? Make sure you do not have one on your sideyou do not have one on your side


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Market & Industry AnalysisMarket & Industry Analysis

• The impact of Market size & PotentialThe impact of Market size & Potential• Pareto effect (By Alfredo Pareto of Italy)Pareto effect (By Alfredo Pareto of Italy)• Market growth and attractiveness: The link Market growth and attractiveness: The link

with BCGwith BCG• Cost structure (CoGs) = Material, Labour, Cost structure (CoGs) = Material, Labour,

OH; Fixed and Variable costs. How to OH; Fixed and Variable costs. How to managemanage

• Core competencies for success (Hamel & Core competencies for success (Hamel & Prahalad)Prahalad)

• Porter’s Five Forces & Generic Strategies + Porter’s Five Forces & Generic Strategies + Video showVideo show


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Macro Environmental Macro Environmental FactorsFactors

• Looking ‘beyond the wall’ not just acrossLooking ‘beyond the wall’ not just across

• Do not be myopic, recall the ‘mouse-Do not be myopic, recall the ‘mouse-trap fallacy’.trap fallacy’.

• From ‘PEST’ to ‘SLEEPTIN’.From ‘PEST’ to ‘SLEEPTIN’.

• Do not be complacent. Manage the Do not be complacent. Manage the dynamics of the market which are dynamics of the market which are always changing in a fascinating speed.always changing in a fascinating speed.


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Strategic Marketing ChoicesStrategic Marketing Choices

• Make a strategic Strategy choiceMake a strategic Strategy choice

• The new dimension of the definition of The new dimension of the definition of Marketing (By Prof. ole Gabriel) – MNCsMarketing (By Prof. ole Gabriel) – MNCs

• The concept of Sustainable Competitive The concept of Sustainable Competitive AdvantageAdvantage

• Alternative growth Strategies (By Igor Alternative growth Strategies (By Igor Ansoff)Ansoff)

• Corporate Strategic Choice (Does it know Corporate Strategic Choice (Does it know that choices exist?)that choices exist?)


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Managing the Marketing Managing the Marketing StrategyStrategy

• Implementation depends on; people, Implementation depends on; people, structures, systems and more structures, systems and more important, culture!!!important, culture!!!

• Strategic evaluations and control; Strategic evaluations and control; determine the variances and take the determine the variances and take the corrective measure immediately (Do not corrective measure immediately (Do not be like Africa bottling company). And…be like Africa bottling company). And…

• Sales Analysis, CBA and Marketing Sales Analysis, CBA and Marketing audit.audit.


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ConclusionConclusion

• Strategic Marketing is important in Strategic Marketing is important in order to avoid generalisability. order to avoid generalisability. ‘Customers are different and their ‘Customers are different and their differences are different’ (Gabriel, differences are different’ (Gabriel, 2004).2004).

• Companies which will ignore strategic Companies which will ignore strategic Marketing are destined to fail, the Marketing are destined to fail, the question is when and not whether…question is when and not whether…

• Strategic marketing will enhance TQM.Strategic marketing will enhance TQM.


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THE END!THE END!

• Think Strategically, Think Strategically, act strategically, act strategically, smile strategically smile strategically and walk and walk strategically!!!strategically!!!


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MODULE 3

MACRO-ENVIRONMENTAL FACTORS

3-1


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Environmental AnalysisEnvironmental Analysis

• Any effort at environmental analysis Any effort at environmental analysis must be well-organized, systematic, must be well-organized, systematic, and supported by sufficient and supported by sufficient resources (e.g., people, financial, resources (e.g., people, financial, information).information).

• Environmental analysis should be an Environmental analysis should be an ongoing effort.ongoing effort.

• Environmental analysis empowers Environmental analysis empowers the marketing manager because it the marketing manager because it encourages both encourages both analysis and analysis and synthesissynthesis of information. of information.3-2


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Data Versus InformationData Versus Information

• Managers are more likely to be overwhelmed Managers are more likely to be overwhelmed with data rather than face a shortage.with data rather than face a shortage.

• Data does not become informative until it is Data does not become informative until it is transformed in a manner that makes it transformed in a manner that makes it usefuluseful to decision makers.to decision makers.

• Environmental analysis is valuable only to the Environmental analysis is valuable only to the extent that it improves the quality of the extent that it improves the quality of the resulting plans and decisions.resulting plans and decisions.

• Perpetually analyzing data without making Perpetually analyzing data without making any decisions is usually not worth the added any decisions is usually not worth the added expense.expense.

3-3


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Three Key EnvironmentsThree Key Environments

• Analysis of the Analysis of the external environmentexternal environment ((macroenvironmentalmacroenvironmental) should include all the ) should include all the external factors— competitive, economic, political, external factors— competitive, economic, political, legal/ regulatory, technological, and sociocultural—legal/ regulatory, technological, and sociocultural—that can exert direct and indirect pressures on both that can exert direct and indirect pressures on both domestic and international marketing activities.domestic and international marketing activities.

• The marketing manager should examine the The marketing manager should examine the customer environmentcustomer environment (5 W’s) to assess the current (5 W’s) to assess the current and future situation with respect to customers in the and future situation with respect to customers in the firm's target markets.firm's target markets.

• Finally, a critical evaluation of the firm's current and Finally, a critical evaluation of the firm's current and anticipated anticipated internal environmentinternal environment ((microenvironmentalmicroenvironmental) with respect to its objectives ) with respect to its objectives and performance, allocation of resources, structural and performance, allocation of resources, structural characteristics, and political and power struggles.characteristics, and political and power struggles.3-4


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Four Basic Types of Competition

Brand Competitors: market products that are similar in features and benefits to the same customers at similar prices

Product Competitors: compete in the same product class, but with products that are different in features, benefits, and price

Generic Competitors: market very different products that solve the same problem or satisfy the same basic need

Total Budget Competitors: compete for the limited financial resources of the same customers

3-5


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Stages of Competitive Analysis

1) Identify all current and potential brand, product, generic, and total budget competitors

2) Assess each key competitor in terms of relevant characteristics, such as size, profitability, growth, objectives, strategies, etc.

3) Assess each key competitor’s strengths and weaknesses, as well as the major competencies that each competitor possesses

4) Focus on each competitor’s marketing capabilities in terms of their products, pricing, distribution, and promotion

5) Estimate each competitor’s most likely strategies and responses under different environmental situations, as well as their reactions to the organization’s own marketing efforts

3-6


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Economic ConditionsEconomic Conditions

• A thorough examination of economic factors requires A thorough examination of economic factors requires marketing managers to gauge and anticipate the marketing managers to gauge and anticipate the general economic conditions of the nation, region, general economic conditions of the nation, region, state, and local area in which they operate.state, and local area in which they operate.

• Economic factors to consider include inflation, Economic factors to consider include inflation, employment and income levels, interest rates, taxes, employment and income levels, interest rates, taxes, trade restrictions and tariffs, current and future trade restrictions and tariffs, current and future stages of the business cycle (prosperity, stagnation, stages of the business cycle (prosperity, stagnation, recession, depression, and recovery), consumers' recession, depression, and recovery), consumers' overall impressions of the economy and their ability overall impressions of the economy and their ability and willingness to spend, and current and and willingness to spend, and current and anticipated spending patterns of consumers in the anticipated spending patterns of consumers in the firm's target market.firm's target market.

3-7


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Political TrendsPolitical Trends

• Many marketers view political factors as Many marketers view political factors as being beyond their control and do little being beyond their control and do little more than adjust the firm's strategies to more than adjust the firm's strategies to accommodate changes in those factors.accommodate changes in those factors.

• Other firms take a more proactive stance Other firms take a more proactive stance by seeking to influence elected officials.by seeking to influence elected officials.

3-8


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Legal and Regulatory FactorsLegal and Regulatory Factors

• The marketing manager should carefully The marketing manager should carefully examine recent court decisions and recent examine recent court decisions and recent rulings of federal, state, local and self-rulings of federal, state, local and self-regulatory trade agencies to determine their regulatory trade agencies to determine their effects on marketing activities.effects on marketing activities.

• Companies that engage in international Companies that engage in international marketing activities should also consider marketing activities should also consider changes in the trade agreements between changes in the trade agreements between nations.nations.

3-9


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Changes in TechnologyChanges in Technology

• Many changes in technology assume a Many changes in technology assume a frontstagefrontstage presence in that they are presence in that they are most noticeable to customers.most noticeable to customers.

• Technological changes can also assume Technological changes can also assume a a backstagebackstage presence when their presence when their advantages are not necessarily advantages are not necessarily apparent to consumers.apparent to consumers.

3-11


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Sociocultural FactorsSociocultural Factors

• Sociocultural factors are those Sociocultural factors are those socialsocial and and culturalcultural influences can cause changes in influences can cause changes in attitudes, beliefs, norms, customs, and attitudes, beliefs, norms, customs, and lifestyles.lifestyles.– There are many changes taking place in the There are many changes taking place in the

demographic makeup of the U.S. population.demographic makeup of the U.S. population.– Changes in cultural values can also create Changes in cultural values can also create

challenges and opportunities for marketers.challenges and opportunities for marketers.

3-12


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The Customer EnvironmentThe Customer Environment

• Information should be collected that identifiesInformation should be collected that identifies– The firm's current and potential customersThe firm's current and potential customers– The prevailing needs of current and potential The prevailing needs of current and potential

customerscustomers– The basic features of the firm's and competitors' The basic features of the firm's and competitors'

products that are perceived as meeting customers' products that are perceived as meeting customers' needsneeds

– Anticipated changes in customers' needsAnticipated changes in customers' needs

• In assessing the firm's target markets, the In assessing the firm's target markets, the marketing manager should attempt to marketing manager should attempt to understand all relevant buyer behavior and understand all relevant buyer behavior and product usage statistics.product usage statistics.

3-13


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5-W Model5-W Model

• Who Are Our Current and Potential Customers? Who Are Our Current and Potential Customers?

• What Do Our Customers Do with Our Products? What Do Our Customers Do with Our Products?

• Where Do Our Customers Purchase Our Products?Where Do Our Customers Purchase Our Products?

• When Do Our Customers Purchase Our Products? When Do Our Customers Purchase Our Products?

• Why (and How) Do Our Customers Select Our Why (and How) Do Our Customers Select Our Products? Products?

• Why Do Potential Customers Not Purchase Our Why Do Potential Customers Not Purchase Our Products? Products?

3-14


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WhoWho Are Our Current and Are Our Current and Potential Customers?Potential Customers?

• The manager should considerThe manager should consider– demographic characteristicsdemographic characteristics (gender, age, income, occupation, (gender, age, income, occupation,

education, ethnic background, family life cycle, etc.)education, ethnic background, family life cycle, etc.)

– geographic characteristicsgeographic characteristics (where customers live, density of (where customers live, density of the target market, etc.)the target market, etc.)

– psychographic characteristicspsychographic characteristics (attitudes, opinions, interests, (attitudes, opinions, interests, motives, lifestyles, etc.) in defining the firm's target markets.motives, lifestyles, etc.) in defining the firm's target markets.

• Depending on the type of products sold by the firm, Depending on the type of products sold by the firm, purchase influencers, such as children or spouses, may purchase influencers, such as children or spouses, may be important as well.be important as well.

• For business-to-business marketers, the analysis For business-to-business marketers, the analysis should focus on the decision-making unit (DMU).should focus on the decision-making unit (DMU).

3-15


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WhatWhat Do Our Customers Do with Do Our Customers Do with Our Products?Our Products?

• The "what" question entails an assessment of how The "what" question entails an assessment of how customers consume and dispose of the firm's customers consume and dispose of the firm's products.products.

• Here the marketing manager might be interested inHere the marketing manager might be interested in– identifying how often products are consumed (sometimes identifying how often products are consumed (sometimes

called the called the usage rateusage rate))– differences between heavy and light users of productsdifferences between heavy and light users of products– whether complementary products are used during whether complementary products are used during

consumptionconsumption– what customers do with the firm's products after what customers do with the firm's products after

consumptionconsumption

3-16


+255-784-455 499+255-784-455 499 5454

WhereWhere Do Our Customers Do Our Customers Purchase Our Products?Purchase Our Products?

• Until recently, most firms looked solely at traditional Until recently, most firms looked solely at traditional channels of distribution, such as brokers, channels of distribution, such as brokers, wholesalers, and retailers. wholesalers, and retailers.

• Many other forms of distribution are available today, Many other forms of distribution are available today, most notably nonstore retailing, which includesmost notably nonstore retailing, which includes– vending machinesvending machines– door-to-door sellingdoor-to-door selling– direct marketing through catalogs or infomercialsdirect marketing through catalogs or infomercials– electronic merchandising through computers and interactive electronic merchandising through computers and interactive

televisiontelevision

3-17


+255-784-455 499+255-784-455 499 5555

WhenWhen Do Our Customers Do Our Customers Purchase Our Products?Purchase Our Products?

• The "when" question refers to any situational The "when" question refers to any situational influences that may cause customer purchasing influences that may cause customer purchasing activity to vary over time, including the seasonality activity to vary over time, including the seasonality of the firm's products and the variability in of the firm's products and the variability in purchasing activity caused by promotional events.purchasing activity caused by promotional events.

• The "when" question also includes more subtle The "when" question also includes more subtle influences that can affect purchasing behavior, such influences that can affect purchasing behavior, such asas– physical and social surroundingsphysical and social surroundings– time perceptionstime perceptions– the purchase taskthe purchase task– time of daytime of day– time available to search for alternativestime available to search for alternatives– what the purchase is intended to accomplish.what the purchase is intended to accomplish.

3-18


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Why (and How)Why (and How) Do Our Do Our Customers Select Our Products?Customers Select Our Products?

• The "why" question involves identifying the basic The "why" question involves identifying the basic need-satisfying benefits provided by the firm's need-satisfying benefits provided by the firm's products. products.

• The potential benefits provided by the features of The potential benefits provided by the features of competing products should also be analyzed.competing products should also be analyzed.

• It is also important to identify potential changes in It is also important to identify potential changes in customers' current needs and the needs that customers' current needs and the needs that customers may have in the future. customers may have in the future.

• The "how" part of this question refers to the means of The "how" part of this question refers to the means of payment that customers use when making a payment that customers use when making a purchase.purchase.

• How can we practice CRMHow can we practice CRM3-19


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Why Do Potential Customers Not Purchase the Organization’s Products?

• Noncustomers have a basic need that the product does not fulfill

• The product does not match noncustomers’ lifestyles or image

• Competing products have better features or benefits

• The product is too expensive for some customers

• Noncustomers may have high switching costs

• Noncustomers are simply unaware of the product’s existence

• Noncustomers have misconceptions about the product

• Poor distribution makes the product hard to find

3-20


+255-784-455 499+255-784-455 499 5858

Internal EnvironmentInternal Environment

• First, the marketing manager must First, the marketing manager must periodically assess the firm's current periodically assess the firm's current marketing goals, objectives, and performance. marketing goals, objectives, and performance.

• Second, the marketing manager should Second, the marketing manager should review the current and anticipated levels of review the current and anticipated levels of organizational resources that can be used for organizational resources that can be used for marketing purposes.marketing purposes.

• Finally, the marketing manager should review Finally, the marketing manager should review current and anticipated structural issues that current and anticipated structural issues that could affect marketing activities.could affect marketing activities.

3-21


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Collecting Environmental Data & Collecting Environmental Data & InformationInformation

• The marketing manager should invest time and The marketing manager should invest time and money to perform research to uncover data that is money to perform research to uncover data that is pertinent to the development of the marketing plan. pertinent to the development of the marketing plan. – This effort will always involve the collection of This effort will always involve the collection of secondary secondary

data,data, which is compiled inside or outside the organization which is compiled inside or outside the organization for some purpose other than the current analysis. for some purpose other than the current analysis.

– If the required data or information is not available, If the required data or information is not available, primary data primary data may have to be collected through marketing may have to be collected through marketing research.research.

– Accessing secondary data sources is usually preferable as a Accessing secondary data sources is usually preferable as a first option because they can be obtained more quickly and first option because they can be obtained more quickly and at less cost than collecting primary data.at less cost than collecting primary data.

3-22


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Sources of Environmental DataSources of Environmental Data

• Internal sourcesInternal sources may also be a good source of data on customer may also be a good source of data on customer needs, attitudes, and behavior. The organization's own records needs, attitudes, and behavior. The organization's own records are the best source of data on current objectives, performance, are the best source of data on current objectives, performance, and available resources. and available resources.

• The sheer volume of available information on the economy, our The sheer volume of available information on the economy, our population, and business activities is the major strength of most population, and business activities is the major strength of most government datagovernment data sources. sources.

• The The articles and research reportsarticles and research reports that are available in periodicals that are available in periodicals and books provide a gamut of information about many and books provide a gamut of information about many organizations, industries, and nations. organizations, industries, and nations.

• Commercial sourcesCommercial sources are almost always relevant to a specific are almost always relevant to a specific issue because they deal with the actual behaviors of customers in issue because they deal with the actual behaviors of customers in the marketplace.the marketplace.

• The best approach to secondary data collection is one that blends The best approach to secondary data collection is one that blends data and information from a variety of sources.data and information from a variety of sources.

• If needed secondary data is not available, out of date, inaccurate If needed secondary data is not available, out of date, inaccurate or unreliable, or irrelevant to the specific problem at hand, the or unreliable, or irrelevant to the specific problem at hand, the manager may have little choice but to collect primary data manager may have little choice but to collect primary data through marketing research. through marketing research.

3-23


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Overcoming Problems in Data Overcoming Problems in Data CollectionCollection

• One of the most common problems is an One of the most common problems is an incomplete or inaccurate assessment of the incomplete or inaccurate assessment of the situation for which data is being gathered to situation for which data is being gathered to address.address.

• Another common difficulty is the expense of Another common difficulty is the expense of collecting environmental data.collecting environmental data.

• A third issue is the time it takes to collect A third issue is the time it takes to collect environmental data.environmental data.

• A final challenge is finding a way to organize the A final challenge is finding a way to organize the vast amount of data and information that are vast amount of data and information that are collected during the environmental analysis. collected during the environmental analysis.

3-24


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CONCLUSIONCONCLUSION

• The need of the correct information for scanning the The need of the correct information for scanning the environment is vitalenvironment is vital

• The need of SLEEP-TIN is necessaryThe need of SLEEP-TIN is necessary

• The externalities are never static by dynamic AND…The externalities are never static by dynamic AND…

• The Macro environmental components need to be The Macro environmental components need to be interlinked.interlinked.


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MODULE 4:MODULE 4:CUSTOMERS’ ANALYSISCUSTOMERS’ ANALYSIS

Understand Who are your customers?Understand Who are your customers?

How to make value for them?How to make value for them?

How to communicate the value to them?How to communicate the value to them?

Motivate them and meet their unmet needs Motivate them and meet their unmet needs to delight themto delight them

Who affect and effect the buying decision?Who affect and effect the buying decision?

How to retein your costomers?How to retein your costomers?


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What We Need to Know What We Need to Know about Current and Potential about Current and Potential

CustomersCustomers

• Who buys and uses the productWho buys and uses the product

• What customers buy and how they use itWhat customers buy and how they use it

• Where customers buyWhere customers buy

• When customers buyWhen customers buy

• How customers chooseHow customers choose

• Why they prefer a productWhy they prefer a product

• How they respond to marketing programsHow they respond to marketing programs

• Will they buy it (again)?Will they buy it (again)?


+255-784-455 499+255-784-455 499 6565

Who Buys and Uses the Who Buys and Uses the ProductsProducts

• Initiator Initiator -who identifies the need for -who identifies the need for productproduct

• InfluencerInfluencer -who has informational or -who has informational or preference input to the decisionpreference input to the decision

• DeciderDecider –who makes the final decision –who makes the final decision through budget authorizationthrough budget authorization

• PurchaserPurchaser –who makes the actual –who makes the actual purchasepurchase

• UserUser


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Buying Roles and Buying Roles and Needs/Benefits SoughtNeeds/Benefits Sought


+255-784-455 499+255-784-455 499 6767

Categories for Describing Categories for Describing ConsumersConsumers

(SEGMENTATION)(SEGMENTATION)

1.1.DemographicDemographic

2.2.SocioeconomicSocioeconomic

3.3.PersonalityPersonality

4.4.Psychographics and valuesPsychographics and values


+255-784-455 499+255-784-455 499 6868

Major Segmentation Variables for Major Segmentation Variables for Business MarketsBusiness Markets

• DemographicDemographic

• Operating variablesOperating variables

• Purchasing approachesPurchasing approaches

• Situational factors Situational factors

• Personal characteristicsPersonal characteristics


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Major Segmentation Major Segmentation Variables for Business Variables for Business Markets: DemographicMarkets: Demographic•IndustryIndustry: :

– Which industries should we focus on?Which industries should we focus on?

•Company sizeCompany size: : – What size companies should we focus What size companies should we focus

on?on?

•LocationLocation: : – What geographic areas should we What geographic areas should we

focus on?focus on?


+255-784-455 499+255-784-455 499 7070

Major Segmentation Variables Major Segmentation Variables for Business Markets: Operating for Business Markets: Operating

VariablesVariables•TechnologyTechnology: :

– What customer technologies should we What customer technologies should we focus on?focus on?

•User/NonuserUser/Nonuser statusstatus: : – Should we focus on heavy, medium, Should we focus on heavy, medium,

light users or nonusers?light users or nonusers?•CustomerCustomer capabilitiescapabilities: :

– Should we focus on customers needing Should we focus on customers needing many or few services?many or few services?


+255-784-455 499+255-784-455 499 7171

Major Segmentation Variables for Major Segmentation Variables for Business Markets: Purchasing Business Markets: Purchasing

ApproachesApproaches•Purchasing-function organizations:Purchasing-function organizations:

– Should we focus on companies with highly centralized Should we focus on companies with highly centralized or decentralized purchasing organizations?or decentralized purchasing organizations?

•Power structure:Power structure: – Should we focus on companies that are engineering Should we focus on companies that are engineering

dominated, financially dominated, etc.?dominated, financially dominated, etc.?•Nature of existing relationships:Nature of existing relationships:

– Should we focus on companies with which we have Should we focus on companies with which we have strong relationships or simply go after the most strong relationships or simply go after the most desirable companies?desirable companies?

•General purchase policies: General purchase policies: – Should we focus on companies that prefer leasing? Should we focus on companies that prefer leasing?

Service contracts? Systems purchases? Sealed Service contracts? Systems purchases? Sealed bidding?bidding?

•Purchasing criteria:Purchasing criteria: – Should we focus on companies that are seeking quality? Should we focus on companies that are seeking quality?

Service? Price?Service? Price?


+255-784-455 499+255-784-455 499 7272

Major Segmentation Variables Major Segmentation Variables for Business Markets: for Business Markets:

Situational FactorsSituational Factors•UrgencyUrgency: :

– Should we focus on companies that need Should we focus on companies that need quick and sudden delivery or service?quick and sudden delivery or service?

•SpecificSpecific applicationapplication: : – Should we focus on certain applications of Should we focus on certain applications of

our product rather than all applications?our product rather than all applications?

•SizeSize ofof orderorder: : – Should we focus on large or small orders?Should we focus on large or small orders?


+255-784-455 499+255-784-455 499 7373

Major Segmentation Variables for Major Segmentation Variables for Business Markets: Personal Business Markets: Personal

CharacteristicsCharacteristics

•Buyer-Seller similarityBuyer-Seller similarity: : – Should we focus on companies whose Should we focus on companies whose

people and values are similar to ours?people and values are similar to ours?

•Attitudes toward riskAttitudes toward risk: : – Should we focus on risk-taking or risk Should we focus on risk-taking or risk

avoiding customers?avoiding customers?

•LoyaltyLoyalty: : – Should we focus on companies that Should we focus on companies that

show high loyalty to their suppliers?show high loyalty to their suppliers?


+255-784-455 499+255-784-455 499 7474

Sources of Customer ValueSources of Customer Value

• EconomicEconomic::– The economic benefit a customer derives from The economic benefit a customer derives from

using a productusing a product• FunctionalFunctional::

– Those aspects of a product that provide Those aspects of a product that provide functional or utilitarian benefits to customersfunctional or utilitarian benefits to customers

•PsychologicalPsychological: : – The image of the product, including how the The image of the product, including how the

product “feels” and whether that feeling product “feels” and whether that feeling matches the image the customer wants to matches the image the customer wants to projectproject


+255-784-455 499+255-784-455 499 7575

Measuring Brand EquityMeasuring Brand Equity1.1. Awareness:Awareness:

Being aware of a brand is usually a requirement for its purchase and Being aware of a brand is usually a requirement for its purchase and tends to lead to more favorable opinions by reducing the risk tends to lead to more favorable opinions by reducing the risk associated with a familiar option.associated with a familiar option.

2.2. Associations:Associations: Images related to overall quality as well as specific product Images related to overall quality as well as specific product attributes and user characteristics affect the reaction to a brand.attributes and user characteristics affect the reaction to a brand.

3.3. Attitude:Attitude: Overall favorability toward a brand is a critical part of brand equity.Overall favorability toward a brand is a critical part of brand equity.

4.4. Attachment:Attachment: Loyalty to a brand is the strongest type of equity, and most Loyalty to a brand is the strongest type of equity, and most beneficial for sellers. beneficial for sellers.

5.5. Activity:Activity: The strongest fans of a brand become advocates. The strongest fans of a brand become advocates.


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Manifestations of Customer Manifestations of Customer ValueValue• Price.Price.

– Price is the company’s assessment of the product’s value.Price is the company’s assessment of the product’s value.

• Price sensitivity.Price sensitivity.

– A product with constant sales when prices increase generally is of A product with constant sales when prices increase generally is of greater value than one for which demand slumps. greater value than one for which demand slumps.

• Satisfaction.Satisfaction. – Survey-based satisfaction measures are standard practice in my Survey-based satisfaction measures are standard practice in my

business.business.

• Complaints and compliments.Complaints and compliments. – The number of complaints or compliments the company receives The number of complaints or compliments the company receives

indicates the product’s value.indicates the product’s value.

• Word-of-mouth.Word-of-mouth.

– Although often difficult to track, spoken and written comments Although often difficult to track, spoken and written comments provide a useful subjective assessment of a product’s value.provide a useful subjective assessment of a product’s value.


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Manifestations of Customer Manifestations of Customer Value cont.Value cont.

• Margin/profit contribution.Margin/profit contribution. – Generally, higher margins indicates partially monopolistic Generally, higher margins indicates partially monopolistic

positions due to greater communicated value. positions due to greater communicated value.

• Dollar sales.Dollar sales. – Total dollar sales provide an aggregate measure of the value Total dollar sales provide an aggregate measure of the value

of a product as assessed by the market. of a product as assessed by the market.

• Competitive activity.Competitive activity. – Competitive activity such as new-product introductions Competitive activity such as new-product introductions

indicates that the total gap between customer value and indicates that the total gap between customer value and company costs is sufficiently large to allow for profits even company costs is sufficiently large to allow for profits even when more companies divide the market.when more companies divide the market.

• Repeat purchase rate.Repeat purchase rate. – High loyalty indicates high brand value. High loyalty indicates high brand value.


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Assessing the Value of the Product Assessing the Value of the Product CategoryCategory

1.1. Determine the uses of the productDetermine the uses of the product

2.2. Estimate the importance of the usesEstimate the importance of the uses

3.3. List competing products for the usesList competing products for the uses

4.4. Determine the relative effectiveness Determine the relative effectiveness of the product category in each of the product category in each usage situationusage situation


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Desirable Criteria for Desirable Criteria for SegmentsSegments

• SizeableSizeable

• IdentifiableIdentifiable

• ReachableReachable

• Respond differentlyRespond differently

• CoherentCoherent

• Stable Stable


+255-784-455 499+255-784-455 499 8080

Major Uses of Potential Major Uses of Potential EstimatesEstimates

1.1.To make entry / exit decisionsTo make entry / exit decisions

2.2.To make resource level decisionsTo make resource level decisions

3.3.To make location and other To make location and other resource allocation decisionsresource allocation decisions

4.4.To set objectives and evaluate To set objectives and evaluate performanceperformance

5.5.As an input to forecastsAs an input to forecasts


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Useful Sources for Potential Useful Sources for Potential EstimatesEstimates

• Government Sources Government Sources

• Trade AssociationsTrade Associations

• Private CompaniesPrivate Companies

• Financial and Industry AnalystsFinancial and Industry Analysts

• Popular PressPopular Press

• The InternetThe Internet


+255-784-455 499+255-784-455 499 8282

New or Growing Product New or Growing Product PotentialPotential

• Relative AdvantageRelative Advantage– Is the new product superior in key benefits?Is the new product superior in key benefits?– To what degree?To what degree?

• CompatibilityCompatibility– What level of change is required to understand What level of change is required to understand

and use a new product?and use a new product?– For customers? Intermediaries? The company?For customers? Intermediaries? The company?

• RiskRisk– How great is the risk involved?How great is the risk involved?– What is the probability someone will buy a new What is the probability someone will buy a new

product?product?


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Methods of Estimating Market Methods of Estimating Market and Sales Potentialand Sales Potential

• Analysis-Based EstimatesAnalysis-Based Estimates1.1. Determine the potential buyers or Determine the potential buyers or

users of the productusers of the product

2.2. Determine how many are in each Determine how many are in each potential group of buyers defined by potential group of buyers defined by step 1step 1

3.3. Estimate the purchasing or usage rateEstimate the purchasing or usage rate


+255-784-455 499+255-784-455 499 8484

How Are Sales Forecasts How Are Sales Forecasts Used?Used?

1.1.To answer “what if” questionsTo answer “what if” questions

2.2.To help set budgetsTo help set budgets

3.3.To provide a basis for a To provide a basis for a monitoring systemmonitoring system

4.4.To aid in production planningTo aid in production planning

5.5.By financial analysts to value a By financial analysts to value a companycompany


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• The knowledge of customers is paramountThe knowledge of customers is paramount• Understand what customers are buying Understand what customers are buying • Why do they buy from you?Why do they buy from you?• How do they make the buying decisionHow do they make the buying decision• Make customers your part time marketersMake customers your part time marketers• Retain the customers as it is cheaper Retain the customers as it is cheaper

thank new…..ANDthank new…..AND• Integrate Technology in managing your Integrate Technology in managing your

customers.customers.


COMPETITORS ANDCOMPETITORS ANDMARKET ANAYSISMARKET ANAYSIS

COMPETITORS ANDCOMPETITORS ANDMARKET ANAYSISMARKET ANAYSIS

Module 5Module 5

Opportunities, Threats, Industry Opportunities, Threats, Industry Competition, and Competitor Competition, and Competitor

AnalysisAnalysis

Module 5Module 5

Opportunities, Threats, Industry Opportunities, Threats, Industry Competition, and Competitor Competition, and Competitor

AnalysisAnalysis

……………………………………….……………………………………….


+255-784-455 499+255-784-455 499 8787

Political/Legal

Political/Legal

EconomicEconomic

TechnologicalTechnological

GlobalGlobal

DemographicDemographicSocioculturalSociocultural

CompetitiveCompetitiveEnvironmentEnvironment

Industry Environment


Components of the General EnvironmentComponents of the General Environment


+255-784-455 499+255-784-455 499 8888

SWOT AnalysisSWOT Analysis

• StrengthsStrengths

• WeaknessesWeaknesses

• Opportunities Opportunities

• ThreatsThreats


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The purpose of SWOT The purpose of SWOT AnalysisAnalysis

• It is an easy-to-use tool for It is an easy-to-use tool for developing an overview of a developing an overview of a companycompany’’s strategic situations strategic situation– It forms a basis for matching your It forms a basis for matching your

companycompany’’s strategy to its situations strategy to its situation


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SWOT is the starting SWOT is the starting pointpoint

• It provides an overview of the It provides an overview of the strategic situation.strategic situation.

• It provides the It provides the ““raw materialraw material”” to do to do more extensive internal and more extensive internal and external analysis.external analysis.


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OpportunitiesOpportunities

• An OPPORTUNITY is a chance for An OPPORTUNITY is a chance for firm growth or progress due to a firm growth or progress due to a favorable juncture of circumstances favorable juncture of circumstances in the business environment.in the business environment.

• Possible Opportunities:Possible Opportunities:– Emerging customer needsEmerging customer needs– Quality ImprovementsQuality Improvements– Expanding global marketsExpanding global markets– Vertical Integration Vertical Integration


+255-784-455 499+255-784-455 499 9292

ThreatsThreats

• A THREAT is a factor in your A THREAT is a factor in your companycompany’’s external environment that s external environment that poses a danger to its well-being.poses a danger to its well-being.

• Possible Threats:Possible Threats:– New entry by competitorsNew entry by competitors– Changing demographics/shifting demandChanging demographics/shifting demand– Emergence of cheaper technologiesEmergence of cheaper technologies– Regulatory requirementsRegulatory requirements


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Opportunities and Threats Opportunities and Threats form a basis for EXTERNAL form a basis for EXTERNAL analysisanalysis

• By examining opportunities, you can By examining opportunities, you can discover untapped markets, and new discover untapped markets, and new products or technologies, or identify products or technologies, or identify potential avenues for diversification.potential avenues for diversification.

• By examining threats, you can identify By examining threats, you can identify unfavorable market shifts or changes unfavorable market shifts or changes in technology, and create a defensive in technology, and create a defensive posture aimed at preserving your posture aimed at preserving your competitive position.competitive position.


+255-784-455 499+255-784-455 499 9494

The purpose of The purpose of Five-Forces AnalysisFive-Forces Analysis

• The five forces are environmental The five forces are environmental forces that impact on a companyforces that impact on a company’’s s ability to compete in a given market.ability to compete in a given market.

• The purpose of five-forces analysis is The purpose of five-forces analysis is to diagnose the principal competitive to diagnose the principal competitive pressures in a market and assess pressures in a market and assess how strong and important each one how strong and important each one is.is.


+255-784-455 499+255-784-455 499 9595

Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition


+255-784-455 499+255-784-455 499 9696

Threat of New EntrantsThreat of New Entrants

Barriers to Entry

Barriers to Entry

Expected RetaliationExpected Retaliation

Government PolicyGovernment Policy

Economies of ScaleEconomies of Scale

Product DifferentiationProduct Differentiation

Capital RequirementsCapital Requirements

Switching CostsSwitching Costs

Access to Distribution ChannelsAccess to Distribution Channels

Cost Disadvantages Independent Cost Disadvantages Independent of Scaleof Scale


+255-784-455 499+255-784-455 499 9797

Bargaining Power of Suppliers


Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants



+255-784-455 499+255-784-455 499 9898

Bargaining Power of SuppliersBargaining Power of Suppliers

Suppliers exert power in the industry by:Suppliers exert power in the industry by:

* Threatening to raise* Threatening to raiseprices or to reduce qualityprices or to reduce quality

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:

Supplier industry is dominated by a Supplier industry is dominated by a few firmsfew firms

Suppliers’ products have few substitutesSuppliers’ products have few substitutes

Buyer is not an important customer to Buyer is not an important customer to suppliersupplier

Suppliers’ product is an important Suppliers’ product is an important input to buyers’ productinput to buyers’ product

Suppliers’ products are differentiatedSuppliers’ products are differentiated

Suppliers’ products have high Suppliers’ products have high switching costsswitching costs

Supplier poses credible threat of Supplier poses credible threat of forward integrationforward integration


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Bargaining Power of Buyers


Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants





+255-784-455 499+255-784-455 499 100100

Bargaining Power of BuyersBargaining Power of Buyers

Buyers compete with the supplying

industry by:

Buyers compete with the supplying

industry by:

* Bargaining down prices* Bargaining down prices

* Forcing higher quality* Forcing higher quality

* Playing firms off of* Playing firms off ofeach othereach other

Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases Buyers are concentrated or purchases are large relative to seller’s salesare large relative to seller’s sales

Purchase accounts for a significant Purchase accounts for a significant fraction of supplier’s salesfraction of supplier’s sales

Products are undifferentiatedProducts are undifferentiated

Buyers face few switching costsBuyers face few switching costs

Buyers’ industry earns low profitsBuyers’ industry earns low profits

Buyer presents a credible threat of Buyer presents a credible threat of backward integrationbackward integration

Product unimportant to qualityProduct unimportant to quality

Buyer has full informationBuyer has full information


+255-784-455 499+255-784-455 499 101101

Threat of Substitute Products


Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants







+255-784-455 499+255-784-455 499 102102

Threat of Substitute ProductsThreat of Substitute Products

Products with similar function limit the prices firms can charge

Products with similar function limit the prices firms can charge

Keys to evaluate substitute products:Keys to evaluate substitute products:

Products with improving Products with improving price/performance tradeoffs price/performance tradeoffs relative to present industry relative to present industry productsproducts

Example:Example:

Electronic security systems in Electronic security systems in place of security guardsplace of security guards

Fax machines in place of Fax machines in place of overnight mail deliveryovernight mail delivery


+255-784-455 499+255-784-455 499 103103



Threat of New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Rivalry Among Competing Firms

in Industry

Rivalry Among Competing Firms

in Industry







+255-784-455 499+255-784-455 499 104104

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:Intense rivalry often plays out in the following ways:

Jockeying for strategic positionJockeying for strategic position

Using price competitionUsing price competition

Staging advertising battlesStaging advertising battles

Making new product introductionsMaking new product introductions

Increasing consumer warranties or serviceIncreasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunityOccurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse offPrice competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but Advertising battles may increase total industry demand, but may be costly to smaller competitorsmay be costly to smaller competitors


+255-784-455 499+255-784-455 499 105105

CutthroatCutthroat competitioncompetition is more likely to occur when: is more likely to occur when:

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Numerous or equally balanced competitorsNumerous or equally balanced competitors

Slow growth industrySlow growth industry

High fixed costsHigh fixed costs

Lack of differentiation or switching costsLack of differentiation or switching costs

High storage costsHigh storage costs

Capacity added in large incrementsCapacity added in large increments

High strategic stakesHigh strategic stakes

High exit barriersHigh exit barriers

Diverse competitorsDiverse competitors


+255-784-455 499+255-784-455 499 106106

The Five Forces are The Five Forces are Unique to Your IndustryUnique to Your Industry

• Five-Forces Analysis is a Five-Forces Analysis is a framework for analyzing a framework for analyzing a particular industry.particular industry.– Yet, the five forces affect all the other Yet, the five forces affect all the other

businesses in that industry.businesses in that industry.


+255-784-455 499+255-784-455 499 107107

Competitor AnalysisCompetitor Analysis

The follow-up to Industry Analysis is The follow-up to Industry Analysis is effective analysis of a firm’s effective analysis of a firm’s CompetitorsCompetitors

CompetitiveCompetitiveEnvironmentEnvironment




+255-784-455 499+255-784-455 499 108108


AssumptionsAssumptionsWhat assumptions do our competitors hold about the future of industry and themselves?

Current StrategyCurrent StrategyDoes our current strategy support changes in the competitive environment?

Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?

CapabilitiesCapabilitiesHow do our capabilities compare to our competitors?

ResponseResponseWhat will our competitors do in the future?

What will our competitors do in the future?

Where do we have a competitive advantage?

Where do we have a competitive advantage?

How will this change our relationship with our competition?



+255-784-455 499+255-784-455 499 109109


How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?

What is the attitude toward risk?What is the attitude toward risk?

What Drives the competitor?



+255-784-455 499+255-784-455 499 110110

What is the competitor doing?

What can the competitor do?




Current StrategyCurrent StrategyHow are we currently competing?How are we currently competing?

Does this strategy support changes in the competitive structure?

Does this strategy support changes in the competitive structure?



+255-784-455 499+255-784-455 499 111111

What does the competitor believe about itself and the industry?





Does this strategy support changes in the competition structure?


Do we assume the future will be volatile?Do we assume the future will be volatile?

Are we assuming stable competitive conditions?Are we assuming stable competitive conditions?

What assumptions do our competitors hold about the industry and themselves?


AssumptionsAssumptions



+255-784-455 499+255-784-455 499 112112

What are the competitor’s capabilities?








Are we operating under a status quo?Are we operating under a status quo?




What are my competitors’ strengths and weaknesses?What are my competitors’ strengths and weaknesses?

How do our capabilities compare to our competitors?


CapabilitiesCapabilities



+255-784-455 499+255-784-455 499 113113








Are we operating under a status quo?Are we operating under a status quo?




ResponseResponseWhat will our competitors do in the future?What will our competitors do in the future?

Where do we have a competitive advantage?Where do we have a competitive advantage?




What are my competitors’ strengths and weaknesses?What are my competitors’ strengths and weaknesses?





+255-784-455 499+255-784-455 499 114114


• Know your competitors as you know Know your competitors as you know yourselfyourself

• Create and sustain your competitive Create and sustain your competitive AdvantageAdvantage

• The Market size matters! Take the The Market size matters! Take the advantage of it. AND…advantage of it. AND…

• The Key success Factors will give you The Key success Factors will give you the core competencies hence a the core competencies hence a competitive Advantagecompetitive Advantage


+255-784-455 499+255-784-455 499 115115

Module 6Module 6INTERNAL Vs. External INTERNAL Vs. External

Analysis Analysis MissionMissionVisionVisionValuesValuesSWOT AnalysisSWOT AnalysisStrategic PlanningStrategic Planning

Does it work? Is it worth it?Does it work? Is it worth it?


+255-784-455 499+255-784-455 499 116116

Sustainability of a Sustainability of a Competitive AdvantageCompetitive Advantage

• Sustainability of a competitive advantage Sustainability of a competitive advantage is a function of:is a function of:– the rate of core-competence obsolescence due the rate of core-competence obsolescence due

to environmental changesto environmental changes– the availability of substitutes for the core the availability of substitutes for the core

competencecompetence– the imitability of the core competencethe imitability of the core competence


+255-784-455 499+255-784-455 499 117117

ExternalExternal and Internal and Internal AnalysesAnalyses

General

General

Env

iron

men

t

Env

iron

men

t

GeneralGeneral

EnvironmentEnvironment

Gen

eral

Gen

eral

Environm

ent

Environm

ent

SocioculturalSociocultural

Global

Global

TechnologicalTechnological

Polit

ical

/Leg

al

Polit

ical

/Leg

al

Dem

ogra

phic

Dem

ogra

phic Econom

ic

Economic

IndustryIndustryEnvironmentEnvironment

CompetitorCompetitorEnvironmentEnvironment

By studying the external By studying the external environment, firms identify environment, firms identify what they what they might choose to domight choose to do

Opportunities and threatsOpportunities and threats


+255-784-455 499+255-784-455 499 118118

ExternalExternal and Internal and Internal AnalysesAnalyses

By studying the internal By studying the internal environment, firms identify environment, firms identify what they what they can docan do

Unique resources, Unique resources, capabilities, and core capabilities, and core competenciescompetencies

(sustainable competitive (sustainable competitive advantage)advantage)

External and External and InternalInternal AnalysesAnalyses


+255-784-455 499+255-784-455 499 119119

Challenge of Internal Challenge of Internal AnalysisAnalysis• How do we effectively manage current How do we effectively manage current

core competencies while simultaneously core competencies while simultaneously developing new ones?developing new ones?

• How do we assemble bundles of How do we assemble bundles of resources, capabilities and core resources, capabilities and core competencies to create value for competencies to create value for customers?customers?

• How do we learn to change rapidly?How do we learn to change rapidly?


+255-784-455 499+255-784-455 499 120120

Three Conditions Affecting Three Conditions Affecting Managerial Decisions About Managerial Decisions About Resources, Capabilities, and Resources, Capabilities, and Core CompetenciesCore Competencies

• UncertaintyUncertainty regarding characteristics of the regarding characteristics of the general and the industry environments, general and the industry environments, competitors’ actions, and customers’ preferencescompetitors’ actions, and customers’ preferences

• ComplexityComplexity regarding the interrelated causes regarding the interrelated causes shaping a firm’s environments and perceptions of shaping a firm’s environments and perceptions of the environmentsthe environments

• Intraorganizational ConflictsIntraorganizational Conflicts among among people making managerial decisions and those people making managerial decisions and those affected by themaffected by them


+255-784-455 499+255-784-455 499 121121

Components ofComponents ofInternal AnalysisInternal Analysis

Discovering CoreDiscovering CoreCompetenciesCompetencies

ResourcesResources• TangibleTangible• IntangibleIntangible


CoreCoreCompetenciesCompetencies

CompetitiveCompetitiveAdvantageAdvantage

StrategicStrategicCompetitivenessCompetitiveness

Four CriteriaFour Criteriaof Sustainableof SustainableAdvantagesAdvantages

• ValuableValuable• RareRare• Costly to ImitateCostly to Imitate• NonsubstitutableNonsubstitutable

ValueValueChainChain

AnalysisAnalysis

• OutsourceOutsource


+255-784-455 499+255-784-455 499 122122



Resources are what a firm has Resources are what a firm has to work with--its assets--to work with--its assets--including its people and the including its people and the value of its brand namevalue of its brand name

Resources represent inputs into Resources represent inputs into a firm’s production process... a firm’s production process... such as capital equipment, skills such as capital equipment, skills of employees, brand names, of employees, brand names, finances and talented managersfinances and talented managers


+255-784-455 499+255-784-455 499 123123



Tangible ResourcesTangible Resources• FinancialFinancial• PhysicalPhysical• Human resourcesHuman resources• OrganizationalOrganizational

Intangible ResourcesIntangible Resources• TechnologicalTechnological• InnovationInnovation• ReputationReputation


+255-784-455 499+255-784-455 499 124124



Capabilities become important when they are combined Capabilities become important when they are combined in unique combinations which create core competencies in unique combinations which create core competencies which have strategic value and can lead to competitive which have strategic value and can lead to competitive advantageadvantage


+255-784-455 499+255-784-455 499 125125



Capabilities are what a firm does, and represent the firm’s Capabilities are what a firm does, and represent the firm’s capacity or ability to integrate individual firm resources to capacity or ability to integrate individual firm resources to achieve a desired objectiveachieve a desired objective


+255-784-455 499+255-784-455 499 126126


CoreCoreCompetenciesCompetencies

Core competencies are resources and capabilities that serve Core competencies are resources and capabilities that serve as a source of competitive advantage over rivalsas a source of competitive advantage over rivals

Core competencies distinguish a company competitively Core competencies distinguish a company competitively and make it distinctiveand make it distinctive

McKinsey and Co. recommends using three to four McKinsey and Co. recommends using three to four competencies when framing strategic actionscompetencies when framing strategic actions


+255-784-455 499+255-784-455 499 127127




Valuable: Capabilities that help a firm neutralize threats or Valuable: Capabilities that help a firm neutralize threats or exploit opportunitiesexploit opportunities


+255-784-455 499+255-784-455 499 128128




Rare: Capabilities that are not possessed by many othersRare: Capabilities that are not possessed by many others


+255-784-455 499+255-784-455 499 129129




Costly to imitate: capabilities that other firms cannot Costly to imitate: capabilities that other firms cannot develop easily, usually due todevelop easily, usually due to

• Unique historical conditionsUnique historical conditions• Causal ambiguityCausal ambiguity• Social complexitySocial complexity


+255-784-455 499+255-784-455 499 130130




Nonsubstitutable: capabilities that do not have strategic Nonsubstitutable: capabilities that do not have strategic equivalentsequivalents

• Invisible to competitorsInvisible to competitors• Firm specific knowledgeFirm specific knowledge• Trust-based working relationships between managers Trust-based working relationships between managers

and nonmanagerial personneland nonmanagerial personnel


+255-784-455 499+255-784-455 499 131131

Core Competence as a Core Competence as a Strategic CapabilityStrategic Capability

ResourcesResources• Inputs to a firm’s Inputs to a firm’s

production processproduction process

CapabilityCapability• A nonstrategicA nonstrategic

team or resourceteam or resource

Core CompetenceCore Competence• A strategicA strategic

capabilitycapability

The source ofThe source of

Does it satisfy the Does it satisfy the criteria of sustainable criteria of sustainable competitive competitive advantage?advantage?

YesYes

NoNo

CapabilityCapability• An integration of aAn integration of a

team of resourcesteam of resources


+255-784-455 499+255-784-455 499 132132

ServiceService

Marketing & SalesMarketing & Sales

Outbound LogisticsOutbound Logistics

OperationsOperations

Inbound LogisticsInbound LogisticsFirm

Inf

rast

ruct

ure

Firm

Inf

rast

ruct

ure

Hum

an R

esou

rce

Mgm

t.H

uman

Res

ourc

e M

gmt.

Tec

hnol

ogic

al D

evel

opm

ent

Tec

hnol

ogic

al D

evel

opm

ent

Pro

cure

men

tP

rocu

rem

ent

Margin Margin

Primary ActivitiesPrimary Activities

Sup

port

Act

ivit

ies

Sup

port

Act

ivit

ies

The BasicThe BasicValue ChainValue Chain


+255-784-455 499+255-784-455 499 133133

Margin

Margin Margin

Margin

Primary ActivitiesPrimary Activities

Su

ppo

rt A

ctiv

ities

Su

ppo

rt A

ctiv

ities

OutsourcingOutsourcing

Outsourcing is the Outsourcing is the purchase of some or purchase of some or all of a value-all of a value-creating activity creating activity from an external from an external suppliersupplier

Usually this is Usually this is because the specialty because the specialty supplier can provide supplier can provide these functions more these functions more efficientlyefficiently

ServiceService

Marketing & SalesMarketing & Sales

Outbound LogisticsOutbound Logistics

OperationsOperations

Inbound LogisticsInbound LogisticsFir

m In

fra

stru

ctu

reF

irm

Infr

ast

ruct

ure

Hu

ma

n R

eso

urce

Mg

mt.

Hu

ma

n R

eso

urce

Mg

mt.

Te

chn

olo

gica

l Dev

elo

pm

en

tT

ech

nol

ogi

cal D

eve

lop

me

nt

Pro

cure

me

nt

Pro

cure

me

nt


+255-784-455 499+255-784-455 499 134134

Strategic Rationales for Strategic Rationales for OutsourcingOutsourcing• Improve Business FocusImprove Business Focus

– lets company focus on broader business issues lets company focus on broader business issues by having outside experts handle various by having outside experts handle various operational detailsoperational details

• Provide Access to World-Class CapabilitiesProvide Access to World-Class Capabilities– the specialized resources of outsourcing the specialized resources of outsourcing

providers makes world-class capabilities providers makes world-class capabilities available to firms in a wide range of available to firms in a wide range of applicationsapplications


+255-784-455 499+255-784-455 499 135135

Strategic Rationales for Strategic Rationales for OutsourcingOutsourcing• Accelerate Business Re-Engineering Accelerate Business Re-Engineering

BenefitsBenefits– achieves re-engineering benefits more quickly achieves re-engineering benefits more quickly

by having outsiders--who have already by having outsiders--who have already achieved world-class standards--take over achieved world-class standards--take over processprocess

• Share RisksShare Risks– reduces investment requirements and makes reduces investment requirements and makes

firm more flexible, dynamic and better able to firm more flexible, dynamic and better able to adapt to changing opportunitiesadapt to changing opportunities


+255-784-455 499+255-784-455 499 136136

Core Competencies: Core Competencies: Cautions and RemindersCautions and Reminders

• Never take for granted that core Never take for granted that core competencies will continue to provide a competencies will continue to provide a source of competitive advantagesource of competitive advantage

• All core competencies have the potential All core competencies have the potential to become to become core rigiditiescore rigidities

• Core rigidities are former core Core rigidities are former core competencies that now generate inertia competencies that now generate inertia and stifle innovationand stifle innovation


+255-784-455 499+255-784-455 499 137137

Applying it to your Applying it to your Career/OrganizationCareer/Organization

• What is your core competence?What is your core competence?

• Where does leadership fit?Where does leadership fit?

• Is it really as complicated as theory Is it really as complicated as theory makes it sound – e.g., small makes it sound – e.g., small business?business?

• Where do core competences Where do core competences originate?originate?


+255-784-455 499+255-784-455 499 138138

CONCLUSIONCONCLUSION

• Internal analysis and External are Internal analysis and External are somehow interrelatedsomehow interrelated

• Resource base and capabilities are Resource base and capabilities are necessary for a stable internal necessary for a stable internal environment, ANDenvironment, AND

• Good management team is the best Good management team is the best starting point to give a signal of starting point to give a signal of internal capability/core compenetciesinternal capability/core compenetcies


Module 7Module 7MANAGING THE MARKETING MANAGING THE MARKETING

STRATEGIESSTRATEGIES

Dr. Elisante ole GabrielDr. Elisante ole Gabriel


+255-784-455 499+255-784-455 499 140140

CORPORATE STRATEGY

Deciding the Scopeand Purpose ofthe Business

Business Objectives

Actions and Resources for Achieving Objectives


+255-784-455 499+255-784-455 499 141141

CCHARACTERISTICS OF HARACTERISTICS OF SSUCCESSFUL UCCESSFUL

SSTRATEGYTRATEGY

Unique competitive position for Unique competitive position for the company.the company.

Activities tailored to strategy.Activities tailored to strategy.Clear trade-offs and choices Clear trade-offs and choices

vis-à-vis competitors.vis-à-vis competitors.Competitive advantage arises Competitive advantage arises

from fit across activities.from fit across activities.Sustainability comes from the Sustainability comes from the

activity system not the parts.activity system not the parts.Operational effectiveness a given.Operational effectiveness a given.


+255-784-455 499+255-784-455 499 142142

ORGANIZATIONAL CHANGE

Vertical Disaggregation

Internal Redesign

New Organizational Forms


+255-784-455 499+255-784-455 499 143143

CCORPORATE ORPORATE SSTRATEGY TRATEGY CCOMPONENTSOMPONENTS

Management’s long-term vision Management’s long-term vision for the corporationfor the corporation

ObjectivesObjectivesAssets, skills, and capabilitiesAssets, skills, and capabilitiesBusinesses in which the Businesses in which the

corporation competescorporation competesStructure, systems, and processesStructure, systems, and processesCreation of valueCreation of value


+255-784-455 499+255-784-455 499 144144

MARKETING STRATEGY PROCESS

SituationAnalysis

MarketingProgram

Development

Implementingand Managing

MarketingStrategy

DesigningMarketingStrategy


+255-784-455 499+255-784-455 499 145145

SSITUATION ITUATION AANALYSISNALYSIS

MarketVision, Structure,

and Analysis

ContinuousLearning

AboutMarkets

SegmentingMarkets


+255-784-455 499+255-784-455 499 146146

Designing Market-Driven Strategies

RelationshipStrategies

Market Targetingand StrategicPositioning

Planningfor NewProducts


+255-784-455 499+255-784-455 499 147147

Positioning Strategy Development

Productstrategy

Distributionstrategy

Promotionstrategy

Pricestrategy

Markettarget

Positioning strategy


+255-784-455 499+255-784-455 499 148148

Implementing andManaging Market-Driven

Strategy

Designing Effective Market-Driven Organizations

Strategy Implementation and Control


MMARKETING ARKETING PPLAN LAN

OOUTLINEUTLINE

I.I. Strategic Situation SummaryStrategic Situation Summary

Summarize the key points from your situation Summarize the key points from your situation analysis (marketanalysis (marketanalysis, segments, industry/competition) in analysis, segments, industry/competition) in order to recount theorder to recount themajor events and provide information to better major events and provide information to better understand theunderstand thestrategies outlined in the marketing plan.strategies outlined in the marketing plan.


+255-784-455 499+255-784-455 499 150150

II. Market-Targets and Objectives

The market target may be defined demographically (key characteristics only), geographically, or in social/economic terms. Each market target should have needs and wants that differ to some degree from other targets. These differences may be with respect to types of products purchased, use situation, frequency of purchase, and other variations that indicate a need to alter the positioning strategy to fit the needs and wants of each target. An objective is a quantified goal identifying what is expected when. It specifies the end results expected. The objectives should be written for each target market. Objectives should also be included for the following program components: (1) product, (2) price, (3) distribution, (4) promotion (salesforce, advertising,sales promotion, and public relations), and (5) technical services.


+255-784-455 499+255-784-455 499 151151

III. Positioning Statements

Write statements that describe how you want each market target to perceive each product relative to competition. State the core concept used to position the product (brand) in the eyes and mind of the targeted buyer. The positioning statement should describe: (1) What criteria or benefits the customer considers when buying a product along with the level of importance, (2) What we offer that differentiates our product from competition, and (3) The limitations of competitive products.


+255-784-455 499+255-784-455 499 152152

IV. Market Mix Strategy for Each Market Target

A. Product Strategy

Identify how each product fits the market target. Other issues that may be addressed would be new product suggestions, adjustments in the mix of existing products, and productdeletion candidates.

B. Price Strategy

The overall pricing strategy (I.e., competitive, premium-priced,etc.) should be identified along with a cost/benefit analysis ifapplicable. Identify what role you want price to play, i.e.,increase share, maintenance, etc.


+255-784-455 499+255-784-455 499 153153

C. Distribution Strategy

Describe specific distribution strategies for each market target. Issues to be addressed are intensity of distribution (market coverage), how distribution will be accomplished, and assistance provided to distributors. The role of the sales force in distribution strategy should also be considered.


+255-784-455 499+255-784-455 499 154154

D. Promotion Strategy

Promotion strategy is used to initiate and maintain a flow of communication between the company and the market target. To assist in developing the communications program, the attributes or benefits of our product should be identified for each market target. How our product differs from competition (competitive advantage) should be listed. The sales force’s responsibilities in fulfilling the market plan must be integrated into the promotion strategy. Strategies should be listed for(1) personal selling, (2) advertising, (3) sales promotion, and(4) public relations.


+255-784-455 499+255-784-455 499 155155

E. Marketing Research

Describe the market research problem and the kind of information needed. Include a statement which addresseswhy this information is needed. The specific marketresearch strategies can be written once the above twosteps have been followed.

V. Coordination with Other Business Functions

Indicate other departments/functions that haveresponsibilities for implementing the marketing plan.

VI. Sales Forecasts and Budgets

VII. Contingency Plans

Indicate how your plans should be modified if eventsshould occur that are different from those assumedin the plan.


Module 8Module 8Market Driven StrategyMarket Driven Strategy

A Case of SWA)A Case of SWA)

Dr. Elisante ole GabrielDr. Elisante ole Gabriel


+255-784-455 499+255-784-455 499 157157

SSOUTHWEST OUTHWEST AAIRLINESIRLINES Point-to-Point StrategyPoint-to-Point Strategy On-Time ServiceOn-Time Service High Aircraft UtilizationHigh Aircraft Utilization Market-Oriented CultureMarket-Oriented Culture Low Operating ExpensesLow Operating Expenses Lowest debt to capital ration of Lowest debt to capital ration of

the major airlines.the major airlines. Low FaresLow Fares No Connections with other airlines.No Connections with other airlines.


+255-784-455 499+255-784-455 499 158158

Characteristics of Market-Driven Strategies

Market-Orientation

SuperiorPerformance

Leveraging ofDistinctive

Capabilities

CustomerValue/

CapabilitiesMatch


+255-784-455 499+255-784-455 499 159159

BECOMING MARKET ORIENTED

Effective Market Sensing Processes

Cross-Functional Analysis of Information

Shared Diagnosis and Coordinated Action

Delivery of Superior Customer Value


+255-784-455 499+255-784-455 499 160160

Components of Organizational Capabilities

Skills(cross-functional teams)

Accumulatedknowledge(new product experience)

OrganizationalProcesses Superior

Customer Value

(new product development)

Coordinationof Activities(communication)

Assets(brand image)


+255-784-455 499+255-784-455 499 161161

CompellingLogic of Distinctive

Capabilities

Disproportionate (higher)contribution to superiorcustomer value

Provides value tocustomers on a morecost-effective basis


+255-784-455 499+255-784-455 499 162162

DESIRABLE

CAPABILITIES

DESIRABLE

CAPABILITIES

Superior tothe

CompetitionDifficult toDuplicate

Applicable toMultiple

CompetitiveSituations


+255-784-455 499+255-784-455 499 163163

TYPES OF CAPABILITIES

Outside-InProcesses

Inside-OutProcesses

SpanningProcesses


+255-784-455 499+255-784-455 499 164164

Benefits Costs

CustomerDelivered Value


+255-784-455 499+255-784-455 499 165165

Product

Services

EmployeesImage

Monetary Costs

TimePsychic and physic

costs

Benefits

Costs (Sacrifices)

Value (gain/loss)

Creating Value for Customers


+255-784-455 499+255-784-455 499 166166

MARKET-DRIVEN

STRATEGIES

Market SensingCapabilities

Customer LinkingCapabilities

Finally


+255-784-455 499+255-784-455 499 167167

In pursuing competitive advantage, a In pursuing competitive advantage, a company also has to choose its company also has to choose its scopescope – – whether it will target a particular segment whether it will target a particular segment or go for a broad market. These choices or go for a broad market. These choices define four basic approaches to define four basic approaches to competitive advantage choices a company competitive advantage choices a company makes determines ,“generic strategies” as makes determines ,“generic strategies” as Porter calls them.Porter calls them.

Module 9: GENERIC STRATEGIES

STRATEGIC CHOICE


+255-784-455 499+255-784-455 499 168168

Strategic Advantage

Ivory Soap American Airlines

Broad Broad

Cost Differentiation

Focus Focus

Cost Differentiation

La Quinta Inns Cray Research, Inc

GENERIC STRATEGIES (By M Porter)

Str

ateg

ic T

arge

t (S

cop

e)


+255-784-455 499+255-784-455 499 169169

Failure to make a choice means that a company is Failure to make a choice means that a company is stuck - in - the middlestuck - in - the middle, with no advantage. The , with no advantage. The result is poor performance.result is poor performance.In illustrating the concept of Generic strategies, In illustrating the concept of Generic strategies, Porter used four superior performing companies Porter used four superior performing companies that follow each of the generic strategies. that follow each of the generic strategies. Ivory Ivory SoapSoap is a broadly targeted, low cost producer, is a broadly targeted, low cost producer, La La Quinta InnsQuinta Inns is a cost focuser; is a cost focuser; American AirlinesAmerican Airlines is a broad differentiator, and is a broad differentiator, and Cray ResearchCray Research, , Inc., is a Inc., is a focused differentiator. The Companies and the focused differentiator. The Companies and the strategies are indicated on the Fig. above.strategies are indicated on the Fig. above.

STUCK-IN-THE MIDDLE


+255-784-455 499+255-784-455 499 170170

Cost LeadershipCost Leadership(First dimension) (First dimension)

A cost strategy begins with a good product that is A cost strategy begins with a good product that is acceptable in quality and features. Instead of a acceptable in quality and features. Instead of a unique product, the company following the cost unique product, the company following the cost strategy seeks advantage by opening up a strategy seeks advantage by opening up a sustainable cost gap over its competitors. It sustainable cost gap over its competitors. It does so by managing the areas in the business does so by managing the areas in the business that are critical to cost. This leads to superior that are critical to cost. This leads to superior margins, provided prices are at or near the margins, provided prices are at or near the industry average.industry average.


+255-784-455 499+255-784-455 499 171171

Porter uses Procter & Gambles Ivory Soap to Porter uses Procter & Gambles Ivory Soap to illustrate the basic principles of positioning and illustrate the basic principles of positioning and to discuss the overall cost leadership strategy. to discuss the overall cost leadership strategy. Ivory’s strategies changed since it was first Ivory’s strategies changed since it was first introduced. Porter shows how Ivory moved from introduced. Porter shows how Ivory moved from being a differentiator to being a basic soap being a differentiator to being a basic soap providing good value. Ivory’s shift in strategy providing good value. Ivory’s shift in strategy illustrates both why a strategy may have to illustrates both why a strategy may have to change as well as some principles of competing change as well as some principles of competing as a cost leaderas a cost leader. .


+255-784-455 499+255-784-455 499 172172

Cost LeadershipCost Leadership(2(2ndnd Dimension) Dimension)

Companies can also achieve cost advantage by focusing Companies can also achieve cost advantage by focusing on a particular target segment where they can be more on a particular target segment where they can be more efficient than broadly targeted competitions. Companies efficient than broadly targeted competitions. Companies in this position achieve advantage by dedicating in this position achieve advantage by dedicating themselves to serving the needs of a particular segment, themselves to serving the needs of a particular segment, and no more. Porter shows how La Quinta Inns has and no more. Porter shows how La Quinta Inns has created a strategy around a particular target customer – created a strategy around a particular target customer – the traveling salesperson – and how this dedication the traveling salesperson – and how this dedication satisfies the customer’s needs but allows La Quinta to be satisfies the customer’s needs but allows La Quinta to be very low cost. very low cost.


+255-784-455 499+255-784-455 499 173173

Lessons from La QuintaLessons from La Quinta

1. 1. A focused strategy begins with choosing a A focused strategy begins with choosing a particular target segment with unusual or particular target segment with unusual or distinctive needs.distinctive needs.

2. A focused strategy dedicates everything to 2. A focused strategy dedicates everything to serving the target segment exclusively.serving the target segment exclusively.

3. Despite temptations, a focused strategy 3. Despite temptations, a focused strategy forgoes the opportunity to serve other forgoes the opportunity to serve other segments, or offer other products or services.segments, or offer other products or services.


+255-784-455 499+255-784-455 499 174174

4. A cost focus strategy depends on finding a 4. A cost focus strategy depends on finding a target segment that has a lower level of needs target segment that has a lower level of needs than most of the market.than most of the market.

5.Cost advantage requires investment.5.Cost advantage requires investment.

6. Low cost must become part of the company’s 6. Low cost must become part of the company’s culture if this strategy is to be successfully culture if this strategy is to be successfully implemented.implemented.


+255-784-455 499+255-784-455 499 175175

Porter interviewed Mr. Chuck Knight, CEO of Porter interviewed Mr. Chuck Knight, CEO of Emerson Electric Company, Emerson is the Emerson Electric Company, Emerson is the company most identified in the United States company most identified in the United States with being a low-cost competitor. They with being a low-cost competitor. They discuss how Emerson goes about succeeding discuss how Emerson goes about succeeding as the “best-cost producer”.as the “best-cost producer”.

Chuck Knight lists six points that have been Chuck Knight lists six points that have been critical to Emerson’s success:critical to Emerson’s success:


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1. You can’t be the best-cost producer without 1. You can’t be the best-cost producer without having a high-quality product.having a high-quality product.

2. Know the competitors’ costs.2. Know the competitors’ costs.

3. Be receptive to change and be willing to go 3. Be receptive to change and be willing to go after productivity in your plants.after productivity in your plants.


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4. Devise a formalized cost-reduction program.4. Devise a formalized cost-reduction program.

5. Make all employees a part of the cost-reduction 5. Make all employees a part of the cost-reduction plan by communicating the plan to them plan by communicating the plan to them strongly.strongly.

6. Commit capital to reduce long-run costs.6. Commit capital to reduce long-run costs.


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Summary of: Summary of: Cost LeadershipCost Leadership

1.Cost leadership starts with a good 1.Cost leadership starts with a good product.product.

2.A cost leader is willing to make some 2.A cost leader is willing to make some choices to be low cost.choices to be low cost.

3.Successful cost leaders draw their 3.Successful cost leaders draw their advantage from many sources advantage from many sources throughout the business.throughout the business.


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4. Cost leaders pay intense regular attention to 4. Cost leaders pay intense regular attention to their competitors cost positions.their competitors cost positions.

5. Cost leaders build low cost into the culture of 5. Cost leaders build low cost into the culture of their organizations.their organizations.

6. Cost leaders constantly manage costs down.6. Cost leaders constantly manage costs down.


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Differentiation Differentiation (1(1stst Dimension) Dimension)

The differentiation strategy starts by The differentiation strategy starts by identifying needs that the buyer thinks identifying needs that the buyer thinks are valuable. The differentiator then are valuable. The differentiator then sets out to meet these needs better sets out to meet these needs better than any other competitor, and is willing than any other competitor, and is willing to bear extra costs if necessary to do to bear extra costs if necessary to do so. The differentiator seeks to so. The differentiator seeks to command premium price, which leads command premium price, which leads to superior performanceto superior performance


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Provided the premium exceeds the extra costs Provided the premium exceeds the extra costs of being unique. To illustrate his points, of being unique. To illustrate his points, Porter discusses two companies – American Porter discusses two companies – American Airline and Cray Research, Inc – that Airline and Cray Research, Inc – that successfully use differentiation strategies.successfully use differentiation strategies.

American Airline serves a wide range of American Airline serves a wide range of travelers (business vacation, personal) and travelers (business vacation, personal) and seeks to be the differentiated airline.seeks to be the differentiated airline.


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Lessons from American AirlinesLessons from American Airlines

1. Any differentiator starts with the problem of 1. Any differentiator starts with the problem of creating value for buyers successful. creating value for buyers successful. Differentiators find areas of value that the buyer Differentiators find areas of value that the buyer views as most important.views as most important.

2.Successful differentiators not only create value, 2.Successful differentiators not only create value, they also communicate their uniqueness to they also communicate their uniqueness to consumers through incredible ways.consumers through incredible ways.


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3.Differentiators must be willing to bear the 3.Differentiators must be willing to bear the cost of being unique. Differentiators must, cost of being unique. Differentiators must, however, minimize the added costs of however, minimize the added costs of uniqueness. uniqueness.


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4. In the pursuit of differentiation there is a trade-4. In the pursuit of differentiation there is a trade-off between cost and differentiation. Successful off between cost and differentiation. Successful air differentiators are clear about how they’re air differentiators are clear about how they’re going to make it.going to make it.

5. To sustain differentiation, a company must be a 5. To sustain differentiation, a company must be a moving target and constantly invent new buyer moving target and constantly invent new buyer value. value.


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Differentiation Differentiation (2(2ndnd Dimension) Dimension)

Another route to differentiation is through a focus Another route to differentiation is through a focus strategy; that is, choosing a narrow target and strategy; that is, choosing a narrow target and concentrating on serving its needs better than concentrating on serving its needs better than more broadly targeted competitors.more broadly targeted competitors.

Cray Research, Inc, which manufactures only Cray Research, Inc, which manufactures only supercomputers, is a good example of a supercomputers, is a good example of a company that targets a specific product segment company that targets a specific product segment dedicates itself to providing uniquely high dedicates itself to providing uniquely high performance.performance.


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Lessons from Cray ResearchLessons from Cray Research

1. Differentiation starts with creating value for the 1. Differentiation starts with creating value for the customer that justifies a premium price.customer that justifies a premium price.

2. Differentiation involves more than just a physical 2. Differentiation involves more than just a physical product. product. Helping the customer to use the Helping the customer to use the product is as important as selling it.product is as important as selling it.

3. 3. To be successful, a differentiation strategy must be To be successful, a differentiation strategy must be communicated both internally and externally.communicated both internally and externally.


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4.To sustain differentiation, a company must 4.To sustain differentiation, a company must become a moving target by improving become a moving target by improving performance and constantly seeking performance and constantly seeking innovation.innovation.

5. The differentiation focus strategy requires 5. The differentiation focus strategy requires that the company isolate a segment that has that the company isolate a segment that has more extensive needs in market.more extensive needs in market.


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6. The focuser dedicates itself to (and bets 6. The focuser dedicates itself to (and bets everything on) its particular target everything on) its particular target segment(s).segment(s).

7. A focused differentiator, like a focused 7. A focused differentiator, like a focused low-cost competitor, must avoid the low-cost competitor, must avoid the tendency to blur its focus in pursuit of tendency to blur its focus in pursuit of incremental business.incremental business.


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Overall Lessons about positioningOverall Lessons about positioning

This is based on several examples of the This is based on several examples of the Companies which Porter visited in connection to Companies which Porter visited in connection to this lesson.this lesson.

1. Successful strategy must concern itself with 1. Successful strategy must concern itself with industry structure as well as positioning.industry structure as well as positioning.

2. Successful strategists select positions that are 2. Successful strategists select positions that are different from their competitors.different from their competitors.


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3. Strategy involves making choices and trade-3. Strategy involves making choices and trade-offs, and taking risks. These are the flip-slides of offs, and taking risks. These are the flip-slides of advantage.advantage.


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The Process of Developing StrategyThe Process of Developing Strategy

In this final segment Porter discusses In this final segment Porter discusses some of the practical problems of some of the practical problems of developing and carrying out a strategy. developing and carrying out a strategy. Important issues are how to organize an Important issues are how to organize an effective planning process, how to effective planning process, how to communicate its results, and how to communicate its results, and how to measure performance.measure performance.


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Lessons for Effective Strategy Lessons for Effective Strategy DevelopmentDevelopment

1. To develop strategy effectively, a company 1. To develop strategy effectively, a company needs a formal strategic planning process.needs a formal strategic planning process.

2. A multi-functional team is the best unit to 2. A multi-functional team is the best unit to develop a strategy. It can take the holistic develop a strategy. It can take the holistic approach and make the complex trade-offs approach and make the complex trade-offs essential in formulating effective strategiesessential in formulating effective strategies


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3. To be successful, a strategy needs to 3. To be successful, a strategy needs to be communicated, both internally and be communicated, both internally and externally.externally.

4. It takes time to change and 4. It takes time to change and communicate a strategy. A strategy communicate a strategy. A strategy should be changed should be changed infrequentlyinfrequently and and must be followed consistently.must be followed consistently.


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5. Financial results are a misleading indication of 5. Financial results are a misleading indication of strategic health.strategic health.

6.To gauge strategic health, companies have to 6.To gauge strategic health, companies have to create measure of underlying advantage, such create measure of underlying advantage, such as customer surveys, studies of cost position, as customer surveys, studies of cost position, and studies of how products are performing and studies of how products are performing relative to competition. Customer satisfaction relative to competition. Customer satisfaction ought to be the best yardstick.ought to be the best yardstick.


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7. A strategist must continually probe and test a 7. A strategist must continually probe and test a strategy for the need to change.strategy for the need to change.

FINALLY


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The endThe end

• Create, Create, Communicate Communicate and Sustain and Sustain your superior your superior performance performance for PREMIUM for PREMIUM PRICES!!!!PRICES!!!!


Module 10Module 10PRICING STRATEGIES & PRICING STRATEGIES &

SALESSALES

……………………………………………………………………..


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How Price Fits into Marketing Program Positioning Strategy

Marketing programpositioning strategyProduct

strategy

Targetmarket andobjectives

Distributionstrategy

Pricestrategy

Promotionstrategy


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PPRICING RICING SSITUATIONSITUATIONS

New product pricingNew product pricing

Life cycle pricingLife cycle pricing

Positioning strategy changePositioning strategy change

Countering competitive threatsCountering competitive threats


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Pricing Strategy for Newand Existing Products

Set PricingObjectives

Analyze thePricing Situation

Select PricingStrategy

Determine SpecificPrices and Policies


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Factors Impacting the Pricing Situation

Customer Price Sensitivity

Legal and Ethical Constraints

Competitors’ Likely Responses

Analyzing the Pricing Situation Product

Costs


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Buyers’ Perceptions of Value Offeringsof Brands A-E

PerceivedValue

Perceived Price

Superior Value Zone

D A

C

EB

Inferior Value Zone


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Guide to Cost Analysis

Determine coststructure

A

Analyze cost andvolume relationships

B

Analyze competitiveadvantage

C

Estimate the effectof experience on costs

D

Determine the extentof control over costs

E


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Determinants of Pricing Flexibility

Costs

Demand

Demand-Cost GapCompetition Legal and Ethical Influences


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AboveCompetition

BelowCompetition

Skim strategy

Neutral strategy(same as competition)

Penetration strategy

STRATEGIC APPROACHES


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Illustrative Price Strategies

Low-activestrategy

High-activestrategy

Low-passivestrategy

High-passivestrategy

Activestrategy

Passivestrategy

Highrelativeprice

Lowrelativeprice


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Basis of Determining Specific Prices

Cost CompetitionDemand

Finally


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Module 11Module 11PRODUCT DECISIONSPRODUCT DECISIONS

(Ansoff’s Matrix)(Ansoff’s Matrix)•Product and Service Product and Service

Classification SystemClassification System

•The Product Life CycleThe Product Life Cycle

• Introduction to product matricesIntroduction to product matrices

•Boston Matrix (Growth/Share)Boston Matrix (Growth/Share)

•Ansoff’s Matrix (Product/Market)Ansoff’s Matrix (Product/Market)


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Product and Service Product and Service Classification SystemClassification System

• Convenience goods - little effort, Convenience goods - little effort, relatively inexpensiverelatively inexpensive

• Shopping goods - e.g ‘white goods’, Shopping goods - e.g ‘white goods’, equipment, more expensive, equipment, more expensive, infrequentinfrequent

• Speciality goods - extensive search Speciality goods - extensive search e.g Jewellery, gourmet foode.g Jewellery, gourmet food

• Unsought goods - e.g. Buying a shirt Unsought goods - e.g. Buying a shirt just after seeing it. just after seeing it.


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Few:Few: trial of trial of early earlyadoptersadopters

Growing adopters:Growing adopters: trial of trial of product/service product/service

Entry of Entry of competitorscompetitors

Growing selectivityGrowing selectivity of purchase of purchase

May be manyMay be many

Saturation ofSaturation of users users

Repeat purchaseRepeat purchase reliance reliance

Fight to maintainFight to maintain share share

Drop-offDrop-offin usagein usage

Exit of someExit of somecompetitorscompetitors

Development

Growth

Maturity DeclineDecline

The Product Life Cycle (PLC) Model


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Market Share

MarketGrowth

High

Low

High Low

1. Stars3. QuestionMark (ProblemChild)

2. Cash Cows 4. Dogs

The Boston Matrix (Growth/Share Matrix)


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Market Share

MarketGrowth

High

Low

High Low

FUSEMaverickMiniature Heroes

KIT KATMARS BAR

TOPICBOUNTY

The Boston Matrix - Chocolate Bars


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Diversification

Market Penetration

Market Development

Product Development

Existing Markets New Markets

Exi

stin

g P

rod

uct

sN

ew P

rod

uct

s

Ansoff’s Matrix (Product/Market Matrix)


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Diversification -related or unrelated

E.g. Realignments of the marketing mix

E.g. Geographical expansion

Same outlets and sales strategy - new product

Existing Markets New Markets

Exi

stin

g P

rod

uct

sN

ew P

rod

uct

s

Ansoff’s Matrix (Product/Market Matrix)


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Products DecisionsProducts Decisions

•Product and Service Product and Service Classification System?Classification System?

•The Product Life Cycle stages?The Product Life Cycle stages?

•Growth/Share?Growth/Share?

•Product/Market? – Ansoff’s Product/Market? – Ansoff’s MatrixMatrix


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Module 12Module 12STRATEGY STRATEGY

IMPLEMENTATION & IMPLEMENTATION & CONTROLCONTROL• Implementation is the process that Implementation is the process that

turns a marketing plan into specific turns a marketing plan into specific tasks to be performed and ensures tasks to be performed and ensures that they ultimately accomplish the that they ultimately accomplish the plan’s objectives.plan’s objectives.

• If the implementation process is not If the implementation process is not well thought-out and managed, the well thought-out and managed, the plan will not succeed.plan will not succeed.


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Factors in ImplementationFactors in Implementation

• On-time and accurate performance by On-time and accurate performance by marketing staff, agencies and vendors marketing staff, agencies and vendors (the organization staff must deliver their (the organization staff must deliver their services according to the specifications in services according to the specifications in the plan)the plan)

• Clear delineation of responsibilities of Clear delineation of responsibilities of various elements of the implementation various elements of the implementation process (each task must be accomplished process (each task must be accomplished and naming the individual responsible)and naming the individual responsible)


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Factors Cont …Factors Cont …

• Communication of the plan’s objectives, Communication of the plan’s objectives, strategies, and tactics throughout the strategies, and tactics throughout the bank (it is important that all areas of the bank (it is important that all areas of the bank be aware of the bank’s marketing bank be aware of the bank’s marketing efforts).efforts).

• Cooperation of all areas affected by Cooperation of all areas affected by implementation (the individual who chairs implementation (the individual who chairs the task force must effectively steer the the task force must effectively steer the group toward the desired end).group toward the desired end).


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Factors Cont …Factors Cont …

• Monitoring of results (having a Monitoring of results (having a system in place for monitoring the system in place for monitoring the implementation process and its implementation process and its progress toward achievement of the progress toward achievement of the plan’s goals) = PROGRESSIVE plan’s goals) = PROGRESSIVE EVALUATIONEVALUATION


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STRATEGY CONTROLSTRATEGY CONTROL

• The control process involves continuous The control process involves continuous monitoring and evaluation of the monitoring and evaluation of the strategic plan as well as feedback strategic plan as well as feedback necessary to ensure that the plan has necessary to ensure that the plan has been assigned and communicated to been assigned and communicated to the right people in the right way.the right people in the right way.

• Adequate monitoring system will help to Adequate monitoring system will help to trace the causes of problems and take trace the causes of problems and take corrective actions.corrective actions.


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STRATEGY CONTROLSTRATEGY CONTROL

• Plans may derail because of the changes Plans may derail because of the changes in the operational environment in the operational environment (competition, technology, social, (competition, technology, social, economic, political or legal factors)economic, political or legal factors)

• Or some situation within the firm (lack of Or some situation within the firm (lack of cooperation at the operating level): cooperation at the operating level): ThereforeTherefore

• Problems should be viewed as Problems should be viewed as opportunities for learning, growth, and opportunities for learning, growth, and improvement.improvement.

FINALLY


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Total Concluding SummaryTotal Concluding Summary

• It is imperative for any marketer to It is imperative for any marketer to understand the role of strategy in Businessunderstand the role of strategy in Business

• Strategy is se of unified Coherent and Strategy is se of unified Coherent and integrated set of ideasintegrated set of ideas

• There are long and short term strategiesThere are long and short term strategies

• Customer are not and will never buy Customer are not and will never buy products but valuesproducts but values

• Understand the mission of an organisationUnderstand the mission of an organisation


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Summary Cont..Summary Cont..

• You need to analyse your customers in You need to analyse your customers in order to be customer drivenorder to be customer driven

• Industry analysis is important to determine Industry analysis is important to determine the attractiveness of an industrythe attractiveness of an industry

• Market driven strategies are more Market driven strategies are more sustainable .. ANDsustainable .. AND

• Product decision are necessary in order to Product decision are necessary in order to make proper choice of the strategymake proper choice of the strategy


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THE END !!!THE END !!!

• Companies which Companies which will ignore strategic will ignore strategic Marketing have no Marketing have no room in competitionroom in competition

• Always understand Always understand your competitors as your competitors as you understand you understand yourself.yourself.

• THANK YOU!!THANK YOU!!

8/26/2015 [email protected], +255-784-455 4991 strategic marketing topics 1. trends &...

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