Market Strategy

the financial implications of marketing

Market Strategy

Your task is to prepare a five year plan:

• You must explore several strategies

• Set and quantify objectives

• You must balance profitability with growth and survival

• You will be helped by a computer

• Leaving you to think and discuss

The Business Situation

• A typical manufacturing company• The current, domestic market has stagnated• So you must investigate new markets

– Exporting the current products• Selling directly using your own staff• Selling via non-exclusive agents• Selling via non-exclusive dealers

– Launch New Domestic Products

Performance Measures• Profitability

– Return on Investment

• Growth– Sales (units & value)– Market Share (unit & cash)– Worth (residual profit)

• Survival– Cumulative Cash Flow

• Long Term– Discounted Cash Flow (I.R.R. & N.P.V.)

Market Structure• Total Market

– Total potential sales– Growing over time

• Served (penetrated) Market– Where the company is selling– Penetration of total market increases

• Competitive Share– Proportion of served market that buys– Influenced by your marketing decisions

Market Influences

• Price• Promotion• Performance• Inventory Availability• Receivables Policy• Launch Year

Using the Computer

• Choose & enter a team name• The Planning Options

– Review Current Plan– Compare Plans– What-If Analysis– Change Working Plan– Recess Planning

Review Current Plan

Select from several reports– Detail Results– Summary Results– Combined Detail– Combined Summary

Detail ResultsShows for each of the five years

– Sales Revenue– Unit Market Share– Cash Market Share– Profit – Profit to Sales– Capital Employed– Cumulative Cash Flow– Return on Investment– Residual Profit

Summary ResultsShows for the five years as a whole

– Served Market Share– Total Sales Revenue– Average Unit Market Share– Average Cash Market Share– Total Profit – Average Profit to Sales– Worst Cash Flow– Internal Rate of Return– Net Present Value

Observations

• Think before you act (do not waste your plans)

• Ask for help if you need it• There is no right or wrong answer

(your best plan will be the one that best meets the financial objectives you decide)

• Enjoy the challenge