Chap003 markets and competitive space

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Strategic marketing

Transcript of Chap003 markets and competitive space

PowerPoint Presentation

CRAVENS PIERCY

8/e

McGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Chapter Three

Markets andCompetitiveSpaceMcGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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MARKETS AND COMPETITIVE SPACEMarkets and StrategiesProduct-Market Scope and StructureDescribing and Analyzing End-UsersAnalyzing CompetitionDeveloping a Strategic Vision about the FutureMarket Size Estimation

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MARKETS AND COMPETITIVE SPACEThe Challenges Markets are increasingly complex, turbulent, and interrelated.

Importance of a broad view of the market.

Essential to develop a vision about how the market is likely to change in the future.

Continuous Monitoring is Necessary to:Find promising opportunitiesIdentify shifts in value requirementsUnderstand competitors positioningGuide targeting and positioning decisions

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MARKETS AND STRATEGIES

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Markets Impact StrategiesMarket changes often require altering strategiesForces of change create both market opportunities and threatsInherent danger in faulty market sensing

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Value MigrationsCustomers shift purchasing to new business designs with enhanced value offeringBeware of disruptive technologiesMarket sensing and organizational learning are essential

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PRODUCT-MARKET SCOPE AND STRUCTUREMatching Needs with Product BenefitsProduct-Market Boundaries and StructureForming Product-Markets for AnalysisThe Changing Composition of Markets

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Matching Needs with Product BenefitsA product market matches people with needs to the product benefits that satisfy those needs

A product market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.**Srivastava, et al. (1984) Journal of Marketing, Spring, 32.

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INNOVATION FEATUREIn the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for shareholder value creation.The company invents new ways of providing services to save customers time, money and irritation, while often lowering costs at the same time.Loss adjusters are sent to the road accidents rather than working at head office, and they have the power to write checks on the spot.Progressive reduced the time needed to see a damaged automobile from seven days to nine hours.Policy holders cars are repaired quicker, and the focus on this central customer need has won much automobile insurance business for Progressive.These initiatives also enable Progressive to reduce its own costs the cost of storing a damaged automobile for a day is $28, about the same as the profit from a six-month policy.Progressive Insurance: Customer Needs at the Center of StrategySource: Adapted from Mitchell, Adrian (2004)Heart of the Matter, The Marketer, June 12, 14.

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Product Market Boundaries and StructureDetermining Product-Market Structure

Start with the generic need satisfied by the product category of interest to managementIdentify the product categories (types) that can satisfy the generic needForm the specific product markets within the generic product market

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Illustrative Fast-Food Product-Market StructureFAST-FOOD MARKET

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Forming Product Markets for Analysis Factors influencing product market boundaries:

Purpose of analysis

Changing composition of markets

Extent of market complexity

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The Changing Composition of MarketsChange due to new technologies and emerging competitionConsider existing and emerging marketsIdentify alternative ways to meet needsExtend product-market analysis beyond industry boundaries (e.g. Fast-foods)

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Extent of Market ComplexityThree characteristics of markets:

1. Functions or uses of the product

2. The enabling technology of the product

3. Customer segments in the product-market

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Illustrative Product Market StructureGeneric Product ClassProduct TypeVariant ARegular

Variant BBrandsFood and beveragesfor breakfast mealCerealsReady to eatNaturalPre-sweetenedLifeNutritionalSpecial KProduct 19

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DEFINING AND ANALYZING MARKETSDefine Product-Market Boundaries and StructuresIdentify and Describe End-UsersAnalyze Industry and Value Added ChainEvaluate Key CompetitorsForecast Market Size and Growth Trends

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Identifying andDescribing BuyersHowBuyersMakeChoicesBuildingCustomerProfilesEnvironmentalInfluencesDESCRIBINGAND ANALYZINGEND-USERS

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Identifying and Describing End-UsersIllustrative buyer characteristics in consumer markets: Family size, age, income, geographical location, sex, and occupation Illustrative factors in organizational markets:Type of industryCompany sizeLocation Type of products

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How Buyers Make ChoicesBUYING DECISION PROCESS:

Problem recognition

Information search

Alternative evaluation

Purchase decision

Post-purchase behavior

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Environmental InfluencesExternal factors influencing buyers needs and wants: Government, social change, economic shifts, technology etc.These factors are often non-controllable but can have a major impact on purchasing decisions

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Building Customer ProfilesStart with generic product marketMove next to product- type and variant profiles >> increasingly more specificCustomer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)

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ANALYZING COMPETITION1. Define Industry Structure and Characteristics2. Identify and Describe Key Competitors5. IdentifyNewCompetitors3. Evaluate KeyCompetitorsPRODUCT-MARKETSTRUCTUREANDMARKETSEGMENTS4. Anticipate Actions byCompetitors

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Examples of Levels of CompetitionDiet-RiteColaDiet PepsiDiet CokeProduct from competition:diet colasRegular colasDiet lemonlimesLemon limesFruitflavoredcolasProduct categorycompetition:soft drinksBottlewaterWineBeerCoffeeJuicesGeneric competition:beveragesBaseballcardsFastFoodVideoGamesIceCreamBudget competition:food & entertainment

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Industry AnalysisIndustry size, growth, and composition Typical marketing practicesIndustry changes that are anticipated (e.g. consolidation trends)Industry strengths and weaknessesStrategic alliances among competitors

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Defining Industry Structure & CharacteristicsIndustry FormIndustry EnvironmentCompetitive ForcesValueAddedChainSUPPLIERSPRODUCERSWHOLESALERS/ DISTRIBUTORSRETAILERS/DEALERSCONSUMER/ ORGANIZATIONAL END USERS

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Competitive ForcesRivalry among existing firms.Threat of new entrants.Threat of substitute products.Bargaining power of suppliers.Bargaining power of buyers.Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

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Key Competitor AnalysisBusiness scope and objectivesManagement experience, capabilities, and weaknessesMarket position and trendsMarket target(s) and customer baseMarketing program positioning strategyFinancial, technical, and operating capabilitiesKey competitive advantages (e.g., access to resources, patents)

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Extent of Market CoverageCustomerSatisfactionCurrentCapabilitiesPastPerformanceCompetitor Evaluation

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DEVELOPING A STRATEGIC VISION ABOUT THE FUTUREIndustry Boundaries Blurring and EvolvingCompetitive Structure and Players ChangingValue Migration PathsProduct Versus Business Design CompetitionFirms are Collaborating to Influence Industry StandardsSource: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.

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MARKET SIZE ESTIMATIONUnrealizedPotentialCompanySalesForecastIndustrySalesForecastMarket PotentialEstimateProduct-Market Forecast Relationships (area denotes sales in $s)

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0100200300400500600700800900Sales (in 1000sof units)20012002200320042005200620072008MarketPotentialSales ForecastCompany XYZ Sales ForecastProduct-Market Forecast Relationships for Industrial Painting Units