Mkt 100 021 - week 2 - market planning & analysis

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PrProfessor

FrancescucciJan 18 2011

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(Alpha order by last name)

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Everyone to collect and stamp their

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Be sure to stamp the correct DATE and correct BOX.

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Assistant Professor, MarketingPlease ensure all electronic devices are in “silent

mode”, “vibrate mode” or “turned off”

Anthony Francescucci

MKT 100-021WEEK 2 - MARKET ANALYSIS &

PLANNING

Welcome to

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AGENDA FOR TODAY

Review Module 2

Metric Mastery

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METRICS MASTERY 1 & 2

Understand & Managing Costs,and

Percentage Change

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METRICS 1:UNDERSTANDING & MANAGING COSTS

Variable, Fixed: Capital & Operating

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VARIABLE COSTS

Increase directly in proportion to the level of sales or production, in dollars or units;

• changes in proportion to the activity of a business• sometimes referred to as Cost of Goods Sold (COGS)

• Examples: sales commissions, shipping charges, delivery charges, costs of direct materials or supplies, wages of temporary or part time employees, bonuses

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VARIABLE COSTS

Hamburger Food Cost (Variable Costs) Cost Bun 0.20$ 6 oz Grade A Beef Pattie 0.65$ Condiments 0.10$ Cheese 0.25$ Fresh Garnish (lettuce, tomatoe & Pickle 0.10$

Total Food Cost per Hamburger Sold 1.30$

http://www.google.ca/imgres?imgurl=http://www.mutineermagazine.com/img/blog/hamburger.jpg&imgrefurl=http://www.mutineermagazine.com/blog/2008/10/showcase-your-burger/&usg=__bfnScs8ipjR8HjdhZVXFWM7u11U=&h=240&w=320&sz=15&hl=en&start=4&itbs=1&tbnid=QvhBFZV7oh01iM:&tbnh=89&tbnw=118&prev=/images?q=hamburger&hl=en&sa=G&gbv=2&tbs=isch:1

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FIXED COSTS (CAPITAL VS. OPERATING)

Capital Costs (One-Time)

• One-time costs incurred independent of the quantity produced or sold and are deducted over more than one fiscal period

Fixed Operating Costs

• Costs incurred independent of the quantity of produced or sold and are generally deducted in one fiscal period

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FIXED COSTS – CAPITAL OR OPERATING?

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FIXED COSTS – CAPITAL OR OPERATING?

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WHAT TYPE OF COST?DESCRIPTION TYPE

Commissions to sales reps

Redemption paid to retailers for coupons received

Cost of printing the coupons

Cost of mailing the coupons to customers

Purchase of equipment to manufacturer new product

Labour costs to manufacturer the product

Purchase of “MS Office” licences for Marketing Department

Variable

Variable

Variable

Fixed - Operating

Fixed - Operating

Fixed - Capital

Fixed - Capital

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CLASSIFYING COSTS EXAMPLEThe Acme Coach Company produces one kind of bus. Each bus requires $60 of raw materials and components, and 6 hours of hand labour at $40/hour. The company rents the building where the buses are produced at a cost of $600/month and has an annual insurance premium of $1200/year. Additionally, the company needed to purchase a crane to lift and move components in place for assembly at a cost of $1000 and invested $2500 in tooling to turn the raw materials into components. Finally, the owner pays herself $300/month.

– What are Acme’s variable costs?– What are Acme’s monthly fixed operating costs?– What were Acme’s capital (one-time) costs?– What are Acme’s yearly fixed operating costs?

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CLASSIFYING COSTS EXAMPLEVariable costs:

$ 60 Raw materials and components+ $240 Labour (6 hours @ $40/hour) $300 Total Variable Cost per Unit

Monthly fixed operating costs: $600 Rent $100 Insurance ($1200 / 12 months)+ $300 Salary $1000 Total Fixed Costs per Month

Capital (one-time) costs: $1000 Crane+ $2500 Tooling $3500 Total Capital (one-time) Costs

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CLASSIFYING COSTS EXAMPLE (CONT’D)

A: Yearly fixed operating costs: $7,200 Rent ($600/mth * 12 months) $1,200 Insurance+ $3,600 Salary ($300/mth * 12 months) $12,000 Total Fixed Costs per Year

Q: What are Acme’s yearly fixed operating costs?

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IMPORTANCE TO MARKETERS• Need an understanding of which costs are

variable and which fixed• This distinction is crucial in forecasting the

earnings generated by various changes in unit sales and thus the financial impact of proposed marketing campaigns

• Fundamental to understanding price and volume trade-offs

• Fundamental to understanding profitability

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METRICS 2:PERCENTAGE

CHANGE

PERCENTAGE CHANGE

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18

% Change

NewAmoun

t

OldAmount

OldAmount

100 %

PERCENTAGE CHANGE – EXAMPLE 1

Last year we had sales of did $300,000,

this year our sales are $400,000.

What is the percentage change in sales, year over year?

$400,000 $300,000

$300,000

+ 33.3 %

% Change

NewAmount

OldAmount

OldAmount

100 %

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% Change

NewAmoun

t

OldAmount

OldAmount

100 %

PERCENTAGE CHANGE – EXAMPLE 2

Last year we had sales of $300,000, this year sales are

$150,000.

What is the percentage change

in sales?

$150,000 $300,000

$300,000

-50 %

% Change

NewAmount

ntt

OldAmount

OldAmount

100 %

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LET’S LOOK AT THE WORKSHEET

Metrics Mastery Worksheets 1 & 2

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MODULE 2

Market Planning & Analysis

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IMPROVING DECISION & IMPLEMENTATION PROCESSES

Analyzing competition

Analyzing Channels

Environmental Scanning and Analysis

Market Law and Regulation

Marketing Planning Documents and Processes

SWOT Analysis and Strategic Planning

Implementation and Budgeting

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ANALYZING COMPETITION

Types of Supply Markets Monopoly /

No Competition is where there is a single supplier who

has control over price, quality and

supply.

Oligopolyis a market

dominated by a few suppliers that

require very large investments in equipment or technology.

Monopolistic Competition

has many suppliers with a

variety of product, each of which has

a small market share.

Perfect Competition is when many suppliers sell

essentially the same product.

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WHAT TYPE OF SUPPLY MARKET?OLIGOPOLY PERFECT

COMPETITIONMONOPOLY/

NO COMPETITIONMONOPOLISTICCOMPETITION

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ANALYZING COMPETITION• Company Sales as a % of Total Industry Sales• Top 4 vs. Hefindahl IndexShare of Market

• % of customer who name your brand when asked to name first brand comes to mindShare of Mind

• % spend on media in total industry spendShare of Voice

• % spend on R&D in total industry spendShare of R&D

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MARKET SHARE EXAMPLE

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Market Share

• Market share is measured as a company’s percentage of total industry sales over a specified time period.

• A company’s market share can change dramatically depending on how the market is defined.

• How do we measure market share? From what perspective?

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How do we define Market Share?

• At what level of competition

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How do we evaluate industry

competition?• How competitive is

the industry?

US Athletic Footwear Market Shares - 2000

US Detergent Brand Shares - 2000

Nike 39% Tide 35%

Adidas 15% Gain 12%

Reebok 11% Cheer 8%

New Balance 9% Ultra Tide 5%

K-Swiss 4% Surf 4%

Timberland 3% Tide-Free 4%

Asics 2% Arm & Hammer 4%

Saucony 1% Ultra Surf 3%

Sketchers 1% Private Label 3%

And 1 1% Wisk 2%

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competition?• Which industry

would you choose?



Nike 39% .1521 Tide 35% .1225

Adidas 15% .0225 Gain 12% .0144

Reebok 11% .0121 Cheer 8% .0064

New Balance 9% .0081 Ultra Tide 5% .0025

K-Swiss 4% .0016 Surf 4% .0016

Timberland 3% .0009 Tide-Free 4% .0016

Asics 2% .0004 Arm & Hammer 4% .0016

Saucony 1% .0001 Ultra Surf 3% .0009

Sketchers 1% .0001 Private Label 3% .0009

And 1 1% .0001 Wisk 2% .0004

Top 4 Competitors 74% Top 4 Competitors 60%

Hefindahl Index .198 Hefindahl Index .1528

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competition?• Which industry

would you choose?



Nike 39% .1521 P&G 64% .4096

Adidas 15% .0225 Unilever 7% .0049

Reebok 11% .0121 Arm & Hammer 4% .0016

New Balance 9% .0081 Private Label 3% .0009

K-Swiss 4% .0016 Wisk 2% .0004

Timberland 3% .0009

Asics 2% .0004

Saucony 1% .0001

Sketchers 1% .0001

And 1 1% .0001

Top 4 Competitors 74% Top 4 Competitors 78%

Hefindahl Index .198 Hefindahl Index .4174

Let’sLook Again

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Competitor Audit

• Competitive Advantage in product quality and costs can come from Porter’s Value Chain processes

Purchasing Processes

Inbound Operation Processes

Merchandising & Operations

Processes

Marketing & Sales Processes

Delivery & Service

Processes

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Competitor Audit

• Where along this added-value chain does the competitor have superior processes and capabilities?

• Where does it have resources and extra capacity?

• Where are its competitive advantages in its internal processes?

• Are they unique, hard to imitate, sustainable over the long-term?

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Analyzing Channels






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ANALYZING CHANNELS

Who are the latest entrants in the supply-chain?

What new trading partnerships between suppliers and channels have been formed?

What new technologies (such as wireless UPCs) are being introduced into channel processes such as ordering, buying, payment, warehousing, transportation, and customs clearance processes?

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Retailers and shareholders reinvest profits or invest in manufacturing and services insulated from global competition or leading global competition. Demand increases generally for all goods as a result of falling prices (an income effect) and in particular for the lower priced goods (a substitution effect).

New communication and transportation technologies reduce transaction costs. Low labor costs and quality and on-time delivery assurance contracts make supplier attractive.

Retailer/distributor develops a trading alliance with new source.

Domestic and global sources in existing trade alliances come under pressure to innovate, to reduce prices and increase services.

Retailer/distributor profits increase and or consumer prices drop in very price-competitive markets.

Domestic manufacturing output contracts as profits are lowered by global competition.

Employment in manufacturing sectors exposed to fierce global price competition shrinks. Sectors that are insulated, such as health care, benefit from lower supply prices. Other sectors that lead the world in production and manufacturing innovation, such as pharmaceuticals, aerospace, and forest products, flourish.

If the net effect of shifting investment and employment is a recession, then the retailing/ distribution sector will react to reduced sales by seeking more global suppliers who will reduce cost of goods sold. If they do not, competitors will, and they will gain market share.

Retailer/distributor “discovers” a new global source of supply.

New communication (the Internet) and transportation technologies (the container) reduce transaction costs.

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MKT100

ANALYZING CHANNELS

Researching a Supply-chain Partner

• Is it growing? What are its performance metrics? Its margins? It’s stock-turn?

• Is there a fit between our customer focus and the distributor’s customer focus?

• Is there a fit between our brand reputation and the distributor’s service reputation?

• Is there a fit between our systems and implementation processes?

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MKT100

How Good is the Fit?

Marketing Mix Fit

Manufacturer’s CapabilitiesQuality-value offering Customer service Push-pull marketing Physical delivery Process improvement

Retailer’s CapabilitiesQuality-value offering Customer service Merchandising Procurement Process improvement

Manufacturer’s Customers Where do they want to shop?

Retailer’s Customers What do they want to buy?

Served Market Fit

ANALYZING CHANNELS

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MKT100

ANALYZING CHANNELS

How Good Are its Processes?

• Understanding the reasons for a channel member’s change in performance and behaviour requires understanding its added-value chain:

Purchasing Processes

Inbound Operation Processes

Merchandising & Operations

Processes

Marketing & Sales Processes

Delivery & Service

Processes

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MKT100

ANALYZING CHANNELS

Where along the added-value chain does the distributor have advantages/strengths and disadvantages/weaknesses?

Are the advantages unique, inimitable and sustainable?

How can we help improve the distributor and take advantage of its added-value chain strengths?

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Analyzing Channels






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MKT100

ENVIRONMENT SCANNING AND ANALYSISThe Competitive Environment

The Supply-chain Environment

The Political Environment

The Economic Environment

The Socio-Cultural Environment

The Technology Environment

The Legal Environment

The Natural Environment

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MKT100

ENVIRONMENT SCANNING AND ANALYSIS

Identify the major trends.

Treat the trend line as a surface feature.

Describe the dynamic processes driving the trend.

Who will be the big winners and losers?

How is the trend affecting customer preferences?

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MKT100


Political Legal

• Government policies, structures, and regulations

• Political trends• Taxation issues• Current domestic legislation• Future legislation• Environmental regulations• Employment law• Consumer protection• Industry specific regulations• Competitive regulations• Shareholder/stakeholder

needs/demands

Economic

• Domestic economic trends• Global economic trends• Taxation issues• Market and trade cycles• Market distribution trends• Disposable income• Job growth/unemployment• Inflation• Consumer confidence index• Internal finance• Internal cash flow

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MKT100

ENVIRONMENT SCANNING AND ANALYSISSocio-cultural

• Consumer values, attitudes and opinions

• Media views• Laws affecting social factors• Brand, company, technology image• Consumer buying patterns• Demographics• Lifecycle changes• Population shifts• Education• Trends / Fads• Living standards

Technological

• Competing technology development• Research funding• Associated/dependent technology• Replacement technology/solutions• Maturity of technology• Manufacturing maturity and capacity• Information and communications• Consumer buying mechanisms/technology• Technology legislation• Technology access/licensing/patents• Intellectual property issues• Rate of obsolescence• Software innovations and changes

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MKT100


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Analyzing Channels






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MKT100

MARKET LAW AND REGULATIONTrade between buyers and suppliers needs to be protected by a strong and fair legal system.

Trading contracts have to be able to be enforced by courts.

Professional service providers should be licensed to protect consumers from imposters.

Dangerous products and pollutants must be regulated.

Consumer privacy protected.

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Analyzing Channels






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PLANNING DOCUMENTS AND PROCESSES

Four Sets of Documents are Prepared

Situation Analysis

documents

Strategic Planning

(marketing mix) documents

Implementation documents

Budget documents

They are prepared and used in sequence and do not appear all together in one grand plan.

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PLANNING DOCUMENTS AND PROCESSES

Sources of Analysis and Expertise

• Internal data are records, information and reports that already exist within organizations, such as sales records and financial reports, and old market research study reports.

• External secondary data is data that resides outside the firm such as in trade publications, government reports and consultants reports.

MKT100

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Analyzing Channels






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SWOT ANALYSIS & STRATEGIC PLANNING

Completing the Situation Analysis what do you do?

• You look for and address the threats to your current profitable business.

• You identify new profitable business development opportunities and assess their prospects.

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SWOT ANALYSIS

Strategy Planning Methodology (Stanford U)

Helps to organize your thoughts to develop your company goals and strategies

Start with;

What is your objective? What are you trying to decide?

What are you attempting to solve for?

E.g. Competitive analysis, product analysis, process analysis

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Uncontrollable

Controllable

SWOT PROFILE

SWOT

Internalto the company

Strengths

Weakness

Externalto the company

Opportunities

Threats

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IN DEVELOPING SWOT ANALYSIS

Internal

Evidence (information) to support claim

Customers (feedback,

surveys, mkt research)

Employees 3rd party data

Types

Capabilities Resources (Money, brand,

assets)

Processes(Value Chain,

or Value delivery process)

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Strengths (examples to consider)

• Process competitive advantages • Strong partners• Strong brand reputation• Resources, patents, assets, people • Experience, knowledge • Deep pockets • Excellent distribution reach • Processes, systems, IT, communications • Team based culture (open to change)• Company politics and values

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Weaknesses (examples to consider)

• Process competitive disadvantages • Weak partners• Weak brand reputation• No resources, patents, assets, people • Inexperience, lack of knowledge • No pockets • Poor distribution reach• Processes, systems, IT, communications • Bureaucratic cultural, attitudinal (resists change)• Company politics and values

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IN DEVELOPING SWOT ANALYSIS

External

Evidence from secondary data

Environmental Scan (PESTL)

Industry data

(TRADE ASSOCIATIONS)

Competitive Analysis

Channel Analysis

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Opportunities (examples to consider)

• Industry or lifestyle trends• Technology development and innovation • New global supply chains • New market segments • Business and product development? • Information and research? • Decrease in input costs such as labor costs• New partnerships and distribution channels

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Threats (examples to consider)

• Political, Regulatory, Economic, Nature • Competitor innovations • Falling market demand • Changing consumer preferences• New competitive entries, new substitutes• Increase in input costs such as oil• Loss of key staff

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SWOT CONTINUED

• How do you capitalize / leverage that strengths• How do you address those weaknesses• How to you take advantage of the opportunities• How do you mitigate /minimize the threats

As you identify each of the S.W.O.T., you also need to state the implication for your decision.

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SWOT EXAMPLEDeveloping a new product that will be introduced to an existing target segment that we already market to, and

We identify that we have strong brand recognition within this segment, the implication for our product introduction is?

We can leverage the existing brand recognition in the building awareness to stimulate sales of the new product

If you cannot state the implication for your decision/objective/ business, then it probably is not relevant in your analysis

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BEN AND JERRY’S CANADIAN SWOT

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NOW WHAT?

Now that we have identified our S.W.O.T.

what do we do?

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PRIORITIZE FOR GOAL & STRATEGY DEVELOPMENT

Contingency Plans

Focus of the Plan Goals

& Strategy

Ignore Watch List

Low Impact

High Impact

Low Probability

HighProbability

Determine

Impact to business / plan

if it occurs

Probability of it occurring during

plan period

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Analyzing Channels






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HOW TO IMPLEMENT PLANS

Make self managed teams the main building blocks of the organization.

Eliminate work that fails to add value, cut the activities within each process to a minimum.

Build the company around its three to five “core processes,” Assign an “owner” to each process who is superior at process thinking and getting things done.

Source: The Horizontal Corporation,” BusinessWeek, December 20, 1993, p. 76-81

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HOW TO IMPLEMENT PLANS

How Good are you at?

• Implementation (getting things done): action planning.• Managing your time and activities. Prioritizing tasks and

activities. • Multi-tasking (doing several things at the same time). • Thinking about how a whole lot of operational tasks and

procedures fit together. • Thinking several steps ahead. • Thinking through the execution of a project, program or

campaign.

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Customers Market research firm

Integrated freight-forwarders Design firm

Engineering consultants

Component suppliers

DistributorsSa

les

Logi

stics

Purc

hasi

ng

Prod

uctio

nR&

D

Mar

ketin

g

– Functions are not good at holding together a network of organizational relationships during implementation.

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– A team holds itself together and its network of organizational relationships during implementation much better.

Customers Market research firm

Integrated freight-forwarders Design firm

Engineering consultants

Component suppliers

DistributorsSa

les

Logi

stics

Purc

hasi

ng

Prod

uctio

nR&

D

Mar

ketin

g

Cross-functional team

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BEFORE WE END THE CLASS

Setup for Next Week

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NEXT WEEK: TWO ADDITIONAL READINGS

• World Electric Vehicle (WEV) Case – Can be found in module 2 – “Cases” on the

online site• Download cases from Module 2. It is the second

case.

• Articles on the Wireless Industry– Can be found on blackboard under “Course Info

& Materials / Week 2”

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WEV CASE - AS THE CASE INDICATES

“The opportunity exists for a North American not-for-profit entrepreneurial venture to make the world market

for a small two person vehicle by creating a global partnership between an Indian car manufacturer such as Tata, a Chinese car manufacturer such as BYD and Fiat”

• Assume you will head this entrepreneurial venture• You will be randomly assigned to groups• Discuss & identify either S. W. O. T. of entering the

Canadian market, as assigned

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FOR WIRELESS INDUSTRY ARTICLES

You are asked to READ ALL of the articles included in the readings.

Consider the SITUATION ANALYSIS

of the various competitors in the wireless industry

within Canada.

Come prepared to discuss

the SWOT points for your respective competitor

point of view.

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FOR WIRELESS INDUSTRY ARTICLES

You are assigned a competitor based on your last name;

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REMINDERS FOR NEXT WEEK

• Read, Take Quizzes• Read WEV Case• Read Articles on Wireless

Industry

Continue with Module 2

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BEFORE YOU LEAVE TODAY

name cards

Front of the Class

Hand In:

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SEE YOU NEXT WEEK

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WORLD ELECTRIC VEHICLEStrengths Weaknesses

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WORLD ELECTRIC VEHICLEOpportunities Threats

Mkt 100 021 - week 2 - market planning & analysis

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