Competitors & Customers

Chp 3

Strategic Management & Planning notes

http://opentuition.com/acca/p3/p3-notes-view-online/

CYCLE OF COMPETITION

Incumbent Entrant

Builds Barriers

Attacks soft market

segments

No responseWidens attack to

adjacent segments

Reinforces barriers

Starts price wars

Attacks entrant’s home

market

Restart the cycle in adjacent

market

Product Life Cycle

Product launch – happy lifeCover costsEarn profitsLength not know in advanceCoca-Cola, Gillette, Budweiser,

American Express, Wells-Fargo, and Tabasco

PLC – S Curve

Introduction Stage

Product launchTakes timeSlow growthNegative profitsHigh promotion and

distribution cost

Growth Stage Product, if satisfies market, enters

growth stage Sales climb quickly Early adopters continue, new join

through favorable word of mouth New competitors enter market Competition – increase in sale points Spread of sales, unit cost reduces Sustain rapid growth New market segments Prices may be lowered to attract more

customers (iPod)

Maturity

At some point sale slows down, product enters maturity stage

Lasts longer Marketing management most of the time

deals with mature products More producers selling the same product Greater competition Prices down, increase in sales promotion Drop in profit Well established competitors stay

Maturity

Product manager should modify market, product and marketing mix

Market: increase consumption of product, new users, present users

Product: quality, features, style (milk pak, Honda City)

Four Ps

Decline Stage

Eventually dip Oat meal, VHS tapes, VCR, Tape recorders Reasons: technology, consumer tastes,

increased competition, profits decline, withdrawal from market

Furthermore: Weak product costly to firm Management time Price adjustments Advertising/sales efforts Reputation of other co products affected Old Spice/ co can sell brands

INDUSTRY LIFE CYCLE(CHEMICAL, FOOD, AUTOMOBILE, AIR LINE, TEXTILE, CONSULTING, ELDERLY SERVICES, WASTE TREATMENT ETC)

Industries may display a life cycle Introduction Growth Shakeout Maturity Decline (carriage/rail road, A/V, print

media, oil dependent)

INCEPTION STAGE

Attracts trend setters High price Poor financial results Channels of distribution Monitor success

GROWTH STAGE Expansion of capacity to meet target

market share objectives Reduce prices, penetrate Maintain barriers Promotion to attract more buyers Keep investors aware of the benefits of

the products to secure further financing Search for additional markets Reducing cost of production Product development

SHAKEOUT STAGE

Weak businesses discontinue More focus on existing customers, and

less on new acquisitions

MATURITY STAGE Maximize current financial returns from

products Defend market position Modify markets Modify product to make it cheaper or of

greater benefit Intensify distribution Mergers and mutual agreements

DECLINE

Minimize expenditure (reduce promotion and product refinement)

Weed out variations (sell core products) Narrow distribution Plan exit and identify time to leave the

industry

STRATEGIC GROUP ANALYSIS(FOOD & BEVERAGE) Organizations with similar strategic

characteristics, following similar strategies or competing on similar bases

Product diversity Geographical coverage Extent of branding Pricing policy Product quality Distribution method Target market segment

Integrated Marketing Mix The set of controllable tactical marketing

tools – product, price, place and promotion – that the firm blends to produce the response it wants in the target market.

Product: goods n services Price: amount of money consumers have to

pay to obtain the product Place: includes activities to make the

product available to target consumers. Promotion: includes activities that

communicate the merits of the product and persuade target customers to buy it.

Extended Marketing Mix

PeopleProcessesPhysical Evidence

Levels of Product and Services

3 levels: each level adds to customer value

The core benefit. E.g. Blackberry Actual product: features, design, quality

level, a brand image, and packaging. E.g. Blackberry: actual product, its name, parts, styling, features, and packaging.

Augmented product. Offer consumer services and benefits. (warranty, instructions, quick repair and maintenance when needed)

What is a product? Anything that can be offered to a market

for attention, acquisition, use, or consumption that might satisfy a want or need.

Include physical objects, services, events, persons, places, organizations, ideas, or mixes of these entities. iPod, Camry, BigMac. Doctor’s advice, vacation service, financial services.

Service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

Product and Service Classification

Consumer Product: product bought by final consumer for personal consumption

Include: Convenience product: that the customer

usually buys frequently, immediately, and with a minimum comparison and buying effort: soap, candy, newspaper, fastfood.

Shopping product: that the customer usually buy carefully on suitability, quality, price, and style: furniture, clothing, appliances, hotel, travel service.

Specialty product: consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort: Ferrari FXX, Boss, BB, Disney.

Unsought product: consumer product that the consumer either does not know about or knows about but does not normally think of buying: life insurance, blood donations, living funeral service.

Industrial Product

Product bought by individuals and organizations for further processing or for use in conducting a business.

Materials and parts (wheat, cotton, livestock, crude petroleum) (iron, cement, wires, tires, motors)

Capital items (buildings, generators, trucks etc)

Supplies and services (lubricants, coal, paper, pencils, paints, brooms, conservancy items

Customer Driven Marketing Strategy

Market segmentation: dividing a market into distinct groups of buyers who have distinct needs, characteristics, or behavior and who might require separate products or marketing programs (geographic, demographic, psychographic, and behavioral factors)

Market segment: a group of consumers who respond in a similar way to a given set of marketing efforts. Expensive car buyers. Cost sensitive buyers.

Market Targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.

Niche Marketing

When a company decides to serve only one or few special segments or “market niches”, it is involved in niche marketing.

Such “nichers” specialize in serving customer segments that major competitors overlook or ignore.

Ferrari – 1500 cars in US. Ferrari Superamerica $287,020 Ferrari FXX super sports car $ 2 million Jones Soda

Market Differentiation & Positioning

Actually differentiating the market offering to create superior customer value.

Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

BMW: “the ultimate driving machine” Ford: “built for the road ahead” Mastercard: “priceless experience” Charging low prices than competitors do or by

offering more benefits to justify higher prices. If a company promises greater value, it must deliver greater value.