WEEK 3

Marketing Management

External and Customer Analysis

STRATEGIC ANALYSIS

PPT 3-2

External and Customer Analysis

PPT 3-3

“To be prepared is half the victory.”

- Miguel Cervantes

The Role of External Analysis

External

Analysis

Strategic Decisions

• Where to compete

• How to compete

Strategic Decisions

• Where to compete

• How to compete

Analysis• Information-need areas

• Scenario analysis

Identification• Trends/future events

• Threats/opportunities

• Strategic uncertainties

Figure 3.1

External Analysis

Should be• Directed and Purposeful

Should NOT be• an End In Itself

Should be• Motivated by a Desire to Affect Strategy, Generate, Evaluate and Select Strategic Options

Should• Contribute to the Investment Decision

Is• an Exercise in Creative Thinking from the Perspectives of Customer, Competitor, Market and Environment

Often• Needs to be Continuous

Strategy funnel – industry side

Customer &Benefits

CompetitiveDynamics

CompetitiveSpace

Segment Size Channels

Strategic Positioning

ValueProposition

IndustryStructure

Environmental Trends

IndustryMarket

PerceptualSpace

I. Environmental Scanning: STEEP analysis

Macro-environment

EconomicForces

EcologicalForces

Socio-culturalForces

TechnologicalForces

PoliticalForces

Firm/OrganizationStructureCultureCompetencies Resources

OperatingEnvironment

Trade Association

Regulators

Union/employees

Competitors

Creditors Suppliers

Customers

Communities

Stockholders

Stakeholders shape the operating environment

Macro-environment

Firm/OrganizationStructureCultureCompetencies Resources

OperatingEnvironment

Trade Association

Regulators

Union/employees

Competitors

Creditors Suppliers

Customers

Communities

Stockholders

EconomicForces

EcologicalForces

Socio-culturalForces

TechnologicalForces

PoliticalForces

Company competitive analysis

How does each firm compete? Quality, service, low price, something else?

How effective is each? How well designed are they to compete as they

do? How powerful?

What resources do they control? Money, people, influence...

How aggressive? How hard do they compete? What’s their

trajectory?

Competitor response profile

Future GoalsVision statementManagerial behavior

Critical AssumptionsKey beliefsBlind spots

Response ProfileSatisfied or ambitious?Likely next moves?Vulnerabilities?Sensitive spots? (What will provoke retaliation?)

Current StrategyPrice, quality, distribution, resources

CapabilitiesStrengths & weaknesses

Drivers Abilities

Competitors table

Organizes competitors using crucial dimensions of competition, plus effectiveness, power, trajectory, likely changes...

Market Share

Quality Cost Effective-ness

Aggres-siveness

Competitor1 15% H H M

Competitor2 25% L L H very

Competitor3 5% M M L

Competitor4 20% L L H slipping

Competitor5 15% M M H

Power

M

H

L

H

L

Strategic groups

Groups of firms that pursue similar strategies with similar resources

Pri

ce

Selection

Fast Food

Upscale Chains

Diners/Family Style

Example: Variation on Gartner’s Magic Quadrant

Dynamic competitor analysis

While useful, the competitor table and the strategic groups are essentially static.

It is critical to make guesses about the future -- especially about when trends might stop and the ground might shift, and when new competitors might rise, or existing ones die.

Exercise: Competitor analysis

Make a competitors table, including: market share how they stack up on crucial dimensions of

value effectiveness (star the most competent ones) resources (underline richest ones) aggressiveness (arrows to indicate

trajectories) Note any natural groupings Note any likely changes

New entrants, mergers, exits?

Investment DecisionFour Sound Questions

1. Should existing business area be liquidated, milked, maintain, or a target for investment?

2. What growth directions should receive investment?

3. Should there be market penetration, product expansion, or market expansion?

4. Should new business areas be entered?

Strategic Options

1. What are the value propositions?2. What are the key success factors (KSF)?3. What assets and competencies should

be created, enhanced or maintained?4. What strategies and programs should

be implemented in functional areas?5. What should be the positioning

strategy, segmentation strategy, distribution strategy, brand-building strategy, etc.

External and Customer Analysis

Strategic Uncertainties

PPT 3-18

Focus on specific unknown elements that will affect the outcome of strategic decisions.

Most strategic decisions will be driven by a set of these strategic uncertainties.

“On what does that depend?” will usually generate additional strategic uncertainties.

Strategic Uncertainties

What will the future demand?

Performance improvements?

Competitive technological

developments?

Financial capacity of industry?

Strategic Uncertaintiesvs. Strategic Decisions

Strategic Uncertainties

Will a major firm enter? Will a tofu-based dessert

product be accepted? Will a technology be

replaced? Will the dollar strengthen

against an off-shore currency?

Will computer-based operations be feasible with current technology?

How sensitive is the market to price?

Strategic Decisions Investment in a product

market Investment in a tofu-based

product

Investment in a technology

Commitment to off-shore manufacturing

Investment in a new system

A strategy of maintaining price parity

Customer Analysis

Segmentation

Who are the biggest customers? The most profitable? The most attractive potential customers? Do the customers fall into any logical groups based on needs, motivations, or characteristics?

How could the market be segmented into groups that would require a unique business strategy?

Figure 3.2

Judging a Segmentation Strategy

1. Can a competitive offering be developed and implemented that will be appealing to the target segment?

2. Can the appeal of the offering and the subsequent relationship with the target segment be maintained over time despite competitive responses?

3. Is the resulting business from the target segment worthwhile, given the investment required to develop and market an offering tailored to it?

How Should Segments be Defined?

Customer Characteristics Geographic Type of organization Size of firm Lifestyle Sex Age Occupation

Figure 3.3

How Should Segments be Defined?

Product-Related Approaches User type Usage Benefits sought Price sensitivity Competitor Application Brand loyalty

Figure 3.3

The Loyalty Matrix: Priorities

LowLoyalty

ModerateLoyalty

Loyal

Customer

Non-customer

Medium

Lowto

Medium

High

Highest

Zero

High

Figure 3.4

Customer Analysis

Customer Motivations

What elements of the product/service do customers value most?

What are the customers’ objectives? What are they really buying?

How do segments differ in their motivation priorities?

What changes are occurring in customer motivation? In customer priorities?

Are there any “Hot Buttons” whose salience and impact on the market are significant and growing?

Figure 3.2

Customer Motivation Analysis

IdentifyMotivations

Group andStructure

MotivationsAssess

MotivationImportance

Assign StrategicRoles to Motivations

Figure 3.6

The Customer as Active Partner

Encourage Active Dialogue Mobilize Customer Communities Manage Customer Diversity Co-creating Personalized Experiences

Customer Analysis

Unmet Needs

Why are some customers dissatisfied? Why are some changing brands or suppliers?

What are the severity and incidence of consumer problems?

What are the unmet needs that customers can identify? Are there some of which consumers are unaware?

Do these unmet needs represent leverage points for competitors?

Figure 3.2

Identifying Unmet Needs

Conduct Market Research Use The Ideal Experience Use Creative Thinking

1. Separate ideation from evaluation.2. Approach the problem from different

mental and physical perspectives.3. Have a mechanism to take the most

promising ideas and improve them until they turn into potential winners worth trying.

Relevant Assets and Competencies

Chapter 3 - Competitor Analysis

PPT 3-31

1) -What businesses have been successful over time?

-What assets or competencies contributed to their success?

-What businesses have had chronically low performance?

-Why?

-What assets or competencies do they lack?

Relevant Assets and Competencies

Chapter 3 - Competitor Analysis

PPT 3-32

2) -What are the key customer motivations? -What is needed to be preferred?-What is needed to be considered?-What is really important to the customer?

3) What assets and competencies represent industry mobility (entry and exit) barriers?

Relevant Assets and Competencies

Chapter 3 - Competitor Analysis

PPT 3-33

4) -What are the significant value added components in the value chain?

-Do any provide the potential to generate a competitive advantage?