Introduction 3/12/2014 9:01 AM

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Sheila Taylor
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1 Introduction 3/12/2014 9:01 AM Marketing process of planning and executing the conception, pricing, promotion and distribution of goods services and ideas to create exchange processes with target groups that satisfy customer and organisational objectives. (1985) activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large. (2007) Classic View of Marketing Concept Product concept o Focus on producing and distributing what the organisation makes o Minimise cost o Lead by engineers o Cost effective Sales concept o Focus on selling what the organisation makes o Need well trained sales people Marketing concept o Focus on satisfying the needs and wants of the organisation s customers o Consumers first rather than product first Modern Marketing Both consumer led and resource conscious

marketing strategy means finding right fit between internal and external environments o external market needs and conditions o internal organisational resources Strategic Planning vs.

2 marketing strategy means finding right fit between internal and external environments o external market needs and conditions o internal organisational resources Strategic Planning vs. Marketing Strategy vs. Marketing Management Strategic Planning more general business issues corporate-level strategy, international strategy, entrepreneurial strategy implementation: control/governance, leadership and organisation behaviour, innovation managements Marketing Strategy Contributing to general business issues through the lenses of marketing Borrow from strategy: situation analysis, 5 forces model, value chain, higher-level strategies Unique to marketing strategy: STP, marketing mix strategies Organisation-wide process, recognition of financial role, stakeholder value creation Marketing Management Marketing mix strategies focus (4Ps), more details on execution, functional specialties Implementation-focus, project management-focus

3 o 3. Product categories targeted by organisation and products/brands competing in those categories o 4. Competitors o 5. Identification of market segments! eg. mintel oxygen o 6. Time/space boundaries! eg. your decision 2. External Analysis a. Remote/Macro Environment o Two Steps:! 1. Analysis " identify current situation and likely scenarios in the future! 2. Implications for the firm " positive or negative, opportunity or threat " rate each on a scale o Constant change companies need to adapt o Scanning the environment! Helps capitalise on early opportunities! Provides early signal of impending problems! Wants of customers often driven by macro movements! Improves image of organisation with its publics the firm is up to date! Provides intellectual stimulation building a learning organisation o PEST Analysis! Political " Any proposed legislation or other regulatory processes that are likely to impact the industry Taxation Level of regulation Regional trade & trading areas Internationalisation and globalisation etc.! Economic " Impact of the economy on the business unit and the lives of the target market

4 Exchange rates Savings rates Economic growth rates & business cycle, right now = 0.6 (ASSIGNMENTS) Employment & unemployment etc.! Sociocultural " Three aspects; demographic, sociological, cultural! Technological " Energy, materials, transportation, communications and information, genetic! + Environmental " key factors availability and quality of supply weather conditions government policies (e.g. pollution policies) 3. Critical Success Factors Summary of external environment 4. Internal Analysis Summary Discovering insights requires creative imagination even at the stage of strategic analysis Business scope determines your playing field the domain of interest for the strategy to be developed The remote, macro environment can have a huge impact on a business you need to scan it because it is in constant change. * Libguides -> business and economics -> Marketing Metrics

5 Near Environment 3/12/2014 9:01 AM Tip: remember two tools; analysis and interpretation (see slide 6) 1. Business Scope 2. Near Environment a. Remote/Macro Environment b. Near Environment (Industry Analysis) o Aim is twofold:! To arrive at assumptions about the future size of the market (market sizing/ forecasting)! To arrive at a view about the future attractiveness of the market (industry structure, broad view on competitive dynamics) o Imprecise science: future is unknowable o Basic formula! S = N x L x R! Sales = numbers of buyers x likelihood of buying x quantity to be bought in time period! Predicts how much people will purchase in future based on past trends o Market Attractiveness! 5 Forces model " the lower the level of competitiveness the higher the level of industry attractiveness. " extended the notion of competition to value chain members " helps determine attractiveness, but also industry structure. New entrants Suppliers Buyers Substituted Industry competitors! Strategy groups " Definition: firms/brands within an industry following similar strategies, aimed at similar customers or customer groups

6 " Strategic groups are separated by barriers of mobility factors that would prevent firms/ brands moving from one group to another! PLC " Assumptions of model: By default all industries/products have a limited time pan The cycle follows predictable phases Conditions, opportunities/threats vary along the way " Characteristics of stages Intro: o Sales are slow to build o Little competition o Appeals to innovators Growth: o Rapid sales growth o Very profitable o Competitors slow to react Turbulence o Sales rising o Fierce competition o Weaker competitors drop out Maturity o Growth slows/stalls o Competition stabilizes o Strategy diversion (fixed strategic positions) Decline o Sales drop o Substitutes enter o Marketing support cut. 5 Forces 1. Rivalry Among Existing Firms market attractiveness is HIGH when rivalry among existing firms is Low when.. o number of competitors is LOW

7 o market is concentrated (a few large firms dominate) o market growth is HGIH o exit barriers are LOW o Product differentiation is HIGH o Fixed costs are LOW 2. New Entrants market attractiveness for incumbents is HIGH when entry barriers are HIGH when o cost of entry is high o distributions channels are closed/ unavailable o new entrants can expect high retaliation o differentiation is already high o no unmet needs in the market 3. Substitutes Market attractiveness is HIGH when threat of buyers switching to substitutes is LOW when o Technology is still current o Relative quality/ usefulness of substitute is low o Relative price of substitute is high o Switching costs are high for consumers 4. Supplier Power market attractiveness for incumbents is HIGH when supplier power is LOW, when o suppliers are less concentrated than buyers, there are many supply alternatives o cost of switching suppliers is low o suppliers offerings are undifferentiated o suppliers input is not important for the industry o suppliers threat of forward integration is low o industry s threat of backward integration is high 5. Buyer Power market attractiveness for incumbents is HIGH when buyer power is low, when.. o buyers are less concentrated than sellers, there are many potential buyers o buyers costs to switch are high o industry s product is differentiated o importance of product to buyer is high

8 o buyers threat of backward integration is low o industry s threat of forward integration is high Industry Evolution Industries, similarly to products, companies, brands and people change constantly they evolve over time Industry structure is never rigid: the five forces analysis needs to be conducted dynamically looking into the future Another useful tool is the PLC, as it takes into consideration time, whereas the 5 forces model doesn t really, critiqued as being too static 2. b) Near Environment (Competitor Analysis) steps for detailed competitive analysis o 1. Identifying who most important competitors are! looks are Five Forces done on the strategic group you belong to! identify top market share holders, or strategically most important ones (expected to make a move, innovations, etc.)! think of both current and potential competitiors: is new entry of substitue entry likely? Who are the key players in these areas?! Sellers/buyers; will they forward/backward integrate?! Have a list of 3-5 competitors o 2. Identify what they are doing right now and will do in future! Present " assess competitors current objectives what are they trying to achieve? Why? Are they satisfied with achievements? Key indicators o stated goals o market assumptions o ownership o investment priorities " assess competitors current strategy

9 what target markets are the pursuing? What is their strategic focus? What marketing mix do they us? How do they organise marketing? Key indicators o advertising media and messages o new product introduction rates o recruitment advertisements o price level charged o distribution channels used " assess competitors resource profile marketing culture? Marketing assets and capabilities? Production and operation capabilities? Financial resources? Key indicators o Customer relationship strength o New product success rates o Quality of the people o Product availability o Promotional expenditure! Future " predict competitors future strategies what might the competition do? What under-utilised resources do they have? How will they react to our actions? Key indicators o Past strategies o Past reactions o Recent resource acquisitions o Past successes and failures o Changes in ownership 2.b) Near Environment (Consumer Analysis) Framework for Consumer Analysis Who? o Who is involved in the buying process?! Influences, user consumer o How can you characterise these people?

10 ! Demographics, psychographics, lifestyle, geography o Is there a difference between current and future consumers? Why? o What do they expect from the entire product category? What needs and wants do they have? When? o What is the purchase cycle? o How much do they buy each occasion? What? o Determining what criteria they use when they choose from competing brands:! Functional benefits (better quality, features, extra services, etc.)! Emotional benefits (brand image, perceived users, design, intangibles)! price How? o In what ways do they use the product? What are the typical usage occasions? Where? o What are the outlets for buying (various forms of retail, discounters, direct/online, etc.) Can ask these questions for: o Your own current customers o Nonusers o The product category as a whole

What affects our business from the outside? External Environmental Analysis. The External Environment

Chapter 2 The External : Opportunities, Threats, and Industry Competition, and Competitor Analysis What affects our business from the outside? 1 External al Analysis A continuous process which includes