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Strategic Marketing: Markets and Competitive Space Week 4: Lecture A Strategic Marketing Agenda l Markets and Competitive Space – Markets and Strategies – Product Market Scope and Structure – Describing and Analyzing End Users – Analyzing Competition – Market Size Estimation – Demand Estimation (Presentation article) l Reading: Ch3 from ‘Strategic Marketing’ by David Cravens. Strategic Marketing Markets and Strategies l Impact of markets on Strategy – Markets are never static – they are dynamic – There are several forces causing the change: l deregulation l globalization l mergers and acquisitions l changing customer expectations Market Sensing l disruptive technologies l demographic and lifestyle shifts – The changes put a new kind of pressure from new customers and new competitors on strategies Strategic Marketing Markets and Strategies l Impact of markets on strategy – some insights – Deregulation l Oil and Gas industry in Pakistan – downstream – Globalization l when countries start depending on each other and compete for the share of the wallet across the border – Mergers and Acquisitions l how advantages are combined together to offer unique mix of value – Changing customer expectations – Demographic and lifestyle shifts l younger population, rise of the middle class, more disposable income, health consciousness Strategic Marketing Markets and Strategies l Value Migration – Value is not a static entity – it is unique to each customer and viewpoint, and is constantly evolving. – Customers shifting their purchases away from the products generated by outdated business models to new ones that offer superior value. – Value migration may affect a product category, a company, or an entire industry – Market sensing and staying ahead is crucial Strategic Marketing Markets and Strategies l Business Model: Key Partners Who are they? What are they brining in? What is their interest? Value Proposition What exactly do we offer to our customers? Which customer needs are we satisfying? Who are they? What are the products or bundles of benefits we are offering? Cost Structure Revenue Important costs?. Key Activities Streams What are the key What exactly do we do for our USP? For what value they resources? Procurement, Production, Mktg etc. are willing to pay? What are the costs for How much they key activities? Customer Relationship currently pay? Theme? In what form they Transactional or Transformational? pay? How much are they involved in value creation? Customer Segments Who exactly are those people? Single or multiple? Channels How are we reaching them? Strategic Marketing Markets and Strategies l Value Migration Strategic Marketing Markets and Strategies l Value Migration – There are three stages to value migration: l Stage 1: Value inflow stage - value is absorbed from other companies or industries because of a superior business design l Stage 2: Value stability stage - competitive equilibrium with stable market shares and stable profit margins l Stage 3: Value outflow stage - companies lose value to other industry - reduced profit margins - loss of market share - outflow of talent and other resources Strategic Marketing Markets and Strategies Strategic Marketing Markets and Strategies l A Case in Example: – Automobile industry in the US l Stage 1: – Lack of public transport, larger families and rise of the baby boomers, industrialization, gasoline and outlets availability, limited airstrips and air travel, declining recession etc. – Larger cars; size and availability l Stage 2: – GM and Ford providing such value at a massive scale – Highly regulated industry initially then deregulation – Rise in cost of fuel, urbanization, service sector boom, smaller families, rise of baby busters and innovation from Japs. l Stage 3: – Rise in transit and cost of fuel, economy cars, decline in births, etc. industry shakeouts. Strategic Marketing Markets and Strategies l A Case in Example – One of the most obvious examples is offered by the transportation industry. l In the 1920s, Ford Motor Company experienced a value outflow from its vertically-integrated, single-car-oriented business design [that is, the black model T) as value shifted toward GM, whose price-laddered, multi-optioned business design proved superior in meeting customers’ needs and priorities Strategic Marketing Markets and Strategies l A Case in Example – Intel and Microsoft l branding the ‘chip’ inside and the ‘O/S’ taking away the most of the value from computer giants l Giants such as IBM and DEC lost over $50 billion in market value from 1984-1994 – while newcomers Microsoft, Intel, and Novell gained over $80 billion, thus resulting in a rapid and dramatic reallocation of value in the industry Strategic Marketing Markets and Strategies l A Case in Example – Wal-Mart l Competing in the burgeoning discount retail segment, Wal- Mart profited from the shortcomings of the more traditional retailers. l value-migration shift by capitalizing on meeting the priorities of segments—especially, for greater selection and lower prices for branded staples l It took away business from Macy’s, Marshall Field’s, and May’s at the high end and the Sears, JC Penney, and KMart at the middle and lower ends Strategic Marketing Markets and Strategies l In each transition the trauma of change was the trauma of changing how the company did the business. l Its not about technology or format. – Its how they organized themselves, – how they configured their resources, – and how they fashioned their approach to the customer. The Business Model! Strategic Marketing Product-Market Scope and Structure l Product Market l “Product market is defined as the set of products which are substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers” Matching needs with product benefits l Substitutes: – Financial Services Product Market l money market accounts, mutual funds, T bills, certificates – Landline = Cell phone – Mail: Internet – A vacation trip = a laptop = a pair of jeans and so on l Substitute depend on the ‘share-of-the-wallet’ and unique needs of the customers Strategic Marketing Product-Market Scope and Structure l Product-Market Scope and Structure – Determine Product-Market Boundaries and Structure l Product Market Structure – There are several types of products or classes of products when it comes to kitchen appliances. Generic product market – The starting point in defining product market is to identify the particular need or want that a group of products satisfy Strategic Marketing Product-Market Scope and Structure l Determining Product-Market Boundaries and Structure l Identifying the generic need category of interest to the firm – Fast and convenient food l Identify the products/services that fit into the category – A Snack or a Bar – TV Dinner or Frozen Pizza or a home delivery – Burgers or a Deli l Break-out relevant specific product-markets – Microwave ovens – Convenience store – Super markets – Traditional Restaurants Strategic Marketing Product-Market Scope and Structure l Determining Product-Market Boundaries and Structure l Break-out relevant specific product-markets – Microwave oven, Convenience store, Super markets, Traditional Restaurants supermarkets Microwave Ovens Fast Foods Convenience Traditional Stores Restaurants Strategic Marketing Product-Market Scope and Structure • Affecting Market Complexity l The functions or the uses of the product performed by the customer: They might be different than you had expected!!! Wipe up sawdust Repels Ants Eliminate static electricity Fabric Softener odor out of books Softens musty suitcases and photo albums Collect cat hair Golfers Strategic Marketing Markets and Strategies l Mapping Product Markets – Product Category Structure Product Class Product Category/Sub Category Product Type Brand Strategic Marketing Product Class Product Sub-Category Beverages Product Type Brand Water Flavored Non-Alcoholic Alcohol Milk Wine Juices Bear Soft Drinks Distilled Spirits Hot Beverages Strategic Marketing Describing & Analyzing End-Users l Profiling l Consumer Markets – Demographic Variables – Geographic – Psychographic – Benefits sought – RFM l Organizational Markets – type of industry: Govt, resellers, agriculture and manufacturing, non-profit, services, international – Size l Number of players and demand estimation Strategic Marketing Describing & Analyzing End-Users Problem Recognition Information Search Evaluation of Alternatives Purchase Decision Post-Purchase Evaluation Strategic Marketing Analyzing Competition l Step1: Define Competitive Arena l Industry Characteristics and Trends – sales, number of firms, growth, emerging technologies – watch out conglomerates and international players – strategic alliances and co-branding – usual marketing practices l Value Chain Analysis – supplier side and distribution sides: How they work! l ‘Collaborative or Transactional’ l outsourcing and contacting customers – Consolidation and forward or backward integration Strategic Marketing Analyzing Competition l Analyzing Competition – Step1: Define Competitive Arena – Competitive Forces l Rivalry among existing firms l Threat of new entrants l Threat of Substitute products l Bargaining power of Suppliers l Bargaining power of Buyers Strategic Marketing Analyzing Competition l Step 2: Identify and describe Key Competitors l “A key competitor is a firm going after the same target market.” – Archrivals – New entrants. – Substitute product sellers – Analysis must include historical backgrounds and key decisions made in the past – depict patterns or footprints of changing corporate strategy Strategic Marketing Analyzing Competition l Step 3: Key Competitor Analysis l Business Scope and Objectives l Management Experience, Capabilities and Weaknesses l Market position and trends l Market target(s) and customer base l Positioning Strategy for each segment l Distinctive Capabilities l Financial Performance Strategic Marketing Analyzing Competition l Step 3: Key Competitor Analysis – Perceptual Maps – a “Mental Map” of how our product is perceived by consumers relative to the different competing products in the marketplace. – Linking ‘Segmentation and Positioning’. Strategic Marketing Analyzing Competition Strategic Marketing Analyzing Competition l Perceptual Maps Strategic Marketing Analyzing Competition l Step 4: Anticipating Competitor’s Actions l Estimating Competitor’s Future Strategies – Business intelligence – R&D and New technologies l Identify new competitors; major sources: – companies competing in related product markets – companies with related technologies – companies looking cross selling – companies competing in different geographical markets Strategic Marketing Developing a Strategic Vision about the Future l Questions you need to ask: l Are industry boundaries clear or foggy? l Do firms compete as “distinct entities or as families of suppliers? l Is there a competition in managing value migration? l Where is competition taking place? – product line, business level, corporate levels l Can there be competition between clusters of firms to influence standards and industry evolution? Strategic Marketing Market Size Estimation l Market Potential – it is the maximum amount of product sales from a product market in a defined time. The Upper Limit l Sales Forecast – Generally less than that of market potential – related more to business and product levels l Market Share – This is when your firm gets ‘relative’ Strategic Marketing Next Class…things to do! l Case Analysis – Kids Market Consulting, Ivey Publishing – Questions – Use Porter’s Five Forces Analysis to Consider the attractiveness for the market research industry in Ukraine? What is bottom line – What are the SWOT for KMC in the Ukrainian market? – What are the advantages, disadvantages involved in targetting kids, tweens, and teens? – Keeping in mind the core competencies of KMC, what course of action should Berezovskaya pursue?
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