1 Strategic Business Program Strategic Marketing Class 2

2 What is Market Segmentation? The breaking down or building up of potential buyers into groups called Market Segments

3 Benefits of Market Segmentation 1.Identifies opportunities for new product development 2.Helps design marketing programs most effective for reaching homogenous groups of buyers 3.Improves allocation of marketing resources

4 Segmentation

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7 Fundamental-Buyer Related Questions Who are they? What do they want to buy? How do they want to buy? When do they want to buy? Where do they want to buy? Why do they want to buy?

8 Each Market Segment should be… Measurable Differentiable Accessible Substantial

9 Segment Example

10 The Process of Developing Strategy In this segment, practical problems of developing and carrying out a strategy. Important issues are how to organize an effective planning process, how to communicate its results, and how to measure performance.

11 Effective Strategy Development 1. To develop strategy effectively, a company needs a formal strategic planning process. 2. A multi-functional team is the best unit to develop a strategy. It can take the holistic approach and make the complex trade-offs essential in formulating effective strategies.

12 3. To be successful, a strategy needs to be communicated, both internally and externally. 4. It takes time to change and communicate a strategy. A strategy should be changed infrequently and must be followed consistently. Effective Strategy Development

13 5. Financial results can be a misleading indication of strategic health. 6.To gauge strategic health, companies have to create measure of underlying advantage, such as customer surveys, studies of cost position, and studies of how products are performing relative to competition. Customer satisfaction ought to be the best yardstick. Effective Strategy Development

14 7. A strategist must continually probe and test a strategy for the need to change. Effective Strategy Development

15 SWOT Analysis Strengths Weaknesses Opportunities Threats

16 The Purpose of SWOT Analysis It is an easy-to-use tool for developing an overview of a company ’ s strategic situation It forms a basis for matching your company ’ s strategy to its situation

17 SWOT is the Starting Point It provides an overview of the strategic situation. It provides the “ raw material ” to do more extensive internal and external analysis.

18 Opportunities An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment. Possible Opportunities: Emerging customer needs Quality Improvements Expanding global markets Vertical Integration

19 Threats A THREAT is a factor in your company ’ s external environment that poses a danger to its well-being. Possible Threats: New entry by competitors Changing demographics/shifting demand Emergence of cheaper technologies Regulatory requirements

20 Opportunities and Threats, a Basis for EXTERNAL Analysis By examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification. By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.

21 Ben & Jerry’s: SWOT Analysis

22 Wal-Mart's: SWOT Analysis

23 The Purpose of Five-Forces Analysis The five forces are environmental forces that impact on a company ’ s ability to compete in a given market. The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

24 Threat of New Entrants Porter’s Five Forces Model of Competition Porter’s Five Forces Model of Competition

25 Threat of New Entrants Barriers to Entry Expected Retaliation Government Policy Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale

26 Bargaining Power of Suppliers Threat of New Entrants Porter’s Five Forces Model of Competition Porter’s Five Forces Model of Competition

27 Bargaining Power of Suppliers Suppliers exert power in the industry by: * Threatening to raise prices or to reduce quality Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases Suppliers are likely to be powerful if: Supplier industry is dominated by a few firms Suppliers’ products have few substitutes Buyer is not an important customer to supplier Suppliers’ product is an important input to buyers’ product Suppliers’ products are differentiated

28 Bargaining Power of Buyers Threat of New Entrants Bargaining Power of Suppliers Porter’s Five Forces Model of Competition Porter’s Five Forces Model of Competition

29 Bargaining Power of Buyers Buyers compete with the supplying industry by: * Bargaining down prices * Forcing higher quality * Playing firms off of each other Buyer groups are likely to be powerful if: Buyers are concentrated or purchases are large relative to seller’s sales Purchase accounts for a significant fraction of supplier’s sales Products are undifferentiated Buyers face few switching costs Buyers’ industry earns low profits Product unimportant to quality

30 Threat of Substitute Products Threat of New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Porter’s Five Forces Model of Competition Porter’s Five Forces Model of Competition

31 Threat of Substitute Products Products with similar function limit the prices firms can charge Keys to evaluate substitute products: Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery

32 Threat of Substitute Products Threat of New Entrants Rivalry Among Competing Firms in Industry Bargaining Power of Buyers Bargaining Power of Suppliers Porter’s Five Forces Model of Competition Porter’s Five Forces Model of Competition

33 Rivalry Among Existing Competitors Occurs when a firm is pressured or sees an opportunity Price competition often leaves the entire industry worse off Advertising battles may increase total industry demand, but may be costly to smaller competitors

34 Intense rivalry often plays out in the following ways: Jockeying for strategic position Using price competition Staging advertising battles Making new product introductions Increasing consumer warranties or service Rivalry Among Existing Competitors

35 Cutthroat competition is more likely to occur when: Numerous or equally balanced competitors Slow growth industry High fixed costs Lack of differentiation or switching costs High storage costs Capacity added in large increments High strategic stakes High exit barriers Diverse competitors Rivalry Among Existing Competitors

36 The Five Forces are Unique to Your Industry Five-Forces Analysis is a framework for analyzing a particular industry. Yet, the five forces affect all the other businesses in that industry.

37 Competitor Analysis The follow-up to Industry Analysis is effective analysis of a firm’s Competitors CompetitiveEnvironment Industry Environment

38Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Competitor Analysis

39 Future Objectives How do our goals compare to our competitors’ goals? Capabilities How do our capabilities compare to our competitors? Competitor Analysis

40 Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? What Drives the competitor? Competitor Analysis

41 What is the competitor doing? What can the competitor do? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competitive structure? Competitor Analysis

42 What does the competitor believe about itself and the industry? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we assuming stable competitive conditions? What assumptions do our competitors hold about the industry and themselves? Assumptions Competitor Analysis

What are the competitor’s capabilities? Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Assumptions What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors? Capabilities Competitor Analysis

44 Future Objectives How do our goals compare to our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy How are we currently competing? Does this strategy support changes in the competition structure? Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Assumptions Response What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition? Capabilities What are my competitors’ strengths and weaknesses? How do our capabilities compare to our competitors? Competitor Analysis

45 Know your competitors as you know yourself Create and sustain your competitive Advantage The Market size matters! Take the advantage of it. AND… The Key success Factors will give you the core competencies hence a competitive Advantage Competitor Analysis

46 Price: Positioning Strategy Marketing program positioning strategy Product strategy Target market and objectives Distribution strategy Price strategy Promotion strategy

47 Pricing Situations  New product pricing  Life cycle pricing  Positioning strategy change  Countering competitive threats

48 Set Pricing Objectives Analyze the Pricing Situation Select Pricing Strategy Determine Specific Prices and Policies Pricing Situations New and Existing Product

49 Buyers’ Perceptions of Value Offerings Brands A-E Perceived Value Perceived Price Superior Value Zone D A C E B Inferior Value Zone

50 Guide to Cost Analysis Determine cost structure A Analyze cost and volume relationships B Analyze competitive advantage C Estimate the effect of experience on costs D Determine the extent of control over costs E

51 Above Competition Below Competition Skim strategy Neutral strategy (same as competition) Penetration strategy Strategic Approaches

52 Basis of Determining Specific Prices Cost Competition Demand

53 Product and Service Classification System Convenience goods - little effort, relatively inexpensive Shopping goods - e.g ‘white goods’, equipment, more expensive, infrequent Speciality goods - extensive search e.g Jewellery, gourmet food Unsought goods - e.g. Buying a shirt just after seeing it.

54 Product Life-Cycle Strategies Product Life Cycle

55 Sales response function showing the situation for two different years

56 Strategy Implementation & Control Implementation is the process that turns a marketing plan into specific tasks to be performed and ensures that they ultimately accomplish the plan’s objectives. If the implementation process is not well thought-out and managed, the plan will not succeed.

57 On-time and accurate performance by marketing staff, agencies and vendors (the organization staff must deliver their services according to the specifications in the plan) Clear delineation of responsibilities of various elements of the implementation process (each task must be accomplished and naming the individual responsible) Factors in Implementation

58 Communication of the plan’s objectives, strategies, and tactics throughout the firm (it is important that all areas of the firm be aware of the firm’s marketing efforts). Cooperation of all areas affected by implementation (the individual who chairs the task force must effectively steer the group toward the desired end). Factors in Implementation

59 Monitoring of results (having a system in place for monitoring the implementation process and its progress toward achievement of the plan’s goals) = PROGRESSIVE EVALUATION Factors in Implementation

60 The control process involves continuous monitoring and evaluation of the strategic plan as well as feedback necessary to ensure that the plan has been assigned and communicated to the right people in the right way. Adequate monitoring system will help to trace the causes of problems and take corrective actions. Strategy Control

61 Plans may derail because of the changes in the operational environment (competition, technology, social, economic, political or legal factors) Or some situation within the firm (lack of cooperation at the operating level): Therefore Problems should be viewed as opportunities for learning, growth, and improvement. Strategy Control

62 It is imperative for any marketer to understand the role of strategy in Business Strategy is a set of unified Coherent and integrated set of ideas There are long and short term strategies Customer are not and will never buy products but values Understand the mission of an organisation Concluding Summary

63 You need to analyse your customers in order to be customer driven Industry analysis is important to determine the attractiveness of an industry Market driven strategies are more sustainable.. AND Product decision are necessary in order to make proper choice of the strategy Concluding Summary

64 THE END !!! Companies which will ignore strategic Marketing have no room in competition Always understand your competitors as you understand yourself. THANK YOU!!