Chapter 2 Markets and Competitive Space

MARKETS AND STRATEGIES The Challenges ― Markets are increasingly complex, turbulent, and interrelated. Importance of a broad view of the market. Essential to develop a vision about how the market is likely to change in the future. Continuous Monitoring is Necessary to: Find promising opportunities Identify shifts in value requirements Understand competitors’ positioning Guide targeting and positioning decisions

OPPORTUNITIES OUTSIDE THE COMPETITIVE BOX New Types of Competition Traditional Competitors New Business Models New Customers New Customers Conventional Value Propositions Existing Customer Base New Customer Base(s)

Markets Impact Strategies Market changes often require altering strategies Forces of change create both market opportunities and threats Inherent danger in faulty market sensing

DEFINING AND ANALYZING PRODUCT-MARKETS Determine the Boundaries and Structure of the Product-Market Form the Product-Market Describe and Analyze End-Users Analyze Competition Forecast Market Size and Rate of Change

Matching Needs with Product Benefits A product – market matches people with needs to the product benefits that satisfy those needs “A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”*

Product – Market Boundaries and Structure Determining Product-Market Boundaries and Structure Start with the generic need satisfied by the product category of interest to management Identify the product categories (types) that can satisfy the generic need Form the specific product – markets within the generic product – market

Illustrative Fast-Food Product-Market Structure SUPER MARKETS MICROWAVE OVENS CONVENIENCE STORES TRADITIONAL RESTAURANTS FAST-FOOD MARKET

Extent of Market Complexity Three characteristics of markets: 1. Functions or uses of the product 2. The enabling technology of the product 3. Customer segments in the product-market

Illustrative Product – Market Structure Food and beverages for breakfast meal Generic Product Class Cereals Product Type Ready to eat Variant A Regular Natural Variant B Pre-sweetened Nutritional Life Product 19 Special K Brands

Identifying and Describing Buyers Illustrative buyer characteristics in consumer markets: Family size, age, income, geographical location, sex, and occupation Illustrative factors in organizational markets: Type of industry Company size Location Type of products

How Buyers Make Choices BUYING DECISION PROCESS: Problem recognition Information search Alternative evaluation Purchase decision Post-purchase behavior

Environmental Influences External factors influencing buyers’ needs and wants: Government, social change, economic shifts, technology etc. These factors are often non-controllable but can have a major impact on purchasing decisions

Building Customer Profiles Start with generic product – market Move next to product- type and variant profiles >> increasingly more specific Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)

ANALYZING COMPETITION 1. Define the Competitive Arena for the Generic, Specific, and Variant Product Markets PRODUCT- MARKET STRUCTURE AND SEGMENTS 4. Identify and Evaluate Potential Competitors 2. Identify and Describe Key Competitors 3. Evaluate Key Competitors

Examples of Levels of Competition Baseball cards Bottle water Video Games Fast Food Regular colas Diet lemon limes Ice Cream Beer Diet-Rite Cola Fruit flavored colas Diet Coke Diet Pepsi Wine Product from competition: diet colas Lemon limes Product category competition: soft drinks Juices Coffee Generic competition: beverages Budget competition: food & entertainment

Key Competitor Analysis Business scope and objectives Management experience, capabilities, and weaknesses Market position and trends Market target(s) and customer base Marketing program positioning strategy Financial, technical, and operating capabilities Key competitive advantages (e.g., access to resources, patents)

DEVELOPING A STRATEGIC VISION ABOUT THE FUTURE Industry Boundaries Blurring and Evolving Competitive Structure and Players Changing Value Migration Paths Product Versus Business Design Competition Firms are Collaborating to Influence Industry Standards