Managing Markets Strategically www.wessexlearning.com Managing Markets Strategically Professor Noel Capon R.C. Kopf Professor of International Marketing Columbia Business School New York, NY

Managing Markets Strategically www.wessexlearning.com Section 1: Marketing and the Firm Section 2: Fundamental Insights for Strategic Marketing Section 3: Strategic Marketing Chapter 6: Identifying, Choosing Opportunities Chapter 7: Market Segmentation, Targeting Chapter 8: Market Strategy – Integrating Firm Efforts for Marketing Success Chapter 9: Managing through the Life Cycle Chapter 10: Managing Brands Section 4: Implementing the Market Strategy

Managing through the Life Cycle www.wessexlearning.com Chapter 9 Managing through the Life Cycle

The Fundamental Business Model www.wessexlearning.com Shareholder Value Organizational Survival, Growth Current, Potential Profits Competitors Attract, Retain, Grow Customers Competitors Customer Value Company

Six Marketing Imperatives www.wessexlearning.com • Imperative 1: Determine, recommend which markets to address • Imperative 2: Identify, target market segments • Imperative 3: Set strategic direction, positioning • Imperative 4: Design the market offer • Imperative 5: Secure support from other functions • Imperative 6: Monitor, control execution/performance

Building Product Life-Cycle Scenarios Chapter Roadmap www.wessexlearning.com Building Product Life-Cycle Scenarios Introduction Stage – Pioneers Early Growth Leaders Early Growth Followers Late Growth Stage Growth in a Mature Market Leaders in a Concentrated Mature Market Followers in Concentrated Mature Markets Fragmented Mature Markets Markets in Decline

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Underlying Rationale: Preemption www.wessexlearning.com • The firm should use the life-cycle framework for making strategic marketing decisions • Preemptive strategy-making provides differential advantage • Basis for preemption is multiple scenarios • Scenarios based on product life cycle framework • Each scenario generates several strategic options

Underlying Rationale: Preemption www.wessexlearning.com Class Discussion • Discuss the fall of BlackBerry and Nokia versus the rise of Apple in the context of risk and reward. Would you have developed and introduced the iPod in the face of Sony’s dominance in portable music players? How do you assess Spotify? Consider the role of preemption.

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenarios www.wessexlearning.com

Life Cycle Scenarios www.wessexlearning.com

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenario 1: Pioneers www.wessexlearning.com

Life Cycle Scenario 1: Pioneers www.wessexlearning.com Pioneer Stage – few players; will market take off? Objectives and Challenges • Lay foundation for achieving market leadership and profitability • Slow competitor progress: understand and use barriers • government-imposed • product-specific • firm-driven • first-mover advantage • low-cost — penetration pricing

Life Cycle Scenario 1: Pioneers www.wessexlearning.com Penetration Pricing and Skim Pricing

Life Cycle Class Discussion – LG Electronics Case Study www.wessexlearning.com Class Discussion – LG Electronics Case Study • Why did Nokia lose its strong position in mobile phones? How could Nokia have better assessed its competitive positioning by using the Lifecycle Framework? What strategic options could Nokia have developed?

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenarios 2 and 3: Early Growth www.wessexlearning.com

Life Cycle Scenario 2: Early Growth Leaders www.wessexlearning.com Early Growth Leaders – customers have accepted the product; rapid market growth, leaders in good position Strategic Options • Continue to be leader – enhance position • Continue to be leader – maintain position • Surrender leadership – retreat to a market segment(s) • Surrender leadership – exit the market

Life Cycle Scenarios 2 and 3: Early Growth www.wessexlearning.com

Life Cycle Scenario 3: Early Growth Followers www.wessexlearning.com Early Growth Followers – customers have accepted the product; rapid market growth; followers in weaker position than leaders Strategic Options • Seek market leadership • imitation • leapfrog • Settle for second place • Focus on a market segment(s) • Exit the market

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenario 4: Late Growth www.wessexlearning.com

Life Cycle Scenario 4: Late Growth www.wessexlearning.com Late Growth – minimal benefit from early leadership; segmentation is key Key Issues • How can we segment the market? • How many segments can we identify? • How many segments shall we target? • Which segments shall we target?

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenarios 5, 6, 7, and 8: Maturity www.wessexlearning.com

Life Cycle Scenario 5: Maturity – But Not Really! www.wessexlearning.com Maturity – options for market growth? Critical Questions • Are we sure the market is mature? • What are the possible barriers to growth? • behavioral • economic • governmental • technological

Life Cycle Scenario 5: Maturity – But Not Really! www.wessexlearning.com Growth Options • Increase product use • change the model • design the product to expire • develop new product uses • improve packaging for better ease of use • increase quantity per use occasion • make the product easier to use • Improve the product/service • Improve physical distribution • Reduce price • Reposition the brand • Enter new markets

Life Cycle Scenarios 5, 6, 7, and 8: Maturity www.wessexlearning.com

Life Cycle Scenario 6: Maturity – Concentrated Market Leaders www.wessexlearning.com Maturity – GNP growth; leader among few competitors Strategic Options • Maintain leadership over the long run • Harvest

Life Cycle Scenario 6: Maturity – Concentrated Market Leaders www.wessexlearning.com Maintain Leadership • Leaders often over-invest in mature products • Few alternative opportunities • Internally focused funding criteria • Political power of mature-product champions • Risk aversion to new opportunities • Leaders may under-invest in mature markets • Fear of cannibalization • Inertia • Limited view of the competition • Misunderstanding the challenger’s strategy • Complacency and arrogance

Life Cycle Scenario 6: Maturity – Concentrated Market Leaders www.wessexlearning.com Strategic Options • Maintain leadership over the long run • Harvest

Life Cycle Scenario 6: Maturity – Concentrated Market Leaders www.wessexlearning.com Harvest Strategies • Reasons to harvest • change in firm strategy • desire to avoid specific competitors • government regulations • investment requirements are too high • new technology • Critical question for harvesting • Fast harvesting • Slow harvesting

Life Cycle Scenario 6: Maturity – Concentrated Market Leaders www.wessexlearning.com Harvest Strategies • Reasons to harvest • Critical question for harvesting • fast or slow? • Fast harvesting • find someone to acquire the product • Slow harvesting • cut costs • minimize investment • raise prices

Life Cycle Scenarios 5, 6, 7, and 8: Maturity www.wessexlearning.com

Life Cycle Scenario 7: Maturity – Concentrated Market Followers www.wessexlearning.com Maturity – GNP growth; few competitors; trails leader Strategic Options • Improve market position by growing sales • market segmentation • kenneling • direct attack • Keep on truckin’ • maintain position • rationalize position • Exit • divest • liquidate

Life Cycle Scenarios 5, 6, 7, and 8: Maturity www.wessexlearning.com

Life Cycle Scenario 8: Maturity – Fragmented Markets www.wessexlearning.com Maturity Fragmented Markets – GNP growth; many competitors, none dominant Strategic Options • Acquisition (roll up) • Standardization and branding

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenario 9: Decline www.wessexlearning.com

Life Cycle Scenario 9: Decline www.wessexlearning.com Decline markets are inhospitable if: • Decline is rapid and/or uncertain • The market is commodity-based, with no price-insensitive segments • Competitors • are viable and credible • are evenly balanced and view the market as strategically important • have high fixed costs and are very sensitive to sales declines • Customer switching costs are low

Life Cycle Scenario 9: Decline www.wessexlearning.com Strategic Framework Market Hospitable? Yes A Harvest D Leadership No B Divest C Harvest or segment Low High Business Strengths

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Life Cycle Scenarios: Summary www.wessexlearning.com Preemption – important dimension of strategy making Product life-cycle framework generates nine scenarios • Life cycle scenario 1: Pioneers • Life cycle scenario 2: Early Growth Leaders • Life cycle scenario 3: Early Growth Followers • Life cycle scenario 4: Late Growth • Life cycle scenario 5: Maturity – But Not Really! • Life cycle scenario 6: Maturity – Concentrated Market Leaders • Life cycle scenario 7: Maturity – Concentrated Market Followers • Life cycle scenario 8: Maturity – Fragmented Markets • Life cycle scenario 9: Decline Multiple strategic options per scenario Best competitive strategies are often contrarian

Session Roadmap Managing through the Life Cycle www.wessexlearning.com Session Roadmap • Underlying rationale: preemption • Product life cycles are shortening • Life cycle scenarios • Life cycle scenario 1: Pioneers • Life cycle scenarios 2 and 3: Early Growth • Life cycle scenario 4: Late Growth • Life cycle scenarios 5, 6, 7, and 8: Maturity • Life cycle scenario 9: Decline • Life cycle scenarios: summary

Managing through the Life Cycle www.wessexlearning.com Chapter 9 Managing through the Life Cycle