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7/29/2019 3. External Analysis
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Strategic Marketing Management
Naveed Ilyas
Naveed.ilyas@hotmail.com
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External Analysis
Customer Analysis Competitor Analysis
Market/submarket Analysis
Environmental Analysis and Strategic Uncertainty
Setting priorities for Businesses and Brands
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Identification
Trends / future events Threats / Opportunities Strategic Uncertainties
Analysis
Information need areas Scenario analysis
StrategicDecisions
Where to compete How to compete
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Strategic uncertainty is a particular useful
concept in conducting external analysis
It focuses on specific unknown elements thatwill affect the outcome of strategic decisions
Each of these strategic uncertainties can in
turn, generate another level of strategicuncertainties
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Strategic Uncertainties
Will a major firm enter?
Will a technology be replaced /
Will the rupee strengthen against anoffshore currency?
How sensitive is the market to price?
Strategic Decisions
Investment in a product marketInvestment in a technology
Commitment to offshoremanufacturing
A strategy of maintaining price parity
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The scope of industry external analysis can involve anindustry broadly defined (transport industry),narrowly defined (luxury train coaches) or using ascope that may fall in between:
Railways
Passenger trains
Express trains
The level of analysis will depend on the
organizational unit and strategic decisions involved
One approach to defining the market is to specify thebusiness scope. It can be identified in terms of theproduct market and in terms of the competition
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Approach to External analysis
Customeranalysis
Competitoranalysis
Marketanalysis
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Who are our Current and Potential Customers?1. What are the demographic, geographic and psychographic
characteristics of our customers?
2. Who actually purchase our products?
3. Do these purchasers differ from the users of our products?
4. Who are the major influencers of the purchase decision?5. Who is financially responsible for making the purchase?
What do customers do with our products?1. In what quantities and in what combinations are our products
purchased?
2. How do heavy users of our products differ from the light users/
3. Do purchasers use complimentary products during theconsumption of our products?
4. What do the customers do with our products after consumption?
5. Are our customers recycling our products or packaging?
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Where do customers purchase our products?1. From what types of vendors are our products purchased?2. Does e-commerce have an effect on the purchase of our
products?
3. Are our customers increasing their purchasing from nonstore outlets?
When do customers purchase our products?1. Are the purchase and consumption of our products
seasonal?
2. To what extent do promotional events affect the purchaseand consumption of our products?
3. Do the purchases and consumption of our products varybased on physical surroundings, perceptions or thepurchase task?
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Why (and how) do customers select our products?1. How do our products features compare with competitors?
2. What are the customers needs fulfilled by our products andour competitors products?
3. Are the needs of our customers expected to change in the
future? If so, how?4. What mode of payment do customers use when purchasing
our product?
5. Is the buying behavior discrete or relationship building?
6. How can we develop, maintain and enhance customerrelationship?
7. What are needs of the customers which are not met by ourproducts?
8. What is the potential of converting noncustomers tocustomers of our products?
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Exploration of unmet needs
An analysis of customer motivations
How the market segments
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Can acompetitiveoffering bedeveloped
and
implemented?
Is thecompetitive
offeringsustainable?
Is theresulting
business fromthe targetsegment
worthwhile?
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CUSTOMER CHARACTERISTICS
Geographic Small per-urban communities for
discount stores
Type of organization Computer needs of banks vs retailers
Size of the firm Large hospitals were small sized ones
for pharmacy purchases
Lifestyle Metro sexual men prefer man saloon
services
Sex Mother of young children
Age Cereals for kids
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PRODUCT RELATED APPROACHES
User type Appliance buyers- home builders,
homeowners
Usage Concerts: seasonal ticket holders,
occasional patrons, nonusers
Benefits sought Dessert eaters- calorie conscious
versus convenience seekers
Competition For Mc donalds: KFC, Hardees, Burger
King
Price sensitivity Economy driven Q mobile buyers
versus prestige driven I Phone users
Brand loyalty Those who stick to Heinz ketchup
versus price buyers
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After segmentation, you need to answer
questions such as:
What is behind the purchase decision? How does that differ by segment?
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Newbie shoppers: need simple interface, and lotof hand holding and assurance
Reluctant shoppers: need information,reassurance and access to live customer support
Frugal shoppers: need to be convinced that priceis good and they dont have to search elsewhere
Strategic shoppers: need access to opinions ofpeers or experts and choices in configuring theproducts they buy
Enthusiastic shoppers: need community tools toshare their experiences as well as engaging tools
Convenience shoppers: want superior customerservice
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Role of Qualitative Research
Qualitative research is a powerful tool in
understanding customer motivation
It can involve: Focus group sessions
In-depth interviews
Customer case studies
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Buyer Hot Buttons
Hot buttons are motivations whose salience and
impact on markets are significant and growing.
e.g. retail food products hot buttons include:
Freshness
Healthy eating
Gourmet eating
Meal solutions
Low carb foods
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An unmet need is a customer need that is not
being met by the existing product offering
Unmet needs represent opportunities to
increase market share of firms, break into amarket or create and own new markets
They can also be a threat for established
firms since they can be a lever enabling
competitor entryThe key is to stretch the technology or apply
new technology in order to expose unmet
needs
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Who are the competitors?
Against whom do we usually compete/ Who
are our most intense competitors ? Less
intense but still serious competition?Can these competitors be grouped into
strategic groups?
Who are the potential competitive entrants?
What are the entry barriers
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Public
Trade
Government
Investors
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Evaluating the competitors
What are their objectives and strategies? Their
level of commitment?
What is their cost structure?
What is their image and positioning strategy?
What are the strengths and weaknesses of each
competitor?
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Product
Category
Brand
Competitors
Product
Competitors
Generic
Competitors
Total Budget
Competitors
Luxury cars(transportation)
ToyotaHonda
TrucksPassenger carsMinivans
Rental carsMotor cyclesBicycles
VacationHomeremodeling
Soft drinks(refreshments)
Coca colaPepsi cola
TeaOrange juiceBottled water
Tap water CandyPotato chipsGum
Movies(entertainment)
Harry potterThe Matrix
Cable TVVideo rentals
Athletic eventsConcerts
ShoppingReadingVacations
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A strategic group is a group of firms that:
Over time pursue similar competitive strategies
(e.g. use of same distribution channel, the same
type of communication strategies, or the same
price / quality position)
Have similar characteristics (e.g. size,
aggressiveness)
Have similar assets and competencies (such as
brand associations, logistics, capability, globalpresence and development)
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Competitive analysis should progress through thefollowing stages:
1. Identification: Identify all current and potentialbrands, products, generics, and total budgetcompetitors
2. Characteristics: Focus on key competitors byassessing the size, growth, profitability, objectives,strategies and target market for each one
3. Assessment: Assess each competitors strengthsand weaknesses
4. Capabilities: Focus the analysis on each keycompetitors marketing capabilities
5. Response: Estimate each competitors most likelystrategies and responses under differentenvironment situations as well as its reactions tofirms own marketing effort
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It is also important to consider potential marketentrants such as firms that might engage in:
1. Market expansion: e.g. a fast food chain shouldobserve chains in other regions e.g. Hardeesoutlet opening in Karachi
2. Product expansions: Khaadi going into formalwear by introducing Khaadi Khas
3. Backward integration: Fruit orchids acquired byMitchells
4. Forward integration: Apple opening its ownoutlets in Karachi
5. The export of assets or competencies: e.g. Aweak competitor acquired by a big market playeror strategic mergers
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Market analysis builds on the customer and
competitor analysis to make some strategic
judgments about the market and submarket
and its dynamics
One if the primary objectives of market
analysis is to determine the attractiveness of
a market to current and potential
participantsThe need is to identify emerging submarkets,
key success factors, trends, threats,
opportunities and strategic uncertainties
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Emerging submarkets
Actual and potential market size
Market growth
Market profitabilityCost structure
Distribution system
Key success factors
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Important questions to be answered:
Are submarkets emerging defined by lower price
points, emergence of niches, new applications, a
customer trend or new technology?
What is the size and growth of the submarket?
Can we make money in this submarket?
What is the cost structure for operations?
What are the dynamics of distribution system?
What are the key success factors, assets and
competencies needed in this submarket?
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Industryprofitability
Bargainingpower ofsuppliers
Threat ofpotentialentrants
Competitionamongexisting
firms Threat ofsubstituteproduct
Bargainingpower ofcustomers
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KSFs are the assets and competencies that providethe basis for competing successfully
They are of two types: Strategic necessities: do not necessarily provide and
advantage because others have them, but their absencewould create a substantial weakness
Strategic strengths:firms assets and competencieswhich provide a base of advantage
Also it is critical to determine new and emerging KSFs of theindustry e.g. for industrial firms technological innovation isimportant in introduction and growth phase but role of systemscapability, marketing and services becomes important inmaturity phase . For consumer goods, marketing anddistribution is important in intro and growth phase whilemanufacturing and operations become crucial in maturity phase.
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Technology trends Technologies changing ? Maturing ?
Consumer trends Emerging consumer trends ? Life styles ? Fashion?
Demographics and its impact on market size andsubmarkets
Government / economic trends Regulation, political risks of operating in a
government jurisdictionGeneral Questions Significant trends and future event s
Uncertainty in the environment
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Thank You
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