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8/10/2019 Chap002 Stratgic Marketing Cravens
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Chapter 2
Markets andCompetitive
Space
McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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MARKETS AND COMPETITIVE SPACE
Markets and Strategies
Defining and Analyzing Product-Markets
Describing and Analyzing End-UsersAnalyzing Competition
Market Size Estimation
Developing a Strategic Vision about theFuture
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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 tochange in the future.
Continuous Monitoring is Necessary to:Find promising opportunities
Identify shifts in value requirementsUnderstand competitors positioning Guide targeting and positioningdecisions
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OPPORTUNITIES OUTSIDE THECOMPETITIVE BOX
The Competitive Box
Traditional Competitors New Types of
Competition NewBusinessModels
NewCustomers
NewCustomersConventional Value
Propositions
Existing CustomerBase
New CustomerBase(s)
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AN ARRAY OF CHALLENGES
Disruptive Innovation
Creating New Market Space
Fast ChangingMarkets Commoditization ThreatsDrivers of Changesin Markets
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* Market changes often require alteringstrategies
* Forces of change create both marketopportunities and threats
* Inherent danger in faulty market sensing
Markets Impact Strategies
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DEFINING AND ANALYZINGPRODUCT-MARKETS
Determine the Boundaries andStructure of the Product-Market
Form theProduct-Market
Describe andAnalyze End-Users
AnalyzeCompetition
ForecastMarket Size and
Rate of Change
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Matching Needs with Product Benefits
* A product market matches people withneeds to the product benefits that satisfythose needs
A product market is the set of products judged to be substitutes within those usage
situations in which similar patterns ofbenefits are sought by groups ofcustomers.* *Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
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INNOVATION FEATURE
* In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billionto $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies forshareholder value creation.
* The company invents new ways of providing services to save customers time,money and irritation, while often lowering costs at the same time.
* Loss adjusters are sent to the road accidents rather than working at head office,and they have the power to write checks on the spot.
* Progressive reduced the time needed to see a damaged automobile from sevendays to nine hours.
* Policy holders cars are repaired quicker, and the focus on this central customerneed has won much automobile insurance business for Progressive.
* These initiatives also enable Progressive to reduce its own costs the cost ofstoring a damaged automobile for a day is $28, about the same as the profit from asix-month policy.
Progressive Insurance:Customer Needs at the Center of Strategy
Source: Adapted from Mitchell, Adrian (2004)Heart of the Matter, The Marketer, June 12, 14.
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Product Market Boundaries and Structure
* Determining Product-Market Structure
1. Start with the generic need satisfied bythe product category of interest tomanagement
2. Identify the product categories (types) thatcan satisfy the generic need
3. Form the specific product markets withinthe generic product market
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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
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Illustrative Product Market Structure
Generic ProductClass
Product Type
Variant A
Regular Variant B
Brands
Food and beveragesfor breakfast meal
Cereals
Ready to eat
NaturalPre-sweetened
Life
Nutritional
Special KProduct 19
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DEFINING AND ANALYZING MARKETS
Define Product-Market Boundaries and Structures
Identify and Describe End-Users
Analyze Industry and Value Added Chain
Evaluate Key Competitors
Forecast Market Sizeand Growth Trends
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Identifying andDescribing Buyers
HowBuyersMake
Choices
BuildingCustomer
Profiles
EnvironmentalInfluences
DESCRIBINGAND
ANALYZINGEND-USERS
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Identifying and Describing End-Users
* Illustrative buyer characteristics in consumermarkets:
Family size, age, income, geographicallocation, sex, and occupation
* Illustrative factors in organizational markets:Type of industryCompany sizeLocationType of products
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How Buyers Make Choices
BUYING DECISION PROCESS:
1. Problem recognition
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
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EnvironmentalInfluences
* External factors influencing buyers
needs and wants:Government, social change,economic shifts, technology etc.
* These factors are often non-controllable but can have a majorimpact on purchasing decisions
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Building Customer Profiles
* Start with generic product market
* Move next to product- type and variant
profiles >> increasingly morespecific
* Customer profiles guide decisionmaking (e.g. targeting, positioning,market segmentation etc.)
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ANALYZING COMPETITION
1. Define the CompetitiveArena for the Generic,Specific, and VariantProduct Markets
2. Identifyand
DescribeKey
Competitors
4. Identifyand
EvaluatePotentialCompetitors
3. EvaluateKey
Competitors
PRODUCT-MARKET
STRUCTUREAND
MARKET
SEGMENTS
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Examples of Levels of Competition
Diet-RiteCola
Diet PepsiDietCoke
Product fromcompetition:
diet colas
Regularcolas Diet lemon
limes
Lemonlimes
Fruitflavored
colas
Product category
competition:soft drinks
Bottlewater
Wine
Beer
Coffee
Juices
Generic competition:beverages
Baseball
cards
FastFood
VideoGames
IceCream
Budget competition:food & entertainment
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Industry Analysis
* Industry size, growth, and composition
* Typical marketing practices
* Industry changes that are anticipated (e.g.consolidation trends)
* Industry strengths and weaknesses
* Strategic alliances among competitors
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Defining Industry Structure & Characteristics
Industry FormIndustry
EnvironmentCompetitiveForces Value
Added
Chain
SUPPLIERS
PRODUCERS
WHOLESALERS/DISTRIBUTORS
RETAILERS/DEALERS
CONSUMER/ORGANIZATIONAL END
USERS
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Competitive Forces
1. Rivalry among existing firms.
2. Threat of new entrants.
3. Threat of substitute products.
4. Bargaining power of suppliers.
5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
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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 operatingcapabilities
* Key competitive advantages (e.g.,access to resources, patents)
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Extent ofMarket Coverage
CustomerSatisfaction
CurrentCapabilities
PastPerformance
CompetitorEvaluation
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MARKET SIZE ESTIMATION
UnrealizedPotential
CompanySales
Forecast
IndustrySales
Forecast
Market PotentialEstimate
Product-Market ForecastRelationships
(area denotes sales in $s )
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0 100 200 300 400 500 600 700 800
900
Sales (in 1000sof units)
2003 2004 2005 2006 2007 2008 2009 2010
MarketPotential
Sales Forecast
Company XYZSales Forecast
Product-Market Forecast Relationships forIndustrial Painting Units
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DEVELOPING A STRATEGIC VISION ABOUTTHE FUTURE
Industry Boundaries Blurring and Evolving
Competitive Structure and Players Changing
Value Migration Paths
Product Versus Business DesignCompetition
Firms are Collaborating to Influence IndustryStandards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
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