András Bauer Marketing 1

The Big Picture

• Marketing does not work in a vacuum and it is important to know, what is going on elswhere.

• Historically, Industrial Organization looked at industry performance

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STRUCTURE

CONDUCT

PERFORMANCE

NATURE: SUPPLY AND DEMAND

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Structure-Conduct-Performance

• In this logic the market structure (plus add culture to international) defines how firms « behave », i.e. compete extremely in an oligopoly.

• This behavior will have an impact on company performance, i.e. profits are usually higher in a monopoly or marketing is more intensive in an oligopoly.

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Value Chain Analysis

• As an extension to aggregate industry analysis, one can look inside the firm and determine, what is a contribution of different activities.

• The Value Chain Model is usually still aggregate

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PRIMARY ACTIVITIES

MARGIN

OPERATIONS

IN- LOGISTICS

OUT-LOG ISTI CS

MAR KET ING/ SALES

SER VICE

FIRM INFRASTRUCTURE

HUMAN RESOURCES MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

SUPPORT ACTIVITIES

THE MODEL OF A VALUE CHAIN

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The Value Chain

• Is a good construct, but is clearly based on the old economy with more emphasis on physical creation of products and services

• « Supporting functions » may become the core of the value chain

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An extended version of SCP: The Five Forces Model

• Based on empirical research on firm and industry cases several researcers worked on this concept. (e.g. Bain)

• Michael Porter (Harvard) made an industry competitive framework famous:

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Rivalry within the industry

New entrants

Firms exiting

Bargaining power of buyers

Bargaining power of suppliers

FIVE FORCES

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The Five Forces Model

• Helps you to think strategically

• Looks at power, as moving force of economic competition

• Does not tell you, why firms provide more value to their owners

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SWOT Analysis

• SWOT analysis is based on logic. Looks at the firm and its environment from the inside

Strenghs and Weaknesses

• and from outside:Opportunities and Threats

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SWOT Analysis

• What is important in the SWOT analysis is not the analysis only by itself, but the action plan as a consequence.

• Example: Higher prices than competitors, as a weakness. What can you do about it? What action is required? Or: A growing market, as an opportunity. What should be done to capture it?

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Benchmarking

• Benchmarking helps to establish our comparative position and study the best practice.

• Benchmarking is an important exercise, since it will clarify, where we are. It can be used as an input to a SWOT analysis

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Putting it together: The Balanced Scorecard

• The Balanced Scorecard is an ambitious tool or ,method of organizing, to link performance to strategy and firm activities.

• Though it is very analytical, the journey could be more important than the destination, i.e. the firm experiences learning and synergy

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Vision and Strategy

Customer

Financial

Internal Business Processes

Learning and Growth

THE BALANCED SCORECARD

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The Balanced Scorecard Philosophy

• It is more than a combination of financial and non-financial measures, it includes outcomes and outcome drivers.

• For all firms or business units the BC is unique and can be created from its own variables.

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FINANCIAL MEASURES

Revenue Growth and Mix Cost Reduction/Productivity Asset Utilization/Investment

CUSTOMER MEASURES

Product/Service Attributes Customer Relationship Image and Reputation

INTERNAL MEASURES

Quality and time-based metrics of performance

LEARNING AND GROWTH MEASURES

People, systems and organizational processes

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Customer satisfaction

Customer retention

Customer profitability

Customer acquisition

Market share

Account share

Core outcome drivers and Internal Business Process Measures

Financial Objectives

Customer Outcomes

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Customer Acquisition

Customer Satisfaction

Customer Retention

Product Service Attributes

Image RelationshipValue = + +

CUSTOMER OUTCOMES AND DRIVERS

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THE ANSOFF MATRIX

DEVELOP NEW SEGMENTS

FOCUS ON COMPETITORS ’ CUSTOMERS

FOCUS ON EXISTING CUSTOMERS

FOCUS ON NEW CUSTOMERS IN EXISTING SEGMENTS

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CUSTOMER TARGET

CORE STRATEGY

MARKETING MIX

THE LOGIC OF SEGMENT FOCUSED STRATEGY

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Specific to marketing analysis

• Market segmentation, the capability to identify, describe and analyze segments

• Product positioning, the understanding of how the value proposition works on customers

• Consumer behaviour analysis

• Customer analysis

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LOOK AT THE BIG PICTURE

FIND OUT HOW VALUE IS CREATED

LOOK AT THE FIRM

ANALYZE THE MARKET

ANALYZE COMPETI TORS

FIGURE OUT THE BEST VALUE PRO POSITION

DEFINE THE SPECIFIC MARKETING MIX

IMPLEMENT: TIME AND BUDGET

EVALUATE FUTURE ACTIONS

A ROAD-MAP FOR ANALYSIS