Module 7

Advertising and competition

Market

Competition

Brand

SMART analysis

SWOT analysis

Module 7

Market

Market segments(customers)

Types of markets

Changing market

Markets

• Competition takes place in a market. This does not mean that the market has to be a collection of stalls, like a second-hand market; it doesn’t have a ‘physical’ existence or a specific location at all—it is anywhere that business compete.

The size of market (fast food in U.N)

The following one

food

Fast food(cold)

Fast food

(hot)chicken

pizza

burgersFish and chipsChineseCurries

Sandwich bars

sushi

Crisp,peanuts etc

Market segments

• Markets are most commonly divided by the following:

1. Age

2. Gender

3. Geography

4. Income and lifestyles

1.Age

• Different age groups have different patterns of spending.

• children under 12s— the average age when couples get married— the time when parents have teenage children– empty nesters– the age of retirement

2.Geography

• Spending habits vary in different parts of the country.

E.g. in the South East of Britain, many people commute to work in London, making this a major part of their expenditure.

3.Income and lifestyle

• Socio-economic groups

1. Top earning professional people, eg high court judges

2. People in management, technical jobs, eg bank managers, accountants

3. People in supervisory, eg sales assistant, secretaries

4. Skilled manual workers such as carpenters, plumbers

5. Semi-skilled manual workers such as assembly workers

6. Low income groups such as the unemployed, state pensioners and students.

Types of markets

• Competitive

• Oligopoly

• Duopoly

• Monopoly

Types of markets

1.Competitive-- when there are a lot of businesses, usually of a similar

size, competing for customers2.oligopoly-- when the market is dominated by just a few businesse

s. Eg internationally, the oil market is dominated by half a

dozen companies.In the UK, the supermarkets is an oligopoly, where the b

ig four are Tesco, Asda, Sainsbury’s and Safeway.

Types of markets

3. Duopoly-- a market which is dominated by just two businesse

s.Eg in the UK, the markets for the soap is in the hand

s of Lever Brothers and Procter & Gamble4. Monopoly-- a market is dominated by a single firm.Eg Microsoft Corporation has the monopoly over the

‘windows’ trade mark and operating system.

Monopoly law badly needed in China

• Some behavior of multinationals affecting market competition: unfair pricing and deals.

Eg 1.Microsoft’s operating system software has absolute monopolies, with a 95 percent share of the Chinese market.

2. Eastman Kodak is expected to further consolidate its market dominance after taking another 20 percent from its only Chinese rival, Lucky Film Corp ---- 70% market share.

Monopoly law badly needed in China

anti-monopoly legislation and revising the existing unfair competition law are necessary steps to curb anti-competition acts of multinational companies.

Eg Microsoft has been taken to court in an attempt to break its monopoly as

-- competition is regarded as healthy, encouraging businesses to be more efficient and to produce new ideas and products

Changing markets--changing factors

• Income

• Time

• Technology

• Tastes

Changing markets

• A number of factors has a direct effect on competition in a market. The most common influences causing changes are :

1. Income: the general level of income increases--more expensive goods and services are bought--cease buying cheaper ones--the market for the expensive good or service to

expand --the market for the cheaper ones to contract.

Changing markets

• Time:

Being first into a new market

-- a huge advantage over its competitors

(even if their product is protected by patents )

-- competitors will be along sooner or later.

Changing markets

• TechnologyNew technology replaces old, changing the m

arket for both.Eg gas lamps were replaced by electric light,

which meant that all the businesses that produced gas lamps, or parts for them, had no market any more.

Bath foam and shampoo to replace soap

Changing markets

• Tastes

These change over time; they may include markets in food, fashion and furniture. Current trends in each include healthier eating, tattoos and piercing, and leather.

(e.g. braised pork)

Competition

Competition and profit margin

Competitors’ information gathering strategies

Competitor analysis chart

Price and non-price competition

Competition and profit margin

• The number of firms engaging in producing similar products has increased—costs continue to rise—competitors keep prices down—a narrowing spread between costs and selling prices—what is necessary now for the competitors to maintain or increase profit?

---- increase business sales volume to maintain or increase profit

Information gathering strategies

• Make direct enquiries:

call the company itself and simply request the information

• Visit your local library :

most libraries have reference sections with staff trained to assist researchers in complex information searches

• Study product literature:

from these , you can see that which product they are promoting , the changes they’ve introduced to existing products

• Track media commentary :

to see what your competitors saying about themselves in press release a

nd interviews

Information gathering strategies

• Use your eyes:

observe what your competitors appear to be doing ; to observe their advertisements ; to observe trends , etc

• Search the internet:

there is a good chance that large competitors have a site on the World Wide Web. Scan the information they provide on a regular basis.

• Carry out customer research and talk to customers

• Engage the services of a consultant agency

Competitor analysis chart• About some product which is produced by

different companies, the items we have to compare:

-- materials of the product; price range; discounts ; free estimate ;individual variations ; delivery time; delivery and fitting fee; after-sales service and guarantee; free gifts

Company A Company B Company C

Materials of products

Price range

discounts

Free estimate

Individual variations

Delivery time

Delivery and fitting fee

After-sales service and guarantee

Free gifts/ market share/ promotion/future plan/etc

True or false

• All businesses are able to compete by lowering prices

• False

• Some businesses can’t afford it

Types of competition

• Price competition

• Non-price competition

Price competition

• Promotional pricing-- a temporary price reduction• Loss leaders-- charges less for an item than it actually cost

to lead people into buying other items• Penetration pricing-- charge a special low price to break into a

new market

Price competition

• Creaming

-- charge a high price

• Destroyer pricing

-- set a low price in the hope of driving a competitor out of a business.

(vicious circle)

Non-price competition

1.Adding value– eg with special promotions such as ‘buy one, get one free’ or ‘ free x with every purchase of y’

2.Offering free gifts or other rewards for customer loyalty ( offer through the use of loyalty cards)

Non-price competition

3.Providing a better service than a competitor

4.Selling a wider range of products than a competitor.

5.Providing the customer with convenience and extra facilities, such as car parks, bag packing services, extended opening hours, etc.

Suggest the type of pricing that would be most appropriate for the following

• A new portable DVD device

• A new flavor of ice cream

• A new brand of orange juice, where you really want to build market share

• To get rid of old stock before the spring fashions come in.

Brand

Branding

Valuation of brand

The difference between product

brand and service brand

Sponsoring and brand names

True or false

• Patents can protect businesses from competitors

• True

• Patents can protect new technology from being copied before the market is opened

Branding

• Branding : one of the main ways in which a company tries to make itself different from all the other businesses in a market , which offers a product an identity.

• (giving the product a trade name)

• Brand image is the image of a company’s products or services.

Brand names abroad

• What kind of brand names are acceptable abroad?

-- short, simple, easily read and pronounced

-- culture free

-- legally available

Valuation of brands

• The worth of the brand depends on the following:

1.the amount that has spent on introducing and developing the brand

2.the competition

3.trends in consumer fashion

4. Consumer loyalty towards the brand

5.the number of countries in which the brand can be used

The key difference between

a product brand and a service brand

-- whether you can comparatively easier control the quality that you’re getting.

As service corporation, what should they do?

-- careful recruitment;careful training ;internal communication.

Sponsoring and brand names

• Chinese companies are given greater opportunities as China is better positioned to hold significant sporting events, as the 2008 Beijing Olympics.

• Lenovo Group became a sponsor of the 2006 Winter Games in Turin, Italy and the 2008 Summer Games in Beijing.

• Most sponsors will be multinationals with heavy China operations and some will be big Chinese companies.

Sponsoring and brand names

• The experienced sponsors will look for indirect benefits. They want to promote their brands and enhance their images.

• South Korea’s Kia Motors took Australia Open sponsorship as its top brand marketing strategy, and became a global brand associated with youth and vitality.

(The sponsorship boom is just a bubble, some sponsors are actually losing money.)

Sponsoring and brand names

• By sponsoring, target customer bases can be increased and customer loyalty can be strengthened.

-- a 10% increase in customer loyalty will produce a sales growth of 80%.

Advertising

Commercials

advertisements

Mailing list

Hoarding (billboard)

Junk mail

Point-of-sale advertising

Ways of promoting products• Commercial :

a short picture or sound programme on radio, television or in a cinema , advertising a product or service

• Advertisements :

a public notice usu. Printed in a newspaper , of goods for sale or services offered, or of goods and services wanted

• Mailing list:

a list of names and addresses of persons and organizations to whom advertising material such as notices , leaflets, offers and other sales information is regularly sent .

Ways of promoting products• Hoarding(UK): billboard (US)• Junk mail : consists of advertising matter sent by post a

nd unwanted by the person receiving it • Point-of-sale advertising : advertising by showcards, displays, posters,

etc , in retail shops , where the article can be bought on the spot

SMART analysis• The SMART analysis is a way of making sure that

objectives were

-- specific , measurable, achievable, relevant and timed .

• The purpose of SMART analysis:

-- to evaluate and improve the objective .

SMART analysis

1.Specific: an objective should not be too vague; 2.Measurable : an objective can be assessed ; it is quantifiable 3.achievable: an objective should be realistically possible 4. relevant: an objective should fit the overall aim of the company5.timed : an objective should clearly outline exactly when steps will be

taken

Example

• Cadbury Schweppes, the chocolate and soft drinks giant, has an overall aim to increase the value of the business for shareholders. To achieve this aim, it has set itself specific objectives:

1. Increasing earnings per share by 10% each year.2. Doubling the value of shareholders’ investment

every four years.3. Generating $150m of cash every year that can be

used for projects.( each objective follows the SMART principle.)

SWOT analysis• SWOT analysis is used to categorize

aspects of an organization.

-- It stands for strengths , weaknesses , opportunities and threats .

• It is used by organizations to

----identify areas which may need to be changed , areas which can be developed.

SWOT analysis

1.The internal portions of a SWOT analysis :--strengths and weaknesses of your specific

business.2.The external analysis :--the opportunities presented by the

marketplace --the threats that you face in your chosen

market.

Decide if you think these points describe strengths, weaknesses, opportunities or threats.

• Fast delivery service.• The local government plans to build two new housing estates

in local area.• Lots of useful design software available on the market.• Central location of showroom.• Main store needs renovating.• Not enough promotion- none outside Midlands.• Product literature isn’t attractive enough.• Complacency among some staff at all levels.• Aggressive promotion from key competitors.• Good reputation with current clients.