chap002 stratgic marketing cravens

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.

chap002 stratgic marketing cravens

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