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Topic : 2

Markets and Competitive Space

Dr. Ehsanul Huda Chowdhury

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Market changes often require altering strategies

Forces of change create both market opportunities and threats

Inherent danger in faulty market sensing

Markets Impact Strategies

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Customers shift purchasing to new business designs with enhanced value offering

Beware of disruptive technologies Market sensing and organizational

learning are essential

Value Migrations

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PRODUCT-MARKET SCOPE AND STRUCTURE

4Matching Needs with Product Benefits

4Product-Market Boundaries and Structure

4Forming Product-Markets for Analysis

4The Changing Composition of Markets

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Matching Needs with Product Benefits

A product – market matches people with needs to the product benefits that satisfy those needs

“A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”**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 billion to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for shareholder 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 seven days to nine hours.

Policy holders’ cars are repaired quicker, and the focus on this central customer need has won much automobile insurance business for Progressive.

These initiatives also enable Progressive to reduce its own costs – the cost of storing a damaged automobile for a day is $28, about the same as the profit from a six-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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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 Size and Growth Trends

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Product – Market Boundaries and Structure

Determining Product-Market Structure

1. Start with the generic need satisfied by the product category of interest to management

2. Identify the product categories (types) that can satisfy the generic need

3. Form the specific product – markets within the generic product – market

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SUPER MARKETS

MICROWAVEOVENS

CONVENIENCESTORES

TRADITIONAL RESTAURANTS

Illustrative Fast-Food Product-Market Structure

FAST-FOOD MARKET

3-10Illustrative Product – Market Structure

• Generic Product Class

• Product Type

• Variant ARegular

• Variant B

• Brands

Food and beveragesfor breakfast meal

Cereals

Ready to eat

NaturalPre-sweetened

Life

Nutritional

Special KProduct 19

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Identifying andDescribing Buyers

HowBuyersMake

Choices

BuildingCustomerProfiles

EnvironmentalInfluences

DESCRIBINGAND

ANALYZINGEND-USERS

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Identifying and Describing End-Users

Illustrative buyer characteristics in consumer markets:

Family size, age, income, geographical location, sex, and occupation

Illustrative factors in organizational markets:

Type of industry Company size Location Type 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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Environmental Influences

External factors influencing buyers’ needs and wants: Government, social change,

economic shifts, technology etc.

These factors are often non-controllable but can have a major impact on purchasing decisions

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Building Customer Profiles

Start with generic product – market Move next to product- type and

variant profiles >> increasingly more specific

Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)

3-16ANALYZING COMPETITION

1. Define Industry Structure and

Characteristics2. Identify and Describe Key Competitors

5. IdentifyNew

Competitors

3. Evaluate Key

Competitors

PRODUCT-MARKET

STRUCTUREAND

MARKETSEGMENTS4. Anticipate

Actions byCompetitors

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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 Form Industry EnvironmentCompetitive Forces Value

AddedChain

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 operating

capabilities Key competitive advantages (e.g.,

access to resources, patents)

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Extent of Market Coverage

CustomerSatisfaction

CurrentCapabilities

PastPerformance

Competitor Evaluation

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MARKET SIZE ESTIMATION

UnrealizedPotential

CompanySales

Forecast

IndustrySales

Forecast

Market PotentialEstimate

Product-Market Forecast Relationships (area denotes sales in $’s)

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END