chap003 c and p
TRANSCRIPT
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CRAVENS
PIERCY
8/eMcGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc., All Rights Reserve
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3-2
Chapter Three
Markets andCompetitive
Space
McGraw-Hill/Irwin 2006 The McGraw-Hill Companies, Inc., All Rights Reserve
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3-3
MARKETS ANDCOMPETITIVE SPACE
Markets and Strategies
Product-Market Scopeand Structure
Describing and
Analyzing End-Users Analyzing Competition
Developing a StrategicVision about the Future
Market Size Estimation
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3-4MARKETS ANDCOMPETITIVE SPACEThe Challenges
Markets are increasingly complex,turbulent, and interrelated.
Importance of a broad view of themarket.
Essential to develop a vision abouthow the market is likely to change inthe future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors positioning
Guide targeting and positioning
decisions
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3-5
MARKETS AND
STRATEGIES
Markets and
Strategies are
Interlinked
Forming
a Shared
Vision
Value
Migration
Challenges
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3-6
Market changes often
require altering strategies
Forces of change create
both market opportunities
and threats
Inherent danger in faulty
market sensing
Markets ImpactStrategies
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3-7
Customers shift
purchasing to new
business designs with
enhanced value offering
Beware of disruptivetechnologies
Market sensing and
organizational learning areessential
Value Migrations
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3-8PRODUCT-MARKETSCOPE ANDSTRUCTURE
Matching Needs with Product
Benefits
Product-Market Boundaries and
Structure
Forming Product-Markets for
Analysis
The Changing Composition ofMarkets
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3-9Matching Needswith ProductBenefits
A product market matchespeople with needs to the
product benefits that satisfythose needs
A product market is the setof products judged to be
substitutes within those
usage situations in which
similar patterns of benefitsare sought by groups of
customers.*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
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3-10INNOVATIONFEATURE 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 forshareholder value creation.
The company invents new ways of providing services tosave customers time, money and irritation, while oftenlowering 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 writechecks on the spot.
Progressive reduced the time needed to see a damagedautomobile 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 dayis $28, about the same as the profit from a six-monthpolicy.
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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3-11Product Market Determining Product-Market
Structure
1. Start with the generic needsatisfied by the productcategory of interest to
management2. Identify the product
categories (types) that cansatisfy the generic need
3. Form the specific productmarkets within the genericproduct market
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3-12
SUPERMARKETS
MICROWAVEOVENS
CONVENIENCESTORES
TRADITIONALRESTAURANTS
Illustrative Fast-FoodProduct-Market
Structure
FAST-FOODMARKET
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3-13Forming Product Markets forAnalysis
Factors influencing
product market
boundaries:
Purpose of analysis
Changing composition
of markets
Extent of market
complexity
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3-14The ChangingComposition ofMarketsChange due to new
technologies and emerging
competition
Consider existing and
emerging markets
Identify alternative ways tomeet needs
Extend product-market
analysis beyond industryboundaries (e.g. Fast-foods)
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3-15Extent ofMarket 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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3-16Illustrative Product Market StructureGeneric Product
Class
Product Type
Variant A
Regular
Variant B
Brands
Food and beverages
for breakfast meal
Cereals
Ready to eat
NaturalPre-sweetened
Life
Nutritional
Special KProduct 19
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3-17DEFINING ANDANALYZING MARKETSDefine Product-Market
Boundaries and Structures
Identify and Describe End-Users
Analyze Industry andValue Added Chain
Evaluate Key Competitors
Forecast Market Size
and Growth Trends
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3-18
Identifying andDescribing Buyers
HowBuyersMake
Choices
BuildingCustomerProfiles
EnvironmentalInfluences
DESCRIBING
AND
ANALYZINGEND-USERS
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3-19Identifying andDescribing End-Users Illustrative buyer
characteristics inconsumer markets:
Family size, age,income, geographicallocation, sex, and
occupation Illustrative factors in
organizational markets:
Type of industry
Company size
Location
Type of products
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3-20How Buyers MakeChoices BUYING DECISION
PROCESS:
1. Problem recognition
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
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3-21EnvironmentalInfluences 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 onpurchasing decisions
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3-22Building CustomerProfiles Start with generic product
market
Move next to product-
type and variant profiles
>> increasinglymore
specific
Customer profiles guide
decision making (e.g.
targeting, positioning,market segmentation etc.)
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3-23
ANALYZINGCOMPETITION
1.Define Industry
Structure and
Characteristics
2. Identify
and
Describe
Key
Competitors
5. Identify
New
Competitors
3. EvaluateKey
Competitors
PRODUCT-
MARKET
STRUCTUREAND
MARKET
SEGMENTS4. Anticipate
Actions byCompetitors
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3-24Examples of Levelsof Competition
Diet-Rite
Cola
Diet
Pepsi
Diet
Coke
Product from
competition:
diet colas
Regular
colasDiet lemon
limes
Lemon
limes
Fruit
flavoredcolas
Product category
competition:soft drinks
Bottle
water
Wine
Beer
Coffee
Juices
Generic competition:
beverages
Baseball
cards
Fast
Food
Video
Games
Ice
Cream
Budget competition:
food & entertainment
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3-25Industry Analysis Industry size, growth,
and composition
Typical marketingpractices
Industry changes that
are anticipated (e.g.consolidation trends)
Industry strengths and
weaknesses
Strategic alliancesamong competitors
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3-26Defining IndustryStructure &Characteristics
Industry Form
Industry
Environment
Competitive
Forces
ValueAdded
Chain
SUPPLIERS
PRODUCERS
WHOLESALERS/
DISTRIBUTORS
RETAILERS/
DEALERS
CONSUMER/
ORGANIZATIONAL
END USERS
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3-27CompetitiveForces1. Rivalry among existing firms.
2. Threat of new entrants.
3. Threat of substitute products.
4. Bargaining power ofsuppliers.
5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
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3-28Key CompetitorAnalysis Business scope and
objectives
Management experience,
capabilities, andweaknesses
Market position and trends
Market target(s) and
customer base Marketing program
positioning strategy
Financial, technical, andoperating capabilities
Key competitive advantages(e.g., access to resources,
patents)
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Extent of
Market Coverage
Customer
Satisfaction
Current
Capabilities
Past
Performance
Competitor
Evaluation
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3-30DEVELOPING ASTRATEGIC VISIONABOUT THE FUTURE
Industry Boundaries Blurringand Evolving
Competitive Structure andPlayers Changing
Value Migration Paths
Product Versus BusinessDesign Competition
Firms are Collaborating toInfluence Industry Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
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3-31MARKET SIZEESTIMATION
UnrealizedPotential
Company
Sales
Forecast
Industry
Sales
Forecast
Market Potentia
Estimate
Product-Market ForecastRelationships(area denotes sales in $s)
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0
100
200
300
400
500
600
700
800
900
Sales (in 1000s
of units)
Market
Potential
Sales Forecast
Company XYZ
Sales Forecast
Product-MarketForecastRelationships forIndustrial PaintingUnits