Presentation is loading. Please wait.

Presentation is loading. Please wait.

Michael G.Warner MBA DipM FCIM FIDM

Similar presentations

Presentation on theme: "Michael G.Warner MBA DipM FCIM FIDM"— Presentation transcript:

1 Michael G.Warner MBA DipM FCIM FIDM
Chartered Marketer EMBA DipM FCIM FIDM Michael G.Warner MBA DipM FCIM FIDM

2 CIM Post Graduate Diploma
Marketing Leadership & Planning Michael G.Warner MBA DipM FCIM FIDM

3 SUCCESS Course Objectives
To deliver a coherent and deliverable market oriented internal culture to encourage flexibility which is SMART enough for your employer to understand and give you the go ahead. To follow the CIM guidelines so as not to throw away marks To maximise the LSM on-line resources = SUCCESS Michael G.Warner MBA DipM FCIM FIDM

4 Assessment tasks CIM registration deadline 29th March 2013
Introduction to the assessment. What do you have to do to pass? Michael G.Warner MBA DipM FCIM FIDM

5 Developing marketing strategies and value proposition
Session 2 Developing marketing strategies and value proposition Michael G.Warner MBA DipM FCIM FIDM

6 Strategic Choice – Product Market strategies
The product Market Matrix is one that Logor Ansoff first published in This sets out ways of growing a business via existing or new products , in existing and/new markets. Market penetration – This is where the business focuses on increasing sales by selling existing products into existing markets. A market penetration marketing strategy is very much about “business as usual”. In order to increase sales through this strategies, companies should; Increase product/ service usage Attract new users Promote new uses of the product/ service. Market development – This is where the business seeks to sell its existing products into new markets. There are many ways of approaching this strategy, including: • New geographical markets • New distribution channels Product development – This is where the business aims to introduce new products into existing markets. This strategy often call for the development of new competencies and achieved through an NPD process. In addition to the new products, product development involves product modifications such as new designs and features. Diversification – This is where a business markets new products or services in new markets. There are two types of diversification strategies (related diversification and unrelated diversification) and there is a high level of risk involved as the business is moving into markets in which it has little or no experience. Michael G.Warner MBA DipM FCIM FIDM

7 Michael G.Warner MBA DipM FCIM FIDM
Brand: A Definition ACCORDING TO MARKETING THEORY: “…a name, term, symbol or design, or a combination of them, which is intended to signify the goods of one seller or groups of sellers and to differentiate them from those of competitors” Kotler (1994), Marketing Management RATHER DEFINE A BRAND IN RELATION TO THE CUSTOMER: …is the means by which the company establishes a relationship with the customer (because a brand has an identity and a personality and a product not)… …A sum of all available information about the company, product or service, gained from experience (functional and emotional), differentiating it from another. The appeal is both rational and emotional level; tangible and intangible… …The space in consumers’ hearts and minds that belongs to you… …The reason to choose you over the other guys… INSIGHT The 1st definition defines the brand in terms of the company's intended message, not the customer's understanding of that message. Remember: a brand exists in the mind of the customer Michael G.Warner MBA DipM FCIM FIDM

8 What is a Brand? Product vs Brand
A product is something that is made in a factory; A brand is something that is bought by a customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless. Stephen King (WPP Group, London) The role of the brand is to create a position of differentiation in the mind of the consumer, so that the brand is understood and clearly differentiated from the competition to encourage purchase. Role of brands Identify the maker Simplify product handling Offer legal protection Signify quality Create barriers to entry Serve as a competitive advantage Secure price premium Michael G.Warner MBA DipM FCIM FIDM

9 Michael G.Warner MBA DipM FCIM FIDM
Strategic Choice Strategic Choice How to compete Direction of growth Methods of growth Strategic choice is concerned with three basic questions. How to compete – strategic aimed at developing and maintaining competitive advantage. E.g. Porters three generic strategies Direction of growth – product market strategies that determine the direction of growth. E.g. Ansoff matrix Methods of growth – institutional strategies that determine methods of growth Michael G.Warner MBA DipM FCIM FIDM

10 The Total Product Concept
A product can be a physical product, service, idea or indeed a person. In other words a product is something that can meet the various needs of consumers. Therefore it is understandable that a ‘product’ can have both tangible and intangible elements to it. A Product can be viewed from 3 fundamental levels; The core product This is the basic product i.e. what the consumer is buying. Marketers must define the core product elements in terms which are meaningful to the consumer The actual product Is composed of several characteristics such as styling, brand, quality and packaging The augmented product Additional consumer benefits and services are added. This could include things like warranties, guarantees, finance terms, dedicated help lines. It is at this levels that the most competition takes place. Physical v Psychological/ emotional intelligence Michael G.Warner MBA DipM FCIM FIDM

11 raison d’etre to the consumer
The brand blueprint An approach to defining the brand and how to strengthen it Generics: Entry stakes to the category Inner Outer directed directed values values Core Proposition raison d’etre to the consumer How the brand makes me feel Essence What the brand says about me Core Values fundamental values that define the brand Functional Emotional elements elements Absentees: desirable elements currently lacking from the brand and need to be developed into it Supports Peripherals: values to be reduced Brand Personality How the brand speaks to me Interbrand Newell and Sorrell ©Michael Warner & Snowpine Ltd

12 Boston Consulting Group (BCG) Growth-Share Matrix
Question marks (low share, high growth) Question marks are products operating in high-growth markets but with low relative market shares. They generally require considerable sums of cash since the firm needs to invest in plant, equipment, manpower and marketing communications to keep up with market developments and acquire customers. Stars (high share, high growth) Stars are those products which have moved to the position of leadership in a high growth market. Their cash needs are often high with the cash being spent in order to maintain market growth and keep competitors at bay. As stars also generate large amounts of cash, on balance there is unlikely to be any positive or negative cash flow until such times as the state of market growth declines. At this stage, provided the share has been maintained, the product should become a cash cow. Cash cows (high share, low growth) When the rate of market growth begins to fall, stars typically become the company’s cash cows. The term cash cow is derived from the fact that it is these products which generate considerable sums of cash for the organisation but which, because of the lower rate of growth, use relatively little. Because of the SBU’s position in the market, economies of scale are often considerable and profit margins high. Dogs (low share, low growth) Dogs are those products that have a weak market share in a low-growth market. Typically they generate either a low profit or a loss. The decision faced by the company is whether to hold on to the dog for strategic reasons (e.g. in the expectation that the market will grow). Dog products frequently take up more management time than they justify and there is often a case for phasing out the prod Michael G.Warner MBA DipM FCIM FIDM

13 Michael G.Warner MBA DipM FCIM FIDM
G E Business Screen GE Business Screen was developed by McKinsey & Company in consulting engagements with General Electric in the 1970’s. This is 3*3 portfolio matrix in which axes are generalized as “Industry Attractiveness” and “Business Strengths”. Both factors are calculated by first identifying criteria for each, determining the value of each parameter in the criteria and multiplying that value by a weighing factor. Strategic Implications Grow- This strategy should be adopted for strong business units in attractive industries, average business units in attractive industries and for strong business units in average industries. Hold- This strategy should be adopted for average business units in average industries, strong business units in weak industries and for weak business units in attractive industries. Harvest- This strategy should be adopted for weak business units in unattractive industries, average business units in unattractive industries and for weak business units in average industries. Michael G.Warner MBA DipM FCIM FIDM

14 What makes a Strong Brand?
It must work as a product or service – no fancy advertising or clever logo will compensate Must appeal on both the rational and emotional level – products may all work well; price premium is justified by additional intangible, emotional benefits. Must be integrated and coherent – tangible and intangible benefits must be consistent with each other to present a coherent and believable “brand personality” (TAG-Heuer) What it offers must be wanted by the customer and mean something to him/her – what is relevant may change over time: e.g. “environmentally friendly” is a relevant benefit now for products from motor cars to holidays; 30 years ago – no premium paid for these products. Marketing Advantages of Strong Brands Improved perceptions of product performance Greater loyalty Less vulnerable to competition Less vulnerable to crises Larger margins Inelastic consumer response to price increases Greater trade cooperation Increase in effectiveness of IMC Licensing opportunities Brand extension opportunities Michael G.Warner MBA DipM FCIM FIDM

15 What is customer-based brand equity
Customer-based brand equity is the differential effect of brand knowledge on consumer response to the marketing of a brand. market oriented internal culture to encourage flexibility Aaker model Michael Waner for

16 Michael G.Warner MBA DipM FCIM FIDM
Brand Equity Aaker model Michael G.Warner MBA DipM FCIM FIDM

17 Service quality gaps model
Word-of-mouth communications Personal needs Past experience Expected service CUSTOMER Gap 5 Perceived service Service delivery Gap 4 External communications to customers Gap 3 PROVIDER Service quality specifications Gap 1 Gap 2 Management perceptions of customer expectations Lewis and Mitchell, 1990; Dotchin and Oakland, 1994a; Asubonteng et al ., 1996; Wisniewski and Donnelly, 1996). ©Michael Warner & Snowpine Ltd

18 Michael G.Warner MBA DipM FCIM FIDM
Customer Relationship Marketing (CRM)Customer Relationship Management CRM) Customer Acquisition CR Mgt. Customer Retention Customer Enhancement Marketing Mix Augmentation of product/service offer Branding strategies MIS MkIS DSS Other Sustainable competitive advantages and increase in shareholder value Knowledge Management CR Mark. CRM is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000) CRM is “an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the ‘voice’ of the customer in order to deliver long-term superior customer value, at a profit to well identified existing and potential customers”. (Plakoyiannaki and Tzokas, 2001) CRM strategies are important for all organisational aspects and industries and segments. However, they are a must in heterogeneous markets. In homogeneous markets the rules can, perhaps, be relaxed to an extent. Michael G.Warner MBA DipM FCIM FIDM © Dr George Panagiotou 2009

19 Ethical stance - Four types of Firm on Ethical Issues
Ethically dependent Firms whose ethical standing is a key aspect of their product offering Examples: Oxfam, The Body Shop, Innocent Ethically positive Firms whose ethical standing is important to their credibility but not itself a key attribute Examples: Honda, Sainsbury’s, ,Virgin, Ethically Neutral Firms whose ethical standing is less significant though unethical behaviour would be damaging Examples: British Gas, British Airways Ethically Negative Firms perceived as being a business with negative ethical connotations Examples: Shell, BAT, Banks Michael G.Warner MBA DipM FCIM FIDM

20 International Marketing Strategies
Global - The global organisation conducts operations in a a unified global market. Strategic assets, resources, responsibilities and decisions are controlled centrally. International - In an international organisation assets, resources, responsibilities and decisions are decentralized. However the overall control is carried out by headquarters. Multi domestic - A Multi domestic strategy is where the organisation conducts different strategies in different markets. Transnational - A transnational organisation can be described as one in which organisational units are integrated with large flows of components, products, resources, people and information among interdependent units. The transnational organisation attempts to respond to an environment that is characterized by strong simultaneous forces for both global integration and national responsiveness Michael G.Warner MBA DipM FCIM FIDM

21 Michael G.Warner MBA DipM FCIM FIDM
International investment opportunities based on the directional policy matrix Source: Harrel, G.D. and R.D. Kiefer (1993), ‘Multinational market portfolio in global strategy development’, International Marketing Review 10 (1); Phillips, C., I. Duole, and R. Lowe, International Marketing Strategy, Routledge 1994, pp. 137–8. Michael G.Warner MBA DipM FCIM FIDM

22 Michael G.Warner MBA DipM FCIM FIDM
Value Proposition Value proposition refers to total benefits of using company’s products and services. In other words, value proposition summarises why a customer should buy company’s products or services. Generally there are three approaches/ strategies of developing a value proposition. Product leadership – value proposition created through best quality innovative products. Value focus on quality. Operational excellence – lowest cost achieved through operational excellence. Value focus on cost. Customer intimacy – total solution providers with greater focus on relationship building. Value focus on relationship/ service A value proposition is a clear and succinct statement that outlines to customers and prospects a company's unique value-creating features. In other words value proposition is the basic reasoning as to why people should consider/ buy your product or service. Michael G.Warner MBA DipM FCIM FIDM 22

23 Characteristics & design of the Value Proposition
Clear Concise Credible Consistent over time Core elements Service Price Quality Image Michael G.Warner MBA DipM FCIM FIDM

24 Key Business Concepts: Ikea Example
model Ikea is a low-cost retail service provider Sells home furnishing items at retail directly to the public Revenue model Provides low-cost, easy-to-assemble items in a pleasant shopping environment Value proposition

25 Balanced Scorecard Kaplan and Norton 1992
is a management system (not only a measurement system) that enables organisations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.

26 The Balanced Scorecard (1992) Kaplan and Norton
The Balanced Scorecard is an approach that can be used by strategic marketing managers to control, and keep track of, key performance indicators. In fact the scorecard itself is designed to be wholly strategic since it contains long-term outcomes and drivers of success. There are four zones in a balanced scorecard namely financial, customers, business processes (or simply processes), and learning and growth. Each measure is part of a longer chain of cause and effect, and all of the measures eventually lead to outcomes (read on and this will become clearer). So the scorecard is 'balanced' in that outcomes are in balance with each other. The benefit of the scorecard is that is overcomes short-term quick fixes, and gives the strategic marketing manager a straightforward overview of the organisation. In fact, a scorecard should ideally fit onto a single sheet of paper. In fact Kaplan and Norton (1992), the originators of Balanced Scorecard, describe it as the dials in an airplane cockpit. Learning and Growth. Learning and Growth deals with measures of corporate success in relation to how it learns as it develops over time. So if the company makes mistakes in any way, then it must learn from them and there must be mechanisms in place to make sure that happens. Growth also includes the way in which it generates leaders for the future and equips employees with the necessary skills that will ultimately sustain its business. Examples include skills sets, employee relations and satisfaction, and staff competences. Internal Business Processes. Internal business processes include all operations within the organisation. The measures would cover whether or not value is being delivered to target segments, and the value chain is tracked. Innovation and new product development would also be measured. Examples of internal business processes include Information Technology, manufacturing, marketing operations such as customer service, procurement and quality processes. Customers. As marketers we are very concerned with our customers. We need to make sure that they are satisfied with every aspect of their experience with our organisation. We need to make sure that we not only recruit more new customers, but that we also retain them and extend new products and services to them. We also need to make sure that we are meeting the needs of our target segments. So here, examples of customer measures include customer retention and recruitment, their satisfaction and so on. Financial. Financial measures are vitally important for any business. A note of caution here, since traditional measures of financial success such as Return On Investment (ROI), and made secondary to 'shareholder value.' Shareholder value is the natural measure of success, and so it is prioritised. Information on customers, markets and technology is far more widely available today, so don't bogged down with old fashioned financial measures. Resources, individuals and teams within a business are then aligned with the scorecard objectives, measures, targets and initiatives for each of the four areas of measurement.

27 Michael G.Warner MBA DipM FCIM FIDM

28 Michael G.Warner MBA DipM FCIM FIDM

29 Michael G.Warner MBA DipM FCIM FIDM
Agenda Strategic choice Environmental analysis Industrial and consumer markets Segmenting, targeting and positioning Warfare Strategies Total product concept and Branding International marketing strategies Balanced score card Michael G.Warner MBA DipM FCIM FIDM

30 Michael G.Warner MBA DipM FCIM FIDM
Methods of growth Advantages of acquisitions / mergers Alliance Advantages Marketing advantages e.g. Market power Shared investment risk Production advantage economies of scale Complementary resources Overcome entry barriers Possible government condition Resource and competencies Joint financial strength Disadvantages of acquisitions / mergers Alliance Disadvantages Costly Difficult to select and agree with partner Integration issues E.g. Cultural clashes Managing relationship Conflicts of objectives Loss of competitive advantage through imitation Potential for diseconomies of scale Limits integration/coordination of activities across countries Michael G.Warner MBA DipM FCIM FIDM

31 Michael G.Warner MBA DipM FCIM FIDM
Methods of growth Advantages of licensing Advantages of joint ventures Capital not tied to operations Synergies through Shared resources and competencies Contractually agreed income Flexibility Limit financial/economic risk Shared risk Greenfield – state of art and government finance Disadvantages of licensing Disadvantages of joint ventures Difficult to select and agree with partner Integration issues Loss of competitive advantage through imitation Imbalanced level of expertise and investment Limits participation Greenfield – time consuming and unpredictable cost Licensees become competitors Diminished control over Michael G.Warner MBA DipM FCIM FIDM

32 Michael G.Warner MBA DipM FCIM FIDM
Invest or hold If the business position is strong of the company and the industry environment is favorable then the company should try to retain in the market as there are still opportunity for the organisation to make profits. However the company should take different measures to increase its performance at this level. Following could be considered: Exploit new markets Exploit new products Exploit new applications Exploitation of growth of sub markets. Government stimulated growth. Michael G.Warner MBA DipM FCIM FIDM

33 Be a profitable survivor
This could be achieved by different measures. Majorly the company could encourage competitors to exit from the market. Following alternatives could be identified; Be Visible About Commitment to Survive Raise the Costs of Competing Introduce New Products & Cover New Segments Reduce Competitor’s Exit Barriers Create a Dominant Brand in Fragmented Declining Market Purchase a Competitor’s Market Share or Production Capacity. Michael G.Warner MBA DipM FCIM FIDM

34 Michael G.Warner MBA DipM FCIM FIDM
Milk or harvest The main objective here is to generate cash flow by reducing investment and operating expenses, even if that causes sales and market share to decrease. Conditions Favoring a Milking Strategy Decline rate is pronounced, but not excessively steep. Stable price structure is profitable for efficient firms. Business position is weak, but customer loyalty will still produce sales and profit. Business is not central to strategic direction. A milking strategy can be successfully managed. Following Problems are identifiable with the Milk and Harvest strategy 1.Implementation issues Difficult to Place and Motivate Manager Employee Morale May Suffer Customers May Lose Confidence Competitors May Attack More Vigorously 2. When the Premises are Wrong a Milking Strategy Can Often be Reversed – e.g., oatmeal, pocket watches 3. Flow of Funds from Milking Needs to be Forecasted and Managed Michael G.Warner MBA DipM FCIM FIDM

35 Michael G.Warner MBA DipM FCIM FIDM
Exit or liquidate This strategy is appropriate both the business position and the industry environment is not favorable to the entity. The logic here is to exit or to liquidate the business and avoid loss making as soon as possible, since there is no profitability with the current market condition. Following areas are identified as features of these markets; Rapid and Accelerating Decline Rate Extreme Price Pressures Business Position is Weak; Losing Money No Longer Part of Strategic Direction Exit Barriers Can be Overcome Potential Exit Barriers 1.Specialized Assets 2.Long-term Contracts with Suppliers or Labor 3.Commitments for Spare Parts & Service 4.Effect on Reputation and Other Company Operations 5.Government Restrictions Prohibit Exit Michael G.Warner MBA DipM FCIM FIDM

36 Example of a Competitor Profile
Michael G.Warner MBA DipM FCIM FIDM A student example

37 Michael G.Warner MBA DipM FCIM FIDM
A student example Michael G.Warner MBA DipM FCIM FIDM

38 Michael G.Warner MBA DipM FCIM FIDM
Strategic Wear-out Strategic and tactical wear-out is the problem that any organisation will face if it continues with its current strategies and tactics without considering the changes happening in the macro and micro environment. Followings can be identified as main reasons for strategic wear-out Market changes – customer preferences and requirements, distribution requirements etc Competitor innovations Internal factors – poor cost control, lack of consistent investment, ill advised change of successful strategies In order to avoid strategic wear-out it is important to review marketing strategies and monitor both internal and external environments on a continuous basis. Michael G.Warner MBA DipM FCIM FIDM

39 Industrial and Consumer markets
Variable Industrial Markets Consumer Markets Volume of sales Low High Value of sales Supplier bargaining power Shifting - depending upon number of suppliers and organisational size and importance Usually high Buyer bargaining power Shifting - depending upon number of buyers and organisational size and importance Usually low Service requirements Buying decision making DMU Individual Availability of information Usually High Consumer markets Consumer markets are market are markets where products or services are bought by individuals for their own use. Industrial markets Industrial markets are where goods are purchased for business use. Johnson and Flodhammer have argued that understanding buyer needs is important in industrial markets as well as consumer markets. The needs of the industrial customer needs to be identified for the manufacturer to produce a product or service which will satisfy the level of quality expected. Michael G.Warner MBA DipM FCIM FIDM

40 Marketing Orientation Not-for-Profit Markets
Business Orientations Product Orientation Marketing Orientation High Second Hand Markets Industrial Markets Capital equipment Business-to-business R&D labs Not-for-Profit Markets Auctions Charities Schools Hospitals Gov. Agencies Consumer Markets Types of markets Consumer markets Consumer markets are market are markets where products or services are bought by individuals for their own use. Industrial markets Industrial markets are where goods are purchased for business use. Not for profit markets Not for profits markets includes organisations such as charities, schools and hospital where profit making is not the key objective. FMCG Service-offer Retailing Low High Michael G.Warner MBA DipM FCIM FIDM © Dr George Panagiotou 2009

41 Main organisational Market Approaches
Producer Whole Seller Retailer Consumer Push-Selling Techniques Product Orientation (emphasis on own products) Marketing Orientation (emphasis on customer needs and wants) Pull-Selling Techniques Flow of sales Research and development and marketing communications Product orientation These organisations focus on the product and not on customers and their needs. They believe that production of superior products will lead to products selling themselves. The core vales of a product oriented company include technical expertise, innovation and quality. Marketing orientation A market oriented organisation is focused on the needs of the customer “Marketing orientation is the process by which an enterprise’s target customers’ needs and wants are effectively and efficiently satisfied within the resource limitations and long term survival requirements of that organisation.” Reference; Wilson, R. M., & Gilligan, C. (2005). Strategic marketing management, planning, implementation and control . Oxford: Butterworth-Heinemann. Michael G.Warner MBA DipM FCIM FIDM © Dr George Panagiotou 2009

42 The 7 Ps-based Marketing Mix
The Stages of the Segmentation, Targeting, Positioning (STP) Process Identify the organisation’s position, strengths, weaknesses and capabilities relative to competition, given aims and objectives. Situational analysis Identify desired segments in the industry and segmentation variables within. Develop profiles for each segment Market Segmentation Evaluate the attractiveness of each potential segment(s). Select segment(s) to enter Market Targeting Segmentation can simply be defined as the process of classifying customers into groups which share some common characteristics. Targeting involves the process of evaluating each segments attractiveness and selecting one or more segments to enter Positioning is the process of establishing product/ service concept in the minds of the target market. In other words, in involves creating a clear, distinctive and desirable place relative to competing products in the mind of the consumer Identify the positioning concept within each target segment. Select and develop the appropriate positioning concepts. Product Positioning Develop a relevant marketing mix for each segment The 7 Ps-based Marketing Mix Michael G.Warner MBA DipM FCIM FIDM

43 Bases for Segmentation
Customer Related Geographic Continent; Country; Region; City; Rural; Urban; population Density Demographic Age; Gender; Family Size; Family Lifecycle (old/New); Income; Occupation; Education; Race; Nationality; Social Class. Lifestyle (psychographic) Tastes; Preferences; Motivation; Inclinations; Status. Situation Related Benefits Offered/Benefits Sought Need Satisfiers; Product Features; Low Price; Reliability; Safety; Convenience. Geographic segmentation Geographic segmentation involves dividing markets into different geographical units. For example countries, regions. The organisation then markets on e or more of these units. Modifications to the marketing mix fro different areas may be made to meet the requirements of different geographic segments. Demographic segmentation Markets are divided into groups on the basis of demographic variables such as age, gender, family, size, family lifecycle income, occupation, and social. For example organisations such as Lego, Toys r Us design toys to meet the requirements of children of different age limits. Lifestyle (psychographic) Psychographic segmentation refers to segmentation of markets based on preferences and motivation of individuals. Benefits Offered/Benefits Sought Benefits segmentation is based on the assumption that the benefits sought for from the product provide the most suitable method for segmenting the market. User Status Segmentation can also be based on user status. For example ex users, non users, regular users and potential users. For example cigarette companies target specific user groups. Reference; Wilson, R. M., & Gilligan, C. (2005). Strategic marketing management, planning, implementation and control . Oxford: Butterworth-Heinemann. Michael G.Warner MBA DipM FCIM FIDM

44 Macro Environmental Analysis
Political environment Economic environment Socio-cultural environment Technological environment International environment Environmental and ecological environment In addition to the above factors followings may also be considered. Business Life-Cycle Elasticity/Inelasticity of Demand and Supply Socio-Politico Frameworks Market Structures Michael G.Warner MBA DipM FCIM FIDM

45 Meso Environmental Analysis
Industry Market Place Competitor Profiles (PIMS/Other databases) Segmentation, Targeting, Positioning (STP) Benchmarking Customer profiles Industry Life-Cycle (ILC) Branding/communications Models General Electric (GE) Matrix Product Life-Cycle (PLC) Shell Directional Policy Matrix Consulting Group (BCG) Growth Share Matrix Ansoff Matrix Forces/Dynamics of competition & KFS Strategic Groups Positioning/Perceptual/Cognitive Maps All positive and negative observations/ findings should be included in the opportunities and threats sections of the overall SWOT Analysis/ Telescopic Observations Framework. Michael G.Warner MBA DipM FCIM FIDM © Dr George Panagiotou 2009

46 Micro Environmental Analysis
Organisation’s vision, mission and values Corporate strategy and Resource and competency audit Portfolio analysis Value chain and resource utilisation Innovation audit Cost efficiency Product life‐cycle Degree of customer and market orientation Comparative and best practice analysis Core competencies Organisational culture Financial performance Critical factors for success All positive and negative observations/ findings of the internal analysis should be included in the strength and weakness sections of the overall SWOT Analysis/ Telescopic Observations Framework. Michael G.Warner MBA DipM FCIM FIDM

47 Bases for Segmentation
Consumption or Use pattern Rate of Use; Use with Other Products; Brand Familiarity. Buying Situation Kind of Shop or Distribution Channel; Kind of Shopping; Depth of Assortment; Type of Product. Questions to Ask: Who is the customer?, What is their bargaining power?, What do they buy?, Where do they buy from?, Why do they buy?, When do they buy?, From which competitor can they buy from and why? Michael G.Warner MBA DipM FCIM FIDM

48 Process of creating favourable relative position:
Identification of target market Determination of target market's needs, wants, preferences and desired benefits Examination and assessment of competitors’ characteristics and positioning Comparison of product offerings with competitors Identification of unique position Development and implementation of a marketing program Continuous Review and reassessment Michael G.Warner MBA DipM FCIM FIDM

49 Corporate positioning
Brand/Image Positioning Strategies Corporate positioning Market positioning Product positioning Total Repositioning Corporate positioning – this is where the corporate brand is used for individual product and services. Product positioning – products or service is positioned based on the product features, characteristics and/ or attributes. Market positioning - products or service is positioned based on the users/ customers. Total repositioning - Marketing strategy aimed at changing the position of a product or service in consumers’ minds relative to the positions of competing products Michael G.Warner MBA DipM FCIM FIDM

50 Michael G.Warner MBA DipM FCIM FIDM
Portfolio Analysis Portfolio A collection of products/ SBUs owned by one entity in which each product/ SBU can be separately identified for decision-making and performance measurement. Portfolio Analysis Analyzing elements of a firm's product mix to determine the optimum allocation of its resources. Portfolio Planning The process of managing the products/ SBUs, including choosing and monitoring appropriate markets & industries and allocating funds accordingly. The business portfolio is the collection of businesses and/ or SBUs that make up the company. An SBU can be a company division, a product line or even individual brand and it has to be inline with both internal and external realities of the company (company strengths, opportunities and threats). Key aspects of Portfolio analysis: Portfolio analysis – in the context of both internal and external environment Portfolio planning and strategies – based on the analysis, decision are taken as to which SBU should receive more investment. There is a range of portfolio models developed by world’s leading management consultancy firms and management gurus. Followings can be identified as the few of the widely used portfolio management tools. Boston Consulting Group Portfolio Matrix  McKinsey / General Electric Matrix Shell Directional Policy Matrix Michael G.Warner MBA DipM FCIM FIDM

51 Shortcomings of BCG Matrix
Growth rate is only one aspect of industry attractiveness and high growth markets are not always the most profitable. Definition of the market is sometimes difficult. It considers the product or business in relation to the largest player only. It ignores the impact of small competitors whose market share is rising fast. The use of four categories is too simplistic It ignores interdependence and synergy. Market share is only one aspect of overall competitive position. The BCG is simple and useful technique for strategic analysis. It is convenient for multi-product or multi-divisional companies. It focuses on cash flow and is useful for investment and marketing decisions. However it associates with some limitations and these limitations are outlined in this slide. Michael G.Warner MBA DipM FCIM FIDM

52 Determinants of Strengths and Attractiveness
Industry Attractiveness Market size Market growth Demand variability Price elasticity Industry rivalry Global opportunities Industry profitability Macro-environmental factors Business Strengths Market share Growth in market share Brand equity Distribution Production capacity Management skills Perceived differentiation Profit margins relative to competitors GE Business Screen is more complex analytical model which uses a complex criteria to evaluate the market/ industry attractiveness and business strengths. But it matrix ignores the possibility of knowledge generation and competence sharing between SBUs. Michael G.Warner MBA DipM FCIM FIDM

53 Disadvantages of Portfolio Planning
Portfolio models do not reflect the uncertainties of decision making Most of the models do not take risk in to account Most of the models ignore the importance of niche markets Most of the models ignore the opportunities for creative segmentation Markets are assumed as given rather than created and nurtured Complex assessments and calculations Michael G.Warner MBA DipM FCIM FIDM

54 Shell Directional Policy Matrix
Third widely used portfolio planning tool is the Shell Directional Policy Matrix which is based on prospects for sector profitability and the enterprise’s competitive capabilities. Here also the location of a product/ SBU in any cell of the matrix calls for different strategic decisions. Strategic Implications Leader - major resources should be focused on this Product/ SBU. Try harder - could be vulnerable over a longer period of time Double or quit – company should either increase its investment or divest. Growth - grow the market by focusing just enough resources here. Custodial - just like a cash cow, milk it and do not commit any more resources. Cash Generator - Even more like a cash cow, milk here for expansion elsewhere. Phased withdrawal - move cash to SBU's with greater potential. Divest - liquidate or move these assets on a fast as you can. (adapted from; Michael G.Warner MBA DipM FCIM FIDM

55 Michael G.Warner MBA DipM FCIM FIDM
Elements of a Brand APPROACH: Separate the physical attributes from emotional benefits. What lies at the core of the brand’s identity? CENTRAL CORE: 1. Makes the brand distinctive and valuable 2. Should remain consistent over time 3. Should remain consistent over the different markets 4. Should remain consistent over the products and services using the brand Arnold, D (1992), The Handbook of Brand Management) Michael G.Warner MBA DipM FCIM FIDM

56 Benefits of brand equity
Brand awareness Influences attitude and perceptions Anchor for associations Signal of substance Strong brand associations Differentiation /Positioning High price premium Memory retrieval potential Reasons to buy Brand extension potential Perceived quality Price premium Differentiation /Positioning Reasons to buy Brand extension potential Channel member interest High brand loyalty Reduced marketing costs Trade leverage Attracting new customers Time to respond to competitive threats Michael G.Warner MBA DipM FCIM FIDM

57 Measuring Brand Equity
Interbrand – tracks leading brands on a number of variables: Sales Market growth Internationalisation Well protected in law, etc. Good practice to measure your own and the competition brands – part of broader evaluation of strategic health of company. Michael G.Warner MBA DipM FCIM FIDM

58 Brand Dimensions (according to Interbrand)
BRAND WEIGHT (dominance) BRAND LENGTH (stretch) BRAND BREADTH (franchise) BRAND DEPTH (commitment) Michael G.Warner MBA DipM FCIM FIDM

59 Michael G.Warner MBA DipM FCIM FIDM
Brand Weight Dominance in category or market Dominant market share (market leaders) Standard setter McDonald’s, Coca-Cola, Kodak, Gillette Michael G.Warner MBA DipM FCIM FIDM

60 Michael G.Warner MBA DipM FCIM FIDM
Brand Length Stretch and strechability into new categories and markets Wide “area of competence” Disney, Johnson & Johnson, Harrods, Virgin, Sony Michael G.Warner MBA DipM FCIM FIDM

61 Michael G.Warner MBA DipM FCIM FIDM
Brand Breadth Breadth of franchise in terms of age spread, consumer types and international appeal. A “broad brand” can cross social, cultural and national boundaries. Coca-Cola, MaDonald’s, Kodak, Somy, Visa, Microsoft Michael G.Warner MBA DipM FCIM FIDM

62 Michael G.Warner MBA DipM FCIM FIDM
Brand Depth Degree of commitment the brand has achieved among its customer base and the proximity, intimacy and loyalty they feel to the brand. Intimate relationship with customers, usually on the basis of shared “central” or “higher” values. Apple Computer, Disney, Body Shop, Harley-Davidson, Camel Michael G.Warner MBA DipM FCIM FIDM

63 Michael G.Warner MBA DipM FCIM FIDM
Brand Identity Must be relevant to customer needs and wants Must be clear and easy to understand Is at the heart of the relationship between customer and company Heart of any brand strategy Has a personality of its own Has human qualities which appeal to customers See brand as a person and ask: If this brand were a person, what sort of car would it drive? What is its favourite drink? What would it say to you? If answer is not obvious, the brand personality and also brand identity is not clear Michael G.Warner MBA DipM FCIM FIDM

64 Michael G.Warner MBA DipM FCIM FIDM
Brand Extension A way of strengthening a brand’s positioning Recent example of classic line extension: McGraw-Hill --publisher of textbooks and educational materials into children’s educational software. They started with the brand’s long-standing reputation for educational excellence. Virgin Today’s definition of brand extension: Globalisation Demographic shifts – new classes of consumers Technology – new channels of marketing (Internet, Satellite TV) Industry consolidations – fewer brand choices; likely to become loyal to one Increasing emphasis on relationships – customers want brands to be accountable for their products and promises. Advantages and disadvantages of brand extensions Advantages Development of positive consumer expectations Access to retailer support Leverage of current brand awareness Economies of scale advertising, packaging, distribution Disadvantages Dilution of brand name Risk to brand integrity Risk of harm to parent brand Cannibalisation of parent brand Lost opportunity to create new brand Michael G.Warner MBA DipM FCIM FIDM

65 Michael G.Warner MBA DipM FCIM FIDM
Brand Chartering Recent development (concept) Tough internal audit to charter the underlying strength of their brands on a regular basis Brand Chartering – probes the organisation (strategic strengths) behind the brand Brand Equity – strength of the brand in the marketplace How to do brand chartering: Is there a common interpretation of the brand’s essential meaning throughout the organisation? What core competencies does the brand represent? Would the people be proud to be called manifestations of the brand? Macrae, C (1996), The Brand Chartering Handbook Michael G.Warner MBA DipM FCIM FIDM

66 Michael G.Warner MBA DipM FCIM FIDM
Global Brands Global brands can reap benefits of economies of scale in production, marketing and distribution. They must stay responsive of customer wants – may vary from one country or region to another. The issue is how to balance global economies of scale with local responsiveness. Country specific? Other factors (youth, luxury?) – not country specific Different type of channels? Competition local or international? Communication will have to be different even for global brands (Coke has more than 20 different advertisement versions) Global branding is the worldwide diffusion of the brand. Global branding leads to the development of a global village as customers seek reliable quality products. The creation of global branding speeds up the brands time to market by reducing time consuming modifications. Michael G.Warner MBA DipM FCIM FIDM

67 Positioning the Brand (Definition)
DEFINITION OF BRAND POSITIONING: A company’s attempts to influence the customer’s (target market’s) perception of its brand by presenting (communicating) it in a certain way through: Advertising Point of sale material Direct mail PR Etc NB! The brand is actually positioned by the consumer – all the company can do is send “positioning prompts” to influence. Brand positioning involves creating a unique position in the market. Therefore the brand needs to create a differential advantage in the minds of the customers. Michael G.Warner MBA DipM FCIM FIDM

68 Positioning: How to Build a Brand that Sells
Focus Choose one distinctive thing that will give you the edge Halo effect Invest in one positive image that will impact on the whole portfolio Start with current position Turn current customer perceptions into benefits (if gap between perception and reality is too big, they won’t make the leap) Be different Positioning is about clear, positive difference Be distinctive Message need to be unique, hard-hitting, sensory, creative Michael G.Warner MBA DipM FCIM FIDM

69 Developing a Brand Positioning
3 ESSENTIAL COMPONENTS FOR DEVELOPING A CLEAR BRAND DEFINITION: Clear vision – why are you in business?; where are you going? (3M: “to solve unsolved problems innovatively”) Concise meaning – what your brand represents to the marketplace Understand parameters of relevance – what your brand is and what it is not (limits to which you can extend your brand beyond its core meaning without compromising your credibility) Examples – Disney (clear vision – “to make people happy”); Microsoft (vision – “a computer on every desk in every home”) Michael G.Warner MBA DipM FCIM FIDM

70 Positioning Organisational Alignment
ORGANISATIONAL ALIGNMENT PROGRAMME Use “tagline” or theme – can make or break brand building Identify a few words that communicate the full weight and force of brand message All activities get their energy from this positioning device. Tagline must: Provide clear and recognisable differentiation Respond to customer’s most pressing needs in a believable manner Provide guidance for management decision-making, hiring, training and resource allocation Michael G.Warner MBA DipM FCIM FIDM

71 Positioning the Brand Key Factors
Successful brands are not created overnight – result of careful positioning, supported by long term strategies and consistent investment Frequent change in brand positioning – customer becomes confused Considerable time and effort must be spent in understanding how the customer perceives the brand, before thought can be given to changing that perception Changes in customer perception – only achieved in small steps over long periods of time Michael G.Warner MBA DipM FCIM FIDM

72 Communicating the Brand (cont)
Recently, experts have stressed the inadequacy of relying on mass media to communicate a brand: Cost of mass media is increasing Poorly targeted for today’s increasingly fragmented markets Use the “new media” -- direct marketing, database marketing and building relationships (vouchers, free samples, advice booklets – build relationship with customer). Rather rely on these to communicate brands successfully Michael G.Warner MBA DipM FCIM FIDM

73 Brand Extension (cont)
4 WAYS TO EXTEND: Licensing Pierre Cardin – to a variety of marginal products – brand weakened Co-branding Disney and McDonald’s – there has to be a fit Sponsorships E.g. Olympic Games – linking up with big events Brand agents Individuals that are not only celebrities, but stir emotions that support the brand in a meaningful way (e.g. Tiger Woods & Nike) Licensing Licensing involves contracts in which a foreign licensor provides access of technology or know how to a local licensee in exchange for financial compensation. Co branding Co branding involves linking two or more existing brands from different companies or business units to form a product. Sponsorship Brand sponsorship is a relationship between a provider of funds, resources and an individuals. Sponsorship can foster favorable brand and company associations. Michael G.Warner MBA DipM FCIM FIDM

Brand identity is how the company wants the brand to be perceived. Aaker (1996), Building Strong Brands Michael G.Warner MBA DipM FCIM FIDM

75 Michael G.Warner MBA DipM FCIM FIDM
Brand Loyalty Customers become loyal if brand identity is communicated effectively and positioned positively in their minds However, this does not mean they will never buy any other brand Customers tend to use “repertoires” of brands rather than single brands The specific brand they buy on any one occasion will depend on other factors such as availability, special price offers, recent advertising campaigns, point of sale factors. Highly educated and affluent groups are found to be less loyal! (not willing to pay a price premium for branded products) Michael G.Warner MBA DipM FCIM FIDM

76 Positioning & Communication
Positioning is the development and communication of a differential advantage that makes the organisation’s product or service superior and distinctive in the perception of target customers. Positioning should be meaningful to the target market segment, believable and unique (biggest, most reliable, etc). Positioning involves giving the target market segment the reason for buying your product. Michael G.Warner MBA DipM FCIM FIDM

77 Communicating the Brand (cont)
INTERACTIVE BRAND COMMUNICATION New phenomenon brought on by: Reduced effectiveness of mass media advertising Emergence of the new media Emphasis on relationship and database marketing Other Free telephone numbers Care lines Eliciting feedback (not just complaints) from customers Loyalty cards and clubs (e.g. Voyager) Michael G.Warner MBA DipM FCIM FIDM

78 Brand Management in the New Economy
Brand used to guide all activities surrounding it Coordinate these activities Manage relationships with external partners and agencies (research companies, advertising agencies, and channels) Whole organisation must understand brand Integrated approach to brand management – key issues: Cross functional working Company culture Internal communication CEOs important role to personify the brand (e.g. Richard Branson, Bill Gates, Raymond Ackerman) The corporate brand is of increasing importance (e.g. Virgin) – the corporate brand sells the product! New corporate identities created if parent company has inappropriate or unclear associations (Flora Food Co, Unilever) Michael G.Warner MBA DipM FCIM FIDM

79 New Keys to Brand Building
Use of marketing communications (mass-market advertising-agency model) as primary driver of corporate brand management is fast becoming obsolete. Replaced by an array of communications channels that can target increasingly narrow customer segments. All experiences affect brand image. Customer experience is key to brand building (e.g. Harley Davidson – owner groups, rallies) Align communication of brand to all 4 main audiences – customers, investors, employees and regulators (media, public interest organisations). Align -- key to building brand equity. Communication messages need to line up with experiences of customers. Ensure that entire business deliver the promise implicit in the brand (favourable advertising versus negative service experience – the latter will be remembered) Michael G.Warner MBA DipM FCIM FIDM

80 Positioning & Communication Process
3 steps: Choose brand identity Begin positioning Communicate (marketing mix): Product / service (together with packaging, logo, design) Price (including discounts, etc) Place (where and how it is distributed) Promotion (advertising above and below the line, PR, sponsorship, etc) Michael G.Warner MBA DipM FCIM FIDM

81 Traditional Marketing versus CRM
Aim is to expand customer base and to increase market share by mass marketing Aim is to establish a profitable, long-term, one-to-one relationship with customers Product oriented view Customer oriented view Mass marketing / mass production Mass customization, one-to-one marketing Standardization of customer needs Close customer-supplier relationship Transactional approach/ relationship Relational approach CRM is fundamentally different from traditional marketing that focuses on number of customers and market share. This slides show the main differences between traditional marketing and customer relationship management. Michael G.Warner MBA DipM FCIM FIDM

82 Michael G.Warner MBA DipM FCIM FIDM
Porter’s Diamond The Porter Diamond (Porter, 1998) suggests that national competitive advantage can be achieved by bringing together the following four key elements: Firm strategy, structure and rivalry - strong domestic competition, forcing firms to develop efficient structures and clear strategies for success, is a core component of success. Factor endowments - some degree of natural advantage, such as a large natural resource or a skilled labour force. Demand conditions - viable markets exist and these are characterised by strong and efficient competition. Related and supporting industries - a strong supporting infrastructure, enabling cost effective delivery to markets. Porter argues that long-term competitive advantage is dependent on countries' (and the firms within a country) capacities to innovate and upgrade. These capacities, in turn, arise from competition, pressure and challenge. Innovation interacts with the other important conditions for competitiveness to determine overall advantage. The other key conditions are a strongly competitive domestic market, well developed infrastructure and a network of supporting industries and some degree of advantage, or competitiveness, in the factors of production (for example, skilled labour). However, Porter also specifically emphasises the role of government and the role of chance in determining success. Michael G.Warner MBA DipM FCIM FIDM

83 Assessing country attractiveness possible criteria
Market size Market growth Absence of barriers Profit potential Competitive structure Entry opportunities Compatibility Language Currency Legal systems Technical standards Culture Consumption patterns Michael G.Warner MBA DipM FCIM FIDM

84 12C framework for analysing international markets
Country Concentration Culture/consumer behaviour Choices Consumption Contractual obligations Commitment Channels Communications Capacity to pay Currency Caveats Michael G.Warner MBA DipM FCIM FIDM

85 Michael G.Warner MBA DipM FCIM FIDM
Market Entry Methods Time Quick Joint Venture Less Partnership/Alliance Manufacturing abroad Contracting Control Issues Franchising Licensing When it comes to expanding into international markets, there are a range of alternatives available for a firm. However, the appropriateness of a selected strategy will always depend on the organisational context as these options vary with cost, risk and the degree of control. In this slide an attempt has been made to compare these different options in terms of the time and control issues. Indirect export More Direct export. Organically Slow Market Entry Methods Michael G.Warner MBA DipM FCIM FIDM

86 International Strategies - Hofstede’s Cultural Similarities
Inter-Country Differences PESTILE differences Barriers to entry Market entry methods Cross-Country Similarities Power-distance Collectivism vs. individualism Femininity vs. masculinity Uncertainty avoidance Long- vs. short-term orientation Cultural Similarities: For example, Anglo-Saxons; Hispanic; Nordic; Germanic; Arabic; Other. Michael G.Warner MBA DipM FCIM FIDM

87 Hoftede’s Model of National Cultures
Power distance. Uncertainty avoidance. Individualism –collectivism. Masculinity. Michael G.Warner MBA DipM FCIM FIDM 87

88 Hofstede’s comparative analysis
Distinguished four dimensions: Power distance (high or low) High – accept inequality of wealth and power: e.g. France, Brazil Low – do not accept inequality – e.g. Sweden, UK Uncertainty avoidance High – tolerate ambiguity - e.g. US, Australia Low – uncomfortable with uncertainty, prefer clarity – e.g. Latin America, southern Europe Power distance. Power distance relates to the level of inequality in the level of power in society. Uncertainty avoidance. Uncertainty avoidance relates to the extent which societies can tolerate uncertainty. where there is low tolerance for uncertainty, society will have institutional structures, rules and laws to exercise high level of control. Where there is low uncertainty avoidance, a wide range of opinions can prevail. Michael G.Warner MBA DipM FCIM FIDM 88

89 Michael G.Warner MBA DipM FCIM FIDM
The Strategy Clock Michael G.Warner MBA DipM FCIM FIDM

90 Examples of measures for the financial perspective
Return on capital employed (ROCE) Operating margins Economic value added (EVA) Cash flow Sales growth Michael G.Warner MBA DipM FCIM FIDM

91 Examples of measures for the customer perspective
Market share Brand image and awareness Customer satisfaction Customer retention Customer acquisition Ranking by key accounts Michael G.Warner MBA DipM FCIM FIDM

92 Examples of measures for the internal perspective
Percentage of sales from new products Manufacturing costs Manufacturing cycle time Inventory management Quality indicators Technological capabilities Michael G.Warner MBA DipM FCIM FIDM

93 Examples of measures for the innovation & learning perspective
Product development Purchasing Manufacturing Technology Marketing and sales Michael G.Warner MBA DipM FCIM FIDM

94 Strategic Choice – Competitive strategies
Differentiation A type of competitive strategy with which the organisation seeks to distinguish its products or services from competitors. Cost Leadership A types of competitive strategy with which the organisation aggressively seeks efficient facilities, cuts costs , employs tight cost controls to be more efficient than competitors. Focus Type of competitive strategy that emphasizes concentration on a specific regional market or buyer group. Requirements for Generic Competitive Strategies 01. Overall cost leadership Sustained capital investment Process engineering skills Intense supervision of labour Products designed for ease Low-cost distribution system 02. Differentiation Strong marketing abilities Creativity and Product engineering Strong capability in basic research Corporate reputation for quality or technological leadership Industry experience and unique combination of skills drawn from other businesses Strong cooperation from channels 03. Focus Combination of the above policies directed at the particular strategic target Michael G.Warner MBA DipM FCIM FIDM

95 Michael G.Warner MBA DipM FCIM FIDM
Examples of Companies along the Dimensions of the Generic Strategies in Different Industries Cost Leadership Strategy Low cost producers are those following a cost leadership strategy. Concentration is given to cost reduction in every link in the value chain. These organisations compete on price and earn higher profit. It is essential to note that the companies that follow a cost leadership strategy do not necessarily charge the lowest price. Ex: RyanAir, Easyjet, Asda, Tesco etc Organisations following cost leadership strategies; Improve productivity Gain economies of scales The industries depend on labor skills for product design and production methods try to gain a learning curve effect. Minimizes overhead cost Use technology to reduce cost or improve productivity Relocate to cheaper areas. For example, production is moved to countries where labor is cheap. Problems with cost leadership If the cost leadership applies in the industry, only one firm will pursue this strategy successfully. This is an internal focus strategy. Cost refers to internal measures, rather than the market demand. Differentiation Strategy Developing products and services which offer unique attributes to customers is called a differentiation strategy. This strategy assumes that competitive advantage can be achieved through the unique characteristics of an organisation's products/services These different/unique features should be valued by customers for the success of a differentiation strategy. The uniqueness of the product/service allow the organisation to charge a premium price. The products can be categorized as follows. Breakthrough products- products that offer radical performance advantage over its competition. For example, hybrid cars. Organisations such as Apple, Nokia, Google, Toyota, etc come up with successful breakthrough products. Improved products- products which are superior in terms of better performance. Competitive products- products which drives their appeal from a particular compromise of cost and performance. The key ways that firms used to differentiate are, Brand image Special features of products/services Other activities of the value chain Problems with the differentiation concept Choice of competitors to differentiate is difficult. For example, who are the competitors, do they serve other market segments, do they compete on the same basis. Porter assumes that a differentiated product is sold at a higher price. However, sometimes it can be sold at a competitive price in order to increase market share. Focus Strategy Focus strategy concentrates on a narrow (niche) segments of the market and does not try to serve the entire market. These organisations try to achieve a cost advantage or differentiation within the identified segments. Hence the focus strategy can be, A cost-focus strategy Differentiation-focus strategy Rolls Royce (luxury automobile), Apple (Desktop publishing) are examples of companies that use a focus strategy. Cost focus strategy- the organisation tries to be a cost leader in a particular segment. For example, printing, cloth manufacturers etc follow this strategy. Differentiation focus- the firm uses a differentiation strategy in the chosen market segment. For example, luxury good manufacturers often follow this strategy. Advantages of a focus strategy Competition is relatively low in a niche segment. Drawbacks of a focus strategy The firm sacrifices economies of scale as it serves for a smaller market. Competitors can move into the segment, with increased resources (e.g. the Japanese moved into the US luxury car market, to compete with Mercedes and BMW). The segment needs may eventually become less distinct from the main market. Michael G.Warner MBA DipM FCIM FIDM

96 Michael G.Warner MBA DipM FCIM FIDM
Assessing the value proposition - Strategy Clock MUST DO Michael G.Warner MBA DipM FCIM FIDM Source: Bowman & Faulkner (1995)

97 Strategic Choice – Competitive strategies
According to this model, there are two basic types of competitive advantage a firm can possess: low cost or differentiation. When these two bases are combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. 1. Cost Leadership In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. E.g. economies of scale, proprietary technology, preferential access to raw materials etc. A firm which achieve and sustain overall cost leadership will be an above average performer in its industry, provided it can command prices at or near the industry average. 2. Differentiation Here the focus is on differentiating the product/ service offer from that of competitors in the industry. In a differentiation strategy a company seeks to be unique along some dimensions that are widely valued by buyers. It is rewarded for its uniqueness with a premium price. 3. Focus The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others. The focus strategy has two variants. (a) Cost focus - In cost focus a firm seeks a cost advantage in its target segment. (b) differentiation focus - A firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. Michael G.Warner MBA DipM FCIM FIDM

98 Strategic Choice – Institutional Strategies
There are number of different methodologies available for a company expand its operations. management should identify the most appropriate, suitable as well as feasible option when it comes to selection of the expansion strategy. Each expansion strategy has its own merits as well as demerits and also constraints of which some are company specific and some are external. Growth Strategies Organic growth This is referred to as growth achieved by company itself. Here the company uses self supplied financing from both internal and external for growth. Following examples can be considered: 1. Opening up a new branch 2. Launching a new product 3. Expanding of the capacity of existing operations Inorganic growth This is referred to as company using growth strategies other than organic growth. Most of the times it is strategic alliances. Following examples can be considered; 1. Mergers 2. Acquisitions 3. Joint Ventures 4. Franchises 5. Partnering and gain sharing 6. Licensing Organic growth Inorganic growth Michael G.Warner MBA DipM FCIM FIDM

99 Hostile and declining markets
Characteristics of hostile and declining markets 1. Fall in over all demand level 2. Changes in the technology causing reduction in demand for a particular good or a service 3. Change in customer needs, wants and taste 4. Changes or shifts the in government policy 5. Reduction in average margin earned by the firms. Michael G.Warner MBA DipM FCIM FIDM

100 Strategic alternatives for declining markets
Revitalising the market Be the profitable survivor Milk or harvest Exit or liquidate This slides outlines the four strategic alternatives that can be adapted to cope up with declining markets. However, there are a series of aspects that need to be considered in selecting the most appropriate strategy. These factors can be categorised into two broad headings; nature of the industry and the relative business position. Nature of the industry is defined by rate of decline, price pressures and pockets of demand. These two aspects create four strategic options for dealing with hostile and declining markets. Other than above companies could consider following as risk mitigation strategies in hostile or declining markets. Review margins and develop strong cost structures - If the company could review margins and develop new and effective cost structures then there is a possibility that the company could give reduced prices for customers. This is important in keeping customers in difficult situations. More focus on the customer Reduce potential for proliferation of the product or the brand - Higher the product proliferation higher the cost is. Higher the cost higher the financial risk in managing the product. Therefore companies should try to reduce proliferation in declining markets. Manage share shifting Michael G.Warner MBA DipM FCIM FIDM

101 Strategic alternatives for declining markets
Business position in the key segment STRONG WEAK Invest or Hold Milk or Exit Milk or Exit Exit FAVOURABLE Industry Environment The model explains different strategies available for an organisation in an declining markets. There are four possibilities; 1. Invest or hold- This recommends to hold the investment or not to exit from the current business. 2. Milk- This recommends to further operate in the market and to compete until these the business position and the industry environment further worsens. 3. Exit- This recommends to exit the particular market as it is not profitable to stay further the market. UNFAVOURABLE Michael G.Warner MBA DipM FCIM FIDM

102 Environmental analysis
Macro Meso Micro he macro Environment consist of those factors that the organisation does not have control over, such as the political , economical and Technological factors and demographical factors. Meso means ‘intermediate’, ‘in-between’ or ‘halfway’ and thus it can be used as an umbrella title to denote the organisation’s industry and marketplace environments. The micro environment consists of those factors to an organization which although it cannot control them directly it may be to influence indirectly through marketing campaigns .These factors include, customers , competition , suppliers and Intermediaries . Porters five forces help us to analyse these factors in depth . Michael G.Warner MBA DipM FCIM FIDM

103 Michael G.Warner MBA DipM FCIM FIDM
Selecting Markets Total marketing approach Designs a single marketing mix and directs it towards the entire market Assume that the needs of the target market for a specific kind of product or service are very similar Market segmentation approach Appropriate for heterogeneous markets Markets are sub-divided based on similarities Total Market Approach In this method the organisation designs a single marketing mix and directs it towards the entire market for a particular product or service. The assumption is that the needs of the target market for a specific kind of product or service are very similar, thus the business can satisfy most consumers with a single market approach. Even so, there are two requirements for effective use of this approach: a) a large proportion of customers in the total must have similar needs for the product, and b) the organisation must be able to develop and maintain a single marketing mix that satisfies customers’ needs. Market Segmentation Approach This is appropriate for heterogeneous markets, whereby customers have different requirements. Indeed, in completely heterogeneous markets, the only way to satisfy everyone is by offering tailor-made products and services. In most markets, however, the aggregation of customers into groups with similar needs and wants is feasible. Market segmentation is the process by which customers in markets characterised by heterogeneity can be grouped into smaller, more homogeneous segments. Of course, decision makers must decide which market segment(s) to enter. The total market approach offers scope for economies of scale in production, promotion and distribution. However the increasing competition and sophistication of markets has lead to a decline in the number of organisations adopting a total market approach. Michael G.Warner MBA DipM FCIM FIDM

104 Michael G.Warner MBA DipM FCIM FIDM
Targeting Strategies Undifferentiated marketing one marketing mix strategy that is appropriate for all members of the total market. Differentiated marketing The targeting of two or more market segments, with separate and distinct market offerings, which have been designed to closely meet the needs of those particular segments Concentrated marketing Concentrating the firm’s market offering solely on the needs of one defined target market.. Customised marketing specific individuals Undifferentiated marketing – this is where a company develops one marketing mix strategy that is appropriate for all members of the total market. Differentiated marketing - Only one marketing mix is developed and directed toward a few, or perhaps one, profitable market segments. Concentrated marketing - Exists when a firm develops different marketing mix plans specially tailored for each of two or more market segments. Custom marketing - Tailoring products, services and marketing programs to suit the tastes of specific individuals. Michael G.Warner MBA DipM FCIM FIDM

105 Michael G.Warner MBA DipM FCIM FIDM
Warfare Strategies Marketing Warfare is a term used to describe some of the techniques and tactics marketers use. There are two types of warfare strategies; Defensive Strategies – These are followed by market leaders to defend their market share. There are six defensive strategies. Offensive strategies – Offensive strategies and followed by market challengers and there are five Offensive strategies. Strategies that are based on strategic options from a competitor rather than customer orientation is referred to as competitive marketing strategy. Defensive marketing warfare strategies are a type of marketing warfare strategy designed to protect a company's Market Share , Profitability. Offensive marketing warfare strategies are used by market challengers to capture the market share of the industry leader. Michael G.Warner MBA DipM FCIM FIDM

106 Michael G.Warner MBA DipM FCIM FIDM
Offensive Strategies Offensive Warfare 1. Frontal attack – This is the direct, head on attack meeting competitors with the same product line, price, promotion, etc. Because attack is on the enemy’s strengths rather than weakness it is considered the most risky and least advised strategy. 2. Flanking attack – The aim here is to engage competitors in those products markets where they are weak or have no presence at all. Its overreaching goal is to build a position from which to launch, an attack on the battlefield later. 3. Encirclement attack – Multi pronged attack aimed at diluting the defenders ability to retaliate in strength. The attacker stands ready to block the competitor no matter which way he turns the product market. Product proliferation supplying different types of the same product to the market. Market encirclement consists of expanding the products into all segments and distribution channels. 4. Bypass attack – This is the most indirect form of competitive strategy as it avoids confrontation by moving into new and as yet uncontested fields. Three type of bypass are possible; develop new products, diversify into unrelated products or diversify into new geographical markets. 5. Guerilla warfare – Less ambitious in scope, this involves making small attacks in different locations whilst remaining mobile. Such attacks take several forms. The aim is to destabilize the competitor by small attacks. Michael G.Warner MBA DipM FCIM FIDM

107 Michael G.Warner MBA DipM FCIM FIDM
Defensive Strategies Defensive warfare 1. Position defence – static defence of a current position, retaining current product markets by consolidating resources within existing areas. Exclusive reliance on a position defence effectively means that a business is a sitting target for competition. 2. Mobile defence – A high degree of mobility prevents the attackers chances of localizing the defence and accumulating its forces for a decisive battle. A business should seek market development, product development and diversification to create a stronger base. 3. Pre-emptive defence – Attack is the best form of defence. Pre-emptive defence is launched in a segment where an attack is anticipated instead of moving into related or new segments. 4. Flank position defence – This is used to occupy a position of potential future importance in order to deny that position to an opponent. Leaders need to develop and hold secondary markets to prevent competitors from using them as a spring board into the primary market. 5. Counter offensive defence – This is attacking where the company is being attacked. This requires immediate response to any competitor entering a segment or initiating new moves. 6. Strategic withdrawal. Michael G.Warner MBA DipM FCIM FIDM

108 Michael G.Warner MBA DipM FCIM FIDM
Brand Equity Defined Brand Equity can be defined as consisting of 5 asset categories: Brand awareness Brand loyalty Perceived quality Brand associations in addition to perceived quality Other proprietary brand assets (patents, trademarks, etc) Aaker, D (1996), Building Strong Brands Michael G.Warner MBA DipM FCIM FIDM

109 Michael G.Warner MBA DipM FCIM FIDM
Hofstede (continued) Individual/collectivism Individualist societies stress individual responsibility and success - e.g. US, UK Collectivist societies stress loyalty to group in return for support – e.g. in South America, Asia Masculinity/femininity M. societies show assertive behaviour – e.g. Japan, Italy, Arab countries F. societies show modest behaviour, interest in quality of life – e.g. Sweden, Norway, Denmark Individualism –collectivism Individualism refers to the degree which individual or collective achievement is accepted in society. The extent to which interpersonal relationships are built also depend on the level of individualism and collectivism. Masculinity The extent to which gender differentiation is expressed is denoted by masculinity. Masculine cultures emphasize assertiveness compared to nurturance for feminine cultures. High achievement, control and power are evident in masculine cultures. Michael G.Warner MBA DipM FCIM FIDM 109

110 Brands are under Threat
SOURCES OF THREATS ON BRANDS: Educated consumers Became marketing literate; brands had to offer real added value; trend: loyal customers became loyal to group of brands rather than to a single brand. Powerful retailers Strong retailers dictate terms to manufacturers (e.g. Pick ‘n Pay); retailer builds own brand (Woolworths) – customer loyal to retailer rather than product; only 1 label sold (power of the retail brand). Both of the above leading to pressure on prices No added value – consumer will not pay price premium; trend – demand both low prices AND added value In the 80's -- take-overs and mergers took place, involving leading brands. High prices were paid for these brands. Philip Morris take-over of Kraft in the US in 1988 was a case in point. Philip Morris paid a premiuj of 5 times the value of the company's tangible assets, because of the intangibles that went with them -- the brand names. The, some companies began to list brands as assets on their balance sheets. The concept of "brand equity" emerged. In the 90's, the pressure on brands grew and came from these sources (T) Michael G.Warner MBA DipM FCIM FIDM

111 Brands are under Threat (cont)
The growth of own label If the retailer represents some strong brand values itself, the way is clear for own label products (Woolworths; Pick ‘n Pay) – e.g. own Colas Brand extension instead of innovation Brands which in the past were built through real technical innovation can no longer keep pace, and may choose instead to extend an existing brand into new areas or variants. Can enhance brand, but there is danger of brand dilution or of confusing the customer (e.g. Pierre Cardin). New competition from outside the sector Existing strong brands looking to extend their franchise into other areas also pose a threat (e.g. Virgin). NB! New competitors like this are hard to fight because they are playing a different game. Woolworth's new strategy to also bring in other brands into the shop e.g. Organics, Skip, etc. Virgin and the Health Clubs. Michael G.Warner MBA DipM FCIM FIDM

112 Value Proposition - Examples
Intel: Intel inside IBM: Global solutions for a small planet Lexus: Passionate pursuit of perfection FedEx: When it absolutely, positively has to get there overnight Visa: It is everywhere you want to be Motorola University: Right knowledge, right now Nordstrom: Shopping humanized Michael G.Warner MBA DipM FCIM FIDM

Download ppt "Michael G.Warner MBA DipM FCIM FIDM"

Similar presentations

Ads by Google