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MKTG 6201 Overview Company & Competition Glenn Voss Organizational success depends on alignment… within the internal system and with the external environment.

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Presentation on theme: "MKTG 6201 Overview Company & Competition Glenn Voss Organizational success depends on alignment… within the internal system and with the external environment."— Presentation transcript:

1 MKTG 6201 Overview Company & Competition Glenn Voss Organizational success depends on alignment… within the internal system and with the external environment. The role of management is to recognize & resolve tensions. Smith and Lewis 2011 The answer to which strategy is most effective is never… A is more effective than B, but rather… A is more effective under Conditions C 1 & B is more effective under Conditions C 2. The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, & still retain the ability to function. F. Scott Fitzgerald

2 Case Analysis & Recommendation In case analysis, you apply frameworks and models to generate insights for solving a real or simulated business problem to achieve organizational success. You also calculate metrics to assess the likely outcomes associated with various alternatives. Your recommendation is formulated as a strategy. 2

3 Case Analysis & Recommendation Models Frameworks Metrics Concepts & Terminology 3

4 A system of words used to name concepts in a particular discipline. Examples: – Objectives, Resources & Capabilities – Segmentation, Targeting & Positioning – Product, Price, Promotion-Communication, Place-Channel – Customer Relationship Management – Customer Acquisition & Retention – Customer Satisfaction & Value What is Terminology? 4

5 Terminology An objective is defined as: – The criterion by which the success or failure of the strategy is measured. Characteristics of well-written objectives: – Lists a quantified standard of performance. – Designates a clear time frame. – States goal in measurable terms. – Should be challenging but realistic. Objectives frequently require trade-offs; e.g., increasing market share versus increasing profits; acquiring new customers versus retaining current customers. 5 Samsung: 23% market share & 28% share of profits Apple: 9% market share & 72% of profits Worldwide mobile phones

6 Resource: tangible (e.g., equipment, machinery, mail list), intangible (e.g., brand name, customer knowledge), or human asset that the firm currently possesses. Capability: the ability to deploy individual resources (e.g., patents, know-how, brand names, equipment) to perform a task or activity to produces a desired end result. What the firm can do (i.e., skills) as a result of teams of resources working together. Terminology (cont)cont We are interested in resources & capabilities that are rare & valuable. 6

7 Common Job Interview Mistakes 7

8 A measure for quantitatively assessing a complex process or outcome, along with procedures for carrying out and interpreting the measures. Frequently become objectives, for example: – Market share – Revenue or Unit sales volume – Incremental contribution – Customer lifetime value (CLV) – Growth in any of the above (e.g., % change from last year or quarter) What is a Metric? 8

9 Common Intermediate Objectives (Metrics) Not as compelling as Volume or Financial Objectives Customer satisfaction Customer loyalty Customer acquisition & retention Customer trial & repeat Brand awareness Brand preference Brand loyalty Brand equity 9

10 A structured approach to defining, analyzing or communicating the characteristics of a complex system or process. Examples: – Comprehensive Metabolic Panel, CBC… – Google’s PageRank Algorithm – Competitive Advantage – SWOT Analysis – Product-Market Growth Strategies What is an Analytic Framework? 10

11 Competitive Advantage (Framework) How to create, communicate, capture, and sustain unique value for the customer: Cost Leadership – Lowest cost structure (large share & low price) Marketing Differentiation – providing superior perceived value by developing – Unique image ( brand-centric differentiation ) achieved through targeting, positioning & communication capabilities (large share, high advert costs) – Close relationships with customers ( customer-centric differentiation ) achieved through CRM capabilities & customization (higher prices & costs) Product Differentiation – offering superior economic value by creating superior product/service features & quality through innovation & product development capabilities (small-to-medium share, large profit margins) 11

12 Other Terminology with Similar Meaning Operational Excellence Product or Innovation Differentiation Marketing Differentiation Customer Responsive "A great deal" "Best price" "Trouble free basic service" "Always at cutting edge" "High price but worth it" "Constantly renewing and creative" "Really understands me" “Great brand" “Valuable business partner" Cost Leadership (Operations & Logistics Driven) Product Differentiation (R&D, Technology & Sales Driven) Marketing Differentiation (Brand Advertising or CRM Driven) Tata/Dell Porsche/AppleGM/IBM See McKinsey’s “Unbundling the corporationUnbundling the corporation 12

13 Core Strategy Overview Thrust of strategy Organization Core processes Economic driver Critical Capabilities Value Proposition Marketing Objectives Implementation Cost Leadership - Operational Excellence Lowest delivered cost Reliability/efficiency Top down – employees directed Flat structure Standardized Logistics/fulfillment manufacturing Scale Production Supply chain Price, reliability, access… Mkt Penetration & exploration Price & distribution Marketing Differentiation – Brand- or Customer-centric Complete personalized solution Infomediary Front-line autonomy Have it your way mindset based on fine-grained information Modular operations Integrated view of customer Service Scope Customer/Collaborator relations Positioning & Communications Relationships, customization, full service… Customer satisfaction & retention Product proliferation, promotion & lateral collaborators Product/ Innovation Differentiation Innovative features Greater functionality Decentralized Team-oriented/ loose-knit Experimentation Product development Market sensing Speed Product Innovation Competitor knowledge Innovation, design, features… Product & market exploration Product innovation & key collaborators at all levels

14 SWOT Analysis Incorporating the 5 Cs Company 1 Strengths  Identify valuable & rare resources & capabilities that the company 1 currently possesses. resources & capabilities Opportunities  Relevant opportunities w/respect to customers 2, collaborators 3, competitors 4 & the overall socioeconomic, technology, legal context 5. Company 1 Weaknesses  Identify valuable & rare resources & capabilities that the company 1 currently lacks. resources & capabilities Threats  Relevant threats with respect to customers 2, collaborators 3, competitors 4 & the overall socioeconomic, technology, legal context 5. See the Primer on SWOT Analysis Primer on SWOT Analysis 14

15 A hypothetical or simple description of a complex system or process. Effective strategies rely on insightful or valid models. Examples: – Aristotle’s Geocentric Model – Newton’s Model of Classical Mechanics – Marketing Strategy Formulation & Implementation – Product Life Cycle Model – Demand Elasticity Models What is a Model? accounted for all observations of the movement of the sun and the moon, and the planets, and the stars; good predictor of future positions of celestial bodies (i.e., verifiable) simplicity (Principle of Parsimony) - as few assumptions or rules as possible & no contradictions. 15

16 Porter’s Value Chain Model Competitive Advantage in the Value Chain Product Differentiation Marketing Differentiation Cost Leadership 16

17 Marketing Process Model C ompany C ustomers C ompetitors C ollaborators C ontext SWOT Analysis P roduct/Service Offering P romotion/ Communication P ricing P lace/ Channel Market Segmentation Selection & Targeting Product/Service Offering Positioning Customer Acquisition Customer Retention/Expansion Revenue & Profits Create Value Communicate & Capture Value Sustain Value Customer Relationship Management 17

18 Marketing Strategy Model Formulation & Implementation 1.Objective(s) 2.Target Customers – Segment, Profile & Target 3.Key Competitors – Objectives, target customers, strategy, strengths & weaknesses 4.Core Strategy – Competitive advantage; market penetration, market development, product development, or diversification; & positioning 5.Marketing Mix Implementation Product Strategy Communications Strategy Pricing Strategy CRM Strategy Channel Strategy 18 1.Objective(s) 2.Target Customers – Segment, Profile & Target Segmentation & Targeting define product market, competitors & product-market growth strategy.product market product-market growth strategy

19 Segmentation Variable Framework Demographic  Age  Family size  Family life cycle  Gender  Social class  Income  Occupation  Education  Race  Generation Geographic  Country/Region/Culture  Urban/rural  Climate Psychological  Lifestyle  Personality traits  Expertise & awareness  Attributes/Benefits sought Behavioral (esp. w/CRM)  Usage rate & loyalty  Occasions  Purchase patterns For working professionals in North Texas seeking career advancement, the Cox PMBA is a part-time program that… 19

20 VALS Psychographic Groups (Framework) Use in the Flare Case to Develop Customer Descriptions Take the VALS survey at: 20

21 Marketing Strategy Model Formulation & Implementation 1.Objective(s) 2.Target Customers – Segment, Profile & Target 3.Key Competitors – Objectives, target customers, strategy, strengths & weaknesses 4.Core Strategy – Competitive advantage; market penetration, market development, product development, or diversification; & positioning 5.Marketing Mix Implementation Product Strategy Communications Strategy Pricing Strategy CRM Strategy Channel Strategy 21

22 Competitor Analysis See Market Evolution The first thing to note about the competitive environment is the number of competitors. As the number of competitors increases (decreases): Competitive market is more fragmented (concentrated), Barriers to entry are lower (higher), Supply and demand are more heterogeneous and dynamic, Competitive advantage focuses more on product- centric innovation (downstream brand-centric or customer-centric differentiation or cost leadership) Growth focuses more on revenues (profits) & customer acquisition (retention). 22

23 Competitor Analysis See Product Market Definition Philosophy which is related to Objectives Strategy Strengths & Weaknesses Offensive or Defensive Leader or Follower Growth (revenue/market share) or profit related objectives? Competitive advantage –Cost leadership –Marketing differentiation –Product differentiation Targeted customers Offering position Resources & capabilities to: Resources & capabilities Develop & produce superior products Communicate & distribute offering Manage customer relationships 23

24 Marketing Capabilities Product Management : develop & deliver superior-quality or customized goods & services. Communications Management and Brand-building : create and manage customer value perceptions leading to high levels of brand equity, using effective: positioning, advertising message delivery, personalized communications, & integrated marketing communications Pricing Management : extract the optimal revenue & profit from customers through price discrimination tactics, e.g., using sophisticated yield management capability; unrelated to charging a high (product or marketing differentiation) or low (cost leadership) price. Channel Management : establish and manage channels of distribution that effectively and efficiently deliver value to end-user customers Customer Relationship Management : identify profitable customers and prospects and initiate, maintain, and leverage relationships with these customers to create superior customer- level profits. Requires data collection & interpretation for individual customers, individual customer targeting capability, and personalized communications capability. Market Sensing & Customer Insights : Ability to learn about customers, competitors, channel members and the broader market to develop actionable market intelligence and customer segmentation and targeting schema Marketing Planning & Implementation : conceive and implement marketing strategies that optimize the match between the firm’s resources (including multiple product lines and brands) and the marketplace to achieve superior sales and profits

25 Marketing Strategy Model Formulation & Implementation 1.Objective(s) 2.Target Customers – Segment, Profile & Target 3.Key Competitors – Objectives, target customers, strategy, strengths & weaknesses 4.Core Strategy – Competitive advantage; market penetration, market development, product development, or diversification; & positioning 5.Marketing Mix Implementation Product Strategy Communications Strategy Pricing Strategy CRM Strategy Channel Strategy 25

26 Product-Market Growth Strategy Framework K&P pp Existing Markets New Existing Offerings Market Penetration Expand share and/or size of current customer wallet Product Development Develop new offering features/attributes Market Development Acquire new customer markets Diversification Develop totally new offerings targeting new markets

27 Product & Market Exploration Capabilities 27 Existing Markets New Existing Offerings Exploitation with incremental refinement of current product & market capabilities Product exploration Create new product features & capabilities that enhance offerings’ appeal to current markets Market exploration Adapt current offering to create new market (& capabilities); e.g., new geographic market or new therapeutic use for existing drug Product & Market exploration Create entirely new product- market categories & capabilities; Google’s “cloud services will cost 50% less than competing products.” Amazon “good at making everything as low-cost as possible.” Cost Leadership: Google and Amazon mostly compete by building scale to exploit their digitally-delivered data management and search capabilities Can Google X deliver “world- changing moonshots”? Can Amazon’s Kindle compete effectively in the tablet market?

28 Product & Market Exploration Capabilities 28 Existing Markets New Existing Offerings Exploitation with incremental refinement of current product & market capabilities Product exploration Create new product features & capabilities that enhance offerings’ appeal to current markets Market exploration Adapt current offering to create new market (& capabilities); e.g., new geographic market or new therapeutic use for existing drug Product & Market exploration Create entirely new product- market categories & capabilities; Apple (Jobs): “Consumers don’t know what they want.” iPod, iPhone, iPad… Samsung: “We get most of our ideas from the market.” Samsung “built its business around producing & selling components to … Apple, Sony & Hewlett-Packard…” & doubles Apple’s investment in equipment Samsung has repositioned itself as a competitive consumer brand, exploiting existing capabilities, developing new product (features &) development capabilities, & spending “$3 billion on ads, compared with Apple’s $933 million and Microsoft’s $1.9 billion.” Apple’s strength has been in creating or establishing entirely new product-markets (i.e., radical or disruptive innovation) in rapid succession (i.e., speed) but has not delivered since Jobs’ departure.

29 Marketing Strategy Model Formulation & Implementation 1.Objective(s) 2.Target Customers – Segment, Profile & Target 3.Key Competitors – Objectives, target customers, strategy, strengths & weaknesses 4.Core Strategy – Competitive advantage; market penetration, market development, product development, or diversification; & positioning 5.Marketing Mix Implementation Product Strategy Communications Strategy Pricing Strategy CRM Strategy Channel Strategy Internal consistency between objectives, target customers & competitors, core strategy, and marketing mix implementation is the single-most important criterion for grading case recommendations. 29

30 MKTG 6201 Course Materials Textbook: Strategic Marketing Problems – Roger Kerin & Robert Peterson (K&P) Cases: Cases in course packet Lectures and Discussions: In conjunction with cases & handouts of slides 30

31 At the end of this course, you should be able to: Understand how company strengths & weaknesses & external opportunities & threats influence the success of a marketing strategy; Develop and communicate marketing action plans that effectively target, attract, and retain profitable customer segments; & Conduct basic quantitative analyses to evaluate the outcomes associated with alternative marketing programs. MKTG 6201 Course Learning Outcomes Qualitative Analysis Recommendation Metrics/Quantitative Analysis 31

32 Group Homework (5 × 4)20 Final Examination 20 Final Examination Total40 Assessment & Grade Distribution Cox Recommended Grade Distribution A/A-40% B/B+50% B-…10% 32

33 Sample Grade Sheet 33 TopicPoorFairGoodExcellent Financial Comparison What assumptions are required to make the next-best alternative better?) Economic Value Analysis and Consistency with price elasticity estimates Comparative advantage analysis Summary marketing strategy TOTAL

34 Marketing Pro Formas Breakeven Analysis Customer Lifetime Value (CLV) Sales Forecasts Economic Value Analysis Channel Margin Calculus Demand Elasticity Financial Analysis in Marketing K&P Chapter 2 34

35 Developing Pro Forma & B/E Analyses Traditional Line Items Revenues Cost of Goods Sold Gross Margin (Profit) Operating Expenses (e.g., SG&A) Operating Margin (Profit) Dollars Price * Quantity COGS/unit * Quantity GM/unit * Quantity Variable (VC) & Fixed (FC) Revenue–COGS–VC–FC % 100% COGS% GM% Can vary To conduct breakeven analysis for a proposed change, group variable costs VC = COGS & Variable Operating Expenses And then focus on Incremental Fixed Expenses Net Income Before Tax Income Tax Net Income After Tax See the South Delaware Coors Pro FormaSouth Delaware Coors 35

36 Organizing for Effective B-E Analysis Traditional Income Statement Sales revenue -Cost of goods sold =Gross margin (profit) -Selling expenses -Depreciation -Administrative overhead =Operating margin (profit) -Interest expense =Pretax profit… Incremental Costing Sales revenue -Incremental, avoidable VC =Total (Gross) contribution ($) -Incremental, avoidable FC =Net contribution (profit) -Other fixed or sunk costs =Pretax profit… Contribution Margin % (CM%)= Total Contribution / Sales revenue Contribution Margin $ ($CM)= Total Contribution / Sales volume or $ Contribution per unit 36

37 Breakeven (BE) Analysis To calculate Incremental Sales Revenue required to breakeven (BER) for a given level of incremental fixed costs (FC): VC = Incremental Variable Cost See also 0= (Q * P) – (Q * VC/unit) – FC Net Contribution= Incremental Revenue – VC – FC 0= (Q * P) – (Q * VC/unit) – FC = Q (P – VC/unit) + FC – FC0 FC/(P – VC/unit)= Q required to break even (BEQ) BER = BEQ * P Net Contribution= Incremental Revenue – VC – FC Q = Incremental Quantity P= Incremental Price CM= P – VC/unit 37

38 Calculate Breakeven for the Following Opening a New Office Variable Costs COGS20% Direct Operating Costs20% Total Variable Costs40% Fixed Costs/Year Fixed salaries160,000 Depreciation 50,000 Utilities & phone 12,000 Insurance 10,000 Interest20,000 Property Taxes10,000 Maintenance/Janitorial 5,600 Miscellaneous 2,400 TOTAL $270,000 BEQ= BER= Selling Price =$25 FC/(P – VC/unit) BEQ= 38

39 What does organizational success depend on? What are the 5 Cs and how do they relate to a SWOT analysis? What are three approaches to achieving competitive advantage? Which are most relevant to marketing? What are some key marketing resources & capabilities? What are the 5 steps in the marketing strategy formulation & implementation model? What are the 4 key growth strategies? What are the 5 marketing mix elements (4 Ps + 1)? Review Questions 39

40 Chris Millican, Boston Consulting Group South Delaware Coors Case This is a practice case that addresses whether an MBA student should invest in a Coors distributorship in South Delaware. The initial decision focuses on which marketing research to purchase in order to assess the viability of the distributorship. You will have ten minutes during class to make that decision as a group. After purchasing the research, you will have 20 minutes to develop a pro forma and recommendations for the Coors distributorship (see the Coors Excel spreadsheet).Coors Excel spreadsheet If you need more background on breakeven analysis, review the Breakeven Tool. To complete the spreadsheet, fill in the key assumptions that are highlighted in yellow. The spreadsheet should fill in as you enter these numbers. Note that constructing spreadsheets in this manner is extremely important because it allows you to conduct “What-if” analyses by simply changing your assumptions.Breakeven Tool To prepare for class, read the case carefully, review the Coors Excel spreadsheet, and think about the following questions.Coors Excel spreadsheet Next Week 40


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