Presentation on theme: "MKTG 6201 Overview Company & Competition"— Presentation transcript:
1 MKTG 6201 Overview Company & Competition 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 2011The answer to which strategy is most effective is never…A is more effective than B, but rather…A is more effective under Conditions C1 &B is more effective under Conditions C2.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 1945Glenn Voss
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.
3 Case Analysis & Recommendation ModelsFrameworksMetricsConcepts & Terminology
4 What is Terminology?A system of words used to name concepts in a particular discipline.Examples:Objectives, Resources & CapabilitiesSegmentation, Targeting & PositioningProduct, Price, Promotion-Communication, Place-ChannelCustomer Relationship ManagementCustomer Acquisition & RetentionCustomer Satisfaction & Value
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.Samsung: 23% market share & 28% share of profitsApple: 9% market share & 72% of profitsWorldwide mobile phones
6 We are interested in resources & capabilities that are Terminology (cont)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.We are interested in resources & capabilities that arerare & valuable.
8 What is a Metric?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 shareRevenue or Unit sales volumeIncremental contributionCustomer lifetime value (CLV)Growth in any of the above (e.g., % change from last year or quarter)
9 Common Intermediate Objectives (Metrics) Not as compelling as Volume or Financial Objectives Customer satisfactionCustomer loyaltyCustomer acquisition & retentionCustomer trial & repeatBrand awarenessBrand preferenceBrand loyaltyBrand equity
10 What is an Analytic Framework? A structured approach to defining, analyzing or communicating the characteristics of a complex system or process.Examples:Comprehensive Metabolic Panel, CBC…Google’s PageRank AlgorithmCompetitive AdvantageSWOT AnalysisProduct-Market Growth Strategies
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 developingUnique 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)
12 Other Terminology with Similar Meaning Marketing Differentiation Cost Leadership(Operations & Logistics Driven)Tata/DellOperationalExcellence"A great deal""Best price""Trouble free basic service"Product Differentiation(R&D, Technology & Sales Driven)Marketing Differentiation(Brand Advertising or CRM Driven)Product or InnovationMarketing DifferentiationDifferentiationCustomer Responsive"Always at cutting edge"“Great brand""High price but worth it""Really understands me""Constantly renewing and creative"“Valuable business partner"Porsche/AppleGM/IBMSee McKinsey’s “Unbundling the corporation
13 Core Strategy Overview Cost Leadership -Operational ExcellenceLowest delivered costReliability/efficiencyTop down – employees directedFlat structureStandardizedLogistics/fulfillmentmanufacturingScaleProductionSupply chainPrice, reliability, access…Mkt Penetration & explorationPrice & distributionMarketing Differentiation –Brand- or Customer-centricComplete personalized solutionInfomediaryFront-line autonomyHave it your way mindset based on fine-grained informationModular operationsIntegrated view of customerServiceScopeCustomer/Collaborator relationsPositioning & CommunicationsRelationships, customization, full service…Customer satisfaction & retentionProduct proliferation, promotion & lateral collaboratorsProduct/Innovation DifferentiationInnovative featuresGreater functionalityDecentralizedTeam-oriented/ loose-knitExperimentationProduct developmentMarket sensingSpeedProduct InnovationCompetitor knowledgeInnovation, design, features…Product & market explorationProduct innovation & key collaborators at all levelsThrust of strategyOrganizationCore processesEconomic driverCritical CapabilitiesValue PropositionMarketing ObjectivesImplementation
14 SWOT Analysis Incorporating the 5 Cs Company1 StrengthsIdentify valuable & rare resources & capabilities that the company1 currently possesses.OpportunitiesRelevant opportunities w/respect to customers2, collaborators3, competitors4 & the overall socioeconomic, technology, legal context5.Company1 WeaknessesIdentify valuable & rare resources & capabilities that the company1 currently lacks.ThreatsRelevant threats with respect to customers2, collaborators3, competitors4 & the overall socioeconomic, technology, legal context5.See the Primer on SWOT Analysis
15 What is a Model?A hypothetical or simple description of a complex system or process.Effective strategies rely on insightful or valid models.Examples:Aristotle’s Geocentric ModelNewton’s Model of Classical MechanicsMarketing Strategy Formulation & ImplementationProduct Life Cycle ModelDemand Elasticity Modelsaccounted 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.
16 Porter’s Value Chain Model Competitive Advantage in the Value Chain Product DifferentiationMarketing DifferentiationCost Leadership
19 Segmentation Variable Framework DemographicAgeFamily sizeFamily life cycleGenderSocial classIncomeOccupationEducationRaceGenerationGeographicCountry/Region/CultureUrban/ruralClimatePsychologicalLifestylePersonality traitsExpertise & awarenessAttributes/Benefits soughtBehavioral (esp. w/CRM)Usage rate & loyaltyOccasionsPurchase patternsFor working professionals in North Texas seeking career advancement, the Cox PMBA is a part-time program that…
20 VALS Psychographic Groups (Framework) Use in the Flare Case to Develop Customer Descriptionsself-expression, ideals & achievement determine customers’ product/brand orientationTake the VALS survey at:
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).
23 Competitor Analysis See Product Market Definition Philosophywhich is related toObjectivesStrategyStrengths & WeaknessesOffensive or DefensiveLeader or FollowerGrowth (revenue/market share) or profit related objectives?Competitive advantageCost leadershipMarketing differentiationProduct differentiationTargeted customersOffering positionResources & capabilities to:Develop & produce superior productsCommunicate & distribute offeringManage customer relationships
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 communicationsPricing 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 customersCustomer 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 schemaMarketing 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
26 Product-Market Growth Strategy Framework K&P pp. 7-12 MarketsExistingNewMarket PenetrationExpand share and/or size of current customer walletMarket DevelopmentAcquire new customer marketsExistingOfferingsProduct DevelopmentDevelop new offering features/attributesDiversificationDevelop totally new offerings targeting new marketsNew
27 Product & Market Exploration Capabilities MarketsExistingNewCost Leadership: Google and Amazon mostly compete by building scale to exploit their digitally-delivered data management and search capabilitiesExploitationwith incremental refinement of current product & market capabilitiesMarket explorationAdapt current offering to create new market (& capabilities); e.g., new geographic market or new therapeutic use for existing drugExistingAmazon “good at making everything as low-cost as possible.”Google’s “cloud services will cost 50% less than competing products.”OfferingsProduct explorationCreate new product features & capabilities that enhance offerings’ appeal to current marketsProduct & Market explorationCreate entirely new product-market categories & capabilities;NewCan Amazon’s Kindle compete effectively in the tablet market?Can Google X deliver “world-changing moonshots”?
28 Product & Market Exploration Capabilities MarketsSamsung 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.”ExistingNewExploitation with incremental refinement of current product & market capabilitiesMarket explorationAdapt current offering to create new market (& capabilities); e.g., new geographic market or new therapeutic use for existing drugExistingSamsung “built its business around producing & selling components to … Apple, Sony & Hewlett-Packard…” & doubles Apple’s investment in equipmentApple’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.OfferingsProduct explorationCreate new product features & capabilities that enhance offerings’ appeal to current marketsProduct & Market explorationCreate entirely new product-market categories & capabilities;NewApple (Jobs): “Consumers don’t know what they want.”iPod, iPhone, iPad…Samsung: “We get most of our ideas from the market.”
29 Marketing Strategy Model Formulation & Implementation Objective(s)Target Customers – Segment, Profile & TargetKey Competitors – Objectives, target customers, strategy, strengths & weaknessesCore Strategy – Competitive advantage; market penetration, market development, product development, or diversification; & positioningMarketing Mix ImplementationProduct StrategyPricing StrategyChannel StrategyCommunications StrategyCRM StrategyInternal consistency between objectives, target customers & competitors, core strategy, and marketing mix implementation is the single-most important criterion for grading case recommendations.
30 Strategic Marketing Problems Cases: Cases in course packet MKTG 6201 Course MaterialsTextbook:Strategic Marketing ProblemsRoger Kerin & Robert Peterson (K&P)Cases:Cases in course packetLectures and Discussions:In conjunction with cases & handouts of slides
31 MKTG 6201 Course Learning Outcomes 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.Qualitative AnalysisRecommendationMetrics/Quantitative Analysis
32 Assessment & Grade Distribution Group Homework (5 × 4) 20Final ExaminationTotal 40Cox Recommended Grade DistributionA/A- 40%B/B+ 50%B-… 10%
33 Sample Grade Sheet Topic Poor Fair Good Excellent Financial Comparison What assumptions are required to make the next-best alternative better?).25.5.751Economic Value Analysis andConsistency with price elasticity estimatesComparative advantage analysisSummary marketing strategyTOTAL
34 Financial Analysis in Marketing K&P Chapter 2 Marketing Pro FormasBreakeven AnalysisCustomer Lifetime Value (CLV)Sales ForecastsEconomic Value AnalysisChannel Margin CalculusDemand Elasticity
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 varyNet Income Before TaxIncome TaxNet Income After Tax-See the South Delaware Coors Pro FormaTo conduct breakeven analysis for a proposed change, group variable costsVC = COGS & Variable Operating ExpensesAnd then focus on Incremental Fixed Expenses
36 Organizing for Effective B-E Analysis Traditional Income StatementSales revenueCost of goods sold= Gross margin (profit)Selling expensesDepreciationAdministrative overhead= Operating margin (profit)Interest expense= Pretax profit…Incremental CostingSales revenueIncremental, avoidable VC= Total (Gross) contribution ($)Incremental, avoidable FC= Net contribution (profit)Other fixed or sunk costs= Pretax profit…Contribution Margin % (CM%) = Total Contribution / Sales revenueContribution Margin $ ($CM) = Total Contribution / Sales volumeor $ Contribution per unit
37 Breakeven (BE) Analysis To calculate Incremental Sales Revenue required to breakeven (BER) for a given level of incremental fixed costs (FC):Net Contribution = Incremental Revenue – VC – FCNet Contribution = Incremental Revenue – VC – FC0 = (Q * P) – (Q * VC/unit) – FC= Q (P – VC/unit)0 = (Q * P) – (Q * VC/unit) – FC+ FC– FC+ FCFC/(P – VC/unit) = Q required to break even (BEQ)BER = BEQ * PVC = Incremental Variable CostQ = Incremental QuantityP = Incremental PriceCM = P – VC/unitSee also
38 Calculate Breakeven for the Following Opening a New Office Variable CostsFixed Costs/YearCOGS 20% Direct Operating Costs 20% Total Variable Costs 40%Fixed salaries 160,000 Depreciation 50,000 Utilities & phone 12,000 Insurance 10,000 Interest 20,000 Property Taxes 10,000 Maintenance/Janitorial 5,600 Miscellaneous 2,400 TOTAL $270,000Selling Price =$25BEQ =FC/(P – VC/unit)BEQ =BER =
39 Review Questions 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)?
40 Chris Millican, Boston Consulting Group Next WeekChris Millican, Boston Consulting GroupSouth Delaware Coors CaseThis 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).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.To prepare for class, read the case carefully, review the Coors Excel spreadsheet, and think about the following questions.