Topic : 2 Markets and Competitive Space Dr. Ehsanul Huda Chowdhury

Markets Impact Strategies Market changes often require altering strategies Forces of change create both market opportunities and threats Inherent danger in faulty market sensing

Value Migrations Customers shift purchasing to new business designs with enhanced value offering Beware of disruptive technologies Market sensing and organizational learning are essential

PRODUCT-MARKET SCOPE AND STRUCTURE Matching Needs with Product Benefits Product-Market Boundaries and Structure Forming Product-Markets for Analysis The Changing Composition of Markets

Matching Needs with Product Benefits A product – market matches people with needs to the product benefits that satisfy those needs “A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”* *Srivastava, et al. (1984) Journal of Marketing, Spring, 32.

INNOVATION FEATURE Progressive Insurance: Customer Needs at the Center of Strategy In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for shareholder value creation. The company invents new ways of providing services to save customers time, money and irritation, while often lowering costs at the same time. Loss adjusters are sent to the road accidents rather than working at head office, and they have the power to write checks on the spot. Progressive reduced the time needed to see a damaged automobile from seven days to nine hours. Policy holders’ cars are repaired quicker, and the focus on this central customer need has won much automobile insurance business for Progressive. These initiatives also enable Progressive to reduce its own costs – the cost of storing a damaged automobile for a day is $28, about the same as the profit from a six-month policy. Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.

DEFINING AND ANALYZING MARKETS Define Product-Market Boundaries and Structures Identify and Describe End-Users Analyze Industry and Value Added Chain Evaluate Key Competitors Forecast Market Size and Growth Trends

Product – Market Boundaries and Structure Determining Product-Market Structure Start with the generic need satisfied by the product category of interest to management Identify the product categories (types) that can satisfy the generic need Form the specific product – markets within the generic product – market

Illustrative Fast-Food Product-Market Structure SUPER MARKETS MICROWAVE OVENS CONVENIENCE STORES TRADITIONAL RESTAURANTS FAST-FOOD MARKET

Illustrative Product – Market Structure Food and beverages for breakfast meal Generic Product Class Cereals Product Type Ready to eat Variant A Regular Natural Variant B Pre-sweetened Nutritional Life Product 19 Special K Brands

DESCRIBING AND ANALYZING END-USERS Identifying and Describing Buyers DESCRIBING AND ANALYZING END-USERS How Buyers Make Choices Building Customer Profiles Environmental Influences

Identifying and Describing End-Users Illustrative buyer characteristics in consumer markets: Family size, age, income, geographical location, sex, and occupation Illustrative factors in organizational markets: Type of industry Company size Location Type of products

How Buyers Make Choices BUYING DECISION PROCESS: Problem recognition Information search Alternative evaluation Purchase decision Post-purchase behavior

Environmental Influences External factors influencing buyers’ needs and wants: Government, social change, economic shifts, technology etc. These factors are often non-controllable but can have a major impact on purchasing decisions

Building Customer Profiles Start with generic product – market Move next to product- type and variant profiles >> increasingly more specific Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)

ANALYZING COMPETITION 1. Define Industry Structure and Characteristics 2. Identify and Describe Key Competitors 5. Identify New Competitors PRODUCT- MARKET STRUCTURE AND SEGMENTS 4. Anticipate Actions by Competitors 3. Evaluate Key Competitors

Industry Analysis Industry size, growth, and composition Typical marketing practices Industry changes that are anticipated (e.g. consolidation trends) Industry strengths and weaknesses Strategic alliances among competitors

Defining Industry Structure & Characteristics SUPPLIERS Industry Form Industry Environment Competitive Forces PRODUCERS WHOLESALERS/ DISTRIBUTORS Value Added Chain RETAILERS/DEALERS CONSUMER/ ORGANIZATIONAL END USERS

Competitive Forces Rivalry among existing firms. Threat of new entrants. Threat of substitute products. Bargaining power of suppliers. Bargaining power of buyers. Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.

Key Competitor Analysis Business scope and objectives Management experience, capabilities, and weaknesses Market position and trends Market target(s) and customer base Marketing program positioning strategy Financial, technical, and operating capabilities Key competitive advantages (e.g., access to resources, patents)

Competitor Evaluation Extent of Market Coverage Competitor Evaluation Current Capabilities Customer Satisfaction Past Performance

MARKET SIZE ESTIMATION Product-Market Forecast Relationships (area denotes sales in $’s) Market Potential Estimate Unrealized Potential Company Sales Forecast Industry Sales Forecast

END