Amity School of Business Marketing Management Module II

Amity School of Business Marketing Management Module – II Geetika Jain 1

Amity School of Business Customer Value • In order to survive in this competitive environment wherein buyers have abundant choices, an organization can only survive by fine-tuning its value delivery process. 2

Amity School of Business Value Delivery Process Make the Product Design Product Sell the product Procure Make Price Sell Promote Distribute Service Traditional Physical process Tactical marketing 3 Contemporary value creation & Delivery Process Ad v. n ot io Pr om Sa les for ute trib Dis g kin Ma ce Communicate g cin Pri ice rv Se t. D uc Pr od nin sit io Po Se lec tio n t en gm Se Strategic marketing De v ev. Provide the value g Choose the value

Amity School of Business Value Chain • Michael Porter has proposed the value chain as a tool for identifying ways to create more customer value. – According to this model every organization is a synthesis of activities performed to design, produce, market, deliver and support it’s product. – The value chain identifies nine strategically relevant activities (5 primary and 4 support) that create value and cost in a specific business. 4

Amity School of Business Value Chain M Support Activities Firm Infrastructure gi ar HRM n Technology Development & Service gi Mkting ar Operations Outbound Logistics M Inbound Logistics n Procurement Sales Primary Activities 5

Amity School of Business • Thus, successful marketing requires companies to have capabilities such as understanding customer value, creating customer value, delivering customer value, and sustaining customer value. • In order to ensure that the marketers select and execute right activities marketers have to give priority to strategic planning specifically in 3 different areas. 6

Amity School of Business Strategic Planning • A game plan for long-run survival and growth – – Situation Opportunities, Objectives Resources • The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. 7

Amity School of Business • Strategic Planning calls for action in 3 key areas: – Managing company’s businesses as an investment portfolio. – Assessing each businesses’ strength by considering market growth rate and company’s position to fit into it. – Establishing strategy. 8

Amity School of Business Strategic Planning Implementing Controlling Measuring Results Corporate/ Division Planning Organizing Diagnosing Results Business Planning Implementing Product Planning Taking Corrective Action 9

Amity School of Business Corporate Strategic Planning • All Corporate HQ’s undertake 4 planning activities: – Define Corporate Mission – Establish SBU’s – Assigning Resources to each SBU – Assessing Growth Opportunities 10

Amity School of Business Vision & Mission- the Relationship Vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. n. Vision refers to the category of intentions that are broad, all-intrusive and forward-thinking. n A mission statement is an organization's vision translated into written form. n. It is an statement of the organization’s purpose- what it wants to accomplish in the larger environment. n 11

Amity School of Business A Mission should… • Focus on limited number of goals • Stress the company’s major policies and values • Define the major competitive spheres within which the company will operate: – – – Industry Products and applications Competence Market segment Vertical Geographical 12

Amity School of Business Establishing SBUs • A business portfolio is collection of businesses and products that make up the company. A business portfolio consists of several SBUs (Strategic Business Units). • An SBU is a single business or collection of related businesses that can be planned and evaluated separately from the rest of the company. • An SBU can be a company division, a product line within a division or sometimes a individual product or brand. 13

Amity School of Business Resource Allocation • Once SBUs are defined, management must decide how to allocate corporate resources. • 1970’s saw several portfolio planning models introduced to provide an analytical means for making investment decisions. – BCG matrix – GE 9 Cell • These methods usually use two important dimensions: – The attractiveness of the SBUs Market or industry, and – The strength of the SBU’s position in that market or industry. 14

Amity School of Business Assessing Growth Opportunities • Includes: – Planning new business – Downsizing – Terminating old business • The company’s plans for it’s existing businesses allow it to project sales and profits. • But there tend to be a gap between the two. • If there is a gap between future desired and projected sales, corporate management will have to develop or acquire new businesses to fill it. 15

Amity School of Business Strategic Planning Gap 16

Amity School of Business Options for filling the Strategic Planning Gap • Intensive growth- to achieve growth within the company’s current businesses. – Market penetration – Market development – Product development • Integrative growth- to build or acquire businesses that are related to the company’s current businesses. – Backward integration – Forward integration – Horizontal integration 17

Amity School of Business Options for filling the Strategic Planning Gap • Diversification growth- to add attractive businesses that are unrelated to company’s current businesses. – Concentric Diversification – Horizontal diversification – Conglomerate diversification 18

Amity School of Business SBU Strategies Protect Position Invest To Build Selectively Selectivity / Manage for earnings Limited Expansion or Harvest Protect and Refocus Manage for Earnings Divest INVEST / GROW SELECTIVITY / EARNINGS HARVEST / DIVEST 19

Amity School of Business Integrative Strategies • Backward Integration – Coca-cola has bought domestic and foreign bottling companies in order to increase its production and distribution efficiency • Forward Integration – Apple computer and Dell entered the retail industry to sell by deciding to set up a chain of stores • Horizontal Integration – IDBI acquired United Western Bank; added 230 branches 20

Amity School of Business Diversification Strategies • Concentric Diversification – The entry of Reckitt Benckiser from industrial chemicals into household products. • Conglomerate Diversification – Virgin Media moved from music producing to travels and mobile phones. – ITC presence from FMCG to hotels to agri-businesses to paper boards and specialty paper etc. • Horizontal Diversification – Walt Disney moved from producing animated movies to theme parks and vacation properties 21

Amity School of Business-unit Strategic Planning Process External Analysis Business Mission Goal Strategy Program Implementation SWOT Analysis Internal Analysis Feedback & Control 22

Amity School of Business Porter’s Generic Strategies • Overall Cost Leadership: – The business works hard to achieve lowest production & distribution cost so as to price lower than it’s competitors and win a large market share. – Firms pursuing this strategy should be good at engineering, purchasing, manufacturing, distribution. • Differentiation: – Focus is on achieving superior performance in an important customer benefit area. • Focus: – The business focuses on one or more narrow market segments. The firm gets to know these segments intimately and pursues either cost leadership or differentiation within the target segment. 23

Amity School of Business Strategy Formulation • Strategic alliances – Product or service alliances – HUL joined hands with Pepsi. Co India) to bottle and market Lipton Iced Tea in glass bottles. – Promotional alliances – P&G India has used endorsements of Bombay Dyeing for promoting Ariel detergent powder in the past. – Logistics alliances – Transystem, a joint venture between TCI and Mitsui co. Ltd. Of Japan offers complete logistics services to Toyota Kirloskar Motors Pvt. Ltd. – Pricing collaborations – Airlines, Hotels and car rental companies joining hands to offer attractive rates. 24

Amity School of Business Marketing Process & Product-level Planning • It consists of – – – analyzing marketing opportunities, researching and selecting target markets, designing marketing strategies, planning marketing programs, and organizing, implementing & controlling marketing effort. • Each product level (product line, brand) must develop a marketing plan for achieving it’s goals. • A marketing plan is a written document that details the actions necessary to achieve one or more marketing objectives. 25

Amity School of Business Contents of a Marketing Plan • Executive Summary & table of contents – Brief summary of main goals and recommendations. – Focus on plan’s major thrust. • Current marketing situation – Relevant background data on sales, cost, profit, the market, competitors, channels and macro environmental forces. – This information is used to carry out a SWOT analysis. • Opportunity & Issue analysis – Review the main opportunities and issues in the SWOT which are likely to affect organization’s goal attainment. • Objectives – Outlines plan’s major financial and marketing goals, expressed in sales volume, market share, profit. 26

Amity School of Business Contents of a Marketing Plan • Marketing strategies – Define STP and other Mix Strategies • Action program – Derived from marketing strategies. Answers questions like, what will be done, when will it be done, who will do, how much will it cost. • Financial projection – Build supporting budget. Forecasted sales volume, expected cost of production, projected profit. • Implementation & control – Outlines controls for monitoring and adjusting implementation of the plan. Contingency plans. 27

Amity School of Business Ansoff’s Product-Market Expansion Grid CURRENT PRODUCTS CURRENT MARKETS NEW PRODUCTS MARKET PENETRATION PRODUCT DEVELOPMENT MARKET DEVELOPMENT DIVERSIFICATION 28

Amity School of Business BCG Growth Share Matrix • According to the BCG technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share. • Relative Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms. RMS = Business unit sales this year Leading rival sales this year • Market growth is used as a measure of a market’s attractiveness. – Markets experiencing high growth are ones where the total market share available is expanding, and there’s plenty of opportunity for everyone to make money. 29

Amity School of Business BCG Growth-Share Matrix 30

Amity School of Business GE 9 -Cell Matrix • Each business is rated in terms of two major dimensions, market attractiveness and business strength. • The company has to decide on its list of factors. • Factors underlying Market Attractiveness can be like; – – – – Overall market size Annual market growth rate Competitive intensity Technological requirements Historical profit margins Energy requirement Socio-political-legal factors 31

Amity School of Business GE 9 -Cell Matrix • Factors underlying Business Strength can be like: – Market share – Share Growth – Product Quality – Brand Reputation – Distribution Network – Production Capacity – R&D Performance – Managerial Personnel 32

Amity School of Business Building GE Matrix Weight Factors underlying Market attractiveness Value 1= very unattractive 5= attractive Weight Factors underlying Business Strength Rating (1 -5) Value 1= very unattractive 5= attractive 33

Amity School of Business THE GENERAL ELECTRIC MODEL Classification of SBUs 34