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Module-3 Notes

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7 views

Module-3 Notes

Uploaded by

sherrellpenney
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Paper: Marketing Analysis Toolkit

5 C analysis: Five dimensions of the market environment crucial to making decisions


(Customer, context, company, collaborators, competition)

Analyzing customers: understanding the needs and preferences of the customer


● Problem recognition: understand how, when, and where the customer’s needs arise
● Information search: sources of information used to learn about available options
● Evaluation of alternatives: which features are most important
● Purchase decision: Where do customers go to purchase the product?
● Post-purchase evaluation: How to assess if they have purchased the right product

Analyze the Context: understand how factors in the world affect the business model
● Demographic environment
● Economic environment
● Socio-cultural environment
● Political/Legal environment
● Technological environment
● Natural Environment
Translate the data into strategic implications to understand the opportunities and challenges
presented by the external context.

Analysis of the Company:


● Business model and competitive strategy:
○ What fundamentally does the company do and how does it make money?
○ What is the engine that makes the business run?
○ Firms compete by 1) cost 2) unique benefits 3) focus on niche market
● Competitive advantage analysis:
○ Something the company does and competitors cannot match
○ Sustainable competitive advantage persists over time.
○ The things the firm does well (core competencies) can help outline the
assets/capital of the firm

Collaborators and complementors:


● Collaborators: companies/people that help market the product to customers (suppliers,
distributors, retailer, influencer)
● Complementors: companies/people that benefit when the company sells its products
(other companies that sell complimentary products)

Competitor analysis:
● Identify and analyze firms that offer similar products or alternative solutions to consumer
needs
After looking closely at the five Cs, you need to dive deeper into the dynamics of the industry in
which you compete

1. Porter’s Five Forces (PFF): the five forces create the potential for profitability for the
industry and the competing firms
(Industry competition, potential entrants, substitutes, buyer power, supplier power)
● Industry competitors: less competition is generally better for firms. Focuses on industry
competitiveness as a whole rather than individually
● Potential entrants: high entry barrier and low cost of exit is good
● Availability of substitutes: consumers can easily shift their demands from you to them;
only the most cost-efficient firm makes a profit.
● Buyer power: firms who face buyer power have less price flexibility.
● Supplier power: forces you to pay higher prices, which raises the cost structure.
Potentially, all of these forces dictate the profitability of the industry and firm.

2. SWOT analysis: The goal of a SWOT is not only to make a list as done in 5 C’s and
Porter Fiver Forces, but to pinpoint the most significant, strategically important internal
and external conditions facing the business.

External (things the firm cannot control)

Opportunities: summarize favorable trends or developments in the external environment to


increase sales or profit. Take advantage of them to move forward.

Threats: recognize the factors that impede business performance and plan around them.
Increase in competition, decrease in customer desire, etc.

Internal (things under the firm’s control)

Strengths: Resources that can be used to take advantage of opportunities.


● Focus on those strengths that are customer-relevant and distinctive competence
compared to competitors.

Weaknesses: capabilities inferior to the competition


● Firm should improve capabilities that are valuable to its customers
● Address required competencies just to stay in the game.
● Improving distinctive competencies to advance in competition

Ongoing market scanning: after the baseline has been established, this is an ongoing activity
to understand how things internal/external are changing.

Marketing Decision Making using all the above:


● Market segmentation and target market decision: 5 C’s (customer + competition) to
choose a unique profitable market
● Brand decision: 5 C’s (company + competition) to assess company’s brand strength &
weakness vs. others
● Positioning decision: 5C (company + competition + customer) to evaluate positioning
statements. Own competencies, parity and differentiation, what customer value.
● Product decision: 5 C’s (company + customer) what the company is good at against
what the customer values
● Pricing Decision: PFF to determine industry competitiveness and price points
● Distribution decisions: PFF buyer power + 5 C complementer
● Promotion decision: The customer of 5 Cs indicates when, where, how to communicate

Paper: Porter’s Five Forces

Awareness of the five forces can help a company understand the structure of its industry and
establish a position that is more profitable and less vulnerable to attack.

Threat of entry
● The threat of entry depends on the height of the entry barrier present and the reaction
expected from the incumbents.
● If the barrier is low and the retaliation of the incumbents is minimal, the threat of entry is
high.
● The threat of entry, not whether entry actually occurs, decreases profitability.

Barriers to Entry
1. Supply-side economies of scale
2. Demand side benefits of scale
3. Customer switching cost
4. Capital requirements
5. Incumbency advantages independent of size
6. Unequal access to distribution channels
7. Restrictive government policy

Expected retaliation: How potential entrants expect incumbents to react

The power of suppliers (e.g., Microsoft)


A supplier group is powerful if
● More concentrated than the industry to which it sells (Microsoft).
● It does not depend heavily on the industry for its revenues.
● Industry participants face switching costs for changing suppliers
● The supplier offers products that are differentiated (e.g., special drugs)
● There is no substitute (pilot union).
● If they can threaten to integrate forward,

The power of buyers


A customer group has no leverage if:
● Few buyers purchase in volumes (telecom).
● Industry products are standardized or undifferentiated
● Low switching cost to change vendor
● They can threaten to integrate backwards, making the product themselves.

The buyer is price sensitive if:


● They earn low profits, strapped for cash... Cash-rich customers are less sensitive
● The quality of the buyers' product/service is little affected by the product.
● The industry product has little effect on the buyer’s other costs.

Other factors:
● Intermediate customers (e.g., distributors) can be analyzed as other buyers.
● Producers can attempt to bypass channel clout by advertising downstream (DuPont).
● Buyer power applies equally to consumer and B2B

The threat of substitutes:


The threat of substitute is high if:
● Offers an attractive price-performance trade-off (long distance vs. skype, rental vs
Netflix)
● The cost of switching is low (generic drugs)
● Plastics as a substitute for steel in car manufacture, e.g.

Rivalry among existing competitors


The intensity of rivalry is greater if:
● Competitors are numerous or equal in size and power.
● Industry growth is slow (only market share growth is possible)
● Exit barriers are high (flip of entry barriers)
● Rivals have high commitment to the business (e.g., state-owned,

Price competition is most likely to occur if:


● Products or services are nearly identical.
● High fixed-cost, low marginal-cost
● Capacity must expand in large increments to be efficient
● The product is perishable (tomatoes, old technology)

Other points:
● Price competition transfers profits directly from an industry to customers
● Competition on dimensions other than price, feature, support, delivery, is less likely to
erode profitability, but can actually justify higher prices because it provides customer
value
○ Such rivalry can even raise the barrier to new entrants
● The opportunity for positive-sum competition is greater in industries serving diverse
customer groups.
● How to shift competition in a more positive direction?

Factors: to be understood through the lens of the five forces, but they are not a 'sixth force'
● Industry growth rate: not always an indication of profitable growth
● Technology and Innovation
● Government
● Complementary products/services: compliments are profitable through the way they
affect the 5 forces.

Changes in industry structure: The five forces provide a framework for identifying the most
relevant industry developments and impact on attractiveness
● Shifting Threat of New entrants
● Change in supplier or buyer power
● Shifting Threat of Substitution
● New based of rivalry (eliminating rivalry is a risky strategy)

Implications for strategy: understanding 5 forces is the starting point for developing strategy
● Positioning the company
● Exploiting Industry Changes
● Shaping Industry Changes
● Defining the Industry

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