Topic : 2 Markets and Competitive Space

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

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

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

4. 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

5. 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.

6. INNOVATION FEATURE • 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. Progressive Insurance: Customer Needs at the Center of Strategy Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.

7. 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

8. 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

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

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

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

12. 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

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

14. 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

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

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

17. 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

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

19. 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.

20. 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)

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

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

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