BM Lecture 3 (Module E)
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The document discusses key concepts in strategic management including the product life cycle, industry life cycles, and competitive strategies. It notes that the product life cycle has four stages: introduction, growth, maturity, and decline. During maturity, competition increases and profits typically decline. The industry life cycle also has stages: introduction, growth, shakeout, maturity, and decline. The document emphasizes using market segmentation, targeting, differentiation, and positioning to develop a customer-driven marketing strategy.
BM Lecture 3 (Module E)
- 2. Strategic Management & Planning noteshttp://opentuition.com/acca/p3/p3-notes-view-online/
- 3. Cycle of competitionIncumbentEntrantBuilds BarriersAttacks soft market segmentsNo responseWidens attack to adjacent segmentsReinforces barriersStarts price warsAttacks entrant’s home marketRestart the cycle in adjacent market
- 4. Product Life CycleProduct launch – happy lifeCover costsEarn profitsLength not know in advanceCoca-Cola, Gillette, Budweiser, American Express, Wells-Fargo, and Tabasco
- 5. PLC – S Curve
- 6. Introduction StageProduct launchTakes timeSlow growthNegative profitsHigh promotion and distribution cost
- 7. Growth StageProduct, if satisfies market, enters growth stageSales climb quicklyEarly adopters continue, new join through favorable word of mouthNew competitors enter marketCompetition – increase in sale pointsSpread of sales, unit cost reducesSustain rapid growthNew market segmentsPrices may be lowered to attract more customers (iPod)
- 8. MaturityAt some point sale slows down, product enters maturity stageLasts longerMarketing management most of the time deals with mature productsMore producers selling the same productGreater competitionPrices down, increase in sales promotionDrop in profitWell established competitors stay
- 9. MaturityProduct manager should modify market, product and marketing mixMarket: increase consumption of product, new users, present usersProduct: quality, features, style (milk pak, Honda City)Four Ps
- 10. Decline StageEventually dipOat meal, VHS tapes, VCR, Tape recordersReasons: technology, consumer tastes, increased competition, profits decline, withdrawal from marketFurthermore: Weak product costly to firmManagement timePrice adjustmentsAdvertising/sales effortsReputation of other co products affectedOld Spice/ co can sell brands
- 11. Industry life cycle(chemical, food, automobile, air line, textile, consulting, elderly services, waste treatment etc)Industries may display a life cycleIntroductionGrowthShakeoutMaturityDecline (carriage/rail road, A/V, print media, oil dependent)
- 12. Inception StageAttracts trend settersHigh pricePoor financial resultsChannels of distributionMonitor success
- 13. Growth stageExpansion of capacity to meet target market share objectivesReduce prices, penetrateMaintain barriersPromotion to attract more buyersKeep investors aware of the benefits of the products to secure further financingSearch for additional marketsReducing cost of productionProduct development
- 14. Shakeout stageWeak businesses discontinueMore focus on existing customers, and less on new acquisitions
- 15. Maturity stageMaximize current financial returns from productsDefend market positionModify marketsModify product to make it cheaper or of greater benefitIntensify distributionMergers and mutual agreements
- 16. DeclineMinimize expenditure (reduce promotion and product refinement)Weed out variations (sell core products)Narrow distributionPlan exit and identify time to leave the industry
- 17. Strategic group analysis(Food & Beverage)Organizations with similar strategic characteristics, following similar strategies or competing on similar basesProduct diversityGeographical coverageExtent of brandingPricing policyProduct qualityDistribution methodTarget market segment
- 18. Integrated Marketing MixThe set of controllable tactical marketing tools – product, price, place and promotion – that the firm blends to produce the response it wants in the target market.Product: goods n servicesPrice: amount of money consumers have to pay to obtain the productPlace: includes activities to make the product available to target consumers.Promotion: includes activities that communicate the merits of the product and persuade target customers to buy it.
- 19. Extended Marketing MixPeopleProcessesPhysical Evidence
- 20. Levels of Product and Services3 levels: each level adds to customer valueThe core benefit. E.g. BlackberryActual product: features, design, quality level, a brand image, and packaging. E.g. Blackberry: actual product, its name, parts, styling, features, and packaging.Augmented product. Offer consumer services and benefits. (warranty, instructions, quick repair and maintenance when needed)
- 21. What is a product?Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need.Include physical objects, services, events, persons, places, organizations, ideas, or mixes of these entities. iPod, Camry, BigMac. Doctor’s advice, vacation service, financial services.Service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.
- 22. Product and Service ClassificationConsumer Product: product bought by final consumer for personal consumptionInclude:Convenience product: that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort: soap, candy, newspaper, fastfood.Shopping product: that the customer usually buy carefully on suitability, quality, price, and style: furniture, clothing, appliances, hotel, travel service.
- 23. Specialty product: consumer product with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort: Ferrari FXX, Boss, BB, Disney.Unsought product: consumer product that the consumer either does not know about or knows about but does not normally think of buying: life insurance, blood donations, living funeral service.
- 24. Industrial ProductProduct bought by individuals and organizations for further processing or for use in conducting a business.Materials and parts (wheat, cotton, livestock, crude petroleum) (iron, cement, wires, tires, motors)Capital items (buildings, generators, trucks etc)Supplies and services (lubricants, coal, paper, pencils, paints, brooms, conservancy items
- 25. Customer Driven Marketing StrategyMarket segmentation: dividing a market into distinct groups of buyers who have distinct needs, characteristics, or behavior and who might require separate products or marketing programs (geographic, demographic, psychographic, and behavioral factors)Market segment: a group of consumers who respond in a similar way to a given set of marketing efforts. Expensive car buyers. Cost sensitive buyers.
- 26. Market Targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.
- 27. Niche MarketingWhen a company decides to serve only one or few special segments or “market niches”, it is involved in niche marketing.Such “nichers” specialize in serving customer segments that major competitors overlook or ignore.Ferrari – 1500 cars in US.Ferrari Superamerica $287,020Ferrari FXX super sports car $ 2 millionJones Soda
- 28. Market Differentiation & PositioningActually differentiating the market offering to create superior customer value.Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.BMW: “the ultimate driving machine”Ford: “built for the road ahead”Mastercard: “priceless experience”Charging low prices than competitors do or by offering more benefits to justify higher prices. If a company promises greater value, it must deliver greater value.