29-Aug-13

Good Afternoon
MBA/MPM/M. Sc. In Management Program 2012 University of Sri Jayewardenepura Faculty of Graduate Studies

MMS 5302: Marketing Management

Marketing Management
An Overview
Prof. B.N.F. Warnakulasooriya
Dr.B.N.F. Warnakulasooriya 1

Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view of its final result, that is from the customers point of view. Business success is not determined by the product but by the customer Peter Drucker.
Dr.B.N.F. Warnakulasooriya 2

Learning Objectives: On the completion of this module

students should be able to:

ASSESSMENT

Define the marketing as a business philosophy, a skill and a business function Discuss the core concepts of marketing Analyze and evaluate business strategies and marketing opportunities Solve problems by formulating sound and practical marketing strategies Understand the major strategic marketing concepts including situation analyses, strategic models/ options and planning for market orientation. Dr.B.N.F. Warnakulasooriya 3

Class Participation Presentations ( 5 x 4) Research Paper Final Examination Total

10 marks 20 marks 20 marks 50 marks 100 marks

Dr.B.N.F. Warnakulasooriya

Marketing Social and managerial process by which

individuals and group obtain what they need and want through creating and exchanging products and values with others (Kotler) . The marketers job is to sell the benefits or services built into physical products rather than just describe their physical features. Sellers who concentrate their thinking on the want instead of the customers need are said to suffer from marketing myopia(read the article Marketing Myopia written by Theodore Levitt ,HBR 1974) Benefits: Utilitarian Benefits : objective, functional product attributes. Hedonic benefits: encompasses emotional responses, sensory pleasures, daydreams, and aesthetic consideration. The criteria is subjective and symbolic.
5 Dr.B.N.F. Warnakulasooriya 6

Need - a state of felt deprivation of some basic satisfaction Want objects that will satisfy needs Demand Want are backed by an ability and willingness to
buy

Product Any thing that can be offered to a market for

attention, acquisition, use or consumption and that might satisfy a need or want.
Dr.B.N.F. Warnakulasooriya

29-Aug-13

It is common for utilitarian and hedonic benefits to function simultaneously in a purchase decision. Product choice set Alternative solutions to a need Exchange : Act of obtaining a desired product from someone by offering something in return. There are at least two parties Each party has something that might be of value to the other party. Each party is capable of communication and delivery Each party is free to accept or reject the offer Each party believes it is appropriate or desirable to deal with the other party Dr.B.N.F. Warnakulasooriya
7

Need Set: additional needs

Markets : Consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want. Marketer: A marketer is someone seeking a resource from someone else and willing to offer something of value in exchange Marketing : A business philosophy, a skill and a business function
Dr.B.N.F. Warnakulasooriya 8

As a business philosophy- core values and beliefs that espouse the view that customer satisfaction is the ultimate goal of all marketing activities.
Marketing As a business philosophy-

Creating customers
Innovate to meet the challenges of a changing market Managing the product portfolio in a way which ensure that mature and declining products generate the cash to invest in new and growing products

Achievement of effectiveness The ability to create and keep a customer

Keeping customers
Maintaining a Sustainable Competitive Advantage (SCA) Managing a marketing mix in a way which ensures continuing customer satisfaction

Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya

10

Business operates within a fast changing and unpredictable environment

Economic

Social

The Market Attractiveness Business Position Matrix MABPM provides a structured way to evaluate business units on two key dimensions : the attractiveness of market involved and the strength of the firms position in that market. The analysis and representation naturally lead to a resource allocation decision.

Public S In
Com

In

Cus

Legal

Competitors
Demographic Natural Political

Core marketing System Dr.B.N.F. Warnakulasooriya

11

Dr.B.N.F. Warnakulasooriya

12

29-Aug-13

Evaluating market Attractiveness : size, growth, customer satisfaction level, competition ( quantity,types, effectiveness, commitment), price levels, profitability, technology, government regulations, sensitivity to economic trends.

The Market Attractiveness Business Position Matrix Market Attractiveness

High Medium Low

Evaluating the Ability to Compete : organization, growth, share by segment, customer loyalty, margins, distribution, technology skill, patents, marketing,flexibility. The market attractiveness business position matrix is a formal, structured way to match a firms strengths with market opportunities.
Dr.B.N.F. Warnakulasooriya 13

High

1 1 2

Business Position: Its Medium Ability to Compete

Low

2 3

3 3

Dr.B.N.F. Warnakulasooriya

14

1 - Invest and attempt to grow 2 Invest would be made only when there is a specific reason to believe the investment to be profitable. 3 Harvest or divest ( when the assessment is more negative) The BCG Matrix To use BCG matrix , each of the companys businesses is plotted according to market growth rate ( percentage growth in sales) and relative competitive position ( market share) .
Dr.B.N.F. Warnakulasooriya 15

Market Growth Rate: The projected rate of sales growth for the market to be served by a particular business. It is usually measured as the percentage increase in a markets sales or unit of volume over the two most recent years. MGR provides an indicator of the relative attractiveness of the market served by each of the business in the corporations portfolio businesses. Relative Competitive Position: Expressed as the ratio of a businesss market share divided by the market share of the largest competitor in that market.

Dr.B.N.F. Warnakulasooriya

16

The BCG Growth/ Share Matrix (Boston Consulting Group)

RCP provides a basis for comparing the relative strengths of different business in the businesss portfolio in terms of the strength of their position in each businesss respective market.
Market

Relative competitive position ( Market Share) High Low

High

Stars

Question Mark
(Net Users of Resources)

Businesses are plotted on the matrix once their market growth rate and relative competitive position have been computed. Once plotted, businesses in the BCG matrix will be in one of four cells with differing implications for their role in an overall corporate strategy. Dr.B.N.F. Warnakulasooriya 17

Growth Rate Low

Cash cows

Dogs
18

Net Suppliers of resources Dr.B.N.F. Warnakulasooriya

29-Aug-13

Concept of Sustainable Competitive Advantage Competitive, advantage or edge, results from the execution of a strategy not pursued by competing businesses. Sometimes, competitors may have the same strategy but a competitive advantage is realized when one business implement it better than others. An advantage that is durable is, therefore, an SCA. The sustainable competitive advantage: Unique abilities ( skills and assets that are hard to imitate) that allow the business to consistently and persistently outperform its competitors.
Dr.B.N.F. Warnakulasooriya 19

Marketing strategy: Total sum of integration of

segmentation, targeting, differentiation, and positioning strategies designed to create, communicate, and deliver an offer to a target market, (Fig 1) .

Marketing strategy is not a stand alone endeavor, marketing strategy is an integral component of functional area strategies. The significance of these strategy links lie in the performance synergy between effectiveness and efficiency that lead to productivity gains necessary to create customer value.
Dr.B.N.F. Warnakulasooriya 20

Fig 1 Marketing Strategy

Not all firm resources hold the potential of sustained competitive advantages. To have this potential, a firm resource must have certain properties (Barney 1991).

Customer

Targeting

Company

(a) Resources must be valuable, in the sense that it exploits opportunities and/or neutralizes threats in a firm environment. Resources are valuable when they enable a firm to conceive of or implement strategies that improve its efficiency and effectiveness. (b) Resources must be rare among the current and potential competitors of the firm; However, if these resources are common, and other firms are also having the capability of exploiting the resources in the same way then no firm will enjoy a competitive Dr.B.N.F. Warnakulasooriya 22 advantage;

Competition
Dr.B.N.F. Warnakulasooriya 21

(c) Resource must be imperfectly imitable and there cannot be strategically equivalent substitute for these resources that are valuable but neither rare nor perfectly imitable;

(e) Presence of causal ambiguity (the relationship between the firms competitive advantage in the market place and its comparative advantage in resources is causally ambiguous)

(d) Resources must have the multiple application capability in the sense that they must provide a basis to detect and take advantage of opportunities in new or current markets
Dr.B.N.F. Warnakulasooriya 23 Dr.B.N.F. Warnakulasooriya 24

29-Aug-13

Factors Requisite for the Creation of an SCA

The Way you Compete
Product Strategy Positioning Strategy Manufacturing Strategy Distribution strategy

Basis of Competition
The strategy needs to be based on a set of assets and competencies. Without the support of assets or competencies it is unlikely that the SCA will be enduring. Several questions can help to identify relevant assets and competencies. What assets and competencies are possessed by successful businesses and lacking in unsuccessful businesses ?

Basis of Competition
Assets and Competencies

SCA

What are the key motivations of the major market segments? What are the large value added components? What are the mobility barriers? What elements of the value chain can generate advantage? In general, for an assets or competency to be the basis of an SCA, it should help create a cost advantage over competitors 26 or a point of differenceDr.B.N.F. fromWarnakulasooriya competitors.

Where You compete

Product Market Selection

Whom you compete Against

Competitor Selection Dr.B.N.F. Warnakulasooriya
25

Where you Compete

The choice of the target product market. A well defined strategy supported by assets and competencies can fail because it does not work in the market place. Thus, a strategy and its underline assets and competencies should involve something valued by the market.

In addition , an SCA or the skills and assets used , should have the following conditions (characteristics) Valued and unique : skills and assets are valued and used only if they can improve the efficiency or effectiveness of key marketing activities. These competencies should be those which are unique to the business Flexible and responsive: an SCA should resist competitors duplication and be flexible enough to face environmental changes, etc.
Dr.B.N.F. Warnakulasooriya 28

Identify the Competitors

It is vital to assess whether a competitor or strategic group is weak, adequate, or strong with respect to assets and competencies. The goal is to engage in a strategy that will match up with competitors lack of strength in relevant assets and competencies. Dr.B.N.F. Warnakulasooriya 27

Substantial: the resulting product or service on the market place should be noticeably and substantially different from those of the competitors. The products attributes must be valued. Marketing Mix The marketing mix, core of traditional marketing, consists of four process elements product, price, promotion and place- that are used for the tactical development of a marketing programme
Dr.B.N.F. Warnakulasooriya 29

Variety Quality Design Feature Brand name Packaging Product Sizes Services Price List price Discounts Allowances Payment period Credit terms

Marketing Mix Channels Coverage Locations Inventory Transport Place Sales Promotion Advertising Promotion Sales-force Public relation Direct Dr.B.N.F. Warnakulasooriya 30 marketing Target Market

29-Aug-13

Except for the price variable, all other variables in the marketing mix are resources needed to enter and operate in the market place. Resources are viewed as the tangible and intangible entities that enable a firm to conceive of and implement strategies that improve its efficiency and or effectiveness (Barney 1991). Resources (assets and competencies) if isolated do not generate any synergistic effect of forming core competencies (the things a firm does best in creating value for customers). They should be blended in such a way that superior performance of process can be achieved.
Dr.B.N.F. Warnakulasooriya 31

Similarly, if marketing mix elements are taken individually they do not create any synergistic effect. Shapiro (1985) identifies three types of interaction within the mix: (a) consistency, a logical and useful fit between two or more elements; (b) integration, an active, harmonious interaction among the elements of the mix; and (c) leverage, each element is used to the best advantage in support of the total mix. However, not every combination of marketing mix permits the attainable of competitive advantage. If a firm has a specific assortment of marketing mix (resource) that is rare among competitors, then, it has the potential for generating a comparative advantage for that firm (Barney 1991).
Dr.B.N.F. Warnakulasooriya 32

Shapiro (1985) asserts that the total assortment of marketing mix should be fit with the market, the company, and the competitor
CUSTOMER
COMPANY

Marketing as a skill
Market sensing skills a deep ability to understand customers, market and environment trend ahead of their competitors, ability to anticipate more accurately the responses to actions designed to retain or attract customers, to improve channel relations, or thwart competitors. Open minded inquiry Open mindedness is described as a desire to see and experience new things (Gregersen et al. 1998).
33 Dr.B.N.F. Warnakulasooriya 34

COMPETITOR Dr.B.N.F. Warnakulasooriya

Openness consists of two factors: cosmopolitan orientation, an attitude of openness to others values and practices; and cultural flexibility, the willingness to experiment with different customers (Manning 2003). Open minded inquiry - acquire information about trends, events, opportunities, and threats in the market environment through scanning, direct experience, imitating or problem solving inquiries in a more thoughtful and systematic fashion, in the belief that all decisions starts with the market Dr.B.N.F. Warnakulasooriya 35

Synergistic information Distribution- Information is widely distributed, its value is mutually appreciated, and those functions with potentially synergistic information know where else it could be used beneficially. Mutually informed interpretations Use scenarios and other devices to force managers to articulate, examine, and modify their mental models of how their markets work, how competitors and suppliers will react. Accessible Memory Develop practical mechanism to remember what has worked and why. This data bank should be accessible to the entire orgn. 36 Dr.B.N.F. Warnakulasooriya

29-Aug-13

Market Relating Skills an ability to maintain and enhance customer relationship, marketing skills in negotiation, inter-organizational coordination and conflict management. New skills, abilities, and processes must be mastered Close communication and joint problem solving- develop team based mechanisms for continuously exchanging information about needs, problems, and emerging requirements and taking action.

Coordinating Activities - New mgt processes for (a) joint production planning and scheduling (b) mgt of information system links so each knows others requirements and status and orders can be communicated electronically, and (c) Mutual commitments to the improvement of quality and reliability .
Dr.B.N.F. Warnakulasooriya 38

Dr.B.N.F. Warnakulasooriya

37

Marketing As a Is dedicated to efficiency business function The achievement of maximum output for minimum input Principle Combination of Efficiency And Effectiveness Effective Ineffective SM

Fig - Marketing as a Business Function

Customer Company

Efficient OM

Thrive

Die slowly

Market Segmentation CB

Targeting

Offer - Goods services experiences

Survive Inefficient
Dr.B.N.F. Warnakulasooriya

Die quickly
Competition
39 Dr.B.N.F. Warnakulasooriya 40

Marketing as a Business Function The process of creating the value (product/price), communicating the value (promotion), and delivering the value (channels) (fig 3).

Marketing As a Business Function

Process
Create Value
Communicate value

Deliver Value

Mix

: Product/offer Price/ Value

Promotion

Cannels/value chain

Program
Dr.B.N.F. Warnakulasooriya 41

Marketing Management
Dr.B.N.F. Warnakulasooriya 42