MARKETING STRATEGY

Lecture 4

STRATEGIC ANALYSIS:
MARKET, ENVIRONMENTAL & INTERNAL

IIPM Bangalore
Faculty: Srikanth Gururaj

Strategic Analysis
External Analysis
Customer
motivations, segments

Internal Analysis
Performance
profitability, sales, cust. sat., talent

Competitor
strategy, costs, strengths

Track Record
past strategies, financial resources, competencies

Market
size, growth, profitability, distribution

Strengths Weaknesses

Environment

Opportunities technology, govt., cultural, demographic Threats

SWOT

Whats the Best Strategy?

Strategic Uncertainties Strategic Decisions

External Analysis
Customer
motivations, segments

Strategic Uncertainties
Opportunities Threats

Competitor
strategy, costs, strengths

Market
Environment

size, growth, profitability, distribution

technology, govt., cultural, demographic

Internal Analysis
Performance
profitability, sales, cust. sat., talent

Whats the Best Strategy? OR Strategic Decisions

Strengths

Track Record

past strategies, financial resources, Weaknesses competencies

Strategic Uncertainties Decisions

Strategic Uncertainties AIRTEL
Will HD be accepted / penetrate? - at what affordability levels - how fast - HD content v. TV sets (chicken/egg) Will African growth in basic cell faster than Indian HD? Will vertical integration increase customer loyalty?

Strategic Decisions
Do we invest in HD? - now (leader?) - later (follower?)

MAHINDRA
Will SUVs hold their place in consumer preferences? Losing lifetime value?

A N A L Y S I S

Where do we focus?

Sell handsets? (Multiple locals: Micromax, Karbonn, Lemon, Bling) Invest in sedans? Logan They did scooters

Customer Analysis

Customer Analysis can be examined in 3 key areas:

1) Segmentation
(slides 6-15 review of Brand Mgmt.)

2) Customer Motivations

(slides 17, 18) (part of segmentation)

3) Exploration of Unmet Needs

(slide 20) (also part of segmentation)

All 3 are inter-related, with

segmentation
being all encompassing & seminal

Competitor Analysis New / Potential Competitors

Market Expansion: Product Expansion: Backward/Forward: Integration

Acquire SCA

Geographies
Prince balls Rackets shoes ? supplier / customer enter

CCD (Coffee) /

Mahindra buys Reva

Competitor Analysis
Understanding Competitors Build a Scorecard or Progress/Monitoring Report
Size, Growth Profitability

Brand Equity & Positioning

Current & Past Strategies

Cost Structures

Exit Barriers

Market Analysis

Why do we do it?
1) Make strategic judgments about: a market / sub-market current, potential participants market attractiveness

2) Understand market dynamics: key success factors, trends, threats, opportunities

Market Analysis
Typical Dimensions of Market Analysis
1. Size & Growth 2. Profitability 3. Cost Structure 4. Distribution 5. Market Trends

Market Analysis
1) Size & Growth:
Questions / Considerations
rate, submarkets (actual vs. potential) too small for the big players? declining markets experience curve pricing indicators: leading indicators, turning points, analogous industries?
Price pressures (over-capacity, commoditization) Category Stagnation (non-differentiation, nothing new, exciting) Buyer maturity, sophistication (value more than just brand), no price premiums Substitutes ( smart phones & cell phones, even PCs) Saturation/Penetration

declining markets experience curve pricing

Market Analysis
2) Profitability
Porters Five-Factor Model of Market Profitability
(Industry Structure & Competitive Strategy)

Potential Entrants

Supplier Power

COMPETITION existing firms

Customer Power

Potential Substitutes

Market Analysis
2) Profitability:
(Right question? Any higher-level question?)

Porters Five Factors 1. Competition: Current/Existing . Future/potential?

How many, resources, staying power Points of differentiation, uniqueness? Level of fixed costs (overcapacity & pricing pressures?). Exit barriers? Contracts, relationships New entrants? Barriers, scale, distribution?

2. Substitutes: Ciscco telepresence 3. Customer : retailWal-Mart / travelresorts / integrate back, forward 4. Supplier: concentrated and supplying diverse markets? Intel?

Market Analysis
3) Cost Structure:
Relative strategic degrees of freedom; competitive response? Look at Value Chain to see where the fat or opportunities/threats lie? Air tickets online // containers in 1950s world trade // ready-made garments?

4) Distribution Systems:
Degree of directnesshow many steps? New channels, innovation in channels? Outlet shops, online, door-to-door/direct/multi-tier / bundled / co-branded / telesales, phone/home-shopping

5) Market Trends:
Whats changing? Whats important? Fads vs. Trends = driven by demographics, long-term values, technology, cross-category

Market Analysis
2) Profitability
Porters Five-Factor Model of Market Profitability
(Industry Structure & Competitive Strategy)

VARY BY INDUSTRY & MARKET

Potential Entrants

Supplier Power

COMPETITION existing firms

Customer Power

Potential Substitutes

Market Analysis: Hot Growth Markets?

cant ignore! Many rush in. (e-commerce, dot.com of late 1990s, early 2000s & 10 yrs later in 2011-12; mobile VAS operators in India) Market, economy slows down Aggressive late entrants buy market share by dropping price Market leader/ incumbent fights back with new products, price cuts Superior Follower (Apple Newton Palm Pilot Blackberry Smart Phone Apple iPod, iPhone, iPad) Knock Offs, copies

All leads to Shakeout / consolidation Academic Study of highly anticipated, touted new products/markets from articles/forecasts in Business Week, Fortune, WSJ from 1960-1979: 55% of growth forecasts fell short for various reasons: - Overvaluation of technology, poor consumer demand, cost barriers, political issues, poor distribution (Roll your own cigarettes, moving sidewalks, tooth-decay vaccines, home grocery delivery)

The Competitive Life Cycle

Environmental Analysis
One Step removed (higher level) than market analysis >>>>>>>>>>>>> Strategic uncertainties!

Technology Government Economics Culture Demographics Scenario Building

IMMEDIACY ( how soon? ) Short-Term Long-Term High

Monitor, analyze; contingencies

IMPACT ( how important )

Analyze deeply, fast, plan & act

Low

Forget it!

3 Monitor,
analyze

Internal Analysis
Know Thyself! Understanding a business organization in-depth More information is available! Analysis based on: 1) Financial: Sales, Profits, Costs 2) Organizational structure 3) Management style Identify organizational Strengths, Weaknesses, Constraints and develop responsive strategies!

Internal Analysis
Satisfaction / Loyalty

Quality

Relative Costs

CURRENT PERFORMANCE

Innovation / New Products

Employee Talent Pool

L-T PROFITS

Internal Analysis
McKinsey matrix / GE matrix portfolio analysis model
Market Attractiveness

Competitive Strength
Company / Product Line / Strategic Business Unit: - Strength of assets and competencies - Relative brand strength (marketing) - Market share & share growth - Customer loyalty - Relative cost position -Relative profit margins - Distribution strength - Production capacity - Technology / Innovation - Quality - Finances - Management strength

- Market size & growth rate - Market profitability - Pricing trends - Competitive intensity / rivalry - Entry barriers - Opportunity to differentiate - Demand variability - Segmentation - Distribution structure - Technology development

Internal Analysis
McKinsey matrix / GE matrix portfolio analysis model COMPANY COMPETITIVE STRENGTH High Medium Low

MARKET ATTRACTIVENESS
High

Invest / Grow Earn Selectively

Medium

Harvest / Divest
Low

News Items
Remember Customer Analysis is already presented in class!

e-reading
Market Analysis: Environ. Analysis: Kids Environ. Analysis: Upwardly Mobile Market Analysis: Environ. Analysis: Nestle global Internal Analysis Tiffany watches

Google Editions
distribution innovation ; technology; fad or not? Luxury Brands demographics, lifestyle (both parents working) Tea demographics, work styles import incentive finance community pressure financial resources Issues?