20-05-2006

1st Lecture.

Books:
• Strategic marketing management : David aaker, John Wiley
• Marketing : Keegam, moriarty & Dunlan.

Concept – Business Strategy

“Plans are nothing, planning is everything.”

Business strategy specification: It includes the following

1. The product marketing in which the business is to compete.
2. The level of investment.
3. The functional area strategies needed to compete in the selected product
marketing.
4. The strategic assets and competencies.
5. Allocation of resources.

What is business strategy?

1. The product Market in which the business is to compete:

a. Products it offers and chooses not to offer.
b. Markets it seeks to serve.
c. Competitors it chooses to compete with
d. Level of vertical integration.
2. The level of investment:
a. Invest to grow.
b. Invest only to maintain the existing market.
c. Milk the investment by minimizing investment.
d. Recover investment in assets by liquidity or divesting the business.
3. Functional area strategies:
a. Product line strategy.
b. Communication strategy.
c. Pricing strategy: For example Ranbaxy invest 15% of profit in R&D,
whereas TATA motors invest 8% in R&D.
d. Distribution strategy
e. Manufacturing strategy
f. Segment strategy and global strategy and internet.
4. Strategic Assets and competencies that provide sustainable competitive
advantage (SCA).
a. Strategic Assets: it is a resource that is strong relative to competitors
b. Strategic competence: it is something that business does exceptionally
well.
c. Strategic formulation: it must consider the cost and feasibility.
Strategic Marketing Management – Strategic and Trends.

1. External Market orientation : As opposed to

a. Internally oriented
b. Goal is to develop marketing driven strategies that are sensitive to
customers. Ex: intel launches every year new processor for different types
of customers.
2. Proactive strategies: To influence events in the environment rather than being
reactive.
3. Importance of the information system.
a. How information can be obtained efficiently and effectively.
b. How best it should be analysed processed and store.
4. Knowledge management:
5. Online analysis and decision making
6. Entrepreneurial thrust
7. Implementation.
8. Global realities: Regarding different forms of competition emerging in
different countries.
9. Longer time horizon.
10. Empirical research
11. Interdisciplinary developments.

SOURCES OF INFORMATION GATHERING.

1. Internal database.
2. Market research
a. Primary data
b. Secondary data
c. Market intelligence.

2nd Lecture
05-06-2006

STRATEGIC MARKETING MANAGEMENT

Characteristics & trends.

• Long term horizon :

• Empirical Research: as opposed to conceptual contribution stress has shifted
to empirical evidence.
• Interdisciplinary developments:
o Marketing – emphasis on customer need, PLC, Global brand management,
category management etc.
o Organizational behavior: fit between
WHY STRATEGIC MARKET MANAGEMENT?

• Precipitates the consideration of strategic choices: Nothing is more tragic than

an organisation failing due to delayed strategic decisions.
• Forces a long range view of business
• Helps to allocate resources in a better manner
• It aids strategic analysis and decision making
• Provides strategic management and control
• Leads to a better coordination between planning and implementation.
• Helps business cope with change

STRATEGIC PLANNING AND THE MARKETING PROCESS.

Strategic Planning.

• It is the process of developing and maintaining a strategic fit between the

organization’s goals and capabilities and its changing marketing opportunities.
• It involves four steps:
o Defining a clear mission statement
o Setting supporting objectives.
o Designing a sound business portfolio &
o Coordinating functional strategies.

STEPS IN STRATEGIC PLANNING

Defining Setting Designing the

Planning, marketing,
company’s objectives business
and other strategy.
mission and goals portfolio

Corporate level Management level

Mission statements:
• A statement of the organisation’s purpose what it want to accomplish in the
larger environment
• Mission statement should be
o Realistic
o Specific
o Shout fit the market environment
o Based on the organisation’s distinctive competencies
o Motivating
Market oriented business definitions

Company Product oriented definition Market oriented definition

Revlon We make cosmetic products We sell lifestyle and sell
expression; success,
memories, hope, dreams.
Disney Theme parks We create fantasies
Wall mart We run discount stores We deliver value through low
prices.
Xerox We make copying, fax machines We make business more
productive by helping them
scan, store, retrieve, revise,
distribute, print and publish
documents.
Titan Watches and fashion accessories

SETTING COMPANY OBJECTIVES & GOALS:

• Company’s mission to be converted into detailed supporting objectives for

each level pf management.
• The objectives should
o Clearly spell out each department’s objective
o Should be specific and measurable.

DESIGNING THE BUSINESS PORTFOLIO

• Business portfolio
o The collection of business and product that make up the company.
• Best portfolio
o That best fits the company’s strength and weakness to opportunities.

ANALYSING CURRENT BUSINESS PORTFOLIO.

The company must

• analyze its current business portfolio
o Decide which businesses should receive more or less or no investment.
• Develop growth strategies.
o For adding new products or businesses to the portfolio.

Strategic Business Unit

• A unit of the company that has a separate mission and objectives and that can
be planned independently from other company business
• An SBU can be division, or sometimes a single product or brand.
 June 12, 2006
3rd Lecture.
Analysis current business portfolio.

Strategic business unit.

• A unit of the company that has a separate mission and objectives and that can
be planned independently from other company business…
• An SBU can be a division, or sometimes a single product or brand.

Boston consulting group approach

Growth - share matrix.

Growth here means the growth potential of the product or the company.
Share here means the share in the market.

Growth – share matrix:

• A portfolio planning method that evaluates a company’s strategic business

unit in terms of their market growth rate and relative market share.
• SBU’s are classified as
o Stars
o Cow
o Question mark
o Dogs.

Market growth

High star question mark

Low cash cow dog

High Low
Relative market share

For instance : take maruti udyog

Star : Swift
Cash cow : Maruti 800
? Mark : Baleno, WagonR
Dogs : Zen, Esteem.

Star:
• High growth
• High share business or market
• Need heavy investment
• Eventually they turn into cash cows.

Cash cows:
• Low growth
• High market share business or products.
• These established & successful SBU’s need less investment to hold their
market shares.
• They produce a lot of cash to pay bill and support other SBU’s

Question Mark:

• Low share business units in high growth markets.

• They require lot of cash to hold on their market shares.

Dogs:
• Low growth
• Low share business
• Enough cash to maintain business – but not very large source of cash.

Developing growth strategies.

Various growth strategies has to be developed. One of the way is as follows:

Product – Market expansion: We are talking about both market and product.

A portfolio planning tool for identifying company growth opportunities through

• Market penetration: A strategy for company growth by increasing sales of

current products to current market segments without changing the product.

• Market development: A strategy for company growth by identifying &

developing new market segments for current company products. For e.g.
Shampoo scathes, air travel. No changes were done in the product, but in
strategies.
 • Product development: A strategy for company growth by offering modified or
new product to current market segments. For e.g. Kellogs. It initially used to
come in only one taste. But today they come in variety of flavors.

• Diversification: A strategy for company growth by starting up or acquiring

businesses outside the company’s current product and markets. For e.g. ITC
which was earlier in tobacco business now enters into hospitality business.

Existing products new products

Existing Market penetration product development

Market

New Market development Diversification

Market

THE MARKETING PROCESS

Marketing Process:
The process of
• Analyzing marketing opportunities
• Selecting target markets
• Developing marketing mix..
• Managing the marketing efforts.
Analyzing marketing oppurtunities:

• Market segmentation:
o Divinding the market into distinct groups of buyers on the basis of
 Needs
 Characteristics
 Behavior.
• Market targeting: The process of evaluating each market segment’s attractive
and selecting one or more segments to enter.
• Market Positioning: Arranging of a product to occupy a clear, distinctive and
desirable place relative to competing product in the mind or target customer.

Marketing strategies for the competitive advantage.

• Market Leaders : E.g. coca cola

• Market Followers: TATA AIG has copied Max New York life
• Challengers: Mountain dew
• Niche Players: Nike in its
Developing marketing mix

It is combo of 4P’s

The 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 Price

Target customer
Intended positioning

Promotion Place

• Product: We can alter the product strategy in following ways.

o Variety
o Quality
o Design
o Features
o Brand name
o Packaging: for e.g. chicken mc grill – mc donalds.
o Services: it can be either
 Pre-sales services- free demos
 After sales services

• Price: We can have price advantage by following ways.

o List price: we can keep high price initially and then sell them at discount
o Discounts
o Payment periods: buy now but pay later, more like financing
o Credit terms: terms on which the period

• Promotions:
o Advertising
o Personal selling
o Sales promotion
o Public relations.
 • Place:
o Channels of distribution
o Coverage
o Assortments
o Locations
o Inventory- some company may like to have certain advantage by way of
inventory management
o Transportation
o Logistics: combination of transportation, warehousing and distribution.

Managing the marketing effort

• Market analysis : The company analyze its markets and marketing

environment to find attractive opportunities and potential threats.
Analysis

Planning developing Implementations Control.

strategic
Plans carrying out measure results
The plan
Develop marketing evaluate results
Plans
Take corrective actions

• Planning
• Implementation
•
5th Lecture
26-06-2006
Probability of success. The opportunity matrix.

Probability of success.

1 2

Alternatives

3 4

Cell 1:
Cell 4:
Cell 2,3:

Basis for developing a competitive advantage – Internal.

Organisation advantages:
• Economies of scope: based on the size of organisation.
• Flexibility: it may become the strength for the organisation.
• Competitive stance: many companies enjoys competitive stance. For ex, what
ever business they enter into they wins the market. For ex. WIPRO, it also
entered into the BPO business because it was ongoing thing. It has
successfully captured the market.
• Size:
• Speed of response: for example, the speed of response of Reliance is very less.
If you have any query, it takes a long time for them to response. Its exactly
opposite in hutch, as soon as you call up hutch customer care, within fraction
of seconds, the sms pops up and ask your feed back about the callcenter
person.
• Past performance: it helps you to build your future. For ex: the Reliance and
TATA are able to get the market because of their past performance in the
market.
• Patterns of ownership: for instance Honda, it too 25 years for them to set up
completely owned business in India. It had initially parterned up with Kinetic
and Hero motors to enter into Indian market.
• Reputation: the reputation influences them to enter into the market. It helps in
the distribution channels also. For ex mercedese benz and skoda motors, they
got piles of application for the dealership offers.

Departmental and Functional Advantages:

• Marketing:
o Customer base: the company with strong customer base, it helps you to
expand your business in any way and into any business. For ex: Reliance,
TATA – cars and salts etc.
o Customer Knowledge: if you have the complete customer behaviour and
other related knowledge it helps to enter into an all together new market.
o New Product skills:
o Pricing: we all see Honda cars in India, it has great demand. When we go
global evaluating to price, its shocking. For instance Honda accord is sold
at 18 lacs, but it is sold at merely 10 lacs in other countries. A reputed
company enjoys the platform of pricing. They even charge exobirate rates,
but still they lead the market.
o Communication and Advertising: The advertisers today don’t accept any
company as their client. The reputed companies have privilege to become
clients of leading advertisers.
o Distribution
o Sales Force: a suitable sales force is essential for the company. A Capable
or efficient sales force helps the company to have advantage of them.
o Service Support
o Goodwill: good will of the marketing department plays a big role in this
regards.
• Research and Development:
o Product technology:
o Patents : if you are holding huge patents in terms of product or process
patents, it giving you a edge competition advantage.
• Production:
o Technology: the cost of production is based on the technology. If you
posses huge of technology you get a competitive advantage.
o Process Efficiency: A process efficiency gives a competitive edge and
advantage and help you in cutting the cost.
o Economies of scale:
o Experience: its experience that helps in betterment of procedure.
o Product Quality: for example, the gillete blade made in china doesn’t sell
better than the gillete blade made in germany. Both hold a different
mindset and reputation. For ex: products made in Germany are too good.
People swear by those product made in germnay and other countries like
japan etc.,.
 o Manufacturing flexibility: that is if the company is able to accept the new
technology as and when they come, then it is known as manufacturing
flexibility. It helps the company to grow on this ground.
• Personnel:
o Good management: Worker relation.
o Workforce flexibility:

Advantages based on relationship with external bodies.

• Customer Loyalty.
• Channel control: it can become huge competitive advantage. During a
prolonged relation, the company may develop a good relation. The channel
believes what ever the company says.
• Preferential political and legislative treatment:
• Government assistance: a good relation with government would help the
company to demand subsidies. It may get various advantages like get land etc.
• Beneficial tariff and non tariff trade barriers: the refrigerator and the computer
industry enjoy the trade barriers. They claim based on the environmental
friendly background. So they enjoy the local market.
• Cartels: controlling the production activities. For ex: the Apollo tyres with
MRF and other tyre manufactures held up a cartel and decided to control
manufacturing due to slash in price.
• Intro – organizational relationship: ATM’s the icici bank hold relationship
with other banks. You can use any card in any bank’s atm. Another example is
Pringles and Coke tie up in America and Africa.
• Access to preferential and flexible financial resources.

Sources of competitive advantages:

• A superior market position:
o Ex:
 A differential competitive stance.
 A lower cost base ..or
 A protected niche.
• A superior knowledge and / or relationship base:
o Examples:
 Detailed customer knowledge. Hutch knew how executives
behave, they knew how students behave. So they had clear idea
about response and thus they make offerings like GPRS etc.
 Trade relationship.
 Technical expertise.
 Political links
 Cartel membership
• A superior resource base:
o Examples:
  Size and economies of scale.
 Financial structure
 Strategic alliances
 Breadth of geographic coverage
 Marketing and manufacturing flexibility
 Image and reputation
 Channel control.

Probability of success

s high low
high e
r
i
o 1 2
u
s
n
e 3 4
low s
s
s

Threat matrix:

Cell 1:
• Threats are serious and have high probability of occurrence
• Strategist needs to monitor developments closely and have a contingency plans
available.

Cell 2&3:
• Threats need to be closely mentioned – incase they become critical
• Contingency plans not necessary.

Cell 4
• Threats are very minor and can be largely ignored.

The performance importance matrix

 Performance

high low
high i
m Focus on greater
p managerial efforts to Ensure performance doesn’t
o improve fall.
r performance
t
a
n Areas of low priority Rethink current efforts. Is
low c
e

For example: telecom sector like Reliance industries.

SWOT to TOWS

• One of the the major criticism of swot is that the manager do not come to terms
with strategic choices that the outcomes demand,
• For this reason TOWS has been recommended,
• This would help better integrating with the strategic planning process.

Competitive advantage and value chain.

• Having analysed the strengths and weakness

• Now it is time to improve organisation’s performance through the optimum
utilization of resources.
• TOWS framework provides this value chain.

TOWS Framework.

• Address basic question concerning the internal and external environments.

o Step 1: Prepare the enterprise profile of
a) Types of current business
b) Competitive situation
c) Geographic domain.
d) Pre occupation and culture of the senior management teams.
• Focus on the present and future external environment.
o Step 2: Identify and evaluate
 a) Economic, social, political & demographics, products and technology
and market/ competitive environment.
• Focus on the Present and future external environment
o Step 3: Prepare a forecast, make predictions and assess the future.
• Audit of the organisation’s internal resources
o Step 4: Prepare a detailed Strength and Weaknesses audit of
a) Management and organisation, operations, finance, marketing other
parts of the organisation. Everyone is audited in this system and this
is beauty of this system. Everyone is open for critics. They accept it
and its important for them to develop.
• Actions needed to achieve organisation’s overall purpose and objectives. Under
this system the individual himself motivates himself to contribute. He says
himself to do and not that others ask him to do.
o Step 5:
a) Identify the strategic choices facing the organisation.
• Actions needed to achieve organisation’s overall purpose and objectives.
o Step 6:
a) Prepare the contingency plans.

Marketing Audit

Characteristics of Effective Audits:

• It should be comprehensive
• It should be systematic
• It should be completely independent. This is the reason why the company
generally asks the outside consultants to do it.
• It should be done periodically and not once in blue moon. It should be monthly,
weekly, etc.,

Components of Audit
• Marketing environment audit
• Marketing strategy audit.
• Marketing organisation audit.
• Marketing systems audit.
• Marketing Productivity audit.
• Marketing functions audit. (Market research, advertisement etc )

July 10th 2006

7th Lecture

Marketing environment:
The factors and forces outside marketing that affect marketing managements ability to
develop and maintain successful transaction with its target customers.

The marketing environment offers

• Opportunities
• Threats
• Successful companies keep a constant watch on the rapidly changing
environment. Example supermarkets v/s e-commerce.
• Combination of retailers and home delivery giants wall market and federal
Express.

Micro Environment:-
The forces close to the company that is affecting its ability to serve its customers
• The company: In designing the company’s marketing plans – marketing
management must closely work with other departments and top management

Top Mgt
Purchase
Finance

Marketing Manufacturing
R&D

HR Accounting

• The suppliers: They are an important in the company’s overall customer value
delivery system. They can influence your workers and sometimes become
indispensable. Can lead to
o Delay
o Labour
 o Hike in price
• Channel partners: Marketing intermediaries that help the company promote
sell and distribute its goods to final buyers. They include:
o Reseller: wholesale and retailers, have enough power to dictate terms. Can
even shut manufacturers from large markets.
o Physical distribution firms: logistic firms: companies must determine best
way to store and ship goods.
o Marketing service agencies: market research firms, advertising agencies
and media firms.
o Financial intermediaries: banks, credit companies and insurance
companies etc.
• Customer market: Type of customer markets
o Consumer market: personal consumption
o Business market: for further processing or used in production process
o Reseller market: resell for profit
o Government market: For public services
o International market:
• Competitors: Basic definition of marketing is you first create need. Marketing
concept states:- to be successful a company must deliver must deliver better
customer value and satisfaction than its competitors. The company must
therefore
o Gain strategic competitive advantage
o Ensure superior positioning than competitors
o Large firms must use certain strategies which small firms can’t deploy. Ex
Nestle forced their retailers from keeping Cadbury and made Cadbury to
suffer heavy losses.
• Public: Any group that has an actual or potential interest in or impact on an
organisation’s ability to achieve its objectives.
o Financial public: Banks, Stockholders etc.
o Government public: On issues like product safety truth in advertising.
o Citizen action public: environment group. Ex the human right groups,
labour right, consumer organisation. Sometimes force you to change your
product or put a ban on your product.
o Internal public:-workers, manager, board of directors, when employees
feel good about the company.

July 17, 2006

Macro environment:-
This comprises of the target societal forces that affects the micro environment:

Major factors affecting are

• Demographic environment
• Economic environment
• Political environment
 • Natural environment
• Cultural environment

Demographic environment:

• Baby Boom 1946 – 1964

• Gen X(age group 20 years) 1965 – 1976
• Echo boomers 1977 – 1994

Explanations:

Baby boom: 1946 – 1964

Main characteristics
• Wealthy
• More educated and brand conscious
• Mobile.

Generation X : 1965 – 1976

Main characteristics
• Savvy shoppers : very intelligent shoppers
• Under financial pressure
• People were value conscious. They were looking for value for money
• They were looking for social products like environment friendly products
• Looking for better quality of life
• Job satisfaction
• No personal sacrifices: e.g. people no more save or cut their expenses to buy some
future products like home or do savings for their children’s.

Echo Boomers : 1977 – 1994

Main characteristics
• All time big spenders: more exp on toys , clothes, furniture
• Sony designing electronic products for kids,
• Banks offering investment and banking services for Kids.

Economic environment:

• Change in income: Factors that affect consumer buying power and spending
patters
o Dual careers couples
o DINK: double income but no kids.
o They are more careful spenders
 o Engel’s Law: As income rises : % spending on food utilities decline, %
spending on housing, clothing remains constant, % spending on savings and
health care initially rises and then decline, % spending on entertainment and
insurance rises.

Natural environment:
• Natural recourses that are needed as input by marketer or that are affected by
marketing activities.
• Reasons for marketers to remain aware of natural environment

Technological environment:

Forces that create new technologies, creating new product and market opportunities

• Effects of technology.
o Antibiotics
o Organ transplants
o Notebook computers
o Internet : helping people to transact and do business any where.
o Nuclear missiles
o Chemical weapons.

Political environments:

Laws, government agencies and pressure groups that influence and limit various
organisation and individuals in a society.

Increased emphasis on
• Ethnic
• Socially responsible actions.

Cultural Environment:

Institution and other forces that affect society’s basic values, perception, preferences and
behaviors.

A. Persistence of cultural values

• Indian believe in
o Working
o Getting married
 o Giving charity
o Being honest: these core beliefs are passed on to the next generation and are
reinforced by schools, businesses, government etc.
B. Shifts in secondary cultural values
a. Impact of popluar music group, movies on
i. Young generation
ii. Clothing
iii. Sexual norms etc.
C. People’s view of themselves
a. Some people seek
i. Personal pleasures
ii. Wanting fum
iii. Change and escape
iv. Others seek self realization through religion, recreation etc
v. Finally, people buy products and services those match their needs.
D. People’s view of others:
a. Internet access has forced people to look for social support leading to
i. Joining health clubs
ii. Family vacations etc,
E. People’s view of organisation
a. Organisation are finding newer ways to win customer and employee
confidence
i. Linking themselves to social causes.
ii. Using PR to build more positives images
iii. Companies adopting villages to spread literacy
iv. Providing mobile hospitals to remote places.

F. People’s view of society

a. People’s attitude towards society varies
i. Patriots defend it
ii. Reformist change it
iii. Malcontents want to leave it
• People’s orientation towards society influences their consumption
patterns, level of saving and attitude of towards the market places.
G. People’s view of nature
a. People’s attitude towards nature varies some feel ruled by it
b. Others feel in harmony towards it.
c. Some seek to master it
d. Love of nature – more business: in hiking, camping, fishing etc

Responding to market environment

There are 3 kinds of companies
• Those who make things happen
• Those who watch thing happens
• Those who wonder what happened
 • Environment management perspective: in which the firm takes aggressive
actions to affect the public and forces in its marketing environment rather
than simply watching and reacting to them.
8th lecture
July 17, 2006
Marketing strategy and competitive advantage

Type of consumer product

Conveniences Shopping Specialty Unsought
Marketing
consideration
Consumer Frequent Less frequent Strong brand Little product
buying purchases, low purchase much preference, low awareness
behavior involvement planning brand price sensitivity knowledge,
comparison on little or
price, style negative
quality interest.
Price Low price Higher price High price Varies
Distribution Widespread, Selective Exclusive in Varies
conveninent distribution in one or a few
location fewer outlets outlets per
market
Promotion Mass Ads and Carefully Aggressive
personal selling targeted
Example Toothpaste t.v, furniture Luxury goods – Life insurance,
rolex watches red cross blood
donations.

Industrial products:

• Products that are bought for production activity.

Variables Industrial Consumer

Market structure Geographically Dispersed
concentrated
Fewer buyers Mass markets
Oligopolistic buyers
Products Technically complexity Standardized
Customized
Service delivery and Service delivery and
availability – very availability – somewhat
important important.

VARIABLE INDUSTRIAL CONSUMER

Buyer behavior Functional involvement Family involved
Technical involvement Less
 Stable relation Non personal
Decision making Distinct, observable stages Unobservable
Mental stages
Channels Shorter, more direct fewer Indirect more links
links
Price Competitive – bidding, List price
Negotiations
Promotions Personal selling focused Advertisement focused

9th Lecture
July 24th 2006

Individual Product Decisions:

Product Product
Branding Packaging Labeling
Attribute support
services

Product attributes:-
• Product Quality: The ability of a product to perform its function, its durability,
precision, case of operation and repair and other valued attributes.
o Dimensions of product quality:
o Quality level: between two different brands of same product also differs.
Here the quality means – performance quality – the ability of a product to
perform its function. Ex rolls Royce is expected to perform better than
Chevrolet – smoother ride better handling lasts longer.
o Quality consistency: Here the quality means – conformance quality –
freedom from defect and consistency in delivering a targeted level of
performance. Ex in this sense Chevrolet and rolls Royce can have similar
quality consistency.
• Product features: - there are used as competitive tools for creating product
differentiation.
• Product Design and Style:- Design can enhance operational efficiency style
doesnot enhances / impacts operational efficiency. Ex Black & Decker in
cordless electric iron. Since it enhances its operational efficiency. Style
impacts just the appearance of the product sensational style can grab attention
but need no aid better performance.

Branding:
Brand name selection:- Desirable qualities for a brand name
• Should suggest something about product benefits and qualities.
• Easy to pronounce
• Recognise
 • Remember
• Distinctive
• Easily translatable in various language (i.e in terms of capability to be written
in local language)
• Capable of registration and legal protection.

Brand Sponsor:- (Owner of the brand)

• Manufacturer brand: IBM, Kellogs etc.
• Private Brand: also called store brand, distribution brand. Ex food world
manufacturing floor cleaner or t-shirt sold on Westside.
• Licensed Brand:- Can be called as outsourcing. In the service sector it means
franchising. It is driven by instrument called License agreement.
• Co-Brand: It can result because of strategic alliance or equity participation,
technological partnership. Ex Herohonda – where Honda did not wanted to
create a culture for the brand and too made Hero as its partner in India.
Brand strategy:
• Line Extension: Exisitng brand name extended to new forms, size, and
flavours of existing product category.
o Utilize excess capacity, low cost, low risk, way to introduce new product,
command more shelf space from Resellers.
• Brand Extension: Existing brand names extended to new product categories.
E.g. Barbie doll, furnishing, cosmetics, electronics, sporting goods. Ex
Honda: cars, motorcycles, snow blowers, lawn movers, generator sets and
marine engines. It gives new product instant recognition. It involves some
risk.

• Multi brand:
o New brand name introduced in same category.
o Flanker brand or fighter brand serpeate brands for separate countries to
suit cultures or languages. Ex HLL facing competition from GHADI
o Seiko uses different brand names for High priced watches (Seiko lasale)
and lower priced (Pulsar) to protect flanks of its mainstream Seiko.
o One major drawback : each brand may have small market share none may
be profitable.
• New Brand: New brand name in new product categories
o Mulsustita uses different brand names, technics Panasonic, national and
quasar. Sometimes new brand name brings power when old one’s power
starts waning.

What are different forms of branding strategies that a company can acquire to gain Scn.

Product Category
 Existing New
Existing Line extension Brand extension
New Multi brands New brands

Brand
name

Summary of Major branding decision:

Brand Name Brand Sponsor Brand Strategy

Manufacturer’s
Line Extension
Selection Brand
Brand Extension
Selection Pvt Brand
Multi Brand
Protection Licensing
New Brand
Co-Branding

Packaging

The activity of designing and producing the container or wrapper for a product is called
packaging. Packing includes
• Primary Packing: Tube holding toothpaste
• Secondary Packing: Throw away box holding the tube.
• Shipping Packaging: Used for storage, identification and shipping.

Packaging also includes:

• Labeling, printed information, appearing on or within the package, is also part
of packing.
Packing Decision: To be taken during packaging.
Packaging concept: what is should be or what it must do.
• Protect, introduce, spell out, dispensing methods.
• Size, shape, material, color, text, and brand mark.
 • To ensure that the package is consistent with products advertising, pricing and
distribution.
• Must address safety concerns.
• Should be tamper proof and in some cases child proof.
• Must address environment concerns

July 31, 2006

11th Lecture

Actual and potential market size

• Starting point could be total sales level

• But to know the market share. It is important to know the total size of the
market
• Growth over previous m

Market Growth:
• Market Growth
o What will be the market size in the future and not just the current market
growth? For ex if the telephone industry if, would have just seem the
current market growth then today we wouldn’t have reached today.
o If all else remains the same – growth means more sales and profit even
without increasing the market share
o Conversely, growth situation can involve substantial risks because of
importance of correctly assessing growth contexts.
o Successful companies would remain successful if and only if have
potential growth.
o Growth today has no meaning tomorrow. For example Maruti. Earlier had
mind blowing growth rate and market growth. If they wouldn’t have
projected the future market then they would have been wiped off by the
current market competition. Don’t just take into consideration your growth
• Market Growth
o Forecasting growth
 Demographic data:
 Sales of related equipment: you need to know each and every
factors and information about your products and your produce. For
example if you are into Textiles, then you don’t just need to focus
on the ways to increase its sales. You do need to focus on the
quantum of textile imports and exports. In India we see that the
Arvind Mills failed to do so. They didn’t see that the Levis and
other brands were entering into India and were being heavily
imported. Thus today the arvind mills has to face undue
competition with levis. Same is the case with the Titan and HMT.
o Detecting maturity and Decline stage:
  Price pressure caused by overcapacity and lack of product
differentiation.
 Buyers sophistication and knowledge
 Substitute products or technologies : for example the sintex the
manufacturer of plastic tanks. People earlier just used to sell iron
tanks and tanks made of cement. But just as the sintex came out
with plastic tanks it captured the market hugely.
 Saturation
 No growth sources
 Customer disinterest: this was found in the case of colgate. People
didn’t even think of changing its toothpaste. They were least
important on thinking on it. But when close up and other brand
came out with new USP like gel toothpaste and other related
matters, the colgate suffered a stiff competition. They weren’t
prepared for it.

Market Profitability Analysis

1. The intensity of competition among existing competition:

• Intensity of competition among existing competitors depends on several
factors as under-
o The number of competitors, their size and their commitments
o Whether their products offerings and strategies are similar to those
offered by us or other competitors. This can be juxtaposed with the
TATA Motors experience. It found that its other competitors had used
the same technology and strategies. Thus it wasn’t able to make its
product outstanding. TATA motors identified this at early stage and
they went to Germany and did collaboration with German company to
design its engineering and this worked out for TATA motors.
o The existence of high cost
o The size of exit barriers: if the exit barriers are too strong then the
existing companies wouldn’t leave the market easily. This would
either lead to increase in competition as each company would do
something to increase their market share or the competition would
continue as it is.
2. The existence of potential competitors who will enter if profits are high:
• The potential competitors are likely to enter the market under the
following conditions:
o The capital initial required is high- in automobile or tires or mining
large investment are required thereby increasing the risk
o Environment of scale: a firm may find it difficult to achieve economies
of scale in the short run.
o Distribution channel: Gaining distribution channels may be costly also
gaining shelf space fast enough is not easy.
 o Product differentiation: may be difficult to achieve as loyalty, levels of
existing brands could be very high.

3. Substitute Product: Substitute product will attract customers if prices become

high:-
a. They can influence profitability of the market and can become a major threat
or problem
b. Example:
i. Plastic glass, fiber foil products can exert pressure on metals
ii. Electronic alarms are substitute for the security guards
iii. Emails could be a threat to FedEx and UPS and other related couriers.

4. Customer Power: In oligopolistic buying conditions can become extremely

powerful.
5. Suppliers powerful: they can affect your profit hugely

COST STRUCTURE
• In the metal business, transportation cost are very high
• A competitor can locate plants near customer to enjoy significant cost
advantages.

Distribution Systems

An analysis of the distribution system should include three types of questions:-

• What are the alternative distribution channels
o Sometimes establishing a unique distribution channels can give a
sustainable competitive advantage. It can be found in the case of
DELL computers. They have unique distribution channel. And this has
created a challenge for IBM.
• What are the Trends?
o Missing or misinterpreting trends can spell disasters.
o Between 1994, and 1999 there was a shift in mobile technology from
analog to digital
o Motorola missed it and Nokia capitalized on the same.
• Who has the power in the channel and who is driving it?
o

7th August 7, 2006

Risk in High Growth Markets:

Risk in high growth market can manifest itself in the following 3 ways:

1. Competitive Risk:
a. No. of competitors may be greater than the market can support
b. A competitor may enter with superior product or low cost advantage
2. Market changes:
a. Key success factors (KSF) might change and the organization may be
unable to adapt. For example consider the bread industry. Manythings go
into the bread. Consider a situation where the company is able to find self
rising flour. This would eradicate the yeast component and this would hit
the Yeast market badly. For the bread manufacturer the “self rising Flour”
would become a key success factors. Here the Key success factor would
be anything like better service, or manufacturing ingredients for its other
production activity.
b. Technology might change: For example the Mobile has given a bad hit to
Pager. And the broadband internet has affected the landline internet
connections. These would be example for the technology change.
c. Market growth might fail to meet expectations: for example the SIFY the
internet café’s got bad hit in Pune after the broadband became more
popular and the presence of WI-FI in the market.
d. Price instability may result due to over capacity. Example if new model of
laptop has been launched with better technology, then the shopkeeper may
have to sell the older models at a discount.
3. Firm limitations:
a. Resource might be inadequate to maintain a high growth rate.
b. Adequate distribution may not be available.
 CUSTOMER ANALYSIS

Scope of customer analysis:

Three ways to analyze the customer:

1. Customer segmentation
2. Customer motivation
3. Unmet Needs of a customer.

• Customer Segmentation:
o Who are the biggest customers?
o The most profitable?
o Who are the most potential customers among the whole crowd?
o Can we segment the customers according to
 Needs, characteristics or buying behavior

Customer Segmentation
• How could market be segment based on different business strategies:-
• Benefits sought: dessert eaters – calorie conscious
• Usage level – concert – season tickets, occasional, non users.
• Application – nylon – can be used for ropes, hosiery, tires, fishing.
• Organization type: Pc needs of restaurants, manufacturing, firms, banks.
• Geographic location
• Customer loyalty: those loyal to Heinz ketchup versus price buyers
• User types: soft drink by households versus hotels who buy in bulk.
• Price sensitive: Maruti buyer versus Mercedes Benz buyer

Customer Motivation:
• What element of the product / services does customer value most?
• What are the customers objectives
• What are they really buying
• How do segments differ in their motivation priorities
• What changes are occurring in customer motivation? In customer priorities?
Customer’s Unmet Needs:
• Why some customers remain dissatisfied? Why are some them switching
brands or suppliers?
• What are the severity and incidence of consumer problem?
• What are unmet needs that customers can identify? Are there some of which
consumers are unaware?
• Do these unmet needs represent leverage points for competitors?
Loyalty Matrix: Priorities
Switchers Fence sitters Loyal
Customer Medium High Highest
Priority Priority Priority
Non customer Low to medium High Low
priority Priority Priority

Customer Motivation analysis

• This section deals with the answer to the question of what lies behind the
customer’s purchase decisions.
• There are 6 categories of customers who can be analysed – to reach strategic
decision.

Customer Motivations:
1. New shoppers: Needs
a. A simple interface
b. Lot of hand holding and reassurance
2. Reluctant shoppers: Needs
a. Information
b. Reassurance
c. Access to live customer support
3. Frugal Shoppers: Need to be convinced.
a. They need to be convinced that the Price is Good
b. And do convince them that they don’t need to search for the same further.
4. Strategic shoppers: Need access to
a. Opinion leaders/experts: The sellers give endorsement by some experts
like colgate endorses by the doctors.
b. Choices
5. Enthusiastic shoppers: They need
a. Community as a tool to share their experience.
b. Lots of information from the experts
c. Superior customer service.
d.
August 9, 2006

Customer Motivation analysis

Steps:
1. Identify Motivation
2. Group motivation
3. Assess motivation importance
4. Assign strategic roles to motivation

Other analytical tools

• Qualitative research,
• Changing customer priorities ,
• Customer as active partner,
 o Encourage active dialogue,
o Mobilize customer communities,
o Manage customer diversity,
o Co-operative personalised product example – Dell,
• Identify unmet needs.

New topic: Competitor Analysis

Few Quotes:

• Induce your competitors NOT to invest in those product market and services
where you expect to invest the most …… that is the fundamental rule of
strategy - by, Bruce Henderson, Founder of BCG.
• There is nothing more exhilarating than to be at without result – Winston
Churchill.
• The best way to learn a sport is to watch and imitate a champion – Jean-
Claude Killy. He is a Skier.

Key questions to be addressed:-

1. Who are the competitors?
a. We need to address this question most importantly. Against whom do we
usually compete? Who are our most intense competitors? Makers of
substitute product?
b. Can these competitors be put in strategic groups on the basis of their
assets, competencies and/or strategies?
c. Who are the potential competitive entrants? What are their barriers to
entry so that we can block the competition? Is there any thing that can be
done to discourage them?
d. Example HLL has forgot to answer these question and this is the reason
why the GHADI its compeititor is sweeping away his market. It has
already captured mid of india, western and eastern India and now moving
towards south.
2. Evaluating the competitors:
a. What are their objectives and strategies? Their level of commitment?
Their entry barriers?
b. What is their cost structure? Do they have a cost advantage or
disadvantage? What are they doing to put down their cost? Lafarge an
cement producing MNC has entered into india. It is slowly entering into
india. It has designed its organization in such a way that it has cost
advantage.
c. What is their image and positioning strategy?
d. Which are the most successful/unsuccessful competitors overtime? Why?
e. What are the strength and weakness of each competitors?
f. What leverage points (our strategic weakness or unmet needs or customer
problem) could exploit? For example Wipro initially didn’t realize the
emerging competition with Infosys. It forgot to address the needs of the
 banking industry and this is wehre the infosys took over the wipro. This
made the competition enter in and made it difficult to manage.
g. Evaluate the competitors with respect to their assets and competencies.
Generate a competitor strength grid.

Competitor Analysis

Size, growth, and Image and

positioning Objectives and
profitability. commitments

Competitors Current and past

Strength & weakness
Actions strategies

Exit barriers
Cost structure Organization culture

Understanding Competitors
1. Size, Growth, and Profitability:-
a. Source – Published turnover figure
b. A non profitable company can not have access to capital-externally or
internally
2. Image and Positioning strategy:
a. Useful to understand competitors profile in terms of their positioning
strategy.
b. What are the association – they use? For example – what heart attack
prevention the “Aspirin” can do or like what saffola has done with Heart
protection as their association.
3. Current and Past strategies of competitors
a. Examine their past failures in strategies. Same is not likely to be tried
again. If they have failed in certain region, they wont try to enter into that
region again.
b. What is their strategy dependence on Product Line breadth, product
quality, service distribution, service, distribution, or brand identification
c. Incase of a low cost strategy – is it based on economies of scale,
manufacturing facilities or access to raw material.
4. Competitor organization and culture:
 a. Are managers drawn from marketing, manufacturing or engineering? Few
companies practices to change their managers in their departments so that
they have overall knowledge and the firm is no just driven by one
perspective say like if the manager is from finance stream then the
decision would be more related to finance.
b. Are the largely from another industry or company?
c. A tightly controlled organization would be less aggressive in using
marketing oriented strategies and vice versa for flat organization which
can be more innovative and marketing oriented.
5. Cost Structures:
a. Direct labour cost: in some companies they never keep labours on rolls.
This make them so flexible that they can remove employees if they don’t
need. They pay them so high that they come back to company as and when
the companies require them. This makes the organization to remove labour
is they are not required.
b. Relative cost of raw material and purchase components
c. Investing in inventories and plant and machinery
d. Sales level
e. Number of plants and locations
6. Exit barriers:
a. Specialized assets – plant, equipment etc
b. Fixed cost: labour agreements, maintain parts for existing equipment
c. Relationship to other business – firm’s image shared facilities, distribution
channels or sales force.
d. Government and social barriers: long terms government incentives linked
to a time period of existence / public service obligation
e. Managerial pride or emotional attachment to a business or employees –
affecting economic decisions. This causes inflexibility in an organization.
7. Assessing strengths and weakness of competitors: Checklist of strength and
weakness
a. Innovation:
i. Technical, product or service superiority
ii. New product capability
iii. R&D
iv. Technologies
v. Patents: in certain businesses its essential to acquire patents. For
instance in pharmaceutical companies its essential to acquire
patents or else the competitor would produce the same product and
thus all your R&D would go in vain.
b. Manufacturing
i. Cost structure
ii. Flexible production operation
iii. Equipment
iv. Access to raw material
v. Vertical integration: when you become supplier to your own
customer
 vi. Workforce attitude and motivation
vii. Capacity

c. Finance – access to capital

i. Form operation
ii. Net short-term assets
iii. Ability to use debt and equity financing
iv. Parent’s willingness to finance.
d. Management –
i. Quality of top and middle management,
ii. Knowledge of business,
iii. Culture,
iv. Strategic goals of plans,
v. Entrepreneurial thrust,
vi. Planning / operating system,
vii. Loyalty – employee turnover…
viii. Quality of strategic decision making.
e. Marketing –
i. Product quality reputation
ii. Product differentiation
iii. Brand name recognition: because of proper brand handling
iv. Product line breath
v. Customer orientation
vi. Segmentation / focus
vii. Distribution
viii. Retailer relationship
ix. Advertising / promotion skills
x. Quality of sales force
xi. Customer service and product support
f. Customer Base – it can do magic for you
i. Size and loyalty: it provides a leverage to you, that is why levis
goes to Shoper’s stop to sell their goods.
ii. Market share: it gives economies to scale. It gives long term profit.
iii. Growth of segment served: is the segment in which we are, is
growing or not. today

14th August 14, 2006

Sustainable Competitive advantage:

Following are few quotes-

• Vision is the art of seeing things invisible – Jonathan swift
• Few other quotes of Chinese writers.

Developing SCA (Sustainable Competitive Advantage)

• SCA is the key to successful strategy
 • A strategy can involve a variety of functional area of strategies
• Pricing strategies
• Distribution strategies
• Global strategies
• Infinite way of competing exists

SCA is the key to successful strategy –

Following 4 factors need to be considered in developing a SCA-
1. The way you compete
2. Basis of competition
3. Where you compete?
4. Whom you compete against?

The way you compete:

Product strategy
Positioning strategy
Manufacturing strategy
Distribution strategy etc.

SCA
Basis of competition
* Assets and competencies

Where you compete

* Product – market selection

Whom are you compete against:

Competitors selection

The way you compete:

• Product Strategy:
• Positioning Strategy:
• Manufacturing Strategy:
• Distribution strategy: like Dell or IBM etc.

The basis for Competition:

• The strategy needs to be based on a set of assets and competencies.
• Without the above SCA will not be enduring
 • Examples:
a. Quality cannot be pursued without design and manufacturing
competencies.
b. Premium service positioning cannot be pursued without the right people
and culture.
Where you compete:
• The target product market.
• Examples:
a. P&G potato chips had a host of assets:-
b. Consistent product shelf life, a crush proof container and national
distribution
c. Problem was that these attributes were not highly valued by its target
market which was concerned mainly with taste…
d. It took several years for Pringles to penetrate the market, till it improved
both the actual and perceived taste!!!
Whom you compete against:
• Sometimes an asset or competency will form an SCA only gives the right set of
competitors
• It’s a vital to assess wether a competitor is
a. Weakness, adequate or strong with respect to assets and competencies…
• Examples:
a. If Flight safety is important to airline passengers and if a competitor like
an economy airline is perceived to be a weak in safety then SCA would
indeed exit.

Additional Characteristics of SCA’s

• Substantial: should be enough to make a difference.
a. Example: only creating a marginally superior quality of carpeting may not
be valued adequately by the market
• Sustainable:
a. Example : As PC’s are becoming more of commodities, any SCA based
on the technology difference can be very weak and non sustainable
• Leverage: Difference should be communicable and the cause should believable