Part 1 Marketing strategy and management Chapter 3

Part 1: Marketing strategy and management Chapter 3: Identifying marketing opportunities Step 1: Analyse the current market environment ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 1

When we finish this lecture you should • • Understand the sorts of company objectives that are useful for a company’s marketing strategy Recognise that a company’s resources affect its search for opportunities Know the effect of competitive pressures on strategy planning Understand why a competitive advantage is key to capitalising on marketing opportunities Understand how the economic, technological, social and cultural, and political and legal environments influence strategy planning Know about the different types of international and domestic marketing opportunities to pursue Understand how to screen and evaluate marketing strategy opportunities Know the logic behind planning grids or matrices ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 2

Forces that shape the marketing Environment • Direct marketing environment Customers – The company – Competitors – • External market environment Economic – Technological – Political and legal – Cultural and social – ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 3

Company objectives • Mission statement – Sets out the organisation’s basic purpose for being • Three generic objectives Engage in activities that perform a socially and economically useful function – Develop an organisation to carry out the functions of the business and implement its strategies – Earn sufficient profit to survive – ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 4

Figure 3. 1 A hierarchy of objectives ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 5

Examples of company resources • Financial strength (BHP Billiton) • Production capability and flexibility (Fisher and Paykel) • Marketing strengths – – – Patents (Sarich) Channel relationships (Nestle, Westpac) Distribution dominance (Coca-Cola) Skilled sales force; low-cost Internet Web site Technical capability (Du Pont) Loyal customer base (Kraft) ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 6

The competitive environment • Pure competition • Oligopoly • Monopolistic competition ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 7

Figure 3. 2 The five competitive forces Threats of new entrants ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 8

Competitive advantage • The company has a marketing mix that the target market sees as better than a competitor's mix • The company is required to understand current competitors' offerings – anticipate competitors' likely plans – monitor effects of changes in competition – ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 9

Figure 3. 3 A framework for competitor analysis— disposable nappies in Japan ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 10

Economic environment • Affects the way in which companies (or the whole • • • economy) use resources Affected by the interaction of the macroeconomic system Changes rapidly Marketing strategy may fail if a country suffers a rapid or extended business decline Changes in economy are often accompanied by changes in interest rates Economies of the world are interconnected ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 11

Technological environment • Technology—the application of science to convert • • economic resources to output Robotics (better quality control, lower production costs) Computer scanners at retail check-out counters Automated inventory control Worldwide satellite communications of data Personal computers Fax machines for communication Email for communication Internet and the World Wide Web ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 12

Examples of changes in the political and legal environments • Ban on liquor or cigarette sponsorship • Control of advertising by the Trade Practices • • • Commission (Australia) or Commerce Commission (NZ) Unsafe or defective goods are the liability of the manufacturer Deregulation of the broadcasting industry Deregulation of the airline industry Deregulation of government services to allow competition Native title and land claims legislation ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 13

Figure 3. 4 Main features of the Trade Practices Act (Australia) and the Commerce Act and Fair Trading Act (New Zealand) ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 14

Cultural and social environments • Affect how people live and why they behave as they do • Affect buying behaviour • Variables – – – – Languages people speak Types of education Religious beliefs Types of food Styles of clothing Housing they choose View of marriage and family ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 15

Social and cultural trends • Increasing multiculturalism • Changing role of women More women in the workforce (66 %) – Women delaying marriage and having fewer children – • • ‘Ageing’ of the population More single-person households More convenience-oriented More health consciousness – Food products with reduced fats and added fibre • More concern about the environment ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 16

Attractive opportunities • Marketing strategy planning—finding attractive opportunities and developing profitable marketing strategies • Breakthrough opportunities—enable innovators to develop marketing strategies that are difficult to imitate and are more likely to be profitable for a long period of time • Competitive advantage—exists when the marketing mix of a company is perceived by the target market as superior to that of the company’s competitors ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 17

Figure 3. 5 Four basic types of opportunities Present New ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 18

Types of opportunities • Marketing penetration—Visa sponsored the Sydney 2000 Olympic Games and re-focused its advertising on encouraging current customers to use their card more often, to increase their chance of winning tickets to the Games • Market development—Mc. Donald’s reached new customers by opening outlets in airports, office buildings and zoos ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 19

Types of opportunities (continued) • Product development—Microsoft boosted sales by introducing new versions of programs and also new products • Diversification—Sony expanded into the production of recorded music and motion pictures; Sony announced expansion into corporate Internet ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 20

Evaluating opportunities • Growth strategies are necessary but they can carry different risks Diversification is most risky – Market penetration is the most usual strategy – Market development and international growth are profitable ways of taking advantage of current strengths – Trends in environment may make an opportunity more, or less, attractive – ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 21

Evaluating opportunities (continued) • SWOT is a useful aid for identifying and listing a company’s strengths, weaknesses, opportunities and threats • International trade is increasing; a low-cost foreign producer may enter the home market ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 22

Figure 3. 6 An example of product-market screening criteria for a small retail and wholesale distributor ($5 million annual sales) ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 23

Figure 3. 7 Expected sales and cost curves of two strategies over five-year planning periods ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 24

Figure 3. 8 Continuum of environmental sensitivity ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 25

Figure 3. 9 General Electric’s strategic planning grid ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 26

Figure 3. 10 The Boston Consulting Group (BCG) matrix ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 27

What we will be doing in the next chapter • In Chapter 4 we will discuss how information can be obtained to facilitate the planning and implementation of successful marketing strategies ﴀ Copyright 2004 Mc. Graw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, Mc. Guiggan, Perreault and Mc. Carthy 3– 28