Bài giảng Principles of marketing - Chapter 3. Strategic and Marketing Planning

TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 1 1 Nguyễn Minh ðức 2009 PRINCIPLES OF MARKETING Chapter 3. Strategic and Marketing Planning Dr. NGUYỄN MINH ðỨC NONG LAM UNIVERSITY HCM CITY 2 Nguyễn Minh ðức 2009 The Marketing Mix TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 2 3 Nguyễn Minh ðức 2009 The Marketing Mix
The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives
7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment
Traditional 4Ps extended to encompass growth of service industry 4 Nguyễn Minh ðức 2009 Price TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 3 5 Nguyễn Minh ðức 2009 Price
Pricing Strategy
Importance of:  knowing the market  elasticity  keeping an eye on rivals Image copyright: www.freeimages.co.uk 6 Nguyễn Minh ðức 2009 Product TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 4 7 Nguyễn Minh ðức 2009 Product
Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g.  Extension strategies  Specialised versions  New editions  Improvements – real or otherwise!  Changed packaging  Technology, etc. Image copyright: www.freeimages.co.uk 8 Nguyễn Minh ðức 2009 Promotion TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 5 9 Nguyễn Minh ðức 2009 Promotion
Strategies to make the consumer aware of the existence of a product or service
NOT just advertising 10 Nguyễn Minh ðức 2009 Place TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 6 11 Nguyễn Minh ðức 2009 Place
The means by which products and services get from producer to consumer and where they can be accessed by the consumer  The more places to buy the product and the easier it is made to buy it, the better for the business (and the consumer?) 12 Nguyễn Minh ðức 2009 People TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 7 13 Nguyễn Minh ðức 2009 People
People represent the business  The image they present can be important  First contact often human – what is the lasting image they provide to the customer?  Extent of training and knowledge of the product/service concerned  Mission statement – how relevant?  Do staff represent the desired culture of the business? 14 Nguyễn Minh ðức 2009 Process TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 8 15 Nguyễn Minh ðức 2009 Process
How do people consume services?
What processes do they have to go through to acquire the services?
Where do they find the availability of the service?  Contact  Reminders  Registration  Subscription  Form filling  Degree of technology 16 Nguyễn Minh ðức 2009 The Marketing Mix
Blend of the mix depends upon:
Marketing objectives
Type of product
Target market
Market structure
Rivals’ behaviour
Global issues – culture/religion, etc.
Marketing position
Product portfolio  Product lifecycle  Boston Matrix TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 9 17 Nguyễn Minh ðức 2009 The Boston Consulting Group Matrix (BCG Matrix) (The Product Market Portfolio)
Introduction
Whilst there are companies that produce a single product or service, most organizations are multi- product or consider diversification into other products.
Within a multi-divisional company, there may be some products at Introduction, some at the Growth stage, and others in Maturity and Decline stage.
Each of these may be in different markets, and different countries. 18 Nguyễn Minh ðức 2009 The BCG Matrix
This is a complex planning process, and The Product Market Portfolio, developed by the Boston Consulting Group (1972), is a technique developed to try and handle it.
The Product Market Portfolio is a useful tool for strategic planning, in that it allows the planners to select the optimal strategy for individual units whilst aiming for overall corporate objectives.
As a first step, the technique requires an assessment of each product of an organization in isolation from other products. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 10 19 Nguyễn Minh ðức 2009 The Boston Consulting Group (BCG) Market Growth Market Share High Low High Low STARS QUESTION MARKS CASH COWS DOGS 20 Nguyễn Minh ðức 2009 The BCG Matrix
The Boston Consulting Group (BCG) developed a matrix based on empirical research that assesses a company’s products in terms of Potential Cash Generation and Cash Expenditure requirements.
Products or Strategic Business Units (SBUs) are categorized in terms of:
A) Market Growth Rate and
B) Relative Market Share TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 11 21 Nguyễn Minh ðức 2009 The BCG Matrix
The characteristics of the product depend where it is located in the matrix.
Divisions located in:
-Quadrant I of the BCG Matrix are called Question Marks or Problem Child
-Quadrant II are called Stars
-Quadrant III are called Cash Cows
-Quadrant IV are called Dogs 22 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant I: Question Marks (Problem Child)
Divisions in Quadrant I, have a low relative market share position, yet compete in a high growth industry.
Generation, these firms’ cash needs are high and their cash generation is low.
I.e substantial net cash input is required to maintain or increase market share.
These businesses are called Question Marks because the organization must decide whether to strengthen them by:
-pursuing an Intensive Strategy (e.g Market Penetration, Market Development, or Product Development) or
-to sell them. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 12 23 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant I: Question Marks (Problem Child)
I.e Do the products justify considerable capital expenditure in the hope of increasing their market share, or
Should they be allowed to die quietly as they are squeezed out of the expanding market by rival products?
Conclusion:
The planner is faced with 3 choices:
1. Do nothing – but cash continues to be absorbed
2. Invest to gain market share
3. Sell off 24 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant II: Stars
A Star product has a high relative market share in a high growth market.
This type of product may be in a later stage of its product life cycle.
It represent the organization’s best long-run opportunities for growth and profitability.
Divisions with a high relative market share and a high industry growth rate should receive substantial investment to maintain or strength their dominant positions. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 13 25 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant II: Stars
A Star may be only cash neutral despite its strong position, as large amounts of cash may need to be spent to defend an organization’s position against competitors, as competitors will be attracted to the market by the high growth rates.
Failure to support a Star sufficiently strongly, may lead to the product losing its leading market share position, slipping eastwards in the matrix, and becoming a Problem Child. 26 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant II: Stars
A Star, however, represents the best future prospects for an organization.
As the growth rate for a Star slows, it will drop vertically in the matrix into the Cash Cow quadrant and its cash characteristics will change.
Conclusion: Stars
In the short term, these require capital expenditure in excess of the cash they generate, in order to maintain their market position, but promise high returns in the future. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 14 27 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant III: Cash Cows
This type of product has a high relative market share in a low growth market and should be generating substantial cash inflows.
I.e called Cash Cows because they generate cash in excess of their needs, they are often “milked”.
The period of high growth in the market has ended (I.e the product life cycle is in the maturity or decline stage), and consequently the market is less attractive to new entrants and existing competitors. 28 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant III: Cash Cows
Cash Cow products tend to generate cash in excess of what is needed to sustain their market positions.
I.e In the short term, these require capital expenditure in excess of the cash they generate, in order to maintain their market position, but promise high returns in the future. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 15 29 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant IV:Dogs
The Dog product has a low relative market share in a low growth market.
Such a product tends to have a negative cash flow, which is likely to continue.
It is unlikely that a dog can wrest market share from competitors.
In the view of the Boston Consulting Group (BCG), a Dog product is essentially worthless and should be liquidated. 30 Nguyễn Minh ðức 2009 The BCG Matrix
Quadrant IV:Dogs
Although Dog will show only a modest net cash outflow, or even a modest net cash inflow, they are cash traps which tied up funds and provide a poor return on investment.
However, they may have a useful role, either to complete a product range or to keep competitors out.
=>Each organization will determine the product- market position for all of its products (I.e its portfolio) and determine a strategy on the future direction of the portfolio. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 16 31 Nguyễn Minh ðức 2009 The BCG Matrix
Strategic Management of the Market Portfolio:
The strategies for the overall portfolio are concerned with balance. Strategies would be to have:
1) Cash Cows of sufficient size, and number that can support other products in the portfolio.
2) Stars of sufficient size, and number which will provide sufficient cash generation when current Cash Cows can no longer do so.
3) Problem Children that have reasonable prospects of becoming future Stars.
4. No Dogs, and if they are any, there would need to be good reasons for retaining them. 32 Nguyễn Minh ðức 2009 Product/Market Expansion Grid
Ansoff’s Product-Market Grwoth Vector
(The Product Market Scope Matrix (Ansoff’s Matrix)
Is a useful aid to delineate the range of strategic marketing options particularly by companies with growth objective.
This deceptively simple framework is based on a matrix comparised of “Markets” on the vertical axis and “Products” on the horizontal axis each cell of the matrix so formed represents a different strategic alternative for achieving growth.
The matrix and each alternative is shown in Figure on next slide. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 17 33 Nguyễn Minh ðức 2009 Ansoff’s Product-Market Growth Vector (The Product Market Scope Matrix/Ansoff’s Matrix) PRODUCT MARKET Present New Present 1. Market Penetration 3. Product Development New 2. Market Development 4. Diversification 34 Nguyễn Minh ðức 2009 Product/Market Expansion Grid
1. Market Penetration
This is a strategy by which a company seeks to increase the sales of its present products in its existing markets.
I.e This strategy is based on expanding sales from existing products in existing markets.
A Market Penetration strategy can only be achieved by increasing the market share at the expense of competitors.
Clearly, such a strategy will required aggressive marketing backed by, for example: heavy price discount, promotional activity and so on. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 18 35 Nguyễn Minh ðức 2009 Product/Market Expansion Grid
1. Market Penetration
Kotler suggests that Market Penetration involves aggressive marketing effort, and proposes 3 main ways a company can penetrate a market:
i) The company can try to stimulate customers to increase their current rate of usage. Strategies might include:
-Increasing unit of customer purchase.
-Speeding up the rate of product improvement or obsolescence
-Suggesting new uses for the product.
-Offering customers price incentives for increased use. 36 Nguyễn Minh ðức 2009 Product/Market Expansion Grid
1. Market Penetration
ii) The company can increase its efforts to attract non-users by using promotional incentives, advertising, pricing up or down, etc.
iii) The company can increase its efforts to swing competitors’ by brand differentiation, and stepping up promotion, etc. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 19 37 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 1. Market Penetration Conclusion: In Market Penetration, the firm seeks to do 4 things: a) Maintain or to increase its share of current markets with current products, e.g through competitive pricing, advertising, sales promotion. b) Secure dominance of growth markets. c) Restructure a mature market by driving out competitors. d) Increase usage by existing customers (e.g loyalty cards) 38 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 2. Market Development
Market Development strategy has the aim of increasing sales by repositioning present products to new markets.
This strategy is also referred to as “Market Creation”.
This strategy is based on expansion by entering new markets but with existing product. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 20 39 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 2. Market Development There are many possible approaches. Here are some examples: a) New geographical areas and export markets through regional, national or international expansion. (e.g a radio station building a new transmitter to reach a new audience). b) New distribution channels to attract new customers (e.g organic food sold in supermarkets not just specialist shops). 40 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 2. Market Development c) Different package sizes for food and other domestic items so that both those who buy in bulk and those who buy in small quantities are catered for. d) Differential pricing policies to attract different types of customer and create new market segments. For example, travel companies have developed a market for cheap long-stay winter breaks in warmer countries for retired couples. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 21 41 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development
This strategy has the aim of a company increasing sales by developing products for its existing market.
This entails developing and launching new products for sale in existing markets.
This may require the development of new competences, such as products with additional features, different packaging, different quality levels. 42 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development
At the other extreme, this strategy may be based on entirely new product for the market.
In short, new product development is a generic term that encompasses: -the development of innovative new products and -the modification and improvement of existing products. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 22 43 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development Therefore, Product Development strategy of the company could: a) Develop new product features through attempting to adapt, modify, magnify, minify, substitute, rearrange, reverse or combine existing features. b) Create different quality versions of the product. c) Develop additional models and sizes. 44 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development A company might show a preference for Product Development strategy for the following reasons: a) It holds a high relative share of the market, has a strong brand presence and enjoys distinctive competitive advantages in the market. b) There is growth potential in the market. c) The changing needs of its customers demand new products. Continuous product innovation is often the only way to prevent product obsolescence. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 23 45 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development d) It needs to react to technological developments. e) The company is particularly strong in R & D. f) The company has a strong organization structure based on product divisions. g) For offensive or defensive motives, for example responding to competitive innovations in the market. 46 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development Drawbacks of Product Development: For example: -the process of creating a broad product line is expensive and potentially unprofitable, and -it carries considerable investment risk. TS Nguyễn Minh ðức Lưu ý: Chỉ sử dụng nội bộ cho sinh viên KTS, ðH Nông Lâm TPHCM, nghiêm cấm sao chép, upload, phổ biến ở tất cả các hình thức 24 47 Nguyễn Minh ðức 2009 Product/Market Expansion Grid 3. Product Development Drawbacks of Product Development: There are reasons why new product development is becoming increasingly difficult to achieve: a) In some industries there is a shortage of new product ideas. b) Even when a product is successful it might still suffer a short life cycle with rivals