Marketing (561)

8/3/2019 Marketing (561)

1/59

Question # 1Internal Databases Always Give Information About

Opportunities And Problems Help To Plan MarketingPrograms And Evaluate Performance, Being A MarketingManager Of Any Fast Moving Consuming Goods (FMCG),

What Information Would You Like To Have In Your InternalDatabase? How This Information Would Be Used?

The Company Analyses the Following Database and apply The ProblemSolving / Decision Making Approach / Finalizes the Plan.

1. External AssessmentAreas for opportunities and threats

* Markets [what is the market situation, which is forcing the change

requirements*Customers [how can service the customer -internal / external -better .* Industry [is the industry trend]* Competition [is it the competitive situation*Factors of business [causing the change]* Technology [is it technology change]

2. Internal AssessmentAreas for strengths, weaknesses, and barriers to success

ORGANIZATION DIMENSIONS

*Culture [is the working culture change]* Organization [is the organization demanding change]* Systems [is it the systems change]* Management practices [change in managemement process]

OTHER KEY DIMENSIONS*Cost-efficiency [is it for cost efficiency]* Financial performance [is it for financial performance improvement]* Quality [is it for quality performance improvement*Service [is it for service performance improvement*Technology [is it for technology performance improvement

* Market segments [is it for sales performance improvement* Innovation [is it for performance improvement*new products [is it for new product performance improvement*Asset condition [is it for financial performance improvement*productivity [is it for financial performance improvement

3. Source Strategic objectives and programsThe critical issues that must be addressed if the organization

8/3/2019 Marketing (561)

2/59

Is to succeed

StrengthsWeaknessesOpportunities

Threat

PRIORITY ISSUEFROM THE ABOVE , DETERMINE THE CORE ISSUES WHICH NEEDSTO SOLVED WITH YOUR INVESTMENT.

STRATEGIC PROGRAMSFROM THE ABOVE CORE ISSUES, DETERMINE YOURSTRATEGICPROGRAMS.

MISSION STATEMENT

VISION STATEMENTYoure CORE PURPOSEYoure CORE OBJECTIVESYour Core markets;Your CORE strategic thrusts.

NOW THE QUESTION IS -BASED ON THE ABOVE WHAT ARE THESTRATEGIES NEEDED.

1. Basic question: How is organizational direction determined?Every organization takes on some direction, in terms of what

customers/clients it serves and what functions it performs for thesecustomers. This direction is often called its purpose, Mission or realizedstrategy. An organization's mission is a set of statements that definethe exchange relationship between the organization and itsstakeholders or claimants. More specifically a mission defines thepopulation served and the function it fulfills or the need it satisfies forthat claimant. This direction, or mission, may be the result of adeliberate planning process or it may emerge as the result of a set ofincremental decisions.

THIS ORGANIZATION Realized Strategies are the result of

combinations of Purely Deliberate and Purely Emergent Strategies.

1. THIS ORGANIZATIONS Deliberate Strategy-This process starts with an analysis of a company's current missionand strategies. The most popular tool used in this process is the SWOT(Strengths, weaknesses, opportunities, threats) model. The externalenvironment in terms of opportunities and threats, is analyzed byexamining threats to the company's current position and new

8/3/2019 Marketing (561)

3/59

opportunities (new customers, new applications, unfulfilled customersneeds, etc.). The analysis proceeds by examining the company'sinternal environment in terms of its strengths and weakness. A missionand competitive strategy is formulated that matches opportunitieswith strengths and plans are made to strengthen areas of weakness.

The next step is to develop functional strategies that support theoverall business level competitive strategy. Marketing, HumanResource, Financial, Operations, Information Systems, and R & Dstrategies are developed that support the business unit strategy.Finally, a control system (organizational structure) is designed toinsure that operational decisions are made consistent with thebusiness and functional strategies.

2. THIS ORGANIZATIONS Emergent Strategy- Emergent Strategies are the result of incremental decision making

that achieve some degree of consistency over time and launch theorganization into a direction. When decisions are made or problemsare solved, they have potential strategic impact.

Levels of Strategy

1. Mission/Domain- Before identification of strategy can occur, onemust clearly identify the mission or domain of the organization. Thedomain of an organization consists of the population it serves and thefunctions it performs (satisfies) for that population. Sometimes thedomain is defined in terms of products or services offered (rather than

functions performed), but this tends to be more limiting because itdefines the mission more in terms of means rather than ends.

2. Corporate Level Strategy.1. Vertical Integration STRATEGY

Forward Integration- Gaining ownership or control overdistributors.[TAKE OVER DISTRIBUTORS IN UNREPRESENTED AREAS.

2. Horizontal Integration STRATETGY- Seeking ownership or control over competitors

[BOUGHT OVER ONE SMALL /BUT DYNAMIC COMPETITORS]

3. Market Penetration STRATEGY- Seeking increased market share for present products through greatermarketing efforts

4. Market Development STRATEGY- Introducing present products in new markets

8/3/2019 Marketing (561)

4/59

5. Product Development STRATEGY- Seeking increased sales by improving present products

6. Diversification STRATEGY

1. Concentric- Adding new or related product lines2. Conglomerate- Adding new, but unrelated product lines3. Competitive or Business Level Strategy- How should we compete in our chosen business (as)? Competitivestrategies involve determining the basis of costumer or client decisionmaking. Generally, they are based on some combination of quality,service, cost, time, and quality of the experience.

1. Cost Leadership Strategies- With this strategy you are competing on price. Your variousfunctional strategies all emphasize cost reduction. This is an effective

strategy when the market is comprised of many price sensitive buyers,when there are few ways to achieve product differentiation, whenbuyers do not care much about differences from brand to brand, orwhen there are a large number of buyers with significant bargainingpower.

2. Differentiation Strategies- Differentiation strategies rely on some basis of product differentiationsuch as flexibility, specific features, service, time and availability, lowmaintenance, etc. as the basis for competition. Product developmentand market research are generally necessary components of a

differentiation strategy. Generally, a successful differentiation strategyallows a firm to charge a higher price for its product. Organizationsgenerally need strong R & D departments with strong coordinationbetween R & D and marketing departments. Human Resourcestrategies must place emphasis maintaining a competitive skill baseand motivating employees toward the basis for differentiation.

3. Focus or Niche Strategies- A successful focus strategy depends upon an industry segment thatis of sufficient size, has good growth potential, and it not crucial to thesuccess of other major competitors. Focus strategies are pursued in

limited markets in conjunction with cost leadership and/ordifferentiation strategies. Focus strategies are the most effective whenconsumers have distinctive preferences or requirements and whenrival firs are not attempting to specialize in the same target segment.

4. Functional Strategies

8/3/2019 Marketing (561)

5/59

- How do organizational functional units contribute to the businesslevel strategies? How can functional strategies be integrated toachieve competitive advantage?

1. Marketing Strategies- How do we communicate our

strengths to the customer? How do we identify customer requirementsand changes in customer requirements?

2. Human Resource Strategies- How do we recruit, train,develop, motivate, compensate, and place employees so that behavioris directed toward the competitive strategy and works to buildcompetitive advantage?

3. Financial Strategies- How do we secure financialresources necessary to carry our competitive strategy?

4. Operations Strategies- How do we design our processesto produce products and/or service that meet customer requirementsas specified in our strategy?

5. Information System Strategies- How do we providedecision makers, at all levels, with information necessary to makedecisions consistent with strategy?

6. Technological (R & D) Strategies- How do we developproducts consistent with customer requirements as specified in

strategy?

Strategic control links the internal business environment and theexternal environment. Give example in support of your of answer.

Three fundamental perspectives-strategic controls, continuousimprovement, and the balanced scoreboard-provide the basis fordesigning strategy control systems. Strategic controls are intended tosteer the company toward its long-term strategic goals.

- Premise controls,

-implementation controls,-strategic surveillance, and-special alert controls are types of strategic control.

All four types are designed to meet top management's needs to trackthe strategy as it is being implemented, to detect underlying problems,and to make necessary adjustments. These strategic controls arelinked to the environmental assumptions and the key operating

8/3/2019 Marketing (561)

6/59

requirements necessary for successful strategy implementation. Ever-present forces of change fuel the need for and focus of strategiccontrol.Operational control systems require systematic evaluation ofperformance against predetermined standards or targets. A critical

concern here is identification and evaluation of performancedeviations, with careful attention paid to determining the underlyingreasons for and strategic implications of observed deviations beforemanagement reacts. Some firms use trigger points and contingencyplans in this process.The "quality imperative" of the last 20 years has redefined globalcompetitiveness to include reshaping the way many businessesapproach strategic and operational control. What has emerged is acommitment to continuous improvement in which personnel across alllevels in an organization define customer value, identify ways everyprocess within the business influences customer value, and seek

continuously to enhance the quality, efficiency, and responsivenesswith which the processes, products, and services are created andsupplied. This includes attending to internal as well as externalcustomers. The "balanced scorecard" is a control system thatintegrates strategic goals, operating outcomes, customer satisfaction,and continuous improvement into an ongoing strategic managementsystem.THE FOLLOWING CONTROLS- Premise controls,-implementation controls,

TO TRACK /MONITOR/ ACTION PLANNING BUSINESS INTERNALS.

HOW THE COMPANY MAXIMIZES THE STRENGTHS AS PART OFBUSINESS STRATEGY

Criteria examplesAdvantages of proposition?Capabilities?Competitive advantages?USP's (unique selling points)?Resources, Assets, People?

Experience, knowledge, data?Financial reserves, likely returns?Marketing - reach, distribution, awareness?Innovative aspects?Location and geographical?Price, value, quality?Accreditations, qualifications, certifications?Processes, systems, IT, communications?

8/3/2019 Marketing (561)

7/59

Cultural, attitudinal, behavioral?Management cover, succession?Philosophy and values?

HOW THE COMPANY OVERCOMES THE WEAKNESSES AS PART

OF

BUSINESS STRATEGYCriteria examplesDisadvantages of proposition?Gaps in capabilities?Lack of competitive strength?Reputation, presence and reach?Financials?Own known vulnerabilities?Timescales, deadlines and pressures?

Cash flow, start-up cash-drain?Continuity, supply chain robustness?Effects on core activities, distraction?Reliability of data, plan predictability?Morale, commitment, leadership?Accreditations, etc?Processes and systems, etc?Management cover, succession

HOW THE COMPANY TAKES ADVANTAGE OF THEOPPORTUNITIES

AS PART OF BUSINESS STRATEGY

Criteria examplesMarket developments?Competitors' vulnerabilities?Industry or lifestyle trends?Technology development and innovation?Global influences?New markets, vertical, horizontal?Niche target markets?Geographical, export, import?

New USP's?Tactics: e.g., surprise, major contracts?Business and product development?Information and research?Partnerships, agencies, distribution?Volumes, production, economies?Seasonal, weather, fashion influences?

8/3/2019 Marketing (561)

8/59

HOW THE COMPANY MANAGES THE THREATS AS PART OFBUSINESS STRATEGY

Criteria examplesPolitical effects?

Legislative effects?Environmental effects?IT developments?Competitor intentions - various?Market demand?New technologies, services, ideas?Vital contracts and partners?Sustaining internal capabilities?Obstacles faced?Insurmountable weaknesses?Loss of key staff?

Sustainable financial backing?Economy - home, abroad?Seasonality, weather effects?

THE FOLLOWING CONTROLS

-strategic surveillance, and-special alert controls

TO TRACK /MONITOR/ ACTION PLANNING BUSINESS EXTERNALS

Political (incl. Legal)-Environmental regulations and protection[what are the government regulations/ protection laws that must beobserved ]

-Tax policieswhat tax hinder the business and what taxes incentives areavailable]

-International trade regulations and restrictions

[Does the government encourage exports / with high tariffs onimports]

-Contract enforcement law/Consumer protection[Does the government enforce on consumer protection]

-Employment laws]

8/3/2019 Marketing (561)

9/59

[Is the government encouraging skilled immigrants with temp.permits?]

-Government organization / attitude[ does the government have a very positive attitude towards this

industry]

-Competition regulation[Are there regulation for limiting competition]

-Political Stability[Politically, does the government have a very stablegovernment?]

-Safety regulations[ has the government adopted some of the modern safety

regulations]

Economic-Economic growth[ what is the economic growth rate / what are the reasons ]

-Interest rates & monetary policies[ are the interest rates under control / is there a soundmonetary policies]

-Government spending

[Is government spending is significant and is it under control]

-Unemployment policy[What are the employment / unemployment policies of thegovernment?]

-Taxation[Has the taxation encouraged the industry?]

-Exchange rates[ is there well managed exchange controls and is it helping the

industry]

-Inflation rates[Is the inflation well under control?]

-Stage of the business cycle[Is your industry is on the growth pattern]

8/3/2019 Marketing (561)

10/59

-Consumer confidence[Is the consumer confidence is high/ strong and if not, why]

Social

-Income distribution[Is there balanced income distribution policy]

-Demographics, Population growth rates, Age distribution[What is population growth and why]

-Labor / social mobility[What are the labor policies and is there labor mobility]

-Lifestyle changes[ are there significant lifestyle changes taking place--more

modernization/ why ]

-Work/career and leisure attitudes[ are the population career minded and are seeking betterlifestyle]

-Education[ what are the education policies / is it successful ]

-Fashion, hypes[Are the people becoming fashion conscious]

-Health consciousness & welfare, feelings on safety[Are the people becoming health consciousness?]

-Living conditions[Is the living conditions improving fast and spreading rapidly]

Technological

Government research spending[Is the government spending on research and development?]

Industry focus on technological effort[are the industries focused on using improved technology]

New inventions and development[ are new inventions being encouraged for developments]

Rate of technology transfer

8/3/2019 Marketing (561)

11/59

[ is the rate of technology transfer is speeding up ]

(Changes in) Information Technology[ is the information technology rapidly moving and is theregovernment support]

(Changes in) Internet[ is the internet usage rapidly increasing and why]

(Changes in) Mobile Technology[Is the Mobile technology rapidly developing and is theregovernment support]

THE CONTROLS FOR ANY ORGANIZATION ARE THEFOLLOWING

-EFFECTIVE ORGANIZATION STRUCTURE

-MANAGEMENT CONTROLS AT ALL LEVELS*MARKETING MANAGEMENT*SALES MANAGEMENT*SUPPLY MANAGEMENT*DISTRIBUTION MANAGEMENTETC

-BUDGETORY CONTROLS

-AUTHORIZATIONS CONTROLS

-INVENTORY CONTROLS--RAW MATERIALS

-INVENTORY CONTROLS --FINISHED PRODUCTS-QUALITY CONTROLS-PROCUREMENT CONTROLS-DEBT CONTROLS-SALES/ MARKETING EXPENSES CONTROL-PERSONNEL CONTROL-MONTHLY PERFORMANCE REVIEW AGAINST BUDGET

-HALF YEARLY BUSINESS AUDITING

IN ORGANIZATION, THEY HAVE INTEGRATED THE CONTROLSYSTEMS INTO PLANNING, SO THAT IT HELPS

-TO MEASURE THE DEVIATIONS-TO STUDY THE VARIANCES-TO TAKE APPROPRIATE ACTIONS.

8/3/2019 Marketing (561)

12/59

Management planning and control process"

P .PLANNING-----------------C.CONTROL [c1.establish standards]

P1.establishing objectives.P2.determine detailed activities.p3.delegationP4.schedule tasksP5.allocate resourcesP6.communication and coordinationP7.provide incentivesC2.measure and compare.C3.evaluate results.C4.feedback and coachC5.take corrective action.

The above schematic shows the important interrelationships betweenplanning and control. As you can see, the control process does notbegin after the entire planning process ends, as most managersbelieve.After objectives are set in the first step of the planning process,appropriate standards should be developed for them. Standards areunits of measurement established to serve as a reference base and areuseful in determining time lines, sequences of activities, scheduling,and allocation of resources.For example, if objectives are set and work is planned for 18 people on

an assembly line, standards or reasonable expectations ofperformance from each person then need to be clearly established.The second significant interaction between planning and control occurswith the final step of the control process-taking corrective action. Thiscan take several forms, but two of the most effective are to change theobjectives or alter the plan.Managers dislike doing either; but if a positive motivational climate isto be established, these ought to be the first two corrective actionsattempted. Objectives and standards are based on assumptions, but ifthese assumptions prove inaccurate, then objectives and standardsrequire alteration. Thus sales quotas assigned on the premise of a

booming economy can certainly be altered if, as is often the case, theeconomy turns sour.Likewise, if the assumptions are accurate and objectives and standardshave not been met, then it is possible that the plan developed wasinadequate and needs to be changed.

Controls are to be an integral part of any organization's financial andbusiness policies and procedures. Controls consists of all the

8/3/2019 Marketing (561)

13/59

measures taken by the organization for the purpose of; (1) protectingits resources against waste, fraud, and inefficiency; (2) ensuringaccuracy and reliability in accounting and operating data; (3) securingcompliance with the policies of the organization; and (4) evaluating thelevel of performance in all organizational units of the organization.

Controls are simply good business practices.

1. ResponsibilityEveryone within the COMPANY has some role in controls. The rolesvary depending upon the level of responsibility and the nature ofinvolvement by the individual. The Board of President and seniorexecutives establish the presence of integrity, ethics, competence anda positive control environment. The department heads have oversightresponsibility for controls within their units. Managers and supervisorypersonnel are responsible for executing control policies andprocedures at the detail level within their specific unit. Each individual

within a unit is to be cognizant of proper internal control proceduresassociated with their specific job responsibilities.The Internal Audit role is to examine the adequacy and effectivenessof the company internal controls and make recommendations wherecontrol improvements are needed. Since Internal Auditing is to remainindependent and objective, the Internal Audit Office does not have theprimary responsibility for establishing or maintaining internal controls.However, the effectiveness of the internal controls are enhancedthrough the reviews performed and recommendations made byInternal Auditing.

2. Elements of Internal ControlInternal control systems operate at different levels of effectiveness.Determining whether a particular internal control system is effective isa judgment resulting from an assessment of whether the fivecomponents - Control Environment, Risk Assessment, ControlActivities, Information and Communication, and Monitoring - arepresent and functioning. Effective controls provide reasonableassurance regarding the accomplishment of established objectives.

A. Control Environment

The control environment, as established by the organization'sadministration, sets the tone of THE COMPANY and influences thecontrol consciousness of its people. MANAGERS of each department,area or activity establish a local control environment. This is thefoundation for all other components of internal control, providingdiscipline and structure. Control environment factors include:

Integrity and ethical values;

8/3/2019 Marketing (561)

14/59

The commitment to competence;Leadership philosophy and operating style;The way management assigns authority and responsibility, andorganizes and develops its people;Policies and procedures.

B. Risk AssessmentEvery entity faces a variety of risks from external and internal sourcesthat must be assessed. A precondition to risk assessment isestablishment of objectives, linked at different levels and internallyconsistent. Risk assessment is the identification and analysis ofrelevant risks to achievement of the objectives, forming a basis fordetermining how the risks should be managed. Because economics,regulatory and operating conditions will continue to change,mechanisms are needed to identify and deal with the special risksassociated with change.

Objectives must be established before MANAGERS can identify andtake necessary steps to manage risks. Operations objectives relate toeffectiveness and efficiency of the operations, including performanceand financial goals and safeguarding resources against loss. Financialreporting objectives pertain to the preparation of reliable publishedfinancial statements, including prevention of fraudulent financialreporting. Compliance objectives pertain to laws and regulations whichestablish minimum standards of behavior.The process of identifying and analyzing risk is an ongoing process andis a critical component of an effective internal control system.Attention must be focused on risks at all levels and necessary actions

must be taken to manage. Risks can pertain to internal and externalfactors. After risks have been identified they must be evaluated.Managing change requires a constant assessment of risk and theimpact on internal controls. Economic, industry and regulatoryenvironments change and entities' activities evolve. Mechanisms areneeded to identify and react to changing conditions.

C. Control ActivitiesControl activities are the policies and procedures that help ensuremanagement directives are carried out. They help ensure thatnecessary actions are taken to address risks to achievement of the

entity's objectives. Control activities occur throughout theorganization, at all levels, and in all functions. They include a range ofactivities as diverse as approvals, authorizations, verifications,reconciliations, reviews of operating performance, security of assetsand segregation of duties.Control activities usually involve two elements: a policy establishingwhat should be done and procedures to effect the policy. All policiesmust be implemented thoughtfully, conscientiously and consistently.

8/3/2019 Marketing (561)

15/59

D. Information and CommunicationPertinent information must be identified, captured and communicatedin a form and time frame that enables people to carry out theirresponsibilities. Effective communication must occur in a broad sense,

flowing down, across and up the organization. All personnel mustreceive a clear message from top management that controlresponsibilities must be taken seriously. They must understand theirown role in the internal control system, as well as how individualactivities relate to the work of others. They must have a means ofcommunicating significant information upstream.

E. MonitoringControl systems need to be monitored - a process that assesses thequality of the system's performance over time. Ongoing monitoringoccurs in the ordinary course of operations, and includes regular

management and supervisory activities, and other actions personneltake in performing their duties that assess the quality of internalcontrol system performance.

The scope and frequency of separate evaluations depend primarily onan assessment of risks and the effectiveness of ongoing monitoringprocedures. Internal control deficiencies should be reported upstream,with serious matters reported immediately to top administration andgoverning boards.

Control systems change over time. The way controls are applied may

evolve. Once effective procedures can become less effective due tothe arrival of new personnel, varying effectiveness of training andsupervision, time and resources constraints, or additional pressures.Furthermore, circumstances for which the internal control system wasoriginally designed also may change. Because of changing conditions,management needs to determine whether the internal control systemcontinues to be relevant and able to address new risks.

Components of the Control Activity

1. Internal controls rely on the principle of checks and balances in the

workplace. The following components focus on the control activity:

2. Personnel need to be competent and trustworthy, with clearlyestablished lines of authority and responsibility documented in writtenjob descriptions and procedures manuals. Organizational chartsprovide a visual presentation of lines of authority and periodic updatesof job descriptions ensures that employees are aware of the dutiesthey are expected to perform.

8/3/2019 Marketing (561)

16/59

3. Authorization Procedures need to include a thorough review ofsupporting information to verify the propriety and validity oftransactions. Approval authority is to be commensurate with thenature and significance of the transactions and in compliance with

COMPANY policy.

4. Segregation of Duties reduces the likelihood of errors andirregularities. An individual is not to have responsibility for more thanone of the three transaction components: authorization, custody, andrecord keeping. When the work of one employee is checked byanother, and when the responsibility for custody for assets is separatefrom the responsibility for maintaining the records relating to thoseassets, there is appropriate segregation of duties. This helps detecterrors in a timely manner and deter improper activities; and at thesame time, it should be devised to prompt operational efficiency and

allow for effective communications.

5. Physical Restrictions are the most important type of protectivemeasures for safeguarding COMPANY assets, processes and data.

6. Documentation and Record Retention is to provide reasonableassurance that all information and transactions of value are accuratelyrecorded and retained. Records are to be maintained and controlled inaccordance with the established retention period and properlydisposed of in accordance with established procedures.

7. Monitoring Operations is essential to verify that controls areoperating properly. Reconciliations, confirmations, and exceptionreports can provide this type of information.

3. Recently a very popular strategic alliance took place. Takethe case of that alliance and analyze it looking at the benefitsof strategic alliances.

COMPANIES look for like-minded companies that understandThe complementary value and content solutions can bring to theircustomers.

By combining each companys products and services, turn-keysolutionsCan be developed to efficiently address market needs and tap intonew technologies.

Ultimately the Strategic Alliance Program really means one thing:

8/3/2019 Marketing (561)

17/59

by participating in the alliance program your company has thepotential to increase its revenue and grow its sales and businessopportunities.The Strategic Alliance Program offers excellent opportunities --regardless of company type and size by enabling companies to:

Expand the market opportunity for your business in the fast-growingcollaboration market spaceIncrease your company's knowledge base through access tocollaboration expertsPartner with a proven, x-year leader in the content space.ALLIANCE goal is to ensure the success of our combined efforts to growour businesses together by identifying and acting on ways to increasemutual revenue opportunities, including:

Introductions to new customers and new marketsIssuance of joint press releases

Development of joint marketing collateralJoint participation in tradeshowsSpeaking opportunities at PUBLIC symposiaPreparation of joint proposalsLogo placement on corporate web siteStrategic alliances are common to any industry. Their presence is feltquite significantly in theAirline industry.

1. JETAIRWAYS ---KLM

The guiding factors will be several that include formation ofBlocs, resource scarcity, limits on foreign ownership and limitationsimposed byBilateral agreements. They further forwarded the argument that to bea part of anAlliance will become a necessity for an airline to survive in the future.

2. TOYOTA --- GM

-share auto technology.-share the design facilities

-share the 6 cycle / 8 cycle alloy engine manufacturing-share common parts supply-share distribution points.

3. NIIT ---MICROSOFT

-NIIT IS THE CERTIFICATION / TRAININGAGENT FOR MICROSOFT IN INDIA.

8/3/2019 Marketing (561)

18/59

WHAT DO YOU UNDERSTAND BY DIFFERENTIATION STRATEGY?DISCUSS BY FORMULATING A DIFFERENTIATION STRATEGY FOR ACOMPANY, WHICH IS INTO FMCG SECTOR.

Differentiation Strategy DefinedYour differentiation strategy is an integrated set of action designed toproduce or deliver goods or services that customers perceive as beingdifferent in ways that are important to them. It calls for you to sellnonstandard zed products to customers with unique needs.

Why Differentiate?The concept of being unique or different is far more important todaythan it was ten years ago. The key to successful marketing andcompeting is differentiation.

Hyper competition is a key feature of the new economy. What used tobe national markets with local companies competing for business hasbecome a global market with everyone competing for everyone'sbusiness everywhere. With the enormous competition markets todayare driven by choice - your targeted customers have too many choices,all of which can be fulfilled instantly. Choosing among multiple optionsis always based on differences, implicit or explicit, so you ought todifferentiate in order to give the customer a reason to chose yourproduct or service. Thus, "differentiation is one of the most importantstrategic and tactical activities in which companies must constantly

engage. It is not discretionary".

Differentiation should be aimed at the broad market thatinvolves-the creation of a product or services that is perceived throughout itsindustry as unique.*The company or business unit may then charge a premium for itsproduct.*This specialty can be associated with design, brand image,technology, features, dealers, network, or customers service.

Differentiation is a viable strategy for earning above average returns ina specific business because the resulting brand loyalty lowerscustomers' sensitivity to price. Increased costs can usually be passedon to the buyers. Buyers loyalty can also serve as an entry barrier-newfirms must develop their own distinctive competence to differentiatetheir products in some way in order to compete successfully.

8/3/2019 Marketing (561)

19/59

A differentiation strategy is more likely to generate higher profits thanis a low cost strategy because differentiation creates a better entrybarrier.

-Positioning and differentiating the business.

-Positioning and differentiating the products against rivals-USING the Business-level cross-functional process management-Anticipating changes in technology and customer perceptions andadjusting the strategy to accommodate them.-Influencing the nature of competition through strategic actions suchas virtual integration and through political actions-Building strategic partnerships and co-innovating with other businessunits, partners, and customers.

PROVIDING CUSTOMERS WITH MORE VALUE-ADDED [MVA]"MVA means that you give the customer more, perhaps far more, than

you ever have before. It goes beyond simplifying your customers'interactions with you to delivering solutions to your customers'problems, of which your products and services in their native forms arebut small pieces... You can visualize the principle of MVA as a ladderwith your product at the bottom and the solution to your customer'sproblems at the top. The more help you provide your customers to fillthat gap, the more value you add to them, which, of course,differentiates you from your competitors who are still scramblingaround at the bottom of the ladder. Also, it is to your advantage tocontrol as much of the ladder as you can customers will be less likelyto abandon you in favor of someone else, lower down the ladder, who

offers less value. At the same time, your opportunity for margin andprofit increase."

KEY ELEMENTS OF DIFFERENTIATING STRATEGY

reflect the spirit of the Businessbe symbolic and intuitivebe distinctivecatch eyestay in memoryconnect to different cultures

be adaptable..ETC

AN ORGANIZATION CAN DEVELOP A SERIES OFDIFFERENTIATION STRATEGIES DEPENDING ON ITS PRODUCT/MARKET SITUATIONS ANDTHE ORGANIZATION RESOURCES.

8/3/2019 Marketing (561)

20/59

*CHANGING PRICES STRATEGY

-develop a pricing strategy which will allow the organization tolower pricesTo gain market monopoly and / or prevent competition from entering.

*IMPROVING PRODUCT DIFFERENTIATION STRATEGY

-improve the product features/ benefits to gain significantadvantage in the market.

-develop and implement innovations in the manufacturing processto gainadvantage for the product cost/ distribution.

-develop a brand consciousness in the market to reduce substitution

fromEntering the market.

*CREATIVELY USING CHANNELS OF DISTRIBUTIONSTRATEGY-using vertical integration, to acquire a channel and dominate.

-developing a new / unique distribution channel which is a novelto the industry.

*EXPLOITING RELATIONSHIP WITH SUPPLIERS STRATEGY

-developing / setting E-COMMERCE with suppliers.

-developing/ extending TQM [total quality management] and JIT [justin time]with suppliers to meet the demands of product specifications /price.

*COST LEADERSHIP

-develop the manufacturing to achieve a gross margin, which

could be used to cut price to gain market share, if/when required.

-develop the product sourcing from anywhere, to achieve agross margin, whichcould be used to cut price to gain market share, if/when required.

-develop a trade rebate system for large quantity buyerswhich could block competitors entry.

8/3/2019 Marketing (561)

21/59

8/3/2019 Marketing (561)

22/59

materials such as metals and agricultural products, but a commoditycan also be anything widely available in the open market. In projectmanagement, products are the formal definition of the projectdeliverables that make up or contribute to delivering the objectives ofthe project.

Service:The generic clear-cut, complete and concise definition of the serviceterm reads as follows:

A service is a set of singular and perishable benefitsDelivered from the accountable service provider, mostly in closecoactions with his service suppliers,Generated by functions of technical systems and/or by distinctactivities of individuals, respectively,Commissioned according to the needs of his service consumers by the

service customer from the accountable service provider,Rendered individually to an authorized service consumer at his/herdedicated trigger,And, finally, consumed and utilized by the triggering service consumerfor executing his/her upcoming business or private activity.

Services Marketing and the Extended Marketing

What is services marketing?

A service is the action of doing something for someone or something.It is largely intangible (i.e. not material). A product is tangible (i.e.material) since you can touch it and own it. A service tends to be anexperience that is consumed at the point where it is purchased, andcannot be owned since is quickly perishes. A person could go to a cafone day and have excellent service, and then return the next day andhave a poor experience. So often marketers talk about the nature of aservice as:

Product Marketing VS Service Marketing

The marketing of products and services reveal two different situationswhich require two very different strategies. With products you needonly consider the perceived value, price, location, and advertising.With services you need to consider the perceived value, price, location,advertising, process, people, and proof.

When advertising a service its important to demonstrate your processand proof through testimonials or other sources to build reasonable

8/3/2019 Marketing (561)

23/59

expectations with your customer. These expectations will buildperceived value in your product or service. When advertising aproduct proof is not as critical because the product is tangible andreturnable.

Perceived value is the amount a consumer would expect to pay foryour product before they see the actual price. To build perceivedvalue in a product you demonstrate and explain its benefits in relationto the customers needs. To build perceived value in a service youmustprove that you are consistent and can provide quality service to meetthe customers needs.

Pricing for products will include the cost of materials, manufacturing,and distribution. Service pricing may include a small amount for someoffsite manufacturing or travel but in general the pricing for a service

is mostly profit. This low cost for providing the service will allow you tospend more money advertising and demonstrating the service.

The location of your product or service may not be importantdepending on the type of item youre selling. If you run a retaillocation with many items, a stable location with plenty of walk-by ordrive-by traffic is important. Niche items and services may not requirea stable location as consumers do not need to know where yourservice is locatedunless theyre specifically requesting the service you provide.

The process or operation of your business is a variable that consumerscan compare with your competitors. Use your advertising andpresentation wisely to explain why your process is better than thecompetition.

People are the ones that "deliver" your service. People are the mostdifficult part of maintaining consistency in marketing. With a serviceyoure dependent on people to offer the best customer service to eachand every customer. If a consumer buys a product then tells a friend.The friend can rest assured that if they buy the same product they willhave the same

Result. Services do not operate this way. The trust consumers have ina humans ability to execute the same level of customer service day inand day out is nonexistent and for good reason. People areinconsistent creatures and thats why service marketers are burdenedwithShowing proof not once, but several times over.

8/3/2019 Marketing (561)

24/59

Proof is the evidence that your service or product is worthy ofpurchase. Products seldom need proof because they are tangible andreturnable. Proof for services may include testimonials, photos, audio,video, sales data, or other. In order to gain new customers your proofmust be backed by facts and directly related to the customers needs.

For a consumer, choosing a product is a matter of comparing the facts,choosing a service is like a trial. You have two sides: you and yourcompetitor, or even more. Each side must backup their statementswith evidence in order to prove their case. The consumer will judgeThe case and decide who is telling the truth, who has the mostevidence that is relevant to their needs, and ultimately who is the bestbusiness for hire.

Marketing of Services Is Difficult Than Marketing of Goods

Every business owner knows that having a good marketing plan isabsolutely vital to the success of their business venture. If you don'thave a good marketing plan, then you don't know how to get whereyou want to go. You will just be shooting in the dark and you won't beable to see how you can achieve your goals within the market that youare working within.

However, you need to have different approaches to marketing basedon whether or not you are marketing products or if you are marketingservices. If you are marketing both services and products, then youneed to develop two different marketing plans that share some

similarities-such as the type of business and the company image thatyou want to portray-but are also different. Different tactics work betterfor services versus products. You need to develop marketing plans foreach and every one of them.

So what are the difficulties between product marketing and servicemarketing? Many businesses know how to market products, but it istrickier to market services. Here are some things that you need toknow about the differences between products and services.

1. When you are marketing a service, you are really marketing

relationship and value. This relationship and value needs to bemarketed differently than if you are marketing actual products.

2. Another major difference between marketing services andmarketing products is that when a buyer purchases a service, thebuyer is purchasing something that is intangible, instead of a tangibleproduct, like a computer or a sprinkler system or a web page.

8/3/2019 Marketing (561)

25/59

3. Consumers' concept of a service is often times based on just thereputation of only one single person. Instead of building a reputationbased on the quality of a number of different products, a service isbuilt on how well a particular person delivers on a service, such as howwell a stock advisor does with your stock portfolio.

4. It is pretty easy to compare the quality of different products. It'seasy for you to see if one computer works more quickly than anothercomputer, or if one TV has a better picture than another picture, or ifyour child can break a toy more easily than another toy. However, it ismuch more difficult to compare the quality of similar services that areprovided.

5. Products are returnable. However, services are not returnable.

How to market services

Generally speaking, marketing a product requires what are known asthe "4 P's": Product, Price, Place, and Promotion. Marketing a serviceadds three more "P's" to the traditional "4 P's": People, Physicalevidence, and Process. Service marketing also includes marketingwhat is known as the services cape, which is the aesthetics of yourbusiness place: the outside of your business building, the inside ofyour business building, and the way that the employees look.

Question # 2 (B)How Companies Can Position Their Products For

Competitive Advantage In The Marketplace? Discuss.

HOW TO GAIN A COMPETITIVE EDGEExamine your business and its key operations, policies andrelationships with customers to determine what you should work on tocompete more effectively.

What You Should Know Before Getting StartedGaining a Competitive AdvantageMarketing PositionCompany Resources and OpportunitiesEvaluation of OpportunitiesDefining the Process

Choosing a Competitive Edge

What to Expect

8/3/2019 Marketing (561)

26/59

This Business Builder will help you to become more competitive byidentifying the features of your operation you should focus on tomaximize your efficiency and your product's appeal.

What You Should Know Before Getting Started

By accurately identifying and analyzing your firm's target market andits relative competition, you may recognize potential opportunities forsuccess in selling your product or service. These opportunities, whichyour competitors may have overlooked, will provide your firm with thevision to develop marketing mixes far superior to your competition.

Before getting started you will need to familiarize yourself with somebasic terminology as it relates to customers and their markets.

The First Step Is To Analyze Your Competition. What type ofcompetition exists in your target market, and what impact will

it have on the firm's ability to gain a competitive edge?The uniqueness of your firm's product or service, the number ofcompetitors, the size of your competitors, the overall demand and theprice will all be key factors in your gaining the competitive edge.

There are four basic forms of competitive structures that differ basedupon the number of competitors, relative ease of market entry, typesof products and knowledge of the market. These structures are definedas follows:1. Monopoly.

A firm that produces a product or service with few or no substituteproducts or services. The company that has absolute control over theprice in the market is considered a monopoly. An example would beyour local utility companies.

2. Oligopoly.This structure exists when a few sellers of products or services controlthe supply of a large proportion of your market. These firms tend to setsimilar prices and create more difficult barriers for entry into themarket. The steel industry is a classic example of an oligopoly.

3. Monopolistic Competition.This structure consists of many firms with moderate barriers to entry.Firms competing in this market attempt to develop differentiatedmarket strategies to establish their own market share. Firms sellingsoftware products would fall into this category.

4. Perfect Competition.

8/3/2019 Marketing (561)

27/59

Highlighted by unlimited competition and hardly any barriers to entry,individual firms operating under this structure would be unable toinfluence the price or supply of a particular product or service.Agricultural products are the closest form of pure or perfectcompetition.

What Is Your Target Market?A Market is an aggregate of people, who, as individuals ororganizations, have needs for products in a particular class, and whohave the ability, willingness and authority to purchase such products.This Business Builder will use the term market in that sense, and notuse it in the more general sense of a marketplace or mass market.

In reviewing your market, consider two types of markets:Generic Market. This market is represented by sellers offering

substitute products or services that are dramatically different thanyour product from a physical and conceptual viewpoint. The genericmarket is a broader market where items like automobiles, designerclothes, or vacations may all be in competition with each other.Product Market. This market is represented by sellers offeringsubstitute products or services that are similar to yours from either aphysical or conceptual viewpoint.

Why Is It Important To Gain A Competitive Edge?In today's marketplace, there are thousands upon thousands ofproducts and services available to fulfill the needs of individuals and

businesses. Your ability to identify and exploit the features andassociated benefits of your product or service and demonstrate how itis different or better than the competition will provide you with acompetitive edge. The edge or advantage will provide your firm withthe tools to:Increase sales and market share.Improve profit margins for a given period of time in new or existingmarkets.Ensure your survival in extremely competitive markets.Develop hard-to-copy marketing mixes.

Gaining a Competitive Edge

To get started, you will need to compile all the data collected aboutyour target market trends, customers, products and competitors.Listed below is an outline of the various market plan elements you willneed to review to identify your competitive edge or advantage:

Market Positioning Company Resources and Opportunities

8/3/2019 Marketing (561)

28/59

Evaluation of Opportunities Defining the Process Operational Efficiency Customer Service Product Leadership Choosing a Competitive Edge

Market Position

How Can I Determine My Position In The Market?

The identification of your firm's strengths and weaknesses is animportant task that needs to be accomplished before any competitiveedge can be developed. Try to analyze these factors from outsidesources since perception (how you are perceived by others) is reallythe key. To determine your position in the market, you must ask manyopen ended questions of various types of sources.

Besides your personal assessment, your employees, customers andsuppliers are good targets for questions regarding how they view yourfirm in the market. Some of the more typical questions that might beasked are as follows:

Customer-related Questions:How long have you been a client or customer of ABC Company?How did you hear of them?What criteria led you to select them?Do they perform all of your work in this area?What do you like best about them?What do you like least about them?Compared to other firms, what are their advantages? Disadvantages?Are there any other services you would like them to provide?Would you recommend them to others?

Company Resources and OpportunitiesGenerally speaking, all firms possess some type of resource orresources that help distinguish them from other firms. To developattractive opportunities, you should make good use of your strengths,while avoiding competition with firms having similar strengths.

8/3/2019 Marketing (561)

29/59

8/3/2019 Marketing (561)

30/59

It will affect the development and introduction of new products andservices.

Evaluation of OpportunitiesSubsequent to evaluating your firm's resources (for strengths and

weaknesses), the environmental factors impacting your firm, and yourmanagement objectives, you should screen and evaluate the variousopportunities that have surfaced. To do so, the following steps shouldbe taken:

Match these opportunities against your firm's resources andobjectives.

Eliminate those opportunities that are mismatches. Analyze the remaining opportunities using one or more of the

following approaches: Total profit approach Return on Investment approach Expected value approach Boston Consulting Group approach

The measurement criteria used to evaluate each of these opportunitiesshould include both quantitative and qualitative components.Quantitative components would summarize the objectives of the firmand include items like sales, return on investment and profit targets.

Defining the ProcessIn simple terms, the process of gaining a competitive edge consists ofseveral steps:Discovering what your capabilities and resources are in your targetmarket.Finding a place in the market where you will be able to position thosecapabilities.Developing a strategy to capture and maintain your position.

Implementing and fine tuning your strategy.To improve the odds that successful competitive strategies aredeveloped and implemented, the following factors should beconsidered:

Personal Strengths.Company Strengths.Market PositionCompetitionMarket Trends

There is no single factor which dictates what your firm needs to do inthe market. You need to assess the interaction of all these factors and

8/3/2019 Marketing (561)

31/59

interpret how that particular grouping of factors affects your firm'sability to market your product or service.

Operational Efficiency. This term describes a firm that attempts toutilize processes to provide its customers with dependable products at

a competitive price. Factors you may wish to consider in improvingyour operational efficiency would include the following:Try to match all your business activities with real and distinct customerneeds. You will need to identify all of your customers needs and alignor adjust all of your activities to ensure customer satisfaction.

In What Areas Do I Need To Be Operationally Efficient In OrderTo Outperform My Competitors?

Operational efficiency focuses on efficient production of your productor service, distribution capabilities, and customer satisfaction. It

requires that you outperform your competition as follows:Respond rapidly to changes in market demand by adjusting yourproduct or service.Ensure that each customer is provided with a quality product that hasthe reliability and consistency to satisfy their needs.

Flexibility. Try to be flexible in delivering your products or services toyour customer. Can you deliver different assortments to differentshoppers?Make sure that your employees are provided with the proper training,responsibility and authority to satisfy your customers' needs.

Relationship selling (building long term relationships with yourcustomers) should be encouraged.

Product Leadership. Many high technology companies are alwayssearching to provide state-of-the-art products and services to theircustomers. Their new products or services are formulated based onthe specific demands from their marketplace.

If product leadership is the competitive edge your firm wishes to adoptor maintain, the following factors need to be considered:

Choosing a Competitive EdgeThe competitive edge your firm chooses will depend on the reasonsyour customer will buy a particular product or service. Remember thatcustomers who must meet specific needs are not ready or willing tomake do with the wrong product. Some may like the newest productthat technology has to offer, while others may opt for more convenientquality products at discount prices. Also keep in mind that the strategyyou choose depends on what your market demands, the product or

8/3/2019 Marketing (561)

32/59

service you offer, your firm's values, resources and expertise.Choosing the appropriate strategy for your product or service willprovide you a competitive edge by allowing you to better serve yourcustomers' needs.

Why would my existing or potential customers buy my productor service over that of the competition?Remember to ask not what your advantage can do for you, but whatyour advantage can do for your customer.

Gaining a Competitive EdgeMarket position

___ Have you identified your firm's strengths and weaknesses?

___ Have you identified and analyzed these factors using internal and

external sources?

___ Have you compared your strengths and weaknesses against thoseof the competition?

___ Do you have a clear understanding about what your firm doesbest?

Company resources and opportunities

___ Have you evaluated all functional areas within your firm?

___ What resources do you possess or lack that help distinguish yourfirm from each competitor?

___ What opportunities exist for your firm? Why do you consider themopportunities?

Evaluation of opportunities

___ Have you screened your firm's opportunities by matching themagainst your resources and objectives?

___ Have you eliminated mismatched opportunities?

___ Have you evaluated each opportunity using one of therecommended approaches?

Defining the process

8/3/2019 Marketing (561)

33/59

___ Have you identified your capabilities in your target market?

___ Have you determined where in the market you can position thosecapabilities to gain a competitive edge?

___ Have you developed a strategy to capture or maintain yourposition in the market?

Choosing a competitive edge

___ Do you have a clear understanding of why customers would ratherbuy your product or service vs. one of your competitors?

___ Will your product or service satisfy the customer's need?

___ Have you decided how your firm will gain or maintain a competitive

edge in your target market?Question # 3

Examine Product Life Cycle And Answer The FollowingQuestions? What Stage You Think Is: Most Critical Most Risky Most Profitable Most NegativeYour Answer Must Be Based On Logical Arguments.

The Product Life Cycle

A new product progresses through a sequence of stages fromintroduction to growth, maturity, and decline. This sequence is knownas the product life cycle and is associated with changes in themarketing situation, thus impacting the marketing strategy and themarketing mix.

The product revenue and profits can be plotted as a function of thelife-cycle stages as shown in the graph below:

Product Life Cycle Diagram

8/3/2019 Marketing (561)

34/59

Introduction Stage

In the introduction stage, the firm seeks to build product awarenessand develop a market for the product. The impact on the marketingmix is as follows:

Productbranding and quality level is established, andintellectual property protection such as patents and trademarks are

obtained.

Pricing may be low penetration pricing to build market sharerapidly, or high skim pricing to recover development costs.

Distribution is selective until consumers show acceptance ofthe product.

Promotion is aimed at innovators and early adopters.Marketing communications seeks to build product awareness and toeducate potential consumers about the product.

Sales generally are low and somewhat slow to take off. Customers arecharacterized as 'innovators.'

Production costs tend to be high on a per unit basis because the firmhas yet to experience any significant scale economies.

Marketing costs required for creating customer awareness, interest,and trial and for introducing the product into distribution channels arehigh.

Profits, because of low sales and high unit costs, tend to be negative orvery low.

Competitors tend to be few in number, indeed there may be only onemajor player in the marketplace -- the innovating firm.Growth Stage

8/3/2019 Marketing (561)

35/59

In the growth stage, the firm seeks to build brand preference andincrease market share.

Productquality is maintained and additional features andsupport services may be added.

Pricing is maintained as the firm enjoys increasing demandwith little competition.

Distribution channels are added as demand increases andcustomers accept the Product.

Promotion is aimed at a broader audience.

Sales increase rapidly during the growth phase. This increase is due to:(1) consumers rapidly spreading positive word-of-mouth (WOM) about

the product; (2) an increasing number of competitors enter the marketwith their own versions of the product; (3) and a "promotion effect"which is the result of individual firms employing, advertising and otherforms of promotion to create market awareness, stimulate interest inthe product, and encourage trial.

Cost are declining on a per unit basis because increased sales lead tolonger production runs and, therefore, scale economies in production.Similarly firms may experience curve effects which help to lower unitvariable costs.

Because sales are increasing and, at the same time, unit cost isdeclining, profits rise significantly and rapidly during this stage.

Customers are mainly early adopters and early majority. It is the earlyadopter, specifically, that is responsible for stimulating the WOMeffect. During the latter part of growth, the first major segment of themass market, called the early majority, enters the market. Thiscategory of consumers is somewhat more priced sensitive and lowerson the socio-economic spectrum. As a result, these consumers aresomewhat more risk averse and, therefore, somewhat more hesitant toadopt the product.

Competition continues to grow throughout this stage. As competitorsrecognize profit potential in the market, they enter the market withtheir own versions of the product. As competition intensifies, strategiesturn to those that will best aid in differentiating the brand from thoseof competitors. Attempts are made to differentiate and find sources ofcompetitive advantage. In addition, firms identify ways in which the

8/3/2019 Marketing (561)

36/59

market can be segmented and may develop focused marketingstrategies for individual segments.

Maturity Stage

At maturity, the strong growth in sales diminishes. Competition mayappear with similar products. The primary objective at this point is todefend market share while maximizing profit.

Productfeatures may be enhanced to differentiate the productfrom that of competitors.

Pricing may be lower because of the new competition.

Distribution becomes more intensive and incentives may be

offered to encourage preference over competing products.

Promotion emphasizes product differentiation.

Sales continue to grow during the early part of maturity, but at a muchslower rate than experienced during the growth phase. At some point,sales peak. This peak may last for extended periods of time. In fact,the maturity phase of the life cycle is the longest phase for mostproducts. As a result, most products at any given point in timeprobably are at maturity. And, most decisions made by marketingmanagers will be decisions about managing the mature product.

Costs continue to rise during maturity because of market saturationand continually intensifying competition. When this slowing of sales iscombined with the increasing costs associated with this stage, theresult is that profits will have reached their highest level and must,from this point on, decline.

The only remaining customers to enter the market will be the latemajority and the laggards. These customer groups are by far the mostrisk averse and most hesitant to adopt new products. These customersare quite price sensitive and, as a result, will not buy products until

prices have seen significant declines. Many laggards, the last group toadopt, often do not do so until the product is virtually obsolete and indanger of being displaced by new technologies.

Competition is most intense during this stage. The intensity ofcompetitive in-fighting drives the changes in costs and profitability.Decline Stage

8/3/2019 Marketing (561)

37/59

As sales decline, the firm has several options:

Maintain the product, possibly rejuvenating it by adding newfeatures and finding new uses.

Harvest the product - reduce costs and continue to offer it,possibly to a loyal niche segment.

Discontinue the product, liquidating remaining inventory orselling it to another firm that is willing to continue the product.

The marketing mix decisions in the decline phase will depend on theselected strategy. For example, the product may be changed if it isbeing rejuvenated, or left unchanged if it is being harvested orliquidated. The price may be maintained if the product is harvested, or

reduced drastically if liquidated.

Sales continue to deteriorate through decline. And, unless majorchange in strategy or market conditions occur, sales are not likely tobe revived. Costs, because competition is still intense, continue to rise.Large sums are still spent on promotion, particularly sales promotionsaimed at providing customers with price concessions.

Profits, as expected, continue to erode during this stage with littlehope of recovery.

Customers, again, are primarily laggards.

There generally are a significant number of competitors still in theindustry at the beginning of decline. However, as decline progresses,marginal competitors will flee the market. As a result, competitorsremaining through decline tend to be the larger more entrenchedcompetitors with significant market shares.

Problems with Product Life Cycle.

In reality very few products follow such a prescriptive cycle. The length

of each stage varies enormously. The decisions of marketers canchange the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go fromintroduction to decline. It is not easy to tell which stage the product isin. Remember that PLC is like all other tools. Use it to inform your gutfeeling.

8/3/2019 Marketing (561)

38/59

Question # 4Select Three Different Products Of Your Own Choice And

Explain The Factors (Including Demand, Competition,Costs, And Other Marketing Mix) That Have Influenced Its

Price?

The Marketing Mix

The Marketing mix and the 4 Ps are the controllable elements ofbusiness. In other words, a company has control over what product itmakes, what price it sells the product for, how it wishes to place

(distribute) the product and how it wishes to promote it.

A company may need to adjust its marketing mix for each individualmarket due to the uncontrollable elements. Uncontrollable elementsinclude geography, infrastructure, culture, technology, politics, lawsand competition.

The 4 Ps and the 4 Cs: the Importers Perspective

An importer is most concerned about the 4Cs: Customer solution,customer Cost, Convenience and Communication. The 4 Cs emphasize

customer needs and wants over just trying to sell products. Below is acomparison of the 4 Ps and the 4 Cs from the importers perspective.

Product as Customer Solution

Price as Customer Cost

Place as Convenience

Promotion as Communication

The exporters goal is to sell a product; the importers goal is toprovide a solution for his/her customers. For either party to succeed,both must consider the total cost of shipping, insurance, customsclearance, duties, delivery fees and their own costs of business.Importers want the product to be handled, shipped and delivered tothem as conveniently as possible. An importer also desires goodcommunication in regards to product availability, transit times,problem-solving and marketing support.

Product Basics

8/3/2019 Marketing (561)

39/59

Each product contains a set of attributes. Included in the attributes iscustomer service, which is used to support business relationships.Although the sale is about the product, purchase decisions are alsobased on your ability to add value to the transaction. Exporters who

are reliable, supportive, helpful in financing promotional materials andactivities and good communicators often add to the companys exportsuccess.

Next, consider if any changes should be made to the product beforeselling internationally. Are any label modifications required? Are theproduct packaging, size, color and name of the product appropriate?Considering these and other attributes are essential to positioning yourproduct in a market.

Product analysis includes:

QualityFeaturesBrand NamePackagingLabelingProduct AssortmentProduct Length & Depth

Quality

Quality is the most important feature of a product, and is defined by

the customer. Promoting and communicating product quality isimperative. An exporter often needs to educate the buyer and themarket about a products inherent quality.

Features

Food features differ from other product categories. Ingredients makeup a food and can be an area of competitive advantage. The way foodis processed is also an important feature. A manufacturers care,creativity and technical skills can make up other important productfeatures.

Brand Name

Successful branding of a product is a distinctive marketing skill.Branding includes creating, maintaining, protecting and enhancing theidentity of a good to differentiate against the competition. A productsbrand is a combination of symbolic design, name, term or sign that

8/3/2019 Marketing (561)

40/59

gives the product a unique position within the market. The brand ofteninfluences customer perception and purchasing decisions.

A products name is also important. An exporter must considerwhether the name makes sense, is offensive or means something

entirely different when translated. American exporters are not the onlypeople who face this challenge. Consider the following products thathave had difficulty in the U.S. market:

Mental: French mints Plop: Czech Republic candy bar Crapai: Turkish dill pickles Belchers Square Sausage: Scottish sausage Fart: Polish candy bar Bra: Swedish yogurt Cream Collon: Japanese cookie

Packaging

A products design and container or wrapper is its packaging.Packaging is closely connected with the design and style of theproduct. An importer understands the packaging importance, andmight choose one product over another based upon it. A trade event inSingapore involved a tabletop display of over 60 U.S. food productsand hosted buyers from a variety of chains and wholesalers withinSoutheast Asia.Packaging needs to be both attractive and durable. An exporter shouldalso consider packing options, which better protect the product andthe products packaging.

Labeling

Proper labeling is both a science and an art. Labels contain several keycomponents. First, the design and artwork of the package is oftentimespart of the label. Label information should include: brand and productname, the origin and date of manufacture, a list of contents andingredients, applicable nutritional and health claims, as well as proper

use and shelf life.

Label modifications can be expensive. However, there are programs tohelp. The Branded Program supports the expense involved in labelingchanges to comply with import regulations.

Private Labeling

8/3/2019 Marketing (561)

41/59

8/3/2019 Marketing (561)

42/59

products domestically. In fact, domestic pricing for many companiesthat have been in business some time include discounts, commissions,broker fees and other allowances that are more complicated thanexport pricing. Try to be as competitive as possible to gain marketshare, and remember that the importer has a variety of costs to deal

with that you do not.

Experienced importers have a good idea about what the market pricefor a product should be and will let you know what is required toestablish distribution. If they ask for pricing considerations from you, itoften does not mean your price is too high, but that their cost is toohigh. If both you and the importer agree that the business haspotential, there are ways to deal with the price escalation of export. Ifyour pricing cannot match the importers needs or the marketconditions, then continue trying other importers in other markets. Eachtransaction will provide a valuable lesson in export pricing.

Pricing Variables

Export Price Escalation Discounts Payment Period Payment Terms Use of the Pro forma Invoice

Export Price Escalation

Export pricing from your facility to the ultimate destination is usuallysegmented into three main parts:

Shipping within the United States to the port of export. This iscommonly referred to as inland transportation or pre main-carriagetransport. The further your facility is from the port of export, the moreexpensive shipping becomes.

Shipping from the port of export to the port of import. This isalso referred to as main carriage and is usually listed as the originand destination on the shipping documents. The main carriage isusually the longest leg of the journey, although there are exceptions.

Shipping from the port of import to the ultimate destination.This is referred to as post main-carriage and involves the expensesof getting a product from the port to the importers warehouse or enduse location.

8/3/2019 Marketing (561)

43/59

Every step requires organization, documentation and a logistical plan.Each function may vary between country of destination and type ofbuyer. As mentioned previously there are service providers thatspecialize in the process, such as international freight forwarders,consolidators, customs brokers and shipping companies.

Discounts

As price escalation between your warehouse and the ultimatedestination can cost the importer more than the domestic buyer, theimporter may request some form of discount off of your regular price.Many considerations go into discounting sales. However, the worth ofthe sale to the company in terms of volume, value, profit and long-term business should all be taken into consideration. Discount optionscould include:

Cash discount: Many businesses offer cash discounts to theircustomers in order to fuel demand of the products over a given periodof time. Another type of discount could be offered for early payments,such as one percent per week prior to the invoice coming due.

Quantity discount: This is often used in the export business, andreduces price based on volume. For example, an exporter offers aproduct for $17.00 per carton of 12 boxes of product, under 100boxes. The price could be reduced to $16.00 for amounts between101-499 boxes; $15.00 for amounts between 500-999 and so on. Itgives the importer an incentive to purchase more and increases sales

for the seller.

Seasonal discount: Many foods and ingredients are produced inseasonal cycles. Sometimes, it makes sense to offer an off-seasondiscount to the importer to make sure products move in the periodswhen consumption might be down.

An allowance might also be considered. An allowance may bepromotional support for distributors or retailers who specially featureyour products. The Branded Program provides cost sharing in manytypes of promotional activities, and is of great benefit to many small

businesses in developing export markets for their products.

Payment Period

Export payments may usually take longer than the domesticequivalent sale. As a result, prices should be designed to recover thecost of capital during a lengthy open account sale. For example, if itwould cost a company $300.00 to finance an open account sale of 90

8/3/2019 Marketing (561)

44/59

days, it is a good idea to include that cost in the pricing to absorb theloss. If the importer agrees to pay 50% of the invoice in advance, youcould reduce the equivalent amount of the cost of financing.

Payment Terms

If open account sales are not an option for one or both parties, the useof a consignment controlled payment is an option. This paymentmethod is also referred to as payment by documentary collection, ordraft, either at sight or on a time basis. It restricts access of thecommercial documents prepared for the shipment, which are requiredto take title of the goods at the destination. The documents are onlyreleased to the buyer when payment has been made (sight draft) orwhen an endorsement of the draft obligates them to make paymentwithin a given time frame (time draft).

Use of the Pro forma Invoice

Most export prices are quoted via the use of a pro forma invoice, whichis essentially a quotation to the buyer for a particular shipment. Inactuality, it becomes the first draft of the commercial invoice, the keydocument in the export business. Many importers request pro formainvoices on a consistent basis, and most successful exporters havebecome skilled at issuing them.

Placement (Distribution) Basics

Export distribution can be broken into three steps. During the firststep, products leave the factory or pick-up location and are taken tothe port of export. Next, the shipment leaves the port of export andarrives at the port of import. Finally, the product moves from the portof import to the ultimate destination for storage, sale or use. Morethan one service provider is usually required to perform all of thesefunctions, and because of the distance, paperwork and cost it is veryimportant for all of these functions to work together in a seamlessfashion, at least from the eye of the exporter and importer.

Placement Considerations Distribution Channels Indirect vs. Direct Exporting Who Owns the Goods? Exporting Logistics Interposal Transportation Consolidations Exclusive Distribution

8/3/2019 Marketing (561)

45/59

Export Diversion

Distribution Channels

Channels of distribution vary greatly from one market to the next. For

example, distribution channels in Japan are vastly different from thosein Mexico or India. One of the major considerations of distributionconcerns the length of the channel. The length of a channel refers tothe number of intermediaries in the chain, all of whom are seeking aprofit. The longer the channel, the more expensive the product is atthe retail level. Thus, a shorter channel costs less and delivers thegoods to market more quickly.

Indirect vs. Direct Exporting: Who Owns the Goods?

Many U.S. companies specialize in exporting products for others and

do not produce any goods themselves. These companies may becalled: Export Management Companies, Export Trading Companies,Export Merchants or Buying Offices from overseas firms. Regardless ofthe name, if you sell to another firm and they export your product, youare exporting indirectly, as you have given up title to the goods.Indirect exporting is a common way for small and medium-sizedbusinesses to enter into foreign markets, as it requires little in the wayof capital, time and staff compared to exporting directly. After sometime and experience in the field of international trade, manycompanies begin to develop their own export business, often in othermarkets than the ones served by the exporting company.

Exporting Logistics

Logistics includes all of the activities in moving merchandise from theorigin of manufacture to the point of use or consumption. Exportlogistics include getting the right amount of product to customerswithin the required time frame at a cost that leaves a margin of profitfor both parties. Recent estimates indicate that logistics in tradeaccount for 15% of the total volume, or $1.5 trillion annually.Therefore, controlling logistical costs should be a priority and canresult in more profit for the exporter.

While it is important to remain cost-competitive, choosingtransportation on price alone is not advised. The cheapest method oftransportation is usually not the best, and it is often risky to save a fewcents by selecting an unknown logistics service provider or carrier. Ifgoods are misrouted, lost or not properly serviced, future businesscould be lost. A savvy exporter will look for savings at each stepbeginning with the method of packing goods for shipment and ending

8/3/2019 Marketing (561)

46/59

at product delivery, without sacrificing the quality of shipment. Whenan exporter can add value to the transaction, he/she always should.

Intermodal Transportation

Many exports are shipped by intermodal transport, which is the use oftwo or more modes of transport between origin and destination. Thefurther a product has to be shipped, the more likely it will requireintermodal transportation. Many shipments are picked up by localtrucking firm, transferred to another truck for the interstate haul,loaded onto a container at a port and then loaded onto a vessel forexport. After arriving at the port of import, the shipment may then beoffloaded onto a train, a truck or another vessel prior to its arrival atthe ultimate destination.

Consolidations

Many food importers consolidate their shipments, which means thatthey request the exporter to deliver the shipment to the warehouse ofa freight forwarder, NVOCC (non-vessel operating common carrier), orother consolidator. This company then builds a consolidation ofmultiple suppliers products into an air or ocean container and ships itto the port of import. By consolidating, the importer saves in freightcharges, customs clearance fees and protects the integrity ofshipments by having everything arrive in one lot rather than in partialshipments.

Exclusive Distribution It can work to the benefit of both the buyerand seller to enter into an exclusive distribution agreement. If animporter is truly excited about marketing a product in their country,they will often request the legal right to be the only one to do so. Foran exporter, giving exclusive rights to the right partner can givehis/her brand the best chance of gaining identity and market share.

One key consideration regarding exclusivity is coverage. In somecountries, most of the market may be within the coverage area of onedistributor. In places like Canada, Mexico or Australia, there are

multiple markets that are geographically spread apart and adequatecoverage might not be possible with one partner. In these countries,you might choose more than one distributor and limit the exclusivity toa certain territory that can be properly managed by each one.

Export Diversion

8/3/2019 Marketing (561)

47/59

Despite the channel, mode of distribution or type of distributor youwork with, your exports could be compromised by diversion. Simplyput, diversion occurs when your shipments do not reach the stateddestination and are sent elsewhere without your knowledge. Diversionusually occurs when you have negotiated a special export price, based

on the fact you are free from most domestic equivalent costs likecommissions, broker fees and rebates. The goods are picked up fromyour facility on behalf of the buyer, who then resells them to anotherU.S. customer and they are in turn sold below your domestic price.

Example of a Destination Control Statement:

"These commodities were exported from the United States inaccordance with the export administration regulations for the ultimatedestination of the United Arab Emirates. Diversion contrary to U.S. lawis prohibited."

Promotion BasicsPromotions explain the merits of a product and its company and areoftentimes referred to as communications. Products that requiresignificant promotion in the U.S. may find a similar need ininternational markets.

Promotion Variables

Advertising

Sales promotion Public relations Personal selling Direct marketing Website for Export E-Marketing

Together, these elements make up the promotional mix. In the exportbusiness, a company may find that one or more components of thepromotional mix may vary in effectiveness based on the market, thebuyer or the product being sold. When used at the same time, they arecollectively known as Integrated Marketing Communications", or IMC.It is helpful to take advantage of as many promotions as possible togrow a brand overseas. If a company does not have direct overseascommunications, it should work with the importer to establish effectivepromotions.

Advertising

8/3/2019 Marketing (561)

48/59

Advertising is known as any paid form of non-personal presentationand promotion of goods. While a small business exporter might notever get involved in advertising internationally, the opportunity to doso is increasing with new media and lower costs in specific targetedmarkets.

It is possible to maintain your domestic theme in internationaladvertisements, and in some cases, preferred by the importer as well.It is imperative to have the message translated properly though, if thedestination market does not use English, and in some cases even if itdoes use English. Interpretation of the message is most important,especially as most advertising has a humorous angle, and humor isoften the most difficult aspect of language to interpret.

Examples of creative international advertising include:

A popcorn company targeted children by advertising theirproducts alongside a new childrens movie. Placemats weremade for restaurants that had fun and games for the childrenwith popcorn and movie images.

A honey company hired a local in Greece to paint its car with thecompanys logo and information. Their products were promotedall over town at a minimal cost.

One innovative company used product placement in key British soapoperas to get their products into the living rooms of consumers. Theirproducts could be seen in these fictitious supermarkets andconvenience stores throughout prime time viewing hours.

Sales Promotions

Sales promotions are described as short-term incentives thatencourage the purchase of a product within a given time frame. Theuse of coupons, cents-off, contests, premiums and other deals may berestricted in overseas markets, and are not nearly as common as theyare in the United States. However, promotions can be a strategy usedby your importer, who owns the goods and can decide how and whento promote a product.

Many international sales promotions can be found in grocery stores. In-store demonstrations with product giveaways and cookingdemonstrations are popular along with end-of-aisle gondolas thathighlight new products. Some companies even give away recipe cardsas an incentive to buy the product if its an item consumers may notbe familiar with.

Public Relations (PR)

8/3/2019 Marketing (561)

49/59

Public Relations are based on obtaining favorable publicity andbuilding up a good image as a corporate citizen. Public relationsoften make more of an impact than advertising. This is in part becausethey are true and believable. They are also an effective and

economical way to create awareness about your products, yourcompany and in some cases, yourself. Many small and medium-sizedcompanies have effective public relations in place, even if that is nothow they refer to them.

Personal Selling

Personal selling can pose a challenge with international customers.Cold calling distributor lists is less efficient than a properly set meetingsuch as a Buyers Mission, Trade Mission or meeting at a domestic oroverseas trade show. However, it is important to note that many

importers listed in the marketing reports outlined in Section 2 areaware they have been included in those reports and have requested tobe included in order to be introduced to new suppliers. Food Export-Midwest and Food Export-Northeast also offer an online productcatalog that has been customized to match buyer needs withregistered companies products.

Personal selling is subject to Cultures Consequences. In the U.S., weare used to being approached by strangers who would like to sell aproduct or service. But, in many countries this is not common oracceptable. Many cultures have distinctly different approaches to

doing business, including both verbal and non-verbal communications,negotiations, thinking and decision-making proc