Project 1 Environmental Analysis Marketing Analysis & Research (MAR3613) By Kanghyun Yoon
Strategic Planning Process
Strategic Planning involves developing an overall company strategy for long-run survival and growth (Kotler 2004) .
This process involves:
Defining a Mission : Statement of an organization’s purpose; should be market oriented.
Setting Company Objectives : Supporting goals and objectives to guide the entire company.
Designing a Business Portfolio : Collection of businesses and products that make up the company.
Planning Functional Strategies : Detailed planning for each department designed to accomplish strategic objectives.
Marketing Management Process
Stage 1: Identifying business opportunities or problems.
Designing business portfolio to identify business opportunities or problems.
Implement SWOT analysis to diagnose the strategic fit between company’s capabilities to serve its customers and the changing market environment.
Stage 2: Market Segmentation, targeting, and positioning.
Dividing the total product market into some segments that have homogeneous needs and choosing the best segment(s) to serve.
Identify possible competitive advantages of its product using market positioning strategy.
Stage 3: Understanding the customers.
Requiring careful customer analysis since companies can’t serve profitably all customers.
Stage 4: Developing a marketing mix.
Designing a competitive marketing strategy by blending product, price, promotion, and place tools.
Stage 5: Managing the marketing efforts.
Measuring and evaluating the results of marketing strategies and plans.
Marketing Management Process Target Consumers Product Place Price Promotion Marketing Implementation Marketing Planning Marketing Control Marketing Analysis Competitors Marketing Intermediaries Publics Suppliers Demographic- Economic Environment Technological- Natural Environment Political- Legal Environment Social- Cultural Environment
Stage 1 Identifying business opportunities and/or problems
The starting point toward identifying business opportunities or problems is …
To monitor some environmental factors, as opportunities or threats, from the constantly changing market environment that affect the company’s ability to serve its customers.
Three important tools for environmental analysis
Portfolio analysis with BCG or GE matrix
Market potential assessment or demand forecasting
SWOT analysis consists of:
internal capabilities of company: S trengths and W eaknesses
external uncontrollable factors: O pportunities and T hreats
The goal of SWOT analysis
Identify business/marketing opportunities or problems from environmental analysis.
Find the best strategic fit between company’s capabilities and its changing market environment to serve customers effectively.
Forces that shape opportunities and pose threats to a company:
Demographic - monitors changing nature of population in terms of age, sex, race, occupation, location and other statistics.
Economic - factors that affect consumer buying power and spending patterns.
Natura l - natural resources needed as inputs by marketers or that are affected by marketing activities.
Technological - forces that create new product and market opportunities.
Political - laws, agencies and groups that influence or limit marketing actions.
Cultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors.
What is Business Portfolio?
The collection of businesses and products that make up the company.
Designing the best business portfolio that fits the company’s strengths and helps exploit the most attractive opportunities.
The company must:
analyze its current business portfolio and make investment decisions for each business,
develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should not longer be retained.
Two best-known methods:
Boston Consulting Group (BCG) matrix and General Electric (GE) matrix
Key assumptions for BCG matrix:
The objective is cash balance.
Market share has a direct effect on profitability.
Cash flow can be predicted by the position and direction of the business.
High-growth markets are more attractive.
Business Portfolio Analysis
Examples of BPA (I)
High growth, low share
Build into Stars/ phase out
Requires cash to hold
High growth & share
May need heavy
investment to grow
Low growth, high share
Low growth & share
Low profit potential
Relative Market Share High Low Market Growth Rate Low High Boston Consulting Group Approach
Examples of BPA (II) Industry Attractiveness GE Strategic Business-Planning Grid Business Strength High Medium Low Strong Average Weak A B C D
Two dimensions of BCG matrix
Market growth rate – it indicates a measure of market attractiveness.
Relative market share – it serves as a measure of SBU strength, against competitors, in the market.
Four quadrant in the matrix:
Question marks refer to businesses that have relatively weak market shares in fast growing markets.
“ Build Share” strategy: increase market share with investment
Stars are businesses that have strong market shares in fast-growth markets.
“ Hold” strategy: need heavy investment to sustain their growth.
Cash cows are businesses that have dominant shares in slow- or no-growth markets.
“ Harvest” strategy: maximize short-term cash flows and profits from the SBU.
Dogs refer to businesses that have relatively weak market shares in slow- or no-growth markets.
“ Divest” strategy: divest SBU by phasing it out or selling it.
Boston Consulting Group Matrix
How to Draw BCG Matrix?
Stage 1 : Identify the various Strategic Business Units (“SBU’s”) to design a company portfolio.
Those can be businesses or products or brands.
Stage 2 : Collect secondary data to calculate MGR and RMS.
Market growth rate (MGR)
Relative market share (RMS) = MS of my SBU / MS of top competitor.
Stage 3 : Locate the position of each SBU in a BCG matrix.
Size of circle of each SBU indicates the relative volume of each SBU in dollar unit.
Stage 4 : Recommend some strategic points.
Diagnose current condition of the company.
Suggest some recommendations of what the company should do.
To develop effective targeting strategies and to manage the marketing efforts effectively …
measuring current market size and forecasting future demand are required.
Overly optimistic estimates -> costly overcapacity or excess inventories.
Underestimating market demand -> missed sales and profit opportunities.
Five major uses of market demand
1) To answer “what if” questions; 2) to help set budgets; 3) to make resource allocation decisions over the product life cycle; 4) to set objectives and evaluate performance; 5) to make market entry/exit decision.
Three concepts to understand
1) Market potential (e.g., what the company might or could achieve).
2) Market forecast (e.g., what the company probably will achieve).
3) Market minimum (quota) (e.g., what the company should achieve).
A critical part of forecasting
A key assumption: Forecasts depend on a set of conditions.
Measuring and Forecasting Demand
Forecasting Methods of Demand
Estimating current market potential
Total market potential method (Lilien and Kotler 1983)
Chain-ratio method (Ackoff 1970)
Forecasting future demand
Naïve extrapolation, sales force composite, delphi, executive opinion.
Market survey analysis
Buyer purchase intentions, product tests via market testing.