1. Strategic Marketing-Group Project
Group members
Group8
Ajay Chandar DM16103
Akash.K DM16104
Prateek Sharma DM16160
Harleen Kaur DM16217
Monica Banerjee DM16231
1. First Law
a. Describe briefly the impact of the “First Law” on the performance of your business
and steps you have in place to combat that
The First Law states that when competition in a certain market increases, the general move is to
reduce prices of the product or service. By Porter's techniques, this is known as cost leadership.
The value war depicts a business sector circumstance where the current rivalries battle for piece
of the overall industry by chopping down the costs of their products/services. It is a race to the
last,an endeavor to win clients by offering lower costs. The issue with this focused technique is
that despite the fact that you win the race to the base by offering the least cost in the business
sector, you will in all probability wind up at the base.
Let us have a look at a company like Apple.
At the point when tech organizations are stood up to with stagnating deals, as Apple has been
with the iPad lately, they generally hope to empower request by cutting costs or including
elements and upgrades at the current cost. As it were, they dissolve their net revenue — the
sum made per unit sold in the trust of creating a bigger total benefit through a more significant
volume of offers. That is the manner by which most value wars begin, whether we are looking
at discussing extra large televisions, Android cell phones, or even RAM sticks for motherboard.
Each of these value rivalries has been a help for the shopper, improving increasingly and
alternatives accessible at perpetually decreasing costs, yet they've been decimating to a large
portion of their members. That may be the reason Apple fearlessly declines to take part in them.
At the point when rivalry starts to cut costs keeping in mind the end goal to win the client,
Apple never battled back by likewise cutting costs. It took the other way by battling back with
prevalent worth.
Each business sector is separated into three classifications/levels; the high society, working
class and lower-class. Clashing with rivalries over cost is in a roundabout way going to drive
you to acknowledge the lower-class as your default target market.
2. By choosing to bring down costs, one should understand that one has additionally by
implication chosen to lose the upper and white collar class portion of the business sector. The
lower one runs with their costs, the all the more engaging items/services gets to be to the
lower-class target market and the less engaging it gets to be to the upper and white collar class.
The lower-class are the lion's share in each business sector, they frame the biggest portion of
purchasers. The white collar class is the second biggest section of purchasers, while the high
society frames the minority. Unless the lower-class is your optimal target market, don't get into
a value war with your rivalries. Cost is an estimation of value and the general discernment is
that the lower your value, the lower the quality
Macintosh's response to iPad stagnation has been to go further upmarket. Rather than cutting
iPad costs to counter rivalry from Samsung and whatever remains of the Android swarms,
Apple is venturing into a higher value section and preparing the iPad Pro to wind up its initial
2-in-1 gadget. It will conflict with resistance from Microsoft's Surface Pro and even from Apple's
own particular MacBook range, yet that is the opposition that Tim Cook and organization need
to be in .
Steps in place to Combat
Differentiation of Offering
The choice to re-focus on business sector to catch the upper and white collar class market
fragment must be followed by a determination to separate your offering (item/benefit).
Offer Benefits and Not Features
One vital method for distinguishing offering (product/service) is to accentuate the outcomes
your objective business sector needs and convey on that outcome. It can be trusted that the
value war is for the individuals who don't realize what they are doing. In the event that you can
give individuals the outcomes they need and offer them some assistance with getting free of the
issues they have and don't need, then cost is no issue.
It can be concluded that if one does not want to be having price wars, then one needs to look at
either retargeting the market and identifying the suitable target market, one also needs to look
at differentiating one’s offering and playing on benefits and not features.
2. Profit Pathways
a. Choose one company
b. Discuss and summarize theirapproach to the four strategic ways of generating
profits
3. WalMart’'s ability to provide customers with "everyday low prices" and its presence as an
economic and political giant of huge size and influenceis the result of a process that was made
on some core principles and procedures. Looking at Walmart's history and present operations
helps investors understand the methodology that enables this sizeable chain to do what it's
known to do best – sell cheap. The main strategy for Walmart is its lower costs.It has been
mentioned below as to how Walmart is able maintain low costs.
Lower Costs
Minimization of overhead and operational costs:Proceeding with the model Walton set up for
a minimal effort operation, Walmart still keeps its overhead low. Its officials purportedly
fly standard class and impart lodging rooms to partners. Its small wages and low-
advantage medicinal services arranges which are offered to majority representatives
have been advertised and dissented against. The organization has even been blamed for
requesting that hourly specialists put in extra minutes without pay. Scientists at some
strategy foundations have hypothesized that each Walmart partner does the occupation
of 1.5 to 1.75 representatives of an adversary. It has additionally been said that Walmart
staff are relied upon to keep costs at the very least, notwithstanding to heat and cooling
of the structures.
Leveraging of Its bargaining powerto force suppliers to lower prices:Some surely understood
organizations depend on Walmart for more than 20% of their income. Walmart, as the
main supplier-retailer of the greater part of our purchaser merchandise, wields
impressive control over their primary concern and actually wields this control over all
the shopper products commercial enterprises in the U.S. In holding fast to a technique of
keeping costs low (specialists appraise that Walmart spares customers no less than 15%
on a common truck of staple goods), Walmart is always pushing its suppliers to cut
costs. In the Walmart Effect, creator Charles Fishman talks about how the cost of a four-
pack of GE lights diminished from $2.19 to 88 pennies amid a 5-year period. The weight
on suppliers to lower costs has brought about cutbacks at specific industrial facilities,
changes in assembling inputs and forms, and even the exchange of assembling
procedures to remote nations such as China where work is modest.
Supply chain management based on electronic product information, vendor role in distribution,
and layout of warehouses: Walmart has a store network framework that is viewed in
numerous quarters as a standout amongst the most mechanically progressed and
productive. Whether on account of scanner tags or RFID labels (radio recurrence
distinguishing proof innovation), WalMart was a pioneer in getting itemized item data
electronically joined to items so that such data could be transferred to its database and
could educate its stock administration framework.The objective, as per one analyst, was
to ace the craft of recognizing what it required, whatamount was required, and when it
required it. Amid the initial 8 months of 2005, Walmart allegedly encountered a 16
percent drop in its out-of stock at its RFID-prepared stores.
4. Also key to the cost-effectiveness of Walmart's supply chain strategy and distribution
network is the effective positioning of its 160 distribution centersthat cover almost 120
million square feet and all lie within 130 miles of the stores they supply. (Regional
distribution centers have been placed at locations that offer lower labor and
transportation costs.) Thus they can carry out cross-docking at their warehouses, a
process in which products are taken from a truck upon its arrival and packed in a truck
headed to a store without spending time in the warehouse.This results in reduced costs
for inventory storage and has lowered transportation costs.
Cash to Cash efficiency
Walmart’s ROE and ROA are as shown.
The Return on investment for Walmart has been quite consistent.
Premium Pricing
Walmart is into Everyday Low Price Strategy. It is not into premium pricing. It does not
target the premium segment at all. This is not one of the strategies that Walmart uses to
make profit.
5. Turnover Management
As can be seen from the picture above which gives the data of Walmart’s turnover ratios , it can
be seen that Walmart has quite an efficient turnover system whether it comes to inventory or
receivables.
3. The U-Curve:
The below graph is plotted with the interest income of several banks and their size in
terms of the no. of offices. Each of these banks are in operation for several years having several
thousand customers. We can see that plotting the banks on this curve forms a natural graph.
6. Figure 1 Income of Banks Vs Size
We can see that Central Bank in the beginning of the curve is earning very high level of
income despite the meagre no. of offices it has. It is relatively new and is known for its close
customer relationship.
Vijaya Bank earns almost 60% less income than Central Bank despite the fact that it has
more than 300,000 offices. Vijaya Bank occupies the lowest trough of the curve. It is growing
quite aggressively but the lack of adequate staffing has put its growth on a bumpy ride,
resulting in lower earnings.
7. Banks like Axis Bank, Indian Overseas Bank has grown up large in size and have almost
perfected their operations. Thus they are able to grow to such a huge size and still sustain their
high incomes.
From the above analysis, we can understand that the smaller, younger firms tend to be
more customer centric by forming very strong relationship with them to establish loyalty and
customer base. This enables them to gain trust and earn income despite being a new comer in
the field. The larger banks on the other hand have perfected their operations so that they deliver
their services flawlessly. The customer is satisfied with the quality of services delivered but the
strength of customer relationship is relatively less when compared to the new smaller sized
banks.
4. Value Chain
A value chain is a set of activities that a firm operating in a specific industry performs in
order to deliver a valuable product or service for the market. Analysing its value chain enables a
firm to identify its primary and support activities that add value to its final product and
whether the costs involved in these activities could be reduced or more differentiation brought
about.
a. The product chosen is Coca-Cola. Coca-Cola is a carbonated soft drink. It is produced by
The Coca-Cola Company of Atlanta, Georgia, and is often referred to simply as Coke
(Wikipedia). The final consumer price of a 600ml bottle is between Rs.34 to Rs.37
b. The value chain includes the following Primary Activities:
In-bound logistics- Procuring raw material, Warehouse management, cold-
storage
Operations- Bottling in various SKUs, Capping, Packaging activities, Water
stewardship, Testing and quality control, Recycling
Outbound logistics- Inventory control, Warehousing, cold-storage, customer
order management, transportation, retailing of product and merchandises
Marketing and sales- Product mix (Coca-Cola, Diet Coke, Coke Zero), unique
value proposition (family drink, controlled sugar), advertising, promotions,
campaign management (Open happiness!) , pricing, demand estimation,
distribution management, merchandising, offers during peak demand months
(festivals)
Customer service- Customer relationship management, Voice of customer,
service/product recovery
8. The value chain includes the following Support activities:
Raw materials procurement, supplier-vendor relationship management, billing
and payments cycle management
Firm’s infrastructure, Finance and accounting, total quality management, legal
services
Human Resource management – hiring, staffing, training, payroll, compensation
and benefits, legal bindings
Research & Development – Product development, process streamlining and
efficiency management
Technology support - IT services, Information management system, ERP, CRM
c. Value-add roles for the individual links are:
Inbound logistics:
Locating plants near the cluster of suppliers and dealers will reduce
purchasing transportation and distribution costs.
Operations:
Operational efficiency, supply chain automation, total capacity utilization
and total quality management will result in cost reduction and better
margins
Outbound logistics:
Inventory management results in minimizing wastages
Proximity of warehouses from retail clusters help reduce transportation
costs
Marketing and sales:
Integrated marketing communications help in quick diffusion of products
Better demand estimation prevents overstocking/understocking in retail
stores
Brand management helps in getting price premiums
Customer service:
Makes customers feel as an integral part of the brand
Understanding the needs of consumer and getting an idea about the
changing customer trends help in creating a customer-centric product
Technology support:
Sales force automation, service automation, using ERP helps in cost
reduction
9. R&D help in creating products in sync with consumer demand, product
differentiation in a fragmented cold-drinks market might create more demand
d. Revenue allocation for the links are:
ACTIVI
TY
Inboun
d
logistic
s
Operat
ions
Outboun
d logistics
Marketin
g and
sales
Custome
r service
Technol
ogy
support
Firm’s
infrast
ructure
Procur
ement
HRM
WEIGHT 0.05 0.30 0.10 0.10 0.05 0.05 0.25 0.05 0.10
REVEN
UE 1.75 10.5 3.5 3.5 1.75 1.75 8.75 1.75 3.5
e. Strategic information obtained from this analysis are:
In a fragmented market, cost-cutting in operations will ensure better margins
In a low-involvement product like a cold-drink, it is essential to invest in
marketing and gain top-of-mind recall of the consumers
Market coverage and retailer infrastructure (cold-storage, visibility) play a major
role in product diffusion and sales
Transportation and distribution costs should be managed well by setting-up
warehouses in a closer proximity of the suppliers
Good relationships with vendors and dealers ensure inclusive growth and better
margins
Quality control and high product standards need to be met
5. Pricing Strategy – IndiGo
About the company
IndiGo is a budget airline headquartered in Gurgaon, India.It operates flights to 34 Indian cities
and 5 international destinations.
IndiGo manages to keep its prices competitive by means of the following strategies:
1. The fleet comprises only Airbus A320 planes. This reduces maintenance and training
costs.
2. The company employs an asset-light leasing model, with fleet maintenance contracted to
Airbus
10. 3. IndiGo deploys a maximum of 96 employees to a flight. This is much lower than the
number of persons deployed by its competitors. Air India, for example, deploys 250 employees
to a flight.
The Pricing Strategy
Like other airlines, IndiGo employs dynamic pricing to set fares.
Dynamic Pricing includes the following:
1. Peak User Pricing: This type of pricing takes into account the demand for the service.
IndiGo charges higher prices during peak times of the week (such as Sunday evenings, Monday
mornings and Friday evenings). Additionally, the price of a ticket increases as the date and time
of the flight draw closer.
2. Segmented Pricing: This type of pricing has to do with the customers’ willingness pay
for a service.
IndiGo employs this method of pricing in offering exit row seats, which offer extra
legroom, at a premium.
IndiGo also offers other chargeable extras, such as the option of choosing a seat and pre-
ordering meals.
Block Booking
IndiGo has schemes in place to incentivize block booking. These are as follows:
1. Family fares: IndiGo offers a discount of 25% to families comprising four to nine
members.
2. Group Fares: IndiGo offers group discounts on corporate bookings.
The block booking strategy would encourage travellers to book in groups, thereby
ensuring that the number of passengers on a flight is close to capacity. On the other hand, this
strategy might result in tickets becoming unavailable to individual flyers, driving them to
competing airlines.
11. Multi-part pricing
In offering additional services at added fees, IndiGo implements a multi-part pricing
strategy. This could be further implemented by means of a Frequent Flyer program, which
would let IndiGo offer cheaper tickets and other bonuses to frequent flyers.
Multipart pricing enables IndiGo to operate as a low-cost carrier. Instead of bundling all its
services into an expensive package, IndiGo allows flyers to pick the services they want to avail,
thereby making it inexpensive to them.
Instituting a Frequent Flyer program would help the marketing department of IndiGo
understand what kind of flyer is likely to become a regular customer. This would allow them to
focus their marketing efforts on such flyers.
6.Value Grid
Airline Industry: Airbus A-380
A380 is operatedby13 world-classairlinefleetoperators,withthe likesof Singapore Airlines,Emirates,
Qantas,and manymore.This queenof the skies,isoperatedforall kindsof routes – short, Mediumand
long.
It isa double-Deckerplane,withthe upperdeckreservedforthe premiumticketholder,i.e.,the
Businessclass.While the optionhasbeengivenbythe manufacturertothe operatorstomodifythe
plane as theywantitto be fromthe inside,like Emirates hasashower,Ethihadhasa 3 – bedroom
residence (itverywell leveragesthe otherwisedeadspace).While,youcaneliminate the amenitiesand
pack it densely.
The take-off andlandingissosmooth,thatmany customersratherfeel thatitsnot so‘airline’
experience, whileotherscontradict,makingthe experience kindof neutral.
But, some are blamingthe productfor itis notable to sell itself,especiallyfornotable topenetrate the
marketsinAfrica,AmericaandChina,insteadof slowdownacrossthe world.Though,manyoperators
are critical of the plane,EmiratesCEOis quite vocal initssupport,goingonto say that if airlinesare not
able to operate the plane profitablythere businessmodelisnotright.Thiscomes,especiallywhenthe
Airbushasthreatenedthattheywill be shuttingdownthe productionlineforA380 in 2018 if the sale
doesnotimprove.
13. Thisproduct came at the time justbefore the Global Recession,whenitwasanticipatedthatthe global
travel will increase immensely,espfromAsiatoAmericasandvice-versa.
The Product issuch a useful thingthatAirbusfocusedmore onthe productthat on the relationshipwith
the airliners,butthe recessionandthe slowdowndidgive itahuge blow toits expectedsales.
Also,the vigorwithwhichitwantsto sell A380, itsnot whobuys, the concernis how many were sold.
Though,EmiratesCEO isverybullishonthisproduct,unlike otherswhoare notso positive.
The statementsgivenbythe Airbus,apartfromthe lowerlistandEarly BirdDiscounts,alsosignifyitsbid
to manage itscustomersto sell the productdesperately,andquickly.
Since,the producthas the lowestcostperseat inthe industry,besidesbeingthe mostfuel efficient,
A380 is focusedongivinghuge returnstothe owneras well,besidesamazingexperience tothe
customer.
Since,the airtraffichas reducedwiththe advancementof technology,lesstime totravel,the barriers
have reducedforthe fleetoperatorstonotto extendthe contract.
Beingan innovationcompany,Airbusisstrictlyfocusedonthe productLife Cycle.Afterthis,itwill
naturallymove tothe nextinnovativeplane.
The A380 interiors,its4enginestokeepthe plane almostperfectlysteady,showshow muchAirbushas
givenefforttoimprove the travel experience.This,mayhave impactedthe salesasthere are many
people whowanttohave the real liftingandlandingexperience whichone doesnotgetinthe A380 –
leavingthemunderpowered.
Overall agood plane,butit’sthe businessmodel,whichhelpsdefine itsprofitgenerationabilitywiththe
supportof a boomingpassengermarket.
