Luận văn marketing strategy for real estate product the case of vinaconex

Marketing strategy also consists of marketing objectives, posiliommg strategy, as well as tactics that are marketing mix: Product, price, promotion, and place.. Its, therefore, necessar

9, STRUCTURE OF THE THE8IR — —

CHAPTER 1 THEORETICAL FOUNDATION

1.1.2 THE MARKETING STRATHGY PROCHSS ke

1.2 THE TMPORTANCE OF MARKETING STRATEGY TO REAL ESTATE “a

1/3 ENVIRONMENT ANALYSIS ke ke “a

1.3.1 EXTERNAL ENVIRONMENT ANALYSIS Error! Bookmark not defined

1.3.3 INDUSTRY ANALYSIB — Error! Bookmark not defined

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1.6 TYPES OF MARKETING STRATEGY .— — -

1.6.1 MARKUTING STRATEGY BASED ON PRODUCT LH CYCLI 17

1,6.3INNOVATION STRATHGIHS ke ke "¬-

1.7.1 BCG MODHL ke ke ke cua 23

1.7.3 Gl#MOD12L ke ke ke "-

CHAPTER 2 STATUS OF VINACONEX’S MARKETING STRATEGY

2.9 STATUS VINACONEX’S MARKETING 5TRATEGY see BS

CHAPTER 3 SELECT MARKETING STRATEGY FOR VENACONEXS'

REAL ESTATE PRODUCT

3.1 SETTING UP A FULLY MARKETING DEPARTMENT

3.2 CLOSE COORDINATION WITII OTIIER DEPARTMUINT TO IMPLEMENT

3.3 SEGMEHNT AND SHLECT TARGHT MARKET OF VINACONEX 75

3.3.3 SHLHCT TARGLHT MARKBT ke ke so 8Ì 3.4 SOME WAYS TO IMPLEMENT THE MARKETING STRATEGY 81

35.11NVBSTMEHNT AND BUSINESS TRADE CHNLER se BZ,

3.6 ANSOFF STRATEGIC MODEL WITH MARKET - PRODUCT wee BS

3.7.1 ANNUAL-PLAN CONTROL .— — cee OF

3.7.2 PROFITABILITY CONLROL ke ke see BB

LIST OF FIGUGES

Figure 1.1: Markcting Process

Xigure 1.2: The Marketing Salegy Prooess

Figure 1.3: The Five Forces model of Michael E Porter

Figure 1.4: Product life cycle

Figure 1.7: The four Ps: Marketing mix

Figure 2.1: VINACONLX Organizational Chart

Figure 2.2: Chart on forecasting urbanization growth rate

Table 2.1 Hanoi’s population from 2006 — 2009

Figure 2.3: Hanoi year to date GDP (% y-o-y Growth Rate)

Figure 2.4: Hanoi FDI — Projects (Million USD)

Figure 2.5: CPT Growth Rate by Quartar (% y-ry)

Figure 2.6: Vietnam’s Inflation Rate and prediction

Figure 2 ?: Vietnam slock market

Figure 2.8: Supply about residential for salcs

Figure 2.9: Capital Value and Demand TH se

Figure 2.10: Vocancy Office Rate

Figure 2.11: Retail Marcet 3upply TH se

Figure 2.12: IIotel Qccupaney Rate TH se

Figure 2.13: Supply about office for lease

‘Table 2.4: Future trade center supplier ¬—

Figure 2 14: Supply about new urban area

Figure 2.15: Hotel occupancy rate

LIST OF TABLE

Table 2.1 Tanoi’s population from 2006 — 2009

Table 2.2: Human resources

Table 2.3; Position of VINACONEX cormpares with competitors

Table 2.4: Future trade center supplier

49

59

61

66

Word ‘Trade Organization

Vietnam Constnietion and Import — Export Joint Stock

Corporation

Number

Intemational Standard Organization 9001 : 2000 United National

Foreign Direct Trivesiment

Gross Domestic Product Consumer Price Tidex

Strategic Business Unit

CB Richard Lillis

Central Business DistricL

Associate Director of Research

State Bank of Vietnam

TNTRODUCTION

1 TH RATIONALE

Marketing slrulogy is the key to obtain the success in business and to be an active

approach way Marketing strategy cousists of target market, analyze customer's

demand, competitors, micro environment, macro environment, strength and weakness

of the fin

Marketing strategy also consists of marketing objectives, posiliommg strategy, as well

as tactics that are marketing mix: Product, price, promotion, and place When we build

that strategies and tactics, we have to consider to competitor's reactive activities and customer’s largel

The best way, we can access 1o develop the strategy lo be focus on the things which

we can do well (the strength) can use these strengths to determine and grasp opportunities And also concentrate in the things we cannot do well {the weakness), this Help us to cope with them the best effect by the way improve or absolutcly

rejection

Nowadays, Marketing in real estate in Viet Nam’s companies is only few have professional marketing plan, and the way deploys reasonably Others majority of the companics are confused or don’t know way to marketing real estate and attract the

target customers

Without marketing strategy, companies are not only waste of resources, make faded firm’s image but also bad affect to invest, business operations

According to the present circumstances, almost of real estate companies make

iarkeling purely paste on poster advertising, send the lelior, postcard with cormective address, advertise on newspaper, medium with style is the same, advertising programs

are similar This doesn’t make differences and not aim at segment of target customer

Whereas, more and more foreign competitors with the position of multi-sided strengths, fimancial, profession, marketing and special to be methodical and professional marketing strategy.

Currently, the situation of VINACONEX, they can not keep focusing on selling, out goods but selling goods at a satisfactory profit and retaining customers for later

producls The real ostate market is opening soor under accession lo WTO of Viet

real estate was rather new, the market was very potential because there were very high

demand and limited players in this market Things are changing soon and

VINACOKLX must also change

Its, therefore, necessary to conduct a study on real estate product to deploy marketing

strategy for VINACONEX

2, RESEARCH QUESTION

Tho research problems lead to a number of research questions

> What kind of marketing strategy does VINACONEX need?

» How to implement the chosen strategy successfully?

3 SCOPE OF WORK

The sludy is limited to the following time, place and work

> Time: The marketing strategy of VINACONEX is projected for the next 5 years

> Place; The rescarch is conducted in Hanoi market only

> Work: Marketing strategy for real estate product of VINACONEX

4 DATA SOURCES AND PROM

SING

‘The information used in the sections of this study is primary and secondary

information, which has been collected directly from VINACONEX Corporation and Uhrough ether real estate company’s surveys, discussion, interviews and questionnaire with industry experts, website, books, newspaper, brochures, marketing information

and market reports when available

The study collects information and base on marketing process, marketing strategy model as well as analyze market, analyze competition, segments and select target market, position, The study uses PEST and Five forces model to analyze and find out

threats and opportunities and then uses BCG model, GE model and Product life cycle

from which to make the best marketing strategy for VINACONEX

5, RESEARCH METHODOLOGY

> Research method: Qualitative and quantitative/case study

> Research design: Case study

> Analysis: Descriptive analysis

6 SIGNIFICANCE

The study aims to gain the following significance

> Theatrical aspect: Contribute some recommendations to theories on marketing

strategy

> Practice aspect’ Applying theories on marketing strategy into practice of

VINACONEX

7 LIMITATIONS

Because of limited time and geographical space, the study has the following limitation

> Time: Because there are many changes in the future So that marketing strategy

is projected for the next 5 years

> Place: The research is conducted in Hanoi market only

> Work: Marketing strategy for real estate product of VINACONEX

8 EXPECTED RESULTS

The study is expected to apply successfully theories in marketing strategy for real

estate product of VINACONEX

9 STRUCTURE OF THE THESIS

The thesis is divided into three chapters

Chapter 1: A review of theoretical framework of marketing stratogy

Chapter 2: Analysis of the current status of marketing strategy at VINACONEX

Corporation

Chapter 3: Recommended marketing strategy for VENACONLX Corporation

CHAPTER 1

‘THEORETICAL FOUNDATION 1.1 MARKETING STRATEGY

According to Philip Kotler, enterprise’s mission provides value for market

how profit, Sothat, marketing process' consists of analyzing marketing

oppolunilies, rescarching and scleciug largel markets, designing marketing strategies, planning marketing programs, and organizing, implementing, and

controlling the marketing effort

Figure 1.1: Marketing Process

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The four steps in the marketing process are:

Analyzing market opportunities: The marketer's initial task is to identify potential long — run opportunities given the company’s market oxpericnce and core

competencies ‘Io evaluate its various opportunities, assess buyer needs, and gauge

market size, the firm needs a marketing research and information system Next, the

firm stusties customer markets or business markets to find oul about buying behavior,

perception, wants and needs Smart firms also pay close attention to competitors and

look for major segments within each market that they can profitably serve

Developing marketing strategies: In this step, the marketer prepares a positioning strategy for existing product’s progress through the life cycle, makes decisions about

competitive strategy, product lines, branding, designs and markets its services

Source: Philip Koller, A Framework For Marketing Management, scvond edilion, Prentice Iall Publishing, 2001, pp.70 —71

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Planning marketing programs: To transform marketing strategy in to marketing

programs, marketing managers must make basis decisions on marketing

expenditures, marketing mix, and marketing allocation The first decision is about the level of marketing expenditures needed to achieve the firm’s marketing objectives

The second decision is how to divide the total marketing budget among the various tools in the marketing mix: Product, price, place, promotion And the third decision is

how to allocate the marketing budget to the various products, channel, promotion

media, and sales areas

Managing the marketing effort Marketers organize the firm’s marketing resources to implement and control the marketing plan, because of surprises and disappointment

as marketing plans are implemented, the company needs feedback and control

1.1.1 WHAT IS MARKETING STRATEGY

Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a

sustainable competitive advantage A marketing strategy should be centered on the

key concept that customer satisfaction is the main goal

1.1.2 THE MARKETING STRATEGY PROCESS

Figure 1.2: The Marketing Strategy Process

Marketing

Strategy Process

Marketing strategy management process” consists of steps: Analyze, selection,

implementation and control marketing strategy The first, enterprise has to analyze

market, Determine target market Analyze competitive The next, selecting

marketing strategy which suitable for condition, circumstance, and enterprise’s

capacity, purpose, during implements strategy process, Enterprise must check frequently performance’s result Take care arise case or necessary must consider

analyze process and strategic selection aim adjust or change timely strategy

1.2 THE IMPORTANCE OF MARKETING STRATEGY TO REAL ESTATE One of the mistakes made by real estate businessmen is that they over-believe in their

impulsive decisions and can not perceive the value of marketing in adding value to

their real estate However, in reality, the more they pay attention to marketing activities, the more they can earn from their investment Thus, like other business,

marketing plays an important role in developing real estate business

Marketing strategies bring in many potential values Through studying and analyzing the market, marketing activities can help to maximize profit radios as expected They

provide data base of potential customers, which helps to gain the best ratios in real

estate transaction Those activities also help to orient and build new market segments

for the firm’s products

In short, the more effort the real estate firm put on it’s marketing strategy, the more

chances for them to be successful on the market and over its competitors

1.3 ANALYZE MARKET

1.3.1 MARKET OVERVIEW

Introduce about market planning Analyze supply, demand and elements which relate

to market

1.3.2 ANALYZE MARKET TRENDS

* Source: www easy-marketing-strategies.com /marketing-strategy-process html

Changes in the market are important because they often are the source of new

opportunities and threats Moreover, they have the potential to dramatically affect the

market size Examples include changes in economic, social, regulatory, legal, and political conditions and in available technology, price sensitivity, demand for variety, and level of emphasis on service and support

Political Factors

Political factors include government regulation and legal issues and define both formal and informal rules under which the firm must operate Some examples include: Tax policy, employment laws, environmental regulations, trade restrictions and tariffs, political stability, laws which relate to

Economic factors

Economie factors affect the purchasing power of potential customers and the firm’s

cost of capital The following are examples of factors in the macro-economy:

economic growth, interest rates, exchange rates, inflation rate

Social factors

Social factors include the demographic and cultural aspects of the external macro-

environment These factors affect customer needs and the size of potentia markets Some social factors include: Health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety

Technology factors

Technology factors can lower barriers to entry, reduce minimum efficient production

levels, and influence outsourcing decisions Some technological factors include:

Research and development activity, automation, technology incentives, rate of

technological change

1.3.3 MARKET SEGMENTS.

A market segment is a subgroup of people or organizations sharing one or more

characteristics that cause them to have similar product needs A true market segment

meets all of the following criteria: It is distinct from other segments (heterogeneity across segments), it is homogeneous within the segment (exhibits common

attributes); it responds similarly to a market stimulus, and it can be reached by a

market intervention

Market segmentation is to divide a market into distinct groups with distinct needs,

characteristics, or behavior who might require separate products or marketing mixes Market segmentation process will help for

>

Maximize the business by using the best appeals for the target market

Build better relationships with the customers while attracting new ones

Discover a wealth of information to improve the marketing activities

The market segmentation process on this site helps us to comprehend

How people differ by groups

Look at all the groups that the target market belongs to

Determine appeals that cross the groups, and build the marketing messages on those appeals

Geographical segmentation: Country, region, state, city, density, climate

Demographical segmentation: Gender, age, income, education, occupation, religion, generation, nationality, family size, social class ete

Psychographics: Life style, values, and personality, ete

Behavioral segmentation: Typically done first, occasion, benefits, loyalty status, and attitude toward the product.

1.3.4 SELECTING TARGET MARKET’

Selecting market segments

The firm must look at two factors: The segment’s overall attractiveness, and the

company’s objectives and resources Firstly, the company must ask whether a

potential segment has the characteristics that make it generally attractive, such as size, growth, profitability, scale economies, and low risk Secondly, the company must consider whether investing in the segment makes sense given the company’s objectives and resources Some attractive segments could be dismissed because they

do not mesh with the company’s long — term objectives; some should be dismisses if

the company lacks one or more of the competences needed to offer superior value

Having evaluated different segments, the company can consider five patterns of target market selection

Single-segment concentration: Through concentrated marketing, these the company

gain a thorough understanding of the chosen segment’s needs and achieve a strong

market presence Furthermore, each company enjoys operating economies by specializing in its production, distribution, and promotion If it gains leadership, it

can eam a high retum on investment However, concentrated marketing involves risk

The segment may turn sour because of changes in buying pattem or new competition Selective specialization: Here the company selects a number of segments, each objectively attractive and appropriate They may be little or no synergy among the

segment, but each segment promises to be a moneymaker This strategy has the

advantage of diversifying the company’s risk

Product Specialization: Another approach is to specialize in making a certain product

for several segments

3 Source: Philip Kotler, A Flamework for Marketing Management, second edition, Prentice Hall Publishing, 2001, pp.170 — 185,

10

Market specialization: Here, the company concentrates on serving many needs of a particular customer group

Full market coverage: the company attempts to server all customer groups with all

the products they might need

In undifferentiated marketing: the company ignores segment differences and goes

after the whole market with one market offer

In differentiated marketing: the company operates in several market segments and designs different programs for each segment

1.3.5 ANALYZE COMPETITION

The Five Forces model of Porter‘ is an outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value ) of an industry structure The Competitive Forces analysis is made by the identification of 5 fundamental

The threat of substitute products

The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand)

> Buyer propensity to substitute

> Relative price performance of substitutes

> Buyer switching costs

> Perceived level of product differentiation

The threat of the entry of new competitors

Profitable markets that yield high returns will draw firms This results in many new entrants, which will effectively decrease profitability Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level

The existence of barriers to entry (patents, rights, etc.), economies of product

differences, brand equity, switching costs or sunk costs, capital requirements, access

to distribution, absolute cost advantages, leaming curve advantages, expected

retaliation by incumbents, government policies

The intensity of competitive rivalry

For most industries, this is the major determinant of the competitiveness of the industry Sometimes rivals compete aggressively and sometimes rivals compete in

non-price dimensions such as innovation, marketing, etc: Number of competitors,

rate of industry growth, intermittent industry overcapacity, exit barriers, diversity of competitors, informational complexity and asymmetry, fixed cost allocation per value added, level of advertising expense, economies of scale, and sustainable competitive advantage through improvisation

The bargaining power of customers

Also described as the market of outputs, the ability of customers to put the firm under

pressure and it also affects the customer's sensitivity to price changes

12

>

>

Buyer concentration to firm concentration ratio

Bargaining leverage, particularly in industries with high fixed costs

Buyer volume

Buyer switching costs relative to firm switching costs

Buyer information availability

Ability to backward integrate

Availability of existing substitute products

Buyer price sensitivity

Differential advantage (uniqueness) of industry products

The bargaining power of suppliers

Also described as market of inputs, suppliers of raw materials, components, and

services to the firm can be a source of power over the firm Suppliers may refuse to

work with the firm, or charge excessively high prices for unique resources

>

>

Supplier switching costs relative to firm switching costs

Degree of differentiation of inputs

Presence of substitute inputs

Supplier concentration to firm concentration ratio

Threat of forward integration by suppliers relative to the threat of backward integration by firms

Cost of inputs relative to selling price of the product

13

1.4 INTERNAT ANALYSIS

‘The internal analysis’ of strengths and weaknesses focuses on internal factors that

give an organivation conlain advantages and disadvantages in mecting the necds of its

target market Strengths refer to core competencies that give the firm an advantage in

meeting the needs of its target markets Any analysis of company strengths should be market oriented/customer focused because strengths are only meaningful when they assist the firm in meeting customer needs, Weaknesses refer to any limitations a company faces in developing or implementing a strategy (7) Weaknesses should also

be examined from a customer perspective because customers oflen perceive

weaknesses that a company cannot see, Being market focused when analyzing strengths and weaknesses does not mean that non-market oriented strengths and

weaknes

s should be forgoticn Rather, it suggests that all firms should tic thoir strengths and weaknesses to customer requirements Only those strengths that relate

to satisfying a customer need should be considered true core competencies

‘The following analyses are used to lool: at all intemal factors affecting a company: Resources: A good starting point to identify company resources is to look at tangible, intangible and human resources

Tangible resources are the casicst to identify and evaluate: Fitumcial resources and

physical assets are identifies and valued in the firm’s financial statements

Intangible resources are largely invisible, but over Gime become more important lo the firm than tangible assets because they can be a main source for a competitive advantage Such intangible recourses include reputation assets (brands, image, etc.) and technological assets (proprietary technology and know-how)

Tluman resources or human capital are the productive services human beings offer

the firm in terms of their skills knowledge, reasoning, and decision-making abilities

‘Source:-www mystrategicplan.com/resources/internal-and-external-analysis/

14

Capabilities: Such as financial management, expertise in strategic control, effectiveness in motivating and coordinating business units, management of partnerships, overall company, resource management, compreharsive and ciTective information system that can be used for managerial decision making Capacity in basic research, inmovation of new products, design capability, brand management and

promotion, promotion and exploiting reputation for quality, understand of and

responsiveness to market trends Hffectiveness in promoting and executing sales,

efficiency and speed of fulfillment, quality and effectiveness of customer service

Goal: To identify internal strategic strengths, weaknesses, problems

happen whether or nol a company's management, ig proactive, reactive or passive

about the on-gomg process of evolving a position But a company can positively influence the perceptions through enlightened strategic action

Positioning’ is critical to brand building because it is responsible for projecting the

brand identity and creating the perception and image of the brand in the people's

minds Tu other words, Positioning is process of offering the brand appears lo be

different and better than all competing brands

For a chosen target market segment, real estate enterprises need to select suitable

praduct positionng strategy Positioning’ is what the custamer believes about your

product's value, features, and benefis; il is a comparison to the other available

alternatives offered by the competition ‘hese beliefs tend to based on customer

experiences and evidence, rather than awareness created by advertising or promotion

“Source: Paul ‘Temporal, Branding in asia, revised cdilion, Saik Wah Press, 2000, p.103

* Source: www ezinearticles com/Product-Positioning-Strategies

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Branding is good for customer in that market segmentation, Positioning strategy need

to make remarkable different features, competitive attributes of enterprise’s products compared wilh the olher product which is the same, concurrently Cut different features are necessary for customer, indicates how the firm would like its product or brand to be perceived in the eyes and minds of the market target customers,

competitors are hard imitate, customer can pay for that differences

Withont a clear and strong positioning strategy, lots of time and money are spent in

vain - nol just marketing dollars If we can’t clearly articulate the positioning, and if

it doesn’t have real, meaningful differentiated value to the marketplace and our

organivalion, we are nol only drifling somewhal aimlessly our chances of real

8 success are greatly diminished’

1.6 TYPES OF MARKETING STRATEGY

Marketing strategies may differ depending on the unique situation of the individual business, However there are the ways of categorizing some generic sirategios A brie!

description of the most common categorizing schemes is presented below

* Source: www_proteusb2b com/b2b-marketing-blog

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1.6.1 MARKETING STRATEGY BASED ON PRODUCT LIFE CYCLE”

Figure 1.4: Product life cycle Turnover

Penetration period that begins by a new product is bought on the market

At this period, profit is negative or small because of low consumption, promotion and

distribution cost is very high Need to have amount of money for attractive partner

and distributors Promotion cost control the biggest of the sales” Due to having

promotion at high level for reporting implicit customer about new product and not

known Promote to try on product and ensure to distribute to retail outlet”

“Source: Philip Kotler, A Framework for marketing management, “Developing,

Positioning, and differentiating products through the life cycle”, second edition,

Prentice Hall Publishing, 2001, chapter.10

Only having several competitors and the product main models of that product, because market doesn’t require precise for goods, companies focus to sell their producl (or people who have demand, usually for high deem and groups Price is high because high cost is low productivity Problems about production technology isn’t own entirely and high level for assisting necessary big promotion cost before

obtaining development

Marketing strategies When company launch product out the market marketing inanagers can give out high or low level for marketing campaign, such as: Price, promotion, distribution and quality of product If only carry on price and promotion they follow strategies

- Crop fast skin on milk strategy: High price + strong promotion This strategy

suitable for market is implicit and don't know about product The company has implicit competition and desire create brand interesting

- Crop slowly skin on milk strategy: High price | weak promotion This strategy

suilable for orarket with small scale, All most of markel knows aboul thal product

Buyer pay for high price, implicit competition isn’t happened

- Fast ponetration strategy: Low price + strong promotion This strategy suitable for

large market, customer doesn’t know about product, buyer is sensitive with price,

implicit competition, the production cost of ura decreases when production scale

increase and accumulate production experience

= Slow penetration stralogy: Low price + weak promotion, This stralegy suitable for large market, buyer is sensitive with price and knows product and have implicit competition

Growth period

Tt is marked by increase mapidly sales Pioneer ike product, and customer buy thal

product Competitors penetrate market by high profit

18

This product, profit increase because of promote cost is allocated for amount of goods and the production cost per unit decrease in comparison with reduce rate by

experience curve

Marketing strategy: In this period, the company uses some strategies to lengthen fast

growth rate of the market as long as possible

> The company improve quality of product, add new use for product and immovale design

> ‘The company supplements new designs

>» Penetrating new market segmentations

> Advertising target is nol only fame but also convincemeril

>» Widen distribute scale and join new distribution chamels

> Cut the price to attract buyers who are sensitive price following

Saturation period

Saturation period can divide in to three stages: Fist stage, growth saturation Consumplion growth decrease, no new distribution chanel to reinloree, allhough ol

buyers are still attending to market

Sccond stage, stable saturation Consumption lne per capita is not change because the market is saturated, all most of implicit consumers used product and next consumption level depend on population growth and replace demand

Third stage, decline saturation: Absolute consumption begins decreasing; customers

change into other producls and by-product

Marketing strategy: At this period, some companies reject bad product They focus their resources for new and profitable product However, they defy big potential of old product, So that, marketer need to consider market strategies, product and improve marketing mix

Transform market

19

The company can increase customer by three ways:

> Changing attitude of the people who no use

> Penetrating new market segmentations

} Seize competitor’s customers

The company can increase volume by convincing the people using the product to rise

consume annual

> Using more regular

> Increase consume for each time

> New use and more profound

Transform product

Transform quality product is strategy to enhance feature of the product, such as: duration, reliability, speed, flavors

Innovation strategy to supplement new nature of the product, such as size, weight,

material and additive

Tnmovaling slyle strategy 1o merease product’s allraction

Transform Marketing mix: Product, price, promotion, and place

Recession period

Sales decrease because of progress of technology, taste of consume change and

competition increase rapidly

Profit, decrease, some compares withdraw market and olhers can cul down product

offer

Marketing strategy for this period:

3> Increasing investment capital of company (to comstrain or reinforce it” compelitive posilion}

© Maintain investment of the company till market is not clear

> Cut selective investment while withdraw bad market segmentations

> Harvest to lake back in cash

> Reject activities when has other opportunities

16.2 STRATEGIES BASED ON MARKET DOMINANCE - In this scheme,

firms are classified based on their market share cr dominance of an industry

‘Typically there are three types of market dominance strategies

Leader: The market leader strategy bas the largest market share, the right products

in the right markets, leads the price changes and introductions of products,

distribution coverage and promotional intensity In spite of having the best position in

the market, the leador needs to observe its competitors, their new products and trends

in order to protect their market share against the competitors The market leader

needs to find ways to expand the tolat market demand, protcet ils position [hrough

defensive or offensive actions and increase the company’s market share

Challenger: fhe market challenger strategy hos the companies that have the second, third and lower position at the market These companies can attack the market leader and other companies lo increase (heir market share, Il is not unusual that challenger companies take over the leader position

Vollower: The market follower strategy is by companies that offer products which

are substantially identical those of the market leader The market follower’s benefit is avoiding the costs of developmg new produvis A follower company canmet hope by

compete with the market leader superior products Therefore, it must offer better

service, location, price or some combination thereof

Niche-Player: The niche-player is in the same position as a market follower, but in smaller, specialized markets In some cases they may even be the market Jeader im

such a market

1.6.3 INNOVATION STRATEGIES - This deals with the firm's rate of the new product development and business model innovation It asks whether the company is

on the culting edge of technology and business inmovation Thore arc three types

1.7 SELECT MARKETING STRATEGY AND APPLICATION

1.7.1 BCG MODEL”

The BCG Matrix was created by The Boston Consulting Group and it became on of

the most well-known portfolio management Decision making tools in the early

1970’s It is based on product life cycle theory The BCG Matrix can be used to

determine what priorities should be given in the product portfolio of a business unit which will further help to decide which of the business units to fund, how much to

fund; and which units to sell To ensure long-term value creation, a company should

have a portfolio of products that contains both high-growth products in need of cash

inputs and low-growth products that generate a lot of cash

Figure 1.5: The BCG Matrix

Business | growth Invest rate |

Relative position (Market share)

“Source: Philip Kotler, A Framework for marketing management, second edition, Prentice Hall

Publishing, 2001, pp.61+

Stars are products or services where the company has a high market share and the market is growing ‘They should be invested in further to maintain the growth

Cash cows represent Ibose products in which the company has a high market share

but where the market is mature and slow growing or even declining, ‘hese products should be 'milked' to provide cash for investments in future product areas

Dogs are producls where the company has low markel share and where (he market itself is not growing ‘These should be dropped from the portfolio to release funds for

TmwestrnenlL im more aliraclive opportunities

Question marks are those products in which the company has low share but where the market is beginning to take off or has significant growth potential They need to

be watched closely and investment maintained to keep @ presence since they coukl become tomorrow's starts but equally the commitment should not be too high since they could also turn out ta be tomorrow's dogs!

1.7.1.1 BENEFITS OF THE BCG MATRIX

BCG model is helpful for managers to evaluate balance in the firm’s current portfolio

of Stars, Cash Cows, Question Marks and Dogs

It provides a base for management to decide and prepare for future actions

The model is simple and easy to undersiand,

1.7.1.2 LIMITATIONS OF THE BCG MATRIX

High market share is not the only success factor There is no clear definition of what

constilutes a & markel & quola The model uses only two dimensions — markel share and growth rate Lhis may tempt management to emphasize a particular

product, or to divest prematurely The model neglects small competitors that have

fast growing market shares

1.7.2 GE model

The GE / McKinsey matrix is business portfolio matrix showing relative business strength and industry attractiveness

The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit

Strength" whereas the BCG matrix uses the market growth rate as a proxy for

industry attractiveness and relative market share as a proxy for the strength of the

business unit,

The GE matrix" has nine cells vs four cells in the BCG matrix

Figure 1.6: General Electric-McKinsey Matrix

™ Source: Philip Kotler, A Framework for marketing management, second edition,

Prentice Hall Publishing, 2001, pp.63+

Industry attractivencss and business unit strength are calculated by first identifying criteria for each, determining the value of each parameter in the criteria, and multiplying thal value by a weighling factor The resull is a quanlitahve measure of industry attractiveness and the business unit's relative performance in that industry

Industry Attractiveness

The vertical axis of the GE / McKinsey matrix is industry attractiveness, which is

determined by factors such as the following:

Market growth rate

vvvwwvyvy Macro environmental factors (PEST)

Business Unit Strength

‘The horizontal axis of the GL / McKinsey matrix is the strength of the business unit

Some factors that can be used to determine business unit strength include:

Grow strong business units in attractive industries, average business units in attractive industries, and strong business units in average industries

>» Hold average businesses in average industries, strong businesses in weak industries, and weak business in attractive industries

> Harvest weak business units in unattractive industries, average business units

im unaltrachve industries, and weak business unils 1 average mdusinies,

‘Yhere are strategy variations within these three groups For example, within the harvest group the firm would be inclined to quickly divest itself of a weak business in

an unattractive industry, whereas it might perform a phased harvest of an average business unit in the same industry

While the GE business screen represents au improvement over the simpler BCG growth-share matrix, it still presents a somewhat limited view by not considering interactions among the business units and by neglecting to address the core competencies Ieading to value creation Rather than serving as the primary tool for resource allocation, portfolio matrices are better suited to displaying a quick synopsis

of the strategic business units

Market Penetration

Ilere we market our existing products to our existing customers This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on Llowever, the product is not altered and we do not seek any new

customers

Market Development

Ilere we market our existing product range in a new market This means that the

product remains the same, but it is marketed to a new audience Exporting the

product, or marketing it in a new region, is examples of market development

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Product Development

This is a new product to be marketed to our existing customers Here we develop and innovate new product offerings to replace existing ones Such products are then

marketed to our existing customers This often happens with the auto markets where

existing models are updated or replaced and then marketed to existing customers

Diversification

This is where we market completely new products to new customers There are two types of diversification, namely related and unrelated diversification Related diversification means that we remain in a market or industry with which we are familiar, For example, a soup manufacturer diversifies into cake manufacture (ie the food industry) Unrelated diversification is where we have neither previous industry

nor market experience For example a soup manufacturer invests in the rail busmess

Select strategy is implemented by means of programs, budgets, and procedures

Implementation involves organization of the firm’s resources and motivation of the staff to achieve objective The way in which the strategy is implemented can have a

significant impact on whether it will be successful

1.8 DEVELOPING MARKETING MIX

Marketing mix is a combination of marketing tools that are used to satisfy customers and company objectives The major marketing management decisions can be classified in one of the following four categories: Product, Price, Place, and

Promotion

Figure 1.7: The four Ps: Marketing mix

consumers A tangible product is one that consumers can actually touch, such as a

computer An intangible product is a service that cannot be touched, such as

computer repair, income tax preparation, or an office call

Typically, a product is divided into three basic levels The first level is often called the core product, what the consumer actually buys in terms of benefits Next is the second level, or actual product, that is built around the core product The actual product consists of the brand name, features, packaging, parts, and styling These

components provided the benefits to consumers that they seek at the first level The

final, or third, level of the product is the augmented component The augmented component includes additional services and benefits that surround the first two levels

of the product

Price

‘The second element in marketing mix is price Price is simply the amount of money

that consumers are willing to pay for a product or service In earlier times, the price

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was determined through a barter process between sellors and purchasers In modern times, pricing methods and strategies have taken a number of forms

Pricing new products and pricing existing products require the use of different

strategies For example, when pricing a new product, businesses can use either

market-penetation pricing or a price-skimming strategy A market-penetration

pricing strategy involves establishing a low product price to attract a large number of

customers Py contrast, a price-skimming strategy is used when a high price is

oslablished in order to recover the cost of a new product development as quickly as possible Manufacturers of computers, videocassette recorders, and other technical

ilems with high development costs frequerly use a price-skiruming stralegy

Pricing objeclives are established as a subsel of an organivation’s overall objectives

As a component of the overall business objectives, pricing objectives usually take one of four forms: profitability, volume, meeting the competition, and prestige Profitability pricing objectives mean that the firm focuses mainly on maximizing ils profit Under profitability objectives, a company inoreases its prices so that additional revenue equals the increase in product production costs Using volume pricing objectives, a company aims 1o maximize sales volume wilhin a given specific profit margin ‘the focus of volume pricing objectives is on increasing sales rather than on

an immediate increase in profits Meeting the price level of competitors is another

pricing siralegy With a meeting-he-compelilion pricing stralegy, the focus is less on

price and more on non-price competition items such as location and service With

prestige pricing, products are priced high and consumers purchase them as status symbols

Tn addition to the four basic pricing stralegies, Uhere are five price-adjuslment strategies: discount pricing and allowances, discriminatory pricing, geographical pricing, promotional pricing and psychological pricing Discount pricing and allowances include cash discounts, functional discounts, scasonal discounts, trade-in allowances, and promotional allowances Discriminatory pricing occurs when

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companies scll products or servicos at two or more prices, These price differences may be based on variables such as age of the customer, location of sale, organization membership, lime of day, or season, Geographical pricing is based on the location of the customers Products may be priced differently in distinct regions of a target area because of demand differences Promotional pricing happens when a company temporarily prices products below the list price or below cost Products priced below cost are sometimes called loss leaders ‘the goal of promotional pricing is to increase short-term sales Psychological pricing considers prices by looking at the psychological aspects of price For example, consumers frequently perceive a relationship between product price and product quality

Promotion

Promotion is the third element in the marketing mix Promotion is a communication process that takes place between a business and its various publics Publics are those individuals and organizations (hal have an interest in whal the business produces and

offers for sale ‘Thus, in order to be effective, busmesses need to plan promotional

activities with the communication process in mind The elements of the

communication process arc: sender, oncoding, message, media, decoding, recviver,

feedback, and noise ‘The sender refers to the business that is sendmg a promotional

message to a potential customer Encoding involves putting a message or

promotional activily mto some form Symbols are formed to represent the message

‘The sender transmits these symbols through some form of media Media are methods

the sender uses to transmit the message to the receiver Decoding is the pracess by

which the recciver translates the mearing of (he symbols sont by the sender into a form that can be understood The receiver is the intended recipient of the message

Feedback occurs when the receiver commmicates hack to the sender Noise is

anything (hal interferes will the communication process

There are four basic promotion tools; advertising, sales promotion, public relations, and personal selling ach promotion tool has its own unique characteristics and

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function For instance, advertising is described as paid, no personal communication

by an organization using various media to reach its various publics ‘The purpose of advertising 1 lo inform or porsuade # targeted audience to purchase # producl or service, visit a location, or adopt an idea Advertising is also classified as to its intended purpose The purpose of product advertising is to secure the purchase of the

product by consumers The purpose of institutional advertising is to promote the

image or philosophy of a company Advertising can be further divided into six subcategories: pioneering, competitive, comparative, advocacy, reminder, and

cooperalive advertising Pioneering advertising aims lo develop primary demand for

the product or product category Competitive advertising seeks to develop demand for a specific product or service Comparative advertising seeks to contrast one producl or service with another Advocacy advertising is an organizational approach designed to support socially responsible activities, causes, or messages such as

helping feed the homeless Reminder advertising seeks to keep a product ar company

name in the mind of consumers by iis repetitive wale Cooperative advertising occurs when wholesalers and retailers work with product manufacturers to produce a

single advertising campaign and share the costs Advantages of advertising include

the ability to reach a large group or andicnec at a relatively low cost per individual contacted Further, advertising allows organizations to control the message, which means the message can be adapted to either a mass or a specific target audience Disadvantages of advertising inchide difficulty in measuring results and the inability

to close sales because there is no personal contact between the organization and consumers

The second promotional tool is sales promotion Sales promotions are short-term

incentives used to cneourage corsumers Lo purchase a producl or sorviee There are three basic categories of sales promotion: consumer, trade, and business Consumer

promotion lools include such ilems as free samples, coupons, rebales, price packs,

premiums, patronage rewards, point-of-purchase coupons, contests, sweepstakes, and

games ‘Irade-promotion tools include discounts and allowances directed at

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wholesalers and retailers, Businoss-promotion tools include conventions and trade shows Sales promotion has several advantages over other promotional tools in that it

can produce a tore immediate consumer responac, aliracl more allenition and creale

product awareness, measure the results, and increase short-term sales

Public relations are the third promotional tool An organization builds positive public relations with various groups by obtaining favorable publicity, establishing a good

corporate image, and handling or heading off unfavorable rumors, stories, and events

Organizations have al their disposal a variety of (ools, such as press releases, product publicity, official communications, lobbying, and comseling to develop image

Public relations tools are effective in developing a posilive altitude toward the

organization and can enhance the credibility of a product Public relations activities

have the drawback that they may not provide an accurate measure of their influence

on sales as they are not directly involved with specilic markeling goals

The last promotional iool is personal selling Personal selling involves am interpersonal influence and information-exchange process ‘There are seven general steps in the personal selling process: prospecting and qualifying, pre-approach, approach, presentation and demoustwalion, handling objections, closing, and Lollow-

up Personal selling does provide a measurement of effectiveness because a more immediate response is received by the salesperson from the customer Another advantage of personal selling is that salespeople can shape the infomation presented

to fit the needs of the customer Disadvantages are the high cost per contact and dependence on the ability of the salesperson

For a promotion to be effective, organizations should blend all four promotion tools

together in order to achieve the promotional mx The promotional mix can be influenced by a number of factors, including the product itself, the product life-cycle

slage, and budget Within the promotional mix there are (wo prontotional strategies:

pull and push Pull strategy ocours when the manufacturer tries to ostablish final consumer demand and thus pull the product through the wholesalers and retailers

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Advertising and sales promotion aro most frequently used in a pulling strategy, Pushing strategy, in contrast, ocours when a seller tries to develop demand through

mecntives lo wholesalers and retailers, who i tum place the product im front of

consumers

Place

The fourth clement of the marketing mix is place Place refers to having the right product, in the right location, at the right time to be purchased by consumers This proper placement of products is done through middle people called the channel of distribution Tho channel of distribution is comprised of interdependent manufacturers, wholesalers, and retailers These groups are involved with making a product or service available for use or consumption Rach participant in the chanel

of distribution is concemed with three basic utilities: time, place, and possession

‘Time utility refers to having a product available at the time that will satisfy the needs

of consumers Place ulility occurs when a finn provides satisfaution by locating products where they can be easily acquired by consumers The last utility is possession utility, which means that wholesalers and retailers in the channel of

distribution provide services lo consumers with as few obstacles as possible

Evaluation and Contra)

The implementation of the stralegy must be momiored and adjustments made as

needed

There are four controls: Annual-plan control, Profitability control, Efficiency control,

Strategic control

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