Marketing strategy for real estate product - The case of Vinaconex

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Do Van Dan MARKETING STRATEGY FOR REAL ESTATE PRODUCT THE CASE OF VINACONEX MASTER OF BUSINESS ADMINISTRATION THESIS Hanoi – 20

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Do Van Dan

MARKETING STRATEGY FOR REAL ESTATE PRODUCT

THE CASE OF VINACONEX

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi – 2010

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Do Van Dan

MARKETING STRATEGY FOR REAL ESTATE PRODUCT

THE CASE OF VINACONEX

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisors: Dr Tran Đoan Kim

Hanoi – 2010

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENTS vi

LIST OF FIGUGES vi

LIST OF TABLE x

LIST OF ABBREVIATIONS xi

INTRODUCTION 1

1 THE RATIONALE 1

2 RESEARCH QUESTION 2

3 SCOPE OF WORK 2

4 DATA SOURCES AND PROCESSING 2

5 RESEARCH METHODOLOGY 3

6 SIGNIFICANCE 3

7 LIMITATIONS 3

8 EXPECTED RESULTS 3

9 STRUCTURE OF THE THESIS 3

CHAPTER 1 THEORETICAL FOUNDATION 5

1.1 MARKETING STRATEGY 5

1.1.1 WHAT IS MARKETING STRATEGY 6

1.1.2 THE MARKETING STRATEGY PROCESS 6

1.2 THE IMPORTANCE OF MARKETING STRATEGY TO REAL ESTATE 7

1.3 ENVIRONMENT ANALYSIS 7

1.3.1 EXTERNAL ENVIRONMENT ANALYSIS Error! Bookmark not defined 1.3.2 INTERNAL ANALYSIS 10

1.3.3 INDUSTRY ANALYSIS Error! Bookmark not defined 1.4 MARKET SEGMENTS AND SELECTING TARGET MARKET 10

1.5 POSITIONING 15

1.6 TYPES OF MARKETING STRATEGY 16

1.6.1 MARKETING STRATEGY BASED ON PRODUCT LIFE CYCLE 17

1.6.2 STRATEGIES BASED ON MARKET DOMINANCE 21

1.6.3 INNOVATION STRATEGIES 22

1.6.4 GROWTH STRATEGIES 22

1.7 SELECT MARKETING STRATEGY AND APPLICATION 23

1.7.1 BCG MODEL 23

1.7.1.1 BENEFITS OF THE BCG MATRIX 24

1.7.1.2 LIMITATIONS OF THE BCG MATRIX 24

1.7.2 GE MODEL 25

1.8 DEVELOPING MARKETING MIX 28

CHAPTER 2 STATUS OF VINACONEX’S MARKETING STRATEGY PLANNING 35

2.1 BACKGROUND 35

2.1.1 GENERAL INTRODUCTION 35

2.1.2 ORGANIZATIONAL STRUCTURE 36

2.1.3 BUSINESS OPERATION 37

2.1.4 CAPABILITIES 37

2.2 SCANNING THE ENVIRONMENT 38

2.2.1 EXTERNAL ENVIRONMENT 46

2.2.2 HANOI REAL ESTATE MARKET OVERVIEW 38

2.3 INDUSTRY ANALYSIS 55

2.4 INTERNAL ENVIRONMENT 58

2.4.1 FINANCIAL RESOURCES 58

2.4.2 MATERIAL RESOURCES 58

2.5 SEGMENT AND SELECT TARGET MARKET OF VINACONEX 60

2.6 POSITIONING 61

2.7 LIFE CYCLE FOR REAL ESTATE PRODUCT 65

2.8 BCG AND GE MODEL 69

2.9 STATUS VINACONEX’S MARKETING STRATEGY 72

CHAPTER 3 SELECT MARKETING STRATEGY FOR VINACONEXS’ REAL ESTATE PRODUCT 73

3.1 SETTING UP A FULLY MARKETING DEPARTMENT 73

3.2 CLOSE COORDINATION WITH OTHER DEPARTMENT TO IMPLEMENT THE SELECTED STRATEGY 74

3.3 SEGMENT AND SELECT TARGET MARKET OF VINACONEX 75

3.3.1 MAJOR FACTORS FOR HOME BUYING DECISION 75

3.3.2 SEGMENTATION 76

3.3.3 SELECT TARGET MARKET 81

3.4 SOME WAYS TO IMPLEMENT THE MARKETING STRATEGY 81

3.5 MARKETING STRATEGIES FOR VINACONEX 82

3.5.1 INVESTMENT AND BUSINESS TRADE CENTER 82

3.5.2 OFFICE FOR LEASE 84

3.5.3 NEW URBAN AREA 87

3.6 ANSOFF STRATEGIC MODEL WITH MARKET - PRODUCT 96

3.7 EVALUATION AND CONTROL 97

3.7.1 ANNUAL-PLAN CONTROL 97

3.7.2 PROFITABILITY CONTROL 98

3.7.3 EFFICIENCY CONTROL 98

3.7.4 STRATEGIC CONTROL 98

CONCLUSION 100

REFERENCES 101

APPENDIX 103

LIST OF FIGUGES

Figure 1.1: Marketing Process 5

Figure 1.2: The Marketing Strategy Process 6

Figure 1.3: The Five Forces model of Michael E Porter 11

Figure 1.4: Product life cycle 17

Figure 1.5: The BCG Matrix 23

Figure 1.6: General Electric-McKinsey Matrix 25

Figure 1.7: The four Ps: Marketing mix 29

Figure 2.1: VINACONEX Organizational Chart 36

Figure 2.2: Chart on forecasting urbanization growth rate 49

Table 2.1 Hanoi’s population from 2006 – 2009 49

Figure 2.3: Hanoi year to date GDP (% y-o-y Growth Rate) 51

Figure 2.4: Hanoi FDI – Projects (Million USD) 52

Figure 2.5: CPI Growth Rate by Quarter (% y-o-y) 52

Figure 2.6: Vietnam’s Inflation Rate and prediction 53

Figure 2.7: Vietnam stock market 53

Figure 2.8: Supply about residential for sales 40

Figure 2.9: Capital Value and Demand 42

Figure 2.10: Vocancy Office Rate 43

Figure 2.11: Retail Market Supply 44

Figure 2.12: Hotel Occupancy Rate 45

Figure 2.13: Supply about office for lease 65

Table 2.4: Future trade center supplier 66

Figure 2.14: Supply about new urban area 67

Figure 2.15: Hotel occupancy rate 68

LIST OF TABLE

Table 2.1 Hanoi’s population from 2006 – 2009 49

Table 2.2: Human resources 59

Table 2.3: Position of VINACONEX compares with competitors 61

Table 2.4: Future trade center supplier 66

LIST OF ABBREVIATIONS

WTO Word Trade Organization

VINACONEX Vietnam Construction and Import – Export Joint Stock

Corporation

ISO 9001: 2000 International Standard Organization 9001 : 2000

FDI Foreign Direct Investment

GDP Gross Domestic Product

CPI Consumer Price Index

SBU Strategic Business Unit

CBRE CB Richard Ellis

CBD Central Business District

ADR Associate Director of Research

SBV State Bank of Vietnam

INTRODUCTION

1 THE RATIONALE

Marketing strategy is the key to obtain the success in business and to be an active approach way Marketing strategy consists of target market; analyze customer’s demand, competitors, micro environment, macro environment, strength and weakness

of the firm

Marketing strategy also consists of marketing objectives, positioning 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 target

The best way, we can access to develop the strategy to 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 absolutely 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 companies 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 marketing purely paste on poster advertising, send the letter, postcard with connective 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, financial, 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 products The real estate market is opening soon under accession to WTO of Viet Nam There are more and more foreign investors showing interest in Vietnamese emerging market and domestic companies have also discovered the lucrative of this field In the past, VINACONEX was still successful without any strategic planning because the market was still under the control of the government and doing business in 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 VINACONEX must also change

It is, therefore, necessary to conduct a study on real estate product to deploy marketing strategy for VINACONEX

2 RESEARCH QUESTION

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

 Time: The marketing strategy of VINACONEX 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

4 DATA SOURCES AND PROCESSING

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

information, which has been collected directly from VINACONEX Corporation and through other 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 strategy

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

Chapter 3: Recommended marketing strategy for VINACONEX Corporation

CHAPTER 1 THEORETICAL FOUNDATION 1.1 MARKETING STRATEGY

According to Philip Kotler, enterprise’s mission provides value for market how profit Sothat, marketing process1 consists of analyzing marketing

oppotunities, researching and selecing target markets, designing marketing

strategies, planning marketing programs, and organizing, implementing, and

controlling the marketing effort

Figure 1.1: Marketing Process

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 experience and core

competencies To evaluate its various opportunities, assess buyer needs, and gauge

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

firm studies customer markets or business markets to find out 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

Product Develop ment Service

Develop

ment

Pricing

Sourcing Making

Distribution

&

Servicing

Sales force

Sales Promotion

Advertising

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 management process2 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

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

Economic 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 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

macro-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 etc

 Psychographics: Life style, values, and personality, etc

 Behavioral segmentation: Typically done first, occasion, benefits, loyalty

status, and attitude toward the product

1.3.4 SELECTING TARGET MARKET3

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 earn a high return on investment However, concentrated marketing involves risk The segment may turn sour because of changes in buying pattern 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

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 Porter4 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 competitive forces

Figure 1.3: the Five Forces model of Michael E Porter

Bargaining Power of Buyers

Threat of Substitute Products

Threat

Of New Entrants

Rivalry Among Existing Competitors

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, learning 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

 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

1.4 INTERNAL ANALYSIS

The internal analysis5 of strengths and weaknesses focuses on internal factors that give an organization certain advantages and disadvantages in meeting the needs 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 (?) Weaknesses should also

be examined from a customer perspective because customers often perceive weaknesses that a company cannot see Being market focused when analyzing strengths and weaknesses does not mean that non-market oriented strengths and weaknesses should be forgotten Rather, it suggests that all firms should tie their 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 look at all internal 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 easiest to identify and evaluate: Financial resources and physical assets are identifies and valued in the firm’s financial statements

Intangible resources are largely invisible, but over time become more important to 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)

Human resources or human capital are the productive services human beings offer the firm in terms of their skills, knowledge, reasoning, and decision-making abilities

5

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

Capabilities: Such as financial management, expertise in strategic control,

effectiveness in motivating and coordinating business units, management of partnerships, overall company, resource management, comprehensive and effective information system that can be used for managerial decision making Capacity in basic research, innovation of new products, design capability, brand management and promotion, promotion and exploiting reputation for quality, understand of and responsiveness to market trends Effectiveness in promoting and executing sales, efficiency and speed of fulfillment, quality and effectiveness of customer service

Goal: To identify internal strategic strengths, weaknesses, problems

1.5 POSITIONING

Positioning is something (perception) that happens in the minds of the target market

It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category It will happen whether or not a company's management is proactive, reactive or passive about the on-going process of evolving a position But a company can positively influence the perceptions through enlightened strategic action

Positioning6 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 In other words, Positioning is process of offering the brand appears to be different and better than all competing brands

For a chosen target market segment, real estate enterprises need to select suitable product positioning strategy Positioning7 is what the customer believes about your product's value, features, and benefits; it is a comparison to the other available alternatives offered by the competition These beliefs tend to based on customer experiences and evidence, rather than awareness created by advertising or promotion

6

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

7

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

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

to make remarkable different features, competitive attributes of enterprise’s products compared with the other product which is the same, concurrently that 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

Without a clear and strong positioning strategy, lots of time and money are spent in vain - not 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 organization, we are not only drifting somewhat aimlessly, our chances of real success are greatly diminished8

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 strategies A brief description of the most common categorizing schemes is presented below:

8

Source: www.proteusb2b.com/b2b-marketing-blog

1.6.1 MARKETING STRATEGY BASED ON PRODUCT LIFE CYCLE9

Figure 1.4: Product life cycle

Penetration period

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‖

\9Source: 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 product for 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

managers 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 suitable for market with small scale, All most of market knows about that product Buyer pay for high price, implicit competition isn’t happened

- Fast penetration 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 unit decreases when production scale increase and accumulate production experience

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

Growth period

It is marked by increase rapidly sales Pioneer like product and customer buy that product Competitors penetrate market by high profit

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 innovate design

 The company supplements new designs

 Penetrating new market segmentations

 Advertising target is not only fame but also convincement

 Widen distribute scale and join new distribution channels

 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

Consumption growth decrease, no new distribution channel to reinforce, although old buyers are still attending to market

Second stage, stable saturation: Consumption line 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 products 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

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

Innovating style strategy to increase product’s attraction

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

Marketing strategy for this period:

 Increasing investment capital of company (to constrain or reinforce it’ competitive position)

o Maintain investment of the company till market is not clear

 Cut selective investment while withdraw bad market segmentations

 Harvest to take back in cash

 Reject activities when has other opportunities

1.6.2 STRATEGIES BASED ON MARKET DOMINANCE - In this scheme,

firms are classified based on their market share or dominance of an industry Typically there are three types of market dominance strategies

Leader: The market leader strategy has 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 leader 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 total market demand, protect its position through defensive or offensive actions and increase the company’s market share

Challenger: The market challenger strategy has the companies that have the second,

third and lower position at the market These companies can attack the market leader and other companies to increase their market share It is not unusual that challenger companies take over the leader position

Follower: 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 developing new products A follower company cannot hope to 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 leader in 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 cutting edge of technology and business innovation There are three types:

 Pioneers

 Close followers

 Late followers

1.6.4 GROWTH STRATEGIES - In this scheme we ask the question, ―How should

the firm grow? There are a number of different ways of answering that question, but the most common gives four answers:

1.7 SELECT MARKETING STRATEGY AND APPLICATION

1.7.1 BCG MODEL 10

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

10

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 those products in which the company has a high market share

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

Dogs are products where the company has low market share and where the market

itself is not growing These should be dropped from the portfolio to release funds for investment in more attractive 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 a presence since they could become tomorrow's starts — but equally the commitment should not be too high since they could also turn out to 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 understand

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 constitutes a & market & quota The model uses only two dimensions – market share and growth rate This 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 matrix11 has nine cells vs four cells in the BCG matrix

Figure 1.6: General Electric-McKinsey Matrix

11

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

Prentice Hall Publishing, 2001, pp.63+

Business Unit Strength

High

Medium

Low

Successful Area

Question Area

Acceptable Area

Failure Area Profitable

Selectivity/manage for earnings

Manage for earning

Industry

Attractiveness

Industry attractiveness and business unit strength are calculated by first identifying criteria for each, determining the value of each parameter in the criteria, and multiplying that value by a weighting factor The result is a quantitative 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

 Macro environmental factors (PEST)

Business Unit Strength

The horizontal axis of the GE / 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

in unattractive industries, and weak business units in average industries There 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 an 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 leading 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

Here 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 However, the product is not altered and we do not seek any new customers

Market Development

Here 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

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 (i.e the food industry) Unrelated diversification is where we have neither previous industry nor market experience For example a soup manufacturer invests in the rail business

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

Product

The first element in the marketing mix is the product A product is any combination

of goods and services offered to satisfy the needs and wants of consumers Thus, a product is anything tangible or intangible that can be offered for purchase or use by 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

was determined through a barter process between sellers 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-penetration pricing or a price-skimming strategy A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers By contrast, a price-skimming strategy is used when a high price is established in order to recover the cost of a new product development as quickly as possible Manufacturers of computers, videocassette recorders, and other technical items with high development costs frequently use a price-skimming strategy

Pricing objectives are established as a subset of an organization'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 its profit Under profitability objectives, a company increases its prices so that additional revenue equals the increase in product production costs Using volume pricing objectives, a company aims to maximize sales volume within 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 strategy With a meeting-the-competition pricing strategy, 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

In addition to the four basic pricing strategies, there are five price-adjustment strategies: discount pricing and allowances, discriminatory pricing, geographical pricing, promotional pricing and psychological pricing Discount pricing and allowances include cash discounts, functional discounts, seasonal discounts, trade-in allowances, and promotional allowances Discriminatory pricing occurs when

companies sell products or services at two or more prices These price differences may be based on variables such as age of the customer, location of sale, organization membership, time 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 that have an interest in what the business produces and offers for sale Thus, in order to be effective, businesses need to plan promotional activities with the communication process in mind The elements of the communication process are: sender, encoding, message, media, decoding, receiver, feedback, and noise The sender refers to the business that is sending a promotional message to a potential customer Encoding involves putting a message or promotional activity into 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 process by which the receiver translates the meaning of the symbols sent by the sender into a form that can be understood The receiver is the intended recipient of the message Feedback occurs when the receiver communicates back to the sender Noise is anything that interferes with the communication process

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

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 is to inform or persuade a targeted audience to purchase a product 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 cooperative advertising Pioneering advertising aims to 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 product 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 or company name in the mind of consumers by its repetitive nature 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 audience 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 include 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 encourage consumers to purchase a product or service There are three basic categories of sales promotion: consumer, trade, and business Consumer promotion tools include such items as free samples, coupons, rebates, price packs, premiums, patronage rewards, point-of-purchase coupons, contests, sweepstakes, and games Trade-promotion tools include discounts and allowances directed at