Project 1

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Project 1
Marketing Analysis Research (MAR3613) By
Kanghyun Yoon

• Environmental Analysis

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Strategic Planning Process

• Strategic Planning involves developing an overall
  company strategy for long-run survival and growth
  (Kotler 2004).
• This process involves
• Defining a Mission Statement of an
  organizations purpose should be market
  oriented.
• Setting Company Objectives Supporting goals and
  objectives to guide the entire company.
• Designing a Business Portfolio Collection of
  businesses and products that make up the company.
• Planning Functional Strategies Detailed planning
  for each department designed to accomplish
  strategic objectives.

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Marketing Management Process

• Stage 1 Identifying business opportunities or
  problems.
• Designing business portfolio to identify business
  opportunities or problems.
• Implement SWOT analysis to diagnose the strategic
  fit between companys capabilities to serve its
  customers and the changing market environment.
• Stage 2 Market Segmentation, targeting, and
  positioning.
• Dividing the total product market into some
  segments that have homogeneous needs and choosing
  the best segment(s) to serve.
• Identify possible competitive advantages of its
  product using market positioning strategy.
• Stage 3 Understanding the customers.
• Requiring careful customer analysis since
  companies cant serve profitably all customers.
• Stage 4 Developing a marketing mix.
• Designing a competitive marketing strategy by
  blending product, price, promotion, and place
  tools.
• Stage 5 Managing the marketing efforts.
• Measuring and evaluating the results of marketing
  strategies and plans.

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Marketing Management Process
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Stage 1Identifying business opportunities and/or
problems
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SWOT Analysis

• The starting point toward identifying business
  opportunities or problems is
• To monitor some environmental factors, as
  opportunities or threats, from the constantly
  changing market environment that affect the
  companys ability to serve its customers.
• Three important tools for environmental analysis
• SWOT analysis
• Portfolio analysis with BCG or GE matrix
• Market potential assessment or demand forecasting
• SWOT analysis consists of
• internal capabilities of company Strengths and
  Weaknesses
• external uncontrollable factors Opportunities
  and Threats
• The goal of SWOT analysis
• Identify business/marketing opportunities or
  problems from environmental analysis.
• Find the best strategic fit between companys
  capabilities and its changing market environment
  to serve customers effectively.

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Macro-Environmental Factors

• Forces that shape opportunities and pose threats
  to a company
• Demographic - monitors changing nature of
  population in terms of age, sex, race,
  occupation, location and other statistics.
• Economic - factors that affect consumer buying
  power and spending patterns.
• Natural - natural resources needed as inputs by
  marketers or that are affected by marketing
  activities.
• Technological - forces that create new product
  and market opportunities.
• Political - laws, agencies and groups that
  influence or limit marketing actions.
• Cultural - forces that affect a societys basic
  values, perceptions, preferences, and behaviors.

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Business Portfolio Analysis

• What is Business Portfolio?
• The collection of businesses and products that
  make up the company.
• Designing the best business portfolio that fits
  the companys strengths and helps exploit the
  most attractive opportunities.
• The company must
• analyze its current business portfolio and make
  investment decisions for each business,
• develop growth strategies for adding new products
  and businesses to the portfolio, whilst at the
  same time deciding when products and businesses
  should not longer be retained.
• Two best-known methods
• Boston Consulting Group (BCG) matrix and General
  Electric (GE) matrix
• Key assumptions for BCG matrix
• The objective is cash balance.
• Market share has a direct effect on
  profitability.
• Cash flow can be predicted by the position and
  direction of the business.
• High-growth markets are more attractive.

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Examples of BPA (I)
Boston Consulting Group Approach

Relative Market Share High
Low

• Question Marks
• High growth, low share
• Build into Stars/ phase out
• Requires cash to hold
• market share

• Stars
• High growth share
• Profit potential
• May need heavy
• investment to grow

Market Growth Rate Low High

• Cash Cows
• Low growth, high share
• Established, successful
• SBUs
• Produces cash

• Dogs
• Low growth share
• Low profit potential

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Examples of BPA (II)
GE Strategic Business-Planning Grid
Industry Attractiveness
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Boston Consulting Group Matrix

• Two dimensions of BCG matrix
• Market growth rate it indicates a measure of
  market attractiveness.
• Relative market share it serves as a measure of
  SBU strength, against competitors, in the market.
• Four quadrant in the matrix
• Question marks refer to businesses that have
  relatively weak market shares in fast growing
  markets.
• Build Share strategy increase market share
  with investment
• Stars are businesses that have strong market
  shares in fast-growth markets.
• Hold strategy need heavy investment to sustain
  their growth.
• Cash cows are businesses that have dominant
  shares in slow- or no-growth markets.
• Harvest strategy maximize short-term cash
  flows and profits from the SBU.
• Dogs refer to businesses that have relatively
  weak market shares in slow- or no-growth markets.
  
• Divest strategy divest SBU by phasing it out
  or selling it.

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How to Draw BCG Matrix?

• Stage 1 Identify the various Strategic Business
  Units (SBUs) to design a company portfolio.
• Those can be businesses or products or brands.
• Stage 2 Collect secondary data to calculate MGR
  and RMS.
• Market growth rate (MGR)
• Relative market share (RMS) MS of my SBU / MS
  of top competitor.
• Stage 3 Locate the position of each SBU in a BCG
  matrix.
• Size of circle of each SBU indicates the relative
  volume of each SBU in dollar unit.
• Stage 4 Recommend some strategic points.
• Diagnose current condition of the company.
• Suggest some recommendations of what the company
  should do.

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Measuring and Forecasting Demand

• To develop effective targeting strategies and to
  manage the marketing efforts effectively
• measuring current market size and forecasting
  future demand are required.
• Overly optimistic estimates ? costly overcapacity
  or excess inventories.
• Underestimating market demand ? missed sales and
  profit opportunities.
• Five major uses of market demand
• 1) To answer what if questions 2) to help set
  budgets 3) to make resource allocation decisions
  over the product life cycle 4) to set objectives
  and evaluate performance 5) to make market
  entry/exit decision.
• Three concepts to understand
• 1) Market potential (e.g., what the company might
  or could achieve).
• 2) Market forecast (e.g., what the company
  probably will achieve).
• 3) Market minimum (quota) (e.g., what the company
  should achieve).
• A critical part of forecasting
• A key assumption Forecasts depend on a set of
  conditions.

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Forecasting Methods of Demand

• Estimating current market potential
• Total market potential method (Lilien and Kotler
  1983)
• Chain-ratio method (Ackoff 1970)
• Forecasting future demand
• Judgmental method
• Naïve extrapolation, sales force composite,
  delphi, executive opinion.
• Market survey analysis
• Buyer purchase intentions, product tests via
  market testing.
• Time series analysis
• Naïve methods, moving averages, exponential
  smoothing, Box-Jenkins method, decompositional
  methods, regression method.
• Causal analysis
• Regression method, econometric models,
  input-output analysis, new-product forecasting,
  leading indicators.
• This project will use either total market
  potential or chain-ratio method for assessing
  current market potential or regression method for
  forecasting future demand.

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Estimating Current Market Potential

• Both methods depend on the potential users or
  buyers of the product.
• Step 1 Determine the potential buyers or users
  of the product.
• Step 2 Estimate the purchasing or usage rate.
• Step 3 Find the average price of a unit of the
  product.
• Total Market Potential Method
• Q n X q X p
• Q total market potential, n number of buyers
  in the market, q quantity purchased by an
  average buyer per year, and p price of an
  average unit.
• Chain-Ratio Method
• Q Total number of U.S. households
• X the percentage of U.S. households
  containing one or
• more serious amateur photographers
• X the percentage of these household owning a
  personal computer
• X the percentage of PC-owning households
  with enough discretionary
• income to buy Sonys new digital camera.

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Forecasting Future Demand

• Regression Method
• Key assumptions Sales are time-dependent or can
  be explained with the causal relationships among
  the identified variables.
• Historical data of both dependent and independent
  variables are used for estimating future demand.
• Steps for Using Regression Method
• Step 1 Plot sales over time to identify the
  trend of sales performance.
• Step 2 Specify a causal relationship with the
  identified relevant variables linear or
  non-linear relationship.
• Identify variables regarding customers, marketing
  plans, competitive behaviors, and/or market
  environment.
• Step 3 Gather the historical data for dependent
  and independent variables.
• Step 4 Use the regression command in SPSS
  program to estimate the value of the parameters
  in regression equation.
• Step 5 Prepare the estimated equation - Y â
  b1X1 b2X2.
• Step 6 Prepare the values of X variables and
  plug those into the regression equation to get
  the forecast of Y.

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Reference

• Day, George S. (1986), Analysis for Strategic
  Market Decisions, West Publishing Company. (see
  chapter 6)
• Kotler, Philip (1997), Principles of Marketing
  Management Analysis, Planning, Implementation,
  and Control, 9th ed., Prentice Hall. (see chapter
  9)
• Kotler, Philip and Gary Armstrong (2004),
  Principles of Marketing, 10th ed., Prentice Hall.
  (see chapter 8)
• Lehmann, Donald R. and Russell S. Winer (2005),
  Analysis for Marketing Planning, 6th ed.,
  McGraw-Hill. (see chapter 6)
• McDaniel, Carl and Roger Gates (2004), Marketing
  Research Essentials, 4th ed., John Wiley Sons,
  Inc.
• Urban, Glen L. and John R. Hauser (1993), Design
  and Marketing of New Product, 2nd ed.,
  Prentice-Hall. (see chapters 8-11)
• Zikmund, William G. (2003), Essentials of
  Marketing Research , 2nd ed., Thomson
  South-Western.