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A. Market
The organization can analyze and approach its market in two primary ways. It may
choose to sell everyone in the market, aggregating all types of customers in to one
mass market, or it can choose to segment a large market in to smaller groups.
1. Mass Marketing
The starting point of auditing the market is mass marketing. It is appropriate when
demand is homogeneous, or every potential customer has same basic needs that can
be satisfied in the same basic way for all. Here the market uses one marketing mix for
all customers in hope that every one shall buy its product or services.
A mass marketing strategy can be applied successfully where customers’ want and
need are similar across the market, goods and services that can be standardized and
customers are expected to respond in the similar fashion to the marketing programs.
The argument for mass marketing is that it creates the large potential market, which
leads to the lower cost, which in turn can lead to lower prices or higher margins.
However, many critics point to the increasing splintering of the market, and the
proliferation of the advertising media and distribution channels, which are making it
difficult and increasingly expensive to reach a mass audience. That is the reason,
most companies are turning in to micro marketing at one of four levels:
2. Segment Marketing
It consists of a group of customers who share a similar set of needs and want. Rather
than creating the segment, the marketer’s task is to identify them and decide which
one (s) to target, followed by positioning of its products and services.
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Here the company can offer better design, price disclose, and deliver the products and
services and also can fine-tune the marketing program and activities to better reflect
competitor’s marketing mix.
It can be characterized the market segment in three different ways:
a. Preference Segment: It exists, when all consumers have roughly the same
preference; the market shows no natural segment.
b. Diffused Segment: Here the consumers vary greatly in their preferences.
c. Cluster Segment: It results when natural market segments emerge from
groups of consumers with standard preferences.
3. Niche Marketing:
A niche is a more narrowly defined customer group seeking a distinct mix of benefits.
Marketers usually identify niches by dividing the segment in to sub segment. Here the
customers have a distinct set of needs; they will pay a premium to the firm that best
satisfies them’ the niche is fairly small but has significant size, profit, and growth
potential and is unlikely to attract many other competitors; and the nicher gain certain
economies through specialization.
4. Local Areas
Target marketing is leading to marketing programs tailored to the needs and wants of
the local customer groups in trading areas, neighborhood, and even individual stores.
Retail firms such as Starbucks, Costco have all found great success emphasizing local
marketing initiatives.
Citibank provides different mixes of banking services in its branch, depending upon
the local neighborhood demographics
Local marketing reflects a growing trend called grassroots marketing. Marketing
activities concentrate on getting as close and personally relevant to individual
customers as possible.
Much of Nike’s initial success comes from engaging target consumers through grass
root marketing such as sponsorship of local school teams, local clubs etc.
5. Individual
The ultimate level of segmentation leads to “segment of one” or “One-to-one
marketing”. It is because of the changing trend of the customers for taking more
individual initiatives in determining what and how to buy. They are logging on to
internet, looking up information and evaluation of products or services offers;
conduct dialogue with suppliers, users, and product specialists or critics; and in many
cases design the product and services they want (Product specification)
Bases of Segmentation
i. Geographic Segmentation
ii. Demographic Segmentation
iii. Psychographic segmentation
iv. Behavioral segmentation
(Ref: Philip Kotler Kevin Lane Keller, “Marketing management”, 13th edition, 2009, PHI
Learning Pvt. Ltd, India, p-208)
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B. Supplier
Here three things shall be analyzed. I.e.
1. What is the difference between suppliers and distributors?
2. How are suppliers affecting internal business environment in marketing plan?
3. What is the Service that Supplier could provide you with?
Supplier: is the place (or organization) that is going to supply the company with
the raw materials that one need to create (manufacture) the products.
c. Supply record
Before you deal with supplier, you need to know if they have experience
in the sector you want to introduce your product in. If that supplier has a
good experience, is it has a good record as a supplier in that sector?
Liquidity and financial stability: you prefer dealing with suppliers who
have a good liquidity and financial stability, because this means that they
will deliver you with the raw materials continuously (so your product will
be maintained in the market, no out of stock).
d. New entrants in to the supply chain
e. The selection of the supplier
Let us analyze the below mentioned matrix to know which supplier should be
dealt with.
Now question arises that what are the services that the supplier could provide.
To answer this, the supplier could get a raw materials of high quality or low
quality, the time of delivery of those materials may differs, innovation of the
supplier, warranty is provided or not, quality of delivery, how they respond in
critical situations, record of experience in the sector and with one’s company.
This should be the second choice if one didn't find a supplier that provide low cost but
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providing high service quality, most of the high service quality's' suppliers ask the high
price for their Service quality. Generally one should invest in getting the best service
quality from your suppliers.
C. Customers
Before starting the discussion, let us raise a couple of questions related to customer.
That is;
Did we know why the marketing word or the concept has been created? And why the
organizations are shifting their marketing strategies from selling to marketing?
To answer these, marketers started to think differently when they discovered that they
need to create, develop or release a product that really met customers’ needs. And
hence, the marketers stated to search for their customers’ needs, selecting them
carefully and developing products that satisfy those customers.
The previous process called segmentation and targeting marketing strategies. So the
first step in customers' need analysis is to market segmentation marketing
strategy and targeting marketing strategy.
D. Stakeholders
To understand factors affecting internal business environment of marketing plan,
it is needed to understand and learn about different types of stakeholders,
stakeholders’ classifications and how to deal with each types of stake holders.
Internal Stakeholders are the individuals who are working in the company; Managers
and employees. This type of stakeholders get share of the company business when they
spend certain no. of working years in the company. Their share increase gradually every
year they work in the company.
Connected Stakeholders:
They are called 'connected' stakeholders because they are the organizations or individuals
who aren't working inside the company but their business in directly relevant to the
company, so they became connected to the company's business.
ii. Suppliers (who supply the business with the raw materials being needed).
iii. Customers (Customers are connected to the business, because they can give the
company the reputation and word of mouth to their friends and families).
iv. Creditors (who give the money or services in advance to the company, like banks
and financial institutions).
External Stakeholders:
They are the individuals or corporate who are totally outside your company's business but
they have a power in decision making process and have the right to make decisions and
gain a profit from your company; this is either through their money investment
(organization who buy a share in your company) or due to the service they provided for
your company.
Those stakeholders are:
i. Local Government as stakeholder type
ii. Central Government as stakeholder type
iii. Environmental Groups (Pressure groups like Human rights community)
as stakeholder type
iv. Local Community as stakeholder type
v. Media as stakeholder type
vi. Financial Analysts as stakeholder type
vii. The following illustration will help you to understand all types
of stakeholders.
Figure: Stakeholders
E. Competitors
For understanding the different competitive forces that affect the marketing strategy,
it is needed to understand:
A. What is Porter’s five force model Used For? (Ref: Porter's five Forces that Shape
Strategy)
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Porter’s Five Forces are the five critical factors that could force your business to the
extremes; Porter's Five Forces are focusing on Five Issues:
Force-1: Rivalry among Existing Competitors: The Competition in the same
industry
Force-2: Bargaining Power of Buyers: Buyers
Force-3: Bargaining Power of Suppliers: Suppliers
Force-4: Threat of Entrants: Entrants to your industry
Force-5: Threat of Substitute: Substitutes to your products or services
Porter’s Five Force Model is the cornerstone of understanding what competition means
in micro environmental analysis. It is needed to understand each force of Porter’s five
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forces model because this will help the company to develop effective marketing
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Force-1
WHAT IS THE RIVALRY AMONG EXISTING COMPETITORS IN PORTER’S
FIVE FORCE MODEL
To market new product, one select the industry first. And before starting the business in
that industry, it is needed to study the nature of competition in that market; so collection
of data, its proper analysis and keen observation of the competitors is important before
deciding to choose that industry.
Let us discuss what are the factors (Not the Forces) affecting competition among the
porter’s five forces.
Competitor’s Intention
Competitors’ intention means that the competitors are considering their products (that
are competing with one’s product) as strategic product for them. So when they give
intention to some products, they dedicate resources and make investments
in branding, integrated marketing communications, marketing research and became a
highly competing product of “A” class priority for the company.
Also there are companies which are having 100 products, and the product that is
competing with one’s product isn’t considered as strategic product for them, then it can
be understood that the company has a great opportunity to get a high market share from
the target segment.
Force-2
WHAT IS THE THREAT OF NEW ENTRANT IN PORTER’S FIVE FORCE
MODEL
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The nature of human beings is to resist changes when facing something new in their
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lives. Marketers facing the same issue too. If one created a new product then made good
success and it resulted in a good profit for the company, definitely one will face the
resistance to change when it is seen that the product failing due entrance of new
products that are taking the market share from you. This is because no one in the world
maintained as a star (in B.C.G. Matrix) all of the time. So, to maintain one’s product's
success, it should be known to observe, predict and analyze the threat of new entrants to
one’s sector, search for their plans, predict each move they could take before they do it.
What are the threats of new entrants in Porter’s Five Force Model?
The threat of entry of new products (new competitors) to your business is affected by
many factors which can be summarized in:
1. Supply Side Economies of Scale
It happens when farms produce at larger volumes enjoy lower cost per unit. When the
industry that you will market your product/ services is having wide economy of
scale, this is helping companies to select different pricing strategies for their products
and services, and also it helps them to develop different marketing strategies (Cost
leadership, differentiation, or focus marketing strategy) for their products or services.
It may be because of high R&D and Technology.
Example in the Car industry, you see a wide range of economic prices, so 'TOYOTA'
cars are more economic for most of customers (but their price are matching the
middle class of societies) while 'BMW' is matching special class of customers 'High
class'. When your market has a wide scale of economy, the new entrants'
opportunities will increase.
2. Demand Side Economy of Scale
Also known as Network Effect. It arises when buyers’ willingness to pay for
company’s product increases with the number of other buyers, who also patronize the
company. Here Trust plays a major role.
Example: IBM in the 90s in its PC division. E-Bay for its online auction. Here the
demand side benefit of scale discourages entry by limiting the willingness of the
customers to buy from a new comer, and by reducing the price, the new comer can
command until it builds up a large base of customers. This leads to the next point i.e.
product differentiation or brand loyalty.
So, when there exist a differential advantage than competitor, and the customers
are loyal to the brand, the opportunity of new entrants' entry will be minimized. And
if the new entrants started their business to compete with one’s brand, they will lose
their success opportunities because there exist a differential competitive advantage
and customers’ loyalty with one’s customers.
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If the product's price is high and provides a high quality service, then any
entrant provides the same quality as yours, with less price, then it will affect the
business 100%.
But if somebody offers a product with lower cost and intermediate quality, the
opportunities of new entrants with fewer prices will be decreased, because the
customers are satisfied with the price and the switching cost possibilities will be
decreased.
7. Competitor Retaliation
This is very important, because the main competitors are always competing through
the retailers by providing special offers and bonus to them to impose their products as
the only one available in their stores (Push Strategy). So, if this problem exists in the
market, definitely the opportunities of new entrants will be decreased.
Force-3
WHAT IS THE THREAT OF SUBSTITUTES IN PORTER’S FIVE FORCE
MODEL
The substitute is any alternative product or method which isn't generated from the same
category that one’s product (or the competitors' product) is manufactured from.
Examples of Substitutes:
The substitutes of drugs are healthy vegetables which contain vitamins and
proteins to treat some diseases.
The substitute of cars is bicycles.
The substitute of Air Traveling is Sea Traveling or Roads Traveling.
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If there is possible substitute for one’s product, this will affect the business and one
should know this before the release the product (Market Penetration) or developing the
existing ones (New Product Development).
Because all of the data can be generated from the customers, this may help in product
development and other line and brand extensions.
Force-4
WHAT IS THE BARGAINING POWER OF SUPPLIERS IN PORTER’S FIVE
FORCE MODEL
3. Switching Cost
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The supplier could deal with another company (which may be one’s competitors)
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because they may give them higher price for their services. Even the suppliers need a
high relationship marketing and key accounts management because they are capable
of controlling one’s push strategy to wholesalers and other channel of
distributions which is going to affect one’s business.
4. Foreward Integration
That is, are the suppliers capable to manufacture the similar products of one’s existing
product?
If the suppliers know the knowhow of manufacturing of one’s products and services,
or if the buyers industry is more profitable than the supplier’s industry or if they were
interested to manufacture similar products as one do, then this will prevent the
company from the getting raw materials from those suppliers. And this results in
decreasing the business growth (If there exist limited suppliers).
Also as results of the forward integration of the suppliers, they may want to
manufacture products for the buyer and start integrating with the buyer’s company
business at the same time. That’s why it’s called forward integration. Foreward
integration provides economies of scale for the supplier only if there exist low barrier
for entry for the supplier in to its buyer’s market.
Force-5
WHAT IS THE BARGAINING POWER OF BUYERS IN PORTER’S FIVE
FORCE MODEL
Bargaining power of buyers means that, there are factors that are
influencing buyers control upon your business. It’s called Bargaining Power because it
refers to the power to make buyers bargain between your products and your competitors.
Let us discuss what are the factors affecting the bargaining power of the buyers in
Porter’s five force model.
The factors are: A. Buyer Leverage and B. Buyer Responsiveness
A. Buyer Leverage
Buyer Leverage means the power of buyers, and this power is determined by the
followings.
retailers or other intermediaries, let’s suppose to big retailers (B2B), and they
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started taking control over the supplier and could increase their price or
bargaining power and this is happening because of buyer concentration.
Size of the buyer depends on the economic scale of the buyer and end
consumers, its dependant and correlated to each others. The retailers could buy a
high quantity of the products due the relationship with them, incentive scheme
being offer to them and bonuses. That quantity will last for months which prevent
the competitors from putting their products by the same quantity on their stores
(due to their budget), this have been illustrated in threat of entrant in porter’s five
forces. By increasing the size of the buyer, one could gain the opportunity to
make the products reach first to the end consumer and prevent new entrants from
pushing their products too.
b. Availability of substitute
If there exist substitute of one’s product, the opportunity of getting those
substitutes to the buyers increases. So it is need to push the product first and by
high quantity to make a threat of entry for any coming product and as threat of
preventing any competitor product to be available in those stores.
c. Knowledge of the market
This depends on the culture of the buyers (end consumers). Are they interested in
toothpastes? Different types of cheeses? Are they interested in sports? Are they
interested in books? Which types of books they are interested? Are they interested
in cars? Which economic scales do they have?
d. Backward Integration
Are the main retailers capable of manufacturing their own products and sell it the
end consumers?
Example: Wall Mart stores, they are manufacturing their own products under
Wall Mart Brand name, and then they became competing with their supplier
product which is available at their stores too, which is otherwise called as the
private labeling
B. Buyer Responsiveness
a. Importance of Product
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Are the manufacturer’s product is important to the consumer? Is it urgent for their
daily life activities? Is one’s products is reflected in the increasing the quality of
life for your consumers?
So is your product profitable for the buyer? Is your product doesn't increase the
economic burden to the buyer? These are the questions may arises with the seller.
Some buyers are looking for a product which is different and unique than any
other competitor, then Differentiation marketing strategy is the best marketing
strategy for those types of consumers.
But some industries are already doing this and don't gain brand loyalty from the
consumer. E.g. like some toothpaste, sugar types, generally food products. And
this is happened because they were comparing their marketing activities to their
competitors, so waiting each others to take a marketing communications step
then the competitors do the same.
Reference: