The business context and products (goods and services)

Chapter 3

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Learning Objectives
explain how to determine the purpose of an organization identify different types of business models define what is meant by a product and describe Kotlers five levels of product benefit describe and criticize Copelands product typology understand the stages in, and uses of, the product life cycle explain the concept of portfolio describe the composition and limitations of the BCG matrix and the GE matrix

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Purpose, Context, Models

The vision is an attempt to articulate what the organization should be like in the future. It is what the organization is seeking to become. The mission statement provides direction for the organization by defining what the organization is and its reason for existing. As such, the mission statement often encapsulates the vision and values

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Products and services

A product is anything that is offered for sale.

A good is tangible and is something that can be owned. A service is something that is done on the buyers behalf and is intangible in nature.

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Kotlers five benefit model

1. The core benefit provided by the product. Since all the products on the market will provide this benefit, this will rarely be the level on which companies compete. 2. The generic product, which includes everything that would be necessary to make the product function. 3. The expected product, which is all that the customer has come to expect in a product. 4. The augmented product goes beyond the customers expectations to provide something extra and desirable. 5. The potential product is the product level that encompasses all that the product might ultimately become, but currently does not incorporate.

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Copeland Product Typologies

Convenience goods are products where purchase is relatively frequent, at low prices, and the customer sees little interest or risk in the purchase.

Specialty goods are seen as products that are so differentiated from others, often carrying considerable prestige, that customers may insist on only one brand.

Shopping goods are those that are typically more expensive, of more interest to the purchaser, and some risk is seen in the purchase

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Product Lifecycle
The product life cycle is the complete life of a product or service from its inception and growth, through shakeout and maturity, to its eventual decline and death.

Sales

Introduction

Growth

Maturity

Decline

Time

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Portfolio Analysis: BCG

Relative market share High 10x Low 1x

Rate of market growth

High

Stars

Question marks

Cash cows

Dogs

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Low

GEC Matrix
Market attractiveness
High A B C

Medium

Low

G High

H Medium

I Low

Competitive strength
David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Multinational Market Portfolio

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Reading
Aaker, D.A. (1995) Strategic Market Management (4th edn), New York: John Wiley & Sons. Coates, N. and Robinson, H. (1995) Making industrial new product development market led, Marketing Intelligence and Planning, 13(6): 1215. Doyle, P. (1994) Marketing Management and Strategy, Englewoods Cliffs, NJ: Prentice Hall. Jobber, D. (1995) Principles and Practice of Marketing, New York: McGrawHill. Lancaster, G. and Massingham, L. (1993) Marketing Management, London: McGraw-Hill. Sowrey, T. (1990) Idea generation: identifying the most useful techniques, European Journal of Marketing, 42(5): 209. Von Hippel, E. (1978) Successful industrial products from customer ideas, Journal of Marketing, 42(1): 3949.

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction

Review Questions
1. Explain how the purpose of the organisation can impact on its strategic priorities. 2. Define what is meant by a business model and give examples of different types of business models in the retail sector.

3. Explain what is meant by the term product and how products provide benefit to users.
4. Using theory related to the concept of portfolio, explain why it is important for an organisation to have a balanced portfolio.

David Campbell, David Edgar & George Stonehouse Business Strategy: an introduction