U3 The Position in the Market Flashcards
Case Study
Why Do We Exist?
The top level of an organization, the founders or the corporate level, formulate the guiding philosophy. This guiding philosophy defines?
the values of the organization and dictates how the organization should view itself.
It also formulates the future direction of the organization.
The guiding philosophy provides an internal orientation for?
the employees, guidance for their behavior, and motivation.
To the outside world, the guiding philosophy shows what the organization stands for. It is the basis for?
corporate identity.
Corporate identity
Corporate identity defines the identity of an organization. The identity is defined through all the characteristics of an organization that distinguish it from other organizations.
Mission
The mission is the heart of a strategy; it explains why?
the organization exists and provides clarity to its purpose.
It defines the organization to all who are directly or indirectly connected to it:
employees,
suppliers,
customers,
distributors,
shareholders, etc.,
otherwise referred to as stakeholders.
Stakeholders
Stakeholders are individuals or organizations that are connected to or affected by the organization.
The mission answers the following questions:
=Why do we exist?
=What is our purpose?
=Why are we different from others?
=What do we want to achieve?
=How do we achieve it?
The Bar School provides us with?
an example of a good mission statement.
The first part:
“The mission of the Bar School is to inspire and empower students to become balanced, responsible and global-minded members of society,” answers the question of why the school exists and what its purpose is.
The second
part of the mission statement: “This is accomplished by offering a high-quality, internationally accepted education,” describes how the school will accomplish its mission.
Vision
While the mission statement looks at the purpose of ?
an organization from the present-day perspective, the vision looks at the future of an organization and where it aims to be.
The vision should inspire and unite everyone involved with the organization and should ?
challenge the organization’s resources.
The vision answers the following questions:
=What do we want to accomplish in the future?
=Where do we see our organization in five, ten, 15, or even 20 years?
The vision is the guiding philosophy of the organization, which must reflect the values of?
an organization and is influenced by the strengths and weaknesses of the organization.
An example of a vision:
“We will provide the highest quality product\/service in the market.”
Values
The value statement communicates the values and principles of an ——————–. It defines its guidelines for conducting business. These values should not ————————————, as they provide the basis for each strategy.
organization
change or be adapted
The values of the Bar School are:
(1) Every person is of value and has unique potential, and
(2) Good conduct, teamwork, cooperation and respect are important factors for success; education is a partnership between students, parents, and teachers.
Goals
Many organizations have neither ?
a mission, vision, nor a value statement.
However, every organization has goals. Goals are specific to each layer or department of the organization, as illustrated in the following figure.
Figure 3: Goal Hierarchiesimage
Figure 3: Goal Hierarchiesimage
Figure 3: Goal Hierarchiesimage
The corporate or strategic goals should be?
specific to what should be attained.
They can be developed around many criteria such as:
1-market position goal (i.e. market share, sales volume, developing new markets)
2-profit goals (i.e. profit margin, return on sales)
3-financial goals (i.e. level of liquidity, credit-worthiness)
4-social goals (i.e. employee satisfaction, employment security)
5-goals relating to power and prestige (i.e. image building, changing dependency on other organizations)
These corporate goals are then translated into?
goals for the SBUs.
The SBUs are most often separate entities responsible for?
respective profits or losses, and therefore each SBU will have goals specific to their unit.
The corporate goals could also be translated into?
functional goals (e.g. human resource goals, financial goals, and production goals).
A functional goal for human resources could be?
to increase employee satisfaction.
Below the goals for the SBUs are the marketing goals specific to?
actions or measures.
These marketing goals are specific to activities within ?
the marketing mix.
Marketing mix
The marketing mix includes activities regarding product, price, distribution, and promotion.
These goals are?
more short-term and usually outnumber corporate goals.
These goals serve to guide the individual marketing activities of an organization and allow for?
the measurement of these activities.
Typical examples are the response rate to a specific mailing to customers, the increase in sales due to?
a special promotion, or the increase in brand awareness due to an advertising campaign.
The goals of the Bar School are specific to the original problem encountered by the school. The goals of the board were different from ?
the goals of the school’s leadership.
The board was concerned regarding the interaction patterns within ?
the school and the president was concerned about the performance of the students.
This led the school to set two goals:
1-All students display behavior that reflects the mission and the values of the school, and
2-The students’ performance in three years will be above the level of similar schools.
Integrating these goals into the strategic plan of the school helped to?
change them from conflicting goals to complementing goals.
The systematic approach of the strategic plan, which was designed by?
the entire school community, helped to reach the first goal after one year and the second goal after three years.
What is Our Position in the Market?
Each organization occupies a specific position in the marketplace in which it operates. The position depends on?
the market itself and the competitors operating in this industry.
This means that if the market changes, for example,
through technological changes such as introduction of the Internet, the position of companies operating within this market changes.
Organizations that adapt faster to the new technology gain a better position than those that adapt slowly. The better-adjusted competitors then put pressure on?
the strategic position of the organization.
To show the position of an organization in comparison to its?
competitors, companies draw positioning maps.
Positioning maps place the products or services of a company alongside?
those of their competitors on a chart.
The chart has two axes;
these axes may have different dimensions and depict specific characteristics or customer preferences (i.e. price, quality, speed of service, etc.)
which are generated through a thorough target group preference analysis. The distance of the products or services show?
fairly realistically the differences perceived by the target group.
Target group
A target group is a specific, homogeneous group of customers, which can be defined and reached with a specific marketing communication mix.
Figure 4: Positioning Map (Case Study: Palace Hotel)image
Figure 4: Positioning Map (Case Study: Palace Hotel)image
The development and implementation of a positioning strategy is a company-controlled method of ?
building a specific reputation in the market.
It is based on ?
customer experiences and preferences, and the communication strategy of the company.
Companies should actively manage ?
their reputation or image compared to the competition.
A clear positioning strategy gives organizations a?
competitive advantage.
Positioning a product or service is therefore a?
controlled process to build an image in the market place.
The position is defined and communicated to?
the main target groups.
Positioning is a strategic process that influences?
the actions of the organization and affects all functions of an organization.
Organizations with a clear market position are usually more successful than their competitors.
However, it often happens that companies make the mistake of giving up a?
clearly successful position.
The market leader for copying machines, Xerox, decided to?
enter the personal computer market a few years ago.
A great deal of financial capital and energy went into?
building the new business.
At the same time, the market share in the core business of?
the copying machine business continued to decline.
core business
The core business is the company’s main business, which usually also provides the largest financial contribution to the overall business.
Most companies offer several products or services. The complexity of a positioning strategy becomes evident in?
companies that offer several product lines. Lufthansa is a large organization.
It lends its name ‘Lufthansa’ to many areas of its business that reflect the Lufthansa image of?
high quality and exclusivity (i.e. Lufthansa Technik, Lufthansa Cargo, etc.).
Other Lufthansa companies that do not match that image carry different names, such as?
the charter airline Germanwings, which is also part of the Lufthansa group.
When designing a positioning strategy, organizations should adopt a ——————————————————. This requires an analysis of their strengths and weaknesses and anticipation of trends and changes in the market using
————————————————– methods. Information should be collected internally and externally.
structured approach
quantitative and qualitative
In the process, the position or the desired position should be?
communicated through a positioning statement.
This positioning statement should be clear, understandable, unique, and reflect customer needs. It should be?
realistic and differentiate the product or service from the competition.
The customer needs are defined by analyzing their preferences. These preferences are evaluated for?
the company as well as for the competition and are projected onto the positioning map.
What Information Does the Company Need?
Quantitative Market and Customer Analysis
The first step in a thorough market and customer analysis is?
the quantitative recording of relevant data.
The quantitative analysis is fairly straightforward as the recorded data on?
customers and the market is usually available.
It does not require expansive and expensive research, as the data is usually available through internal sources or can be easily acquired
——————-. Internal sources are employees with —————————————————————————.
externally
market or customer data, sales information, distributors, etc
External sources are?
umbrella organizations,
government or business statistics,
industry experts,
annual reports of competitors, etc.
Independent of the business, global indicators (such as gross national product or population growth) can also be used as?
indicators for a market analysis
A market analysis employs the following key figures:
==market volume (market size, monetary or volume size)
==market potential (maximum size of the market including all segments)
==market growth (annual growth rate in %)
==market share of the main competitors (monetary or volume)
==degree of concentration of the competition (percentage of sales of the ten largest competitors)
==average return on sales in a specific business (can be deducted from the annual reports of the competitors)
==size of the main customer segments (i.e. private customers\/business customers)
Market Segmentation
The market of an organization is divided into so-called ?
market segments.
A market segment consists of ?
customers that have similar needs or preferences.
Market segments can be defined for
both consumer and business-to-business markets according to the following criteria:
Table 1: Market Segments
Table 1: Market Segments
Table 1: Market Segments
Table 1: Market Segments
Table 1: Market Segments
Table 1: Market Segments
business-to-business
two companies with each other.
In the consumer market, we segment according to socio-demographic characteristics such as?
age, gender, stage in the lifecycle, where they live, etc.
We could also segment by usage, for example,
how much the customer buys, whether the customer buys repeatedly and is loyal, what the product is used for (i.e. the product is a present for someone else),
how much value does the product have for the customer, and what are important choice criteria.
Another way to segment the consumer market is by?
user preferences.
We have to investigate how our products compare to?
competitive products, what are the customer’s price or brand preferences, and what properties are sought after in the product.
Finally, the quality of the product or service also plays a role.
In today’s crowded markets, organizations spend fewer resources on mass marketing, and instead they focus more on?
micro-segmenting their markets.
This means that companies segment by?
using several of these criteria, i.e. families who purchase in larger quantities and are price sensitive.
In business-to-business markets, companies segment their customers as well but some of?
the criteria differ from consumer market segmentation.
Segmentation criteria look at business characteristics such as?
the type of industry, location (i.e. domestic or international), the size of the company, the technological standard (e.g. do they use a similar software that can be integrated?),
the profitability (e.g. is the company profitable and is it advisable to expand the cooperation?), or the management (e.g. is it privately owned?).
We can also segment by usage, such as?
defining the value of the product (i.e. is it important?), the purchase volume or frequency (i.e. do they order continuously or twice a year?), how they order (i.e. internet or telephone),
why they choose our product, and what distribution channels do they use (i.e. direct or distributors).
Another way to segment in business-to-business marketing is by?
user preferences.
These criteria are product or support requirements (i.e. do they require online service),?
what are brand preferences and what product properties are required.
This category also includes?
the quality requirements of the product or service.
When segmenting, it is important to consider that the segments can be?
measured and may be differentiated from each other.
Moreover, the segments have to be reachable through the available communication channels and the segments should be sufficiently large such that it is?
worthwhile for the company to define a marketing mix for the specific segment.
What Capabilities Does the Company Have?
As a next step, an organization has to understand its own?
capabilities and resources.
The SWOT analysis is a?
tool in the evaluation of a company or a specific project.
SWOT
The SWOT analysis requests a thorough analysis of the strengths and weaknesses of?
the organization and the opportunities and threats in the environment.
The organization carries out this analysis internally.
Internal resources are:
1-Physical resources such as machines, equipment, buildings, raw materials, patents, computers, etc.,
that determine the efficiency, productivity, and flexibility of the organization.
2-Financial resources such as the balance sheet, cash flow,
and financial support that determine the financial management of the organization and whether financial support is available (i.e. from banks).
3-Human resources such as employees, managers, partners, etc.,
that determine whether an organization has the right people, what training is required, or how the organization can motivate its employees.
The analysis of all these factors provides?
an understanding of the capabilities of the organization and what strategic possibilities are available for and compatible with the organization.
The SWOT matrix can also be used for?
a competitive analysis to look at the strengths and weaknesses of the competitors in the market and compare these with your own organization.
The analysis of opportunities and threats scrutinizes developments in?
the micro- and macro-environment of the organization that influence strategic decisions.
Opportunities and threats refer to trends in the market. This part of the SWOT analysis can be supported by?
the PESTEL analysis and Porter’s Five Forces model.
The following questions are helpful for this part of the analysis:
=What important trends does the company have to follow in order to continue to exist in this market?
=What are the biggest risks? How can the company minimize these risks?
=Who are the competitors? What do the existing competitors do? Are there potential new market entrants or substitutes
Here is a SWOT analysis of a university that wants to offeran online distance learning program and has no experience in this specific field. ?
One factor is listed for each category of the SWOT as an example. There are usually many factors in each category.
The SWOT analysis is mostly carried out in a brainstorming session with members from different parts of the organization, as?
in the case study of the Bar School.
The ideas generated in the brainstorming session are then organized into specific topics. In the example of the Bar School, topics included?
how to improve the school atmosphere and goal-setting among students, topics that arose in relation to the unacceptable attitude of students and the students’ performance.
Table 2: Case Study: SWOT Analysis of a University
Table 2: Case Study: SWOT Analysis of a University
Topics are then prioritized, which is frequently a problematic process in organizations as?
the various departments have different priorities and often consider the issues affecting their own department more urgent than those of other departments.
However, prioritization is important and allows?
management to see what needs to be done first.
Each organization has limited resources and therefore projects need to be ?
prioritized.
The SWOT analysis has some disadvantages.
The brainstorming session can generate long lists of topics and it is often difficult to set priorities.
Frequently the input is purely opinion and the moderator has to be careful that the brainstorming does not turn into a grievance session.
As already mentioned, different departments view strengths and weaknesses in the organization differently and often hide their own departments’ shortfalls.
They also see priorities differently.
In order to address these shortfalls, there should be a general analysis of issues before the SWOT analysis is done. This helps to ?
identify real issues and generates indicators and figures to support particular arguments.
Defining Core Competency
In order to conduct an effective strategic planning cycle, a company has to know its core competencies. A core competency is a?
capability of the organization that is unique or superior to the competition.
This core competency is a competitive advantage for the organization. Therefore, many organizations focus on ?
their core competencies as a strategy, especially in a difficult economic environment.
More Information
Core competency is discussed in the article by Chris Zook (2008) which is recommended reading.
If an organization has a core competency, this means that the company has resources and capabilities that
(1) increase the value of the product or service to the customer
, (2) differentiate the organization from the competition,
and (3) can be expanded in the future. This results in a competitive advantage.
What Capabilities Do Others Have?
Benchmarking
Benchmarking is?
a method that enables specific comparisons between companies and selects the best one as a reference in order to optimize the company’s performance.
These comparisons may help an organization to?
better understand itself,
identify superior methods and practices utilized by other organizations,
and allow certain processes to be adapted.
There are four types of benchmarking:
internal benchmarking
competitive benchmarking
functional benchmarking
generic benchmarking
Reference
Reference means to relate the company to another organization.
Internal benchmarking
Internal benchmarking is performed within your organization. An example?
is an international building material manufacturer comparing the cement production units of its own manufacturing units.
The advantage of internal benchmarking is that?
the data,
figures and numbers,
are readily available.
A comparison of the indicators within the same organization is straightforward as ?
the processes and structures between the units are similar.
One disadvantage might be?
the lack of acceptance of such a benchmarking process, as managers might feel that it is not the processes or units but their management practices that are being compared.
It could be seen as an open criticism, which might compromise the working relationships.
Another form of internal benchmarking is corporate benchmarking.
This type of benchmarking is not limited to the same business, as in the example of the building material manufacturer.
Corporate benchmarking extends into the entire organization—for example,
the production unit of the medical division could be compared to the production unit of telecommunications in the same organization.
However quantitative comparisons are limited as the units belong to?
different businesses and are therefore structured differently.
Competitive benchmarking
Benchmarking partners are?
companies that operate in the same industry and service the same or similar markets.
In both cases, important figures or indicators are compared. This might prove difficult as?
competitive information could be limited or not available at all.
In some industries competitive benchmarking is a commonplace practice—for example
, most car manufacturers provide new models to their competition to compare these in terms of technical development, features, and handling with their own models in that specific category.
Competitive benchmarking needs much —————————————-. Moreover it requires an open communication between ————————- in order to be effective.
preparation work.
competitors
It is important that the participants give and receive?
an equal amount of information.
The advantage of competitive benchmarking is that?
it provides organizations with a clear picture of their position in the market.
However, it is often difficult to compare?
key figures and processes with direct competitors.
Furthermore, the information gained through competitive benchmarking with existing products has ?
no novelty and does not contribute much to innovation or address future trends and developments.
Functional benchmarking
Here companies compare organizational functions, such as ?
comparing their own logistics department with the logistics of an online shop.
This type of benchmarking allows for?
much learning and innovation,
and provides organizations with new ideas and suggestions.
Generic benchmarking or best practice benchmarking
Generic benchmarking goes beyond the functional areas of the organization and the industry it operates within to?
comparing unrelated companies in unrelated industries.
Southwest Airlines in the USA
carried out a classic example of generic benchmarking.
The airline compared the turnaround time of their airplanes, which includes:
un-loading and re-loading, refueling, cleaning, and safety checks, to the pit stops of racing cars at Formula One car races.
This analysis enabled Southwest Airlines to reduce?
the turnaround time of their planes by 50 %.
Nearly 20 years on, the airline is still benefiting from?
this process of improvement.
A value chain analysis is a prerequisite for?
benchmarking processes.
The value chain analysis looks at which steps in the process of creating a product add value for the customer and thus?
contribute to the value creation of the organization.
At Apple,
production is responsible for product quality, the logistics department is responsible for the speed of delivering the product to the customer, and the marketing and communication department is responsible for the creation of emotional aspects for the consumer.
The value chain is ?
an analysis process that connects effectiveness (i.e. what creates value from the perspective of the customer) and efficiency (i.e. where can processes that waste resources be eliminated).
Standard process for benchmarking
The process of a benchmarking project can be divided into the following phases and steps:
1-Goal-setting\/preparation phase
=definition of the problem and internal analysis
=selecting the benchmarking partners and appointing the benchmarking team
2-Comparison phase (quantitative benchmarking)
-definition of the figures and numbers and indicators to be investigated
-data generation
-data analysis
-ranking
-selection of ‘best performers’
3-Analysis phase (qualitative benchmarking)
-analysis of the best processes and strategies
-deduction of the ‘best practices’
4-Improvement and implementation phase
-definition of the improvement measures
-implementation of the improvement measures
-controlling progress and results
It is vital that the features or processes important to the customer are accurately identified in order to ?
select the most relevant competitors and benchmarking partners for comparison.
Additional considerations should be made when benchmarking against poorly performing competitors;
if an organization fares better in some areas than its competitors, it should not be assumed that the organization in fact exceeds customer expectations.
It is advisable to define a vision and mission for the organization before?
starting a strategic planning cycle.
Together with the corporate values, the vision and the mission are ?
the guiding philosophies for the strategic plan.
The goals of the organization are divided into?
a few corporate goals,
goals for the SBUs,
and many marketing goals at the product level.
When developing strategic options, a company has to?
understand its own position in the market. This position depends on the sector it operates within and on the competition.
A structured approach using quantitative and qualitative market research is necessary to?
define the position of an organization.
Organizations must understand customer preferences and use this information to compare themselves with?
the competition.
Positioning maps provide a visual representation of an organizations’ market position in relation to?
its competitors.
Quantitative market research provides information such as?
market volume,
potential,
growth,
market share,
degree of competitive concentration,
average return on sales in the sector and the size of its market segments.
Qualitative market research further?
defines the market segments and extracts information about consumers’ needs and product\/service preferences.
Market segments in the consumer and business-to-business markets are defined by ?
looking at personal or business characteristics, the purchase situation or usage, and user preferences.
The segments have to be?
measurable,
distinguishable,
and reachable and they should be of a certain size.
The capabilities of an organization may be analyzed by?
means of a SWOT analysis.
The analysis of strengths and weaknesses examines ?
the organization internally, while the analysis of opportunities and threats examines the organization’s environment.
In order to conduct a thorough SWOT analysis, an organization must know its core competencies. Core competencies help?
differentiate an organization from the competition and provides a competitive advantage.
Finally, benchmarking is ?
a management method with the goal of optimizing processes by making comparisons with other organizations.
There are four types of benchmarking:
internal,
competitive,
functional,
and generic benchmarking.
Companies can compare their departments or processes with?
other organizations.
A solid benchmarking process requires ?
setting goals,
conducting comparisons and data analyses,
and then using the data to optimize processes.
