Customers, Markets and Products & Their Importance - Coursework Example

Customers, Markets and Products & their importance1 Customers are individuals who buy products/avail services of companies for a price. Example, a person buying car/getting hair-cut in salon. Customers are important as they are the main drivers of market and economy. They are the ones for whom products are made. Market is a location where buyers/sellers gather to buy/sell goods/transact over product(s). Example, consumer markets (products like Soft drinks), business markets (Iron ore sold to manufacturing companies). Markets are important because they identify a fixed place where buying/selling can occur. Markets differentiate commercial place from residential (non-commercial) place. Products are finished goods produced by companies. Example, Pen. Products are important because they are of value to customers as it satisfies their needs, wants and demands in return for a price. Product-to-suit markets are markets profiled into groups of buyers preferring varying products/services after examining their demographics/behavioral patterns. Segment with greatest opportunity is ‘Target Market’ and a corresponding market offering made is ‘Positioning’. Example, Fairness creams for women. Product-to-suit markets important because every customer has distinct demands and preferences; due to which a need to divide markets into segments. Trading Internationally Why to trade internationally: 1. To gain access to new markets and customers (for increased revenues, profits, long term growth). 2. To cut costs and enhance competitiveness (through increased volume of sale achieving economies of scale and learning curve effects). 3. To leverage its core competencies 4. To spread its business risk across a wider market base (economic downturn in one country’s economy may be evened out by buoyant sales in another country). 5. To achieve ease of raw material supply (which is in abundance outside home country). How to trade internationally: 1. Export strategies: Maintain national (one-country) production base and export to foreign markets using company-owned or foreign-controlled forwards distribution channels. 2. Licensing strategies: License foreign firms to use the company’s technology or to produce and distribute the company’s products. Suited for manufacturing companies. 3. Franchising strategy: Suited for service and retailing companies like McDonald’s, Pizza Hut, KFC etc. The franchisee bears cost and risk of establishment whereas; the franchisor only extends resources for recruitment, training, supporting and monitoring the franchisees. 4. Multi-country strategy: Varying the company’s strategy from one country to another as per the local conditions and buyer’s tastes and preferences. 5. Global Strategy: Standard competitive strategy approach in all country markets where the company has a presence. 6. Strategic alliances or joint ventures: Entering foreign markets through alliances with foreign companies and also for strengthening and maintaining competitiveness. PEST Analysis Why PEST analysis: It represents Political, Economic, Social and Technological environment of an organization. This analysis is basically the analysis of the external environment of a company. These external forces are beyond the direct influence and control of the organization but exert significant influence on their functioning. Its study helps an enterprise better adapt to these environmental forces. What is PEST analysis? Political Environment – refers to general state of political development, degree of politicization of business and economic issues, level of political morality, political stability, political ideology & practices of ruling party, extent and nature of governmental intervention in economy and industry, public attitude towards business etc. Economic Environment - refers to nature and direction of economy in which the company operates or will operate. It includes general economic situation of the region and the nation, resource market conditions (money supply, manpower supply, raw material supply, services etc.). Social Environment – refers to social traditions, values and beliefs, levels and standards of literacy and education, ethical standards and state of society, extent of social hierarchical norms, conflict and cohesiveness etc. Technological Environment – refers to pull of technology change, opportunities arising out of technological innovation, risk and uncertainty of technological development, role of R&D etc. Culture Analysis: Cultural analysis involves an investigation into trends, lifestyle pattern, habits and preferences which have evolved over a period of time. Different societies have different cultures and hence a need for the analysis of the culture to identify the differences and similarities between them. From a marketer perspective, cultural analyses helps in creating market segments and decide the suitability of products in a market. A product favored in one region may not be equally acceptable in another thus, giving rise to two different markets. Marketing Strategy Marketing strategy is part of marketing plan which acts as a game plan for achieving a company’s long term objective. It consists of a description of target markets, positioning, products to be offered, pricing, distribution, marketing communication (creating brand awareness) and marketing research (measuring market preference, penetration etc.). Innovation: Innovations are unique, creative and novel ideas or features implemented into a company’s product portfolio or marketing campaigns. Innovation in products generally takes place through the generation of new idea and result into addition of new features to a product or a new product altogether. Innovation in marketing is basically the implementation of new ideas so as to develop a creative and fresh way of campaigning for a product. Product Life Cycle: It is an S-shaped curve which shows the relationship of a product’s sales growth with the passage of time through four major stages: Introduction (slow sales growth), Growth (rapid market acceptance), Maturity (slow down in growth rate) and Decline (sharp downfall). Through this, it is possible to diagnose at which stage does a product lie and hence, appropriate strategic choices can be made using this diagnosis. Figure 1: Product life Cycle Strategy Plan Strategy Plan: Merging of strategic mission, vision and objectives so as to lay out the future direction, performance targets and actions of a company is a strategy plan. Mission: A mission describes the present business scope and purpose of a company (Who we are, what we do, and why we are here). It contains elements of long-term strategy as well as desired outcomes. It broadly illustrates an organization’s present capabilities, customer focus, activities and resource utilization. A good mission statement should be precise, clear, feasible, distinctive and motivating. Vision: It is a blueprint which shows the route a company intends to take so as to grow and strengthen the business. It is a clearly worded statement which gives a direction to the company’s business (where are we going and a rationale for going there). It should be directional, focused, flexible, feasible, desirable and easy to communicate. Aim: These are overall broad and general statements illustrating the goal of a desired project undertaken. Objective: These are specific and concise statements identifying definite and measurable outcomes to be achieved at the end of a project. Objectives are performance targets such as results and outcomes which a company wants to achieve acting as a standard to measure the organization’s progress. These are measurable and contain a deadline. SWOT (Strengths, Weakness, Opportunities and Threats): In SWOT, strength refers to the internal capacity of an organization which enables it to gain strategic edge over its competitor. Weakness refers to the intrinsic limitations or constraints of an organization creating strategic disadvantage for it. Opportunity refers to advantageous organization’s environment which makes it possible for the company to strengthen its position. On the other hand, Threats are those unfavorable conditions which damages or risks an organization’s position. Figure 2: SWOT Matrix SMART: SMART is an acronym identifying the characteristics of usually identify well defined goals or objectives. It is expanded as: (i) Specific – clear and easy to understand (ii) Measurable – which can be gauged and quantified (iii) Achievable – it should be linked to the job description aligned with the target to be met (iv) Realistic – it should be feasible to achieve under a given scenario (v) Time-bound – should have a deadline and not be ongoing, never-ending. Internationalization Internationalization is the process of entering one or more foreign markets. It is the integration of technology, markets, politics, cultures labor, production, and commerce of two different entities. Internationalization is both the process and the result of this integration. Internationalization is different from globalization which refers to the establishment of operations of a company on several continents and thus, its race against rivals for global market leadership. Successful management of internationalization involves majorly two different aspects: 1. Cultural management 2. Gaining Leadership in foreign markets by building competitive advantage Cultural Management: Cultures and lifestyles are one of the most prominent areas in which countries differ. Hofstede identifies four cultural dimensions that can differentiate countries: 2 (i) Individualism vs. collectivism-Collectivist societies such as Japan have strong social belongingness and less importance given to individual achievement. (ii) High vs. low power distance-high power distance cultures have less openness between a boss and a subordinate as against a low power distance culture which encourages free flow of ideas and objection irrespective of the social strata to which a person belongs to. (iii) Masculine vs. Feminine-Culture dominance by assertive males versus nurturing females. (iv) Weak vs. strong uncertainty avoidance-high risk taking or low risk taking people. Gaining Leadership: A company can gain competitive advantage and offset domestic disadvantages by expanding outside its domestic market.3 There are three ways: 1. Using location to lower costs or achieve greater product differentiation. 2. Transferring competitively valuable competencies and capabilities from its domestic markets to foreign markets so as to leverage them there too. 3. Using cross-border coordination in ways that a domestic-only competitor cannot. Change Management Definition: It is a thoughtful planning and implementation of change in consultation with and involvement of those affected by the change. Change must be real, one that can be achieved and measured. There are 3 major models of change: 1. Lewin’s change model – By Kurt Lewin4. It says, there are 2 forces working on every behavior (i) Which maintains the current state (ii) which pushes for its change. When these forces are equal, a “quasi-stationary equilibrium” state occurs. To effect change, one needs to increase the change of force or decrease the force maintaining the current state and according to Lewin, modifying the first force creates less tension and resistance than increasing forces of change, therefore is a more effective change strategy. The steps in this process are : (a) Unfreezing: reducing forcing maintaining the current state, (b) Moving: shifting the behavior to a new level, (c) Refreezing: stabilize at the new state of equilibrium 2. Action Research Model5 – Cyclical in nature involving 8 steps: (i) Problem identification (ii) Consult an expert (iii) Data gathering and preliminary diagnosis (iv) Feedback by expert based on above diagnosis (v) Joint diagnosis with client so that client agrees to work on the identified problems (vi) Joint action planning to decide further actions to be taken (vii) Action involving actual implementation (viii) Review to assess data after implementation. 3. The Positive Model6 - Based on a process called ‘Appreciative inquiry’. 5 phases are involved: (i) Initiate the inquiry to determine the subject of change (ii) Inquire into best practices (iii) Discover themes (iv) Envision a preferred future involving design and delivery of activities which would bring change. An Overall Model of planned change: I. Entering and contracting-involves committing resources and engaging an expert, II. Diagnosing-involves indentifying problems and patterns which need improvement and change III. Planning and implementing change-Based on diagnosis, several types of interventions (HR, technological, human process, strategic) are decided IV. Evaluating and institutionalizing change-Taking a feedback on the after implementation effects and in case of success, making the changed setup a permanent one Activities contributing to Effective change Management: (a) Motivating change- creating willingness for change and overcoming resistance to it (b) Creating a vision-describing core ideology and constructing a future (c) Developing political support-identifying and influencing key stakeholders (those affected by change and those involved in it) (d) Managing the transition-done through planning each activity, commitment and structural management (e) Sustaining momentum-providing resources for change, building support systems for change agents, developing new competencies and skills, reinforcing new behavior and maintain and stabilizing the change. Competitive advantages Competitive advantage is achieved by a company whenever it has some type of upper hand over its rivals in attracting buyers and dealing with the competitive forces. There are 5 strategies for achieving competitive advantage:7 (a) Low cost provider strategy: It refers to a company’s leadership in a particular industry by managing its cost structure such that the prices of its products are lowest and thus attractive as against its competitors. For this, a company can control its cost drivers so as to achieve economies of scale and thus generate volumes or revamp its value chain to upgrade technologies, using direct marketing approaches, simplify products, and streamline processes; (b) Broad Differentiation strategy: It refers to a company achieving advantage over its competitor by differentiating its product or service offering which is unique in itself and valuable to a wide range of customers; (c) Best cost provider strategy: It refers to providing value for money to the customers by integrating good product attributes at a cost lower than the competitors aiming towards best (lower) costs and prices compared to rival’s offering products of comparable attributes; (d) Focused (or market niche) low-cost strategy: It refers to concentrating on narrow segment of customers (niche) and providing lower cost products and outcompeting rivals; and (e) Focused (or market niche) differentiation strategy: It refers to concentrating on narrow segment of customers (niche) and providing customized products and thereby, outcompeting rivals. Business Plans These are formal report on the proposal for a new business with the company description, its goals, and the importance of the startup along with a feasibility study. This report involves a thorough analysis of the products and services to be offered; marketing plan; operational plan; strategic plan; and a financial plan, expenses and capitalization required. Difference with a strategy plan: Strategy plan is a part of the business plan which involves defining a direction for the company and managing its investment objectives through a strategy to achieve its defined objectives. It also defines the resources required for the deployment of the strategy. Strategic plan uses various analysis tools such as SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats); PESTEL analysis (Political, Economic, Social, Technological, Environmental and Legal) etc. Read More