FIEO Welcome

Dr.
Kartik Dave
Dr. Kartik Dave 2
AGENDA
Introduction to Marketing
Customer Analysis
Segmentation of Customers
Competitor Analysis
Market Analysis
Marketing Environment Analysis
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AGENDA
Company Analysis
Selection of Market Segment and
Competitive Strategy
Developing Value Proposition,
Positioning, and Business Design
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WHAT IS MARKETING?
If a business firm is willing and able
to satisfy the need of these group of
people/firms, they can be called the
business firms potential customers.
What is marketing then?
Marketing is acquisition, retention,
and enhancement of business from
these customers at a profit to the
business.
WHAT IS BUSINESS?
What is business?
A business is a collection of activities to
provide some products/services to its
potential customers.
Some of these activities can be termed
primary activities and few other supporting
activities.
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THE INTEGRATED BUSINESS VIEW

Inbound
Logistics

Operations

Outbound
Logistics

Marketin
g
& Sales

Service
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Support
Activities
Primary Activities
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HIERARCHY OF HUMAN NEEDS
Self-
Actualization
Needs
(self-development
and realization)
Esteem Needs
(self-esteem, recognition, status)
Social Needs
(sense of belonging, love)
Safety Needs
(security, protection)
Physiological Needs
(hunger, thirst)
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How a company can consistently deliver
superior value to customers and at the
same time make money for the
shareholders?
This is possible only when the company
has developed certain capabilities to
integrate the different business activities
into processes that provide such value to
the customers at a cost which is less
than the cost of these activities.

MARKETING AND BUSINESS

What are these processes?
The first is the innovation process, which
analyses potential market opportunities,
researches for solutions, and develop
acceptable value propositions for the target
group of customers.
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Second, the business needs an efficient
operations process - it has to produce and
deliver products that meets the world-class
standards of cost and performance.
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Finally, it must have an effective process for
customer creation, customer support, and
customer retention.
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MARKETING MYOPIA
Production orientation to Product
orientation to Sales orientation.
What is the problem with these
orientations?
It resulted in business firms defining
their business in terms of
products/services they produce and
sell.
It led to marketing myopia which
prevented business firms to understand
what customers really need and
whether this need can be met by any
other substitute products.
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MARKETING MYOPIA
American railroads, defined their
business too narrowly (railroad
business instead of transportation
business).
As a result their business declined
inevitably as they could not foresee
that the transportation needs of the
customers could be met by other means
of transport as technology advanced.
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MARKETING MYOPIA
Petroleum industry still thinks itself as
producer of petroleum and petroleum
products instead of thinking itself as
being in the energy business.
It must come out of the narrow grip of its
tight product orientation and instead
think itself as taking care of customers
energy needs. Otherwise the oil firms
will be companies without an industry.
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ESCAPING MARKETING
MYOPIA
How do a business get out of this kind of
marketing myopia?
Business firm must think of itself not as
producing products but as providing
customer value.
This is possible when a business firm is truly
customer oriented.
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PRODUCTS AS
SOLUTIONS/BENEFITS
George Eastman, founder of Kodak:
Kodak sells memories
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PRODUCTS AS
SOLUTIONS/BENEFITS
Charles Revson of Revlon:
In the factory we make cosmetics;
in the store we sell hope.
Customer (Market) Orientation
For marketing to become the central
purpose of business, everybody in every
function must put the customer at the
centre of the business; that is marketing
must be the guiding philosophy of the
organization.
The organizational culture and climate
must effectively encourage the following
behaviours:
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EVOLUTION OF BUSINESS FIRMS
ORIENTATION TO CUSTOMERS
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MARKET ORIENTATION
Customer Orientation
Competitor
Orientation
Inter-functional
Coordination
Target Market
Long-term
profit
focus
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Market-driving companies generate
significantly new products, services,
business formats and raise our sights
and our civilization.
These companies are much more than
customer-led. They lead customers
where they want to go, but dont know
yet.
Sonys innovation culture.
MARKETING AND INNOVATION
Social Marketing
The organizations task is to determine
the needs, wants, and interests of target
markets and to deliver the desired
satisfactions in a way that preserves or
enhances the consumers and the
societys well-being.
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EVOLUTION OF BUSINESS FIRMS
ORIENTATION TO CUSTOMERS
Copyright 2009 Dorling Kindersley
(India) Pvt. Ltd.
24
Holistic Marketing Dimensions
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CUSTOMER
ANALYSIS
Consumer Behavior

The behavior that consumers display in searching
for, purchasing, using, evaluating, and disposing of
products and services that they expect will satisfy
their needs.

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Consumer behavior provides the behavioral fit
to marketing mix which need to be changed from
time to time by marketers.

Consumer Behavior Is Interdisciplinary
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28
Psychology
Sociology
Social
psychology
Anthropology
Economics
BUYERS CHARACTERISTICS
Cultural
Social
Personal
Psychological
Buyer
Culture
Subculture
Social class
Reference
groups
Family
Roles and
structures
Age and
life-cycle
stage
Occupation
Economic
Circum-
stances
Lifestyle
Personality/
self-concept
Motivation
Perception
Beliefs and
attitudes
Learning
Verbal model of culture and value dimensions of
Indian Consumers
The new Emerging Lifestyles of Urban
Consumers
Labelled, Urban, Chilled, Kicked-with-life Indians or the
LUCKIES
Marked by multiple credit cards, off centre job options,
recycling initiatives, a generation much aware about
alternatives and sporting a choicy selection. (These are
referred to as Global Nomads by Radhika Chopra-
DSE)
Confident communicators and can flourish in a global,
competitive market.
Living in style is the in-thing.
Believes in looking good.
Ravaged by labels.
Working hard by day and clubbing all night.
T.V has played a major role.

a new breed of consumer in India
young, increasingly wealthy and
willing to spend on everything from
mobile phones to I-Pods to French
fries.
Time magazine
Median age of 26.2
0
10
20
30
40
50
2005 2010 2025
India US
Source: US Bureau of the Census, International Data Base, 2002
age
Consumerism on rise
% spends
Source: KSA Technopak
Share of Wallet
0
1
2
3
4
5
6
7
8
9
E
a
t
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B
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&

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,

L
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M
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i
l
e

P
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e

20-25 yrs
26-50 yrs
P
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C
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I
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A Hedonistic Society
Information Babies

A rural consumer is looking for
functional value, not frills.
High involvement in the purchase of
any product.
The decision making is a collective
process governed by social values.
They are more brand loyal than their
urban counterparts.
Word-of-mouth recommendations by
users influences purchase decisions.
UNDERSTANDING THE RURAL
MINDSET
The family is the most important
consumer-buying organization in the
society.
Family members
constitute the
most influential
primary reference
group.
Social Characteristics ..
THE FAMILY AND ITS ROLE IN
PURCHASING DECISIONS
THE TRANSITION OF NUF
THEN NOW
Father
Mother
Children
Spousal Role
Parental Role
Strict, Unemotional,
Authoritarian
Caring, Concerned,
Sensitive
Emotional, Caring,
Nurturing
Informed, Independent,
Enterprising
Self-indulgent,
Irresponsible,
Rebellious
Responsible,
Disciplined,
Career-Minded
Strictly Hierarchical,
Rigid
Egalitarian, Flexible
Controlling, Distant
Democratic,
Companionable
Personal Characteristics.

A FAMILY LIFE CYCLE MODEL
Bachelor
Newly
married
No
children
Full Nest
I
Small
Children

Full Nest
II
Grown up
dependent
children
Empty Nest
I
Children not
living
at home
Empty Nest
II
Retired
Children not
living
at home
Typical age range
0 - 25
25 -50
50 +
Single: Always Single; Divorced: Widowed
PSYCHOLOGICAL FACTORS
A persons buying choices are influenced by
four major psychological factors:
Motivation
Perception
Learning
Beliefs and attitudes
PERCEPTION, LEARNING,
BELIEFS AND ATTITUDES
How a motivated person actually acts is
influenced by his or her perception of the
situation, learning, beliefs and attitudes.
Perception is the process by which an
individual selects, organizes, and
interprets information inputs.
Learning involve changes in an
individuals behaviour arising from
experience.
Classical Conditioning

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PERCEPTION, LEARNING,
BELIEFS AND ATTITUDES
A belief is a descriptive thought
that a person holds about
something.
An attitude is a persons enduring
favourable or unfavourable
evaluations, emotional feelings,
and action tendencies toward
some object or idea.
ATTITUDE AND ITS
COMPONENTS
Components

Hierarchy-of-effects

Cognitive

Awareness
Knowledge
Affective

Liking
Preference
Behavioural

Intention to buy
Purchase
MODERN MARKETING MODEL
Product
Money
Equity
(trust)
Experience
(relationship)
Energy
(convenience)
Rational Emotional
Value
THE BUYER EXPERIENCE CYCLE
Purchase Delivery Use
How long does it take
to find product you
need?

Is the place of purchase
attractive & accessible?

How secure is the
transaction environment?

How rapidly can you
make a purchase?

How long does it
take to get the
product delivered?

How difficult
is it to unpack &
install the
new product?

Does the product
require training or
expert maintenance?

Is the product easy
to store when not in
use?

How effective are
the products
features and
functions?

THE BUYER EXPERIENCE CYCLE
Supplements Maintenance Disposal
Do you need
other products
and services to
make this
product work?

If so how costly
are they?

Does the product
require external
maintenance?

How easy is it to
maintain and
upgrade the
product?

Does use of the
product create
waste items?

How easy is it
to dispose of
the product?

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Marketing not only requires a focus on
satisfying customer needs it also has a
competitive dimension.
The firm must seek a value proposition
that satisfies the needs of target
customers more effectively than
competitors.
WHY COMPETITOR ANALYSIS?
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From the perspective of the customer:
Focus on customer choice. A buyer of a particular brand
could be asked what brand would have been purchased
if that brand was out of stock or what are the other
brands he had considered for purchase.
IDENTIFYING COMPETITORS
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Association of products with specific use contexts or
applications. A number of respondents could be asked to
list out the different use situations for a particular
product under study. Then these respondents could be
asked to name all the products that are appropriate for
each of these use contexts.
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A strategic group is a group of firms that:
Over time pursue similar competitive strategies
(e.g., product differentiation, use of same
distribution channel).
Have similar characteristics (e.g., size,
aggressiveness).
Have similar assets and skills (e.g., strong brand,
excellent service quality image).
STRATEGIC GROUPS
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Elements influencing
Competitor Actions
Size, Growth, and Profitability
Image and Positioning Strategy
Competitor Objectives and Commitment
Current and Past Strategies of Competitors
Competitor Organization and Culture
Cost Structure
Exit Barriers
Assessing Strength and Weakness
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COMPETITIVE STRENGTH GRID
Assets and Skills

Key for Success

New product capacity

Product quality

Cost structure

Product differentiation

Dealer satisfaction

Market share

Secondary Importance

Flexible production

Financial capacity

Quality of management

Sales force/distribution

Brand name recognition

Advertising/promotion

Quality of service

Growth of target segment
Company A
Company B Company C
56
DIMENSIONS OF A MARKET
ANALYSIS
The nature and content of an analysis of a
market will often include the following
dimensions:
Actual and potential market size
Market growth
Market profitability
Cost structure
Distribution systems
Trends and developments
Key success factors
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MARKET SIZE AND GROWTH
What are important and potentially
important sub-markets?
What are their size and growth
characteristics?
What are the driving forces behind
sales trends?
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MARKET SIZE AND GROWTH
The potential market includes the usage
gap, which can be penetrated by creating
increased frequency of use, new users,
and new uses.
To forecast growth patterns, it can be
helpful to consider the forces driving
sales, leading indicators, corresponding
industries, pressure on prices, and the
existence of substitute products.
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MARKET PROFITABILITY
Is this a business area where an average
firm will make a profit?
How intense is the competition among
existing firms?
Evaluate the threats from potential
entrants and substitute products.
What is the bargaining power of suppliers
and customers?
How attractive/profitable are the market
and the sub-markets?
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MARKET PROFITABILITY
Michael Porter, Harvard economist and
business strategist, has brilliantly
exposed the market profitability dynamics
through his five forces model.
According to Professor Michael Porter of
Harvard Business School, the state of
competition in an industry is a composite
of five competitive forces.
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These forces are:
The rivalry among competing firms
in the industry.
The attempts of firms in other
industries to win customers over
to their own substitute products.
FORCES DRIVING MARKET
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The potential entry of new
competitors.
The bargaining power and
leverage exercisable by suppliers
of inputs.
The bargaining power and
leverage exercisable by buyers of
the product.
FORCES DRIVING MARKET
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FIVE FORCES DRIVING COMPETITION
Potential
Entrants
Industry
Competitors

Rivalry Among
Existing Firms
Suppliers
Buyers
Substitutes
Threat of
Substitute
Product
or Services
Bargaining Power
of Suppliers
Bargaining Power
of Buyers
Threat of
New Entrants
Entry Barriers
Economics of Scale
Product Differentiation
Capital Requirement
Switching Costs
Access to Distribution Channels
Cost Disadvantages
Government Policy
Rivalry Determinants:
No of Competitors
Industry Growth
Fixed Cost
Switching Cost
Exit Barriers
Determinants of Supplier
Power:
Supplier Concentration
Substitute Inputs
Differentiation of Inputs
Switching Costs Of Suppliers
Importance of the Input
Threat of Forward
Integration
Determinants of Buyer Power:
Buyer Concentration
Buyer Volume
Buyer Switching Cost
Substitute Products
Buyer Information
Ability to Backward Integration

Determinants Of Substitution Threat
Relative price performance of
substitutes
Switching costs
Buyer propensity to substitute
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OTHER COMPONENTS OF A
MARKET ANALYSIS
Cost Structure
What are the major costs for the various
types of competitors?
Distribution Systems
What are the alternative channels of
distribution?
Key Success Factors
What are the key success factors, assets,
and skills needed to compete
successfully?
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Distribution Systems
Access to effective and efficient distribution channel
is often a KSF.
Emergence of e-commerce
Convenience stores at petrol pumps and gas
stations
Catalogue retailing

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Market Trends
What is change and what is important?
Missing or misinterpreting a trend can be disastrous.
Trends drives growth and rewards those who develop
differentiated strategies, fads are short term investment
attracters.
Identify trend or fad:
What is driving it
How accessible is it
Is it broadly based

Strategic Implications for Marketing

Knowledge of the stage of market
development is important in helping to
develop marketing strategies that are tailored
to the level of economic development.
Country Population
(millions)
GDP
per
capita
Cars
per 1000
TVs
per 1000
PCs
per 1000
Canada 33.4 35,700 581 655 460
China 1,321.9 7,800 8 306 19
India 1,129.8 3,800 8 58 6
Kenya 36.9 1,200 13 22 6
Mexico 108 10,700 151 241 69
Strategic Implications for Marketing
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THE COMPANYS MARKETING
ENVIRONMENT
COMPANY
Suppliers
The Economy
Technology
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8/14/2012 70
COMPETITIVENESS OF INDIA
Country GCI
Rank
2004-05
GCI
Rank
2005-06
GCI
Rank
2006-07
GCI
Rank
2007-08
GCI
Rank
2010-11
India 55 50 42 48 51
China 46 49 35 34 27
Brazil 57 65 66 72 58
Japan 9 12 5 8 6
USA 2 2 1 1 4

Source: Global Competitiveness Report 2010-11
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Cocooning
Fantasy adventure
Pleasure Revenge
Small Indulgences
Down Aging
Being Alive
99 lives

SOCIO-CULTURAL MEGA
TRENDS
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8/14/2012 72
WHY TECHNOLOGICAL
ENVIRONMENT IS
IMPORTANT?
Technology is a dynamic force which
shapes peoples and industries' lives and
even wipe out entire industries.
We live in an age in which the pace of
technological change is pulsating ever
faster, causing waves that spread outward
toward all people, and all industries.
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8/14/2012 73
Videotapes + VCR + Television
VCD or DVD + PC or Television.
OR
Entertainment Cable + PC or Television
Analog Camera Digital Camera
Stand Alone Digital Camera DC, PC
Stand Alone Digital Camera Mobile Phone
+ Digital Camera
WHY TECHNOLOGICAL
ENVIRONMENT IS IMPORTANT?
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8/14/2012 74
What are the implications of this shift to
digital camera?
First, traditional camera industry no
longer exists in many of the developed
countries. It has become a peripheral to
the PC, or one of the input/output devices
to a PC.
Second, because of the shift to the digital
cameras, the entire value chain for the
analog camera industry is in trouble.
WHY TECHNOLOGICAL
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WHY POLITICAL-LEGAL
This environment is composed of
laws, government agencies, and
pressure groups that influence and
limit various organizations and
individuals.
Sometimes these laws create new
opportunities for business.
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INDIAN LEGAL ENVIRONMENT
Competition Law replacing
Monopolies And Restricted Trade
Practices Act
Food and Drugs Act
The Food Safety and Standards Act,
2006
Consumer Protection Act
Intellectual Property Rights Act
Environment Protection Act
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MAJOR FORCES DRIVING
BUSINESS
The competitive wellbeing of business
is determined by six major forces.
The power, vigour, and competence of a
companys existing competitors,
suppliers, customers, potential
competitors, complementors, and the
possibility of substitution.
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What such a transition does to a business
is profound, and how the business
manages this transition determines its
future.
We are, in fact, witnessing a major
transition in the way business is done as a
result of some major business trends.
These are:
E-Business
Consolidation
Globalization.
MAJOR FORCES DRIVING
BUSINESS
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E-BUSINESS
E-business is creating new industries,
reinventing others and destroying still
others.
E-business is throwing into turmoil long
established relationships between buyers
and sellers, producers and suppliers,
competitors and regulators and among
each other, regardless of national
boundaries.
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CONSOLIDATION
We are continuing to witness mergers
and acquisitions of unprecedented
scale, industry after industry, cross
industry and cross border.
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GLOBALIZATION
There have been three great eras of
globalization.
Globalization 1.0
This lasted from 1492 when Columbus set sail,
opening the trade between the old world and the
new until around 1800.
The force driving the process of global
integration was the physical prowess of a few
countries of West Europe .
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Globalization 2.0
Lasted roughly from 1800 to 2000.
The force driving the process of global
integration was multinational companies from the
West.
In the first half of this era, global integration was
powered by falling transportation costs, and in the
second half by falling telecommunication cost.

GLOBALIZATION
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8/14/2012 83
Globalization 3.0
Started around the year 2000.
The dynamic force is the newfound power for
individuals to collaborate and compete globally.
Individuals from every corner of the world is being
empowered.
Companies, large and small have also been newly
empowered.
GLOBALIZATION
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84
FORMAT FOR COMPANY ANALYSIS
1.Performance Indicators
Market Share
Sales Growth
Net Profit Margin
ROI
Others
2.Internal Strengths
Internal Weaknesses
External Opportunities
External Threats
3.Competitive Strength Assessment
Key Success Factor

4.Competitive Position
5.Major Strategic Issues
Year 1 Year 2 Year 3 Year 4 Year 5
Firm A Firm B Firm C Firm D Firm E
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Dr. Kartik Dave
Four levels of Micromarketing
Segments
Local areas Individuals
Niches
The Himalaya Drug
Company serves a
growing niche market
by focusing on
ayurvedic medicines
and health
supplements
Copyright 2009 Dorling Kindersley (India) Pvt. Ltd. 8-88
What is Customerization?
Customerization combines operationally
driven mass customization with customized
marketing in a way that empowers
consumers to design the product and service
offering of their choice.
Market segmentation is the process of
dividing a varied and differing groups of
customers or potential customers into smaller
groups, who want the same value (benefits or
solutions to problems) from the product or
service.
Dr. Kartik Dave 89
WHAT IS MARKET
SEGMENTATION?

Criteria for Segmentation:

1. Measurable size, purchasing power etc finding the size of
market for refurbished home appliances is not that easy.

2. Substantial large enough for the firm to find it as a marketing
opportunity Premium car market in India may
not be substantial to warrant local manufacture

3. Accessible segments can be effectively reached and served
in communication, serving last mile is not easy

4. Differentiable segments should be differentiable from one another
if rural consumers and urban consumers show
no difference in features of mobile handsets

5. Actionable It should be possible for formulating marketing programs for
serving the segment (it cannot add segment descriptors
so easily) how to sell money for value products such as
expensive watches and pens not only the monetarily rich
buy it, the mentally rich also buy how to identify
Dr. Kartik Dave 91
CLASSIFICATION OF
SEGMENTATION BASES
General
Product-specific
Observable
Un-
observable
Geographic,
demographic and
socio-economic
variables

User status, usage
frequency, loyalty
and patronage,
situations

Psychographics
(life-style),
values, personality

Benefits, perceptions,
preferences,
intentions

Dr. Kartik Dave 92
SOCIO-ECONOMIC
CLASSIFICATIONS IN INDIA
Education

Occupation

Unskilled
Skilled Workers
Petty Traders
Shop Owners
Businessman
with employees
None
1-9
10+

Illite
Rate

School
4 yrs

School
5-9 yrs

SSC/
HSC

College
Edu

Grad/
Post
(Gen)
Grad/
Post
(Prof)
1 2 3 4 5 6 7
01
02
03
04
05
06
07
E2 E2
E1
D D D
D
E1 D C C
B2 B2
E2 D
D
D
D C
C
C
D
B2 B2
B2
B2
B2 B2
C
C
B1
B1
B1
B1
A2 A2
A2
A2
A2
A2 A2
B1
A1
A1
A1
A1 A1
A1
E2
Dr. Kartik Dave 93
Education

Occupation

Illite
Rate

School
4 yrs

School
5-9 yrs

SSC/
HSC

College
Edu

Grad/
Post
(Gen)
Grad/
Post
(Prof)
Self-employed
Professionals
Clerical/
Salesman

Supervisory
Executives
Junior
Middle/Senior

1
2 3 4
5 6
7
08
09
10
11
12
D D D
D D D
D D
C
C C
C C C
B2
B2
B2
B2
B1 B1 B1
B1
B1
B1
B1
B1
B1
A2
A2
A2
A2
A2
A1
A1
A1
SOCIO-ECONOMIC
CLASSIFICATIONS IN INDIA
In psychographic segmentation, buyers are
divided into different groups on the basis of
lifestyle or personality or values.
People within the same demographic group
can exhibit very different psychographic
profiles.
Dr. Kartik Dave 94
PSYCHOGRAPHIC
SEGMENTATION

The VALS Segmentation System
Sric-bi.com
Dr. Kartik Dave 96
BENEFIT/VALUE BASED
SEGMENTATION
On its own this approach to segmentation,
while able to provide you with an
invaluable insight into how to win a
customer's business, still requires you to
know how to reach them.
The input to this part of the equation,
provided by a detailed understanding of
who the customers are and where they are
to be found, is clearly very important.
Dr. Kartik Dave 97
It is, therefore, worthwhile to look at
an alternative way to classify the
segmentation variables so that we
can find out
What benefits/value the customers
want?
Who are they and where are they?
ALTERNATIVE CLASSIFICATION
OF SEGMENTATION BASES
Dr. Kartik Dave 98
ALTERNATIVE CLASSIFICATION
OF SEGMENTATION BASES
Identifier Variables
(Who they are)
Consumer Markets
Geographic Location
Demographics
Socio-economic Factors
Psychographics

Business Markets
Company Size
Industry
Geographic Location

Response Variables
(What they want)
Benefits Desired
Price, reliability, service
Applications/Usage Situation
User Status, usage frequency,
application of the product
Sensitivity to Marketing Mix
Product features, price,
promotion
Purchasing Behaviour
Buying volume
Switching among brands
Purchasing approach
Channels used
Dr. Kartik Dave 99
Organizational demographics:
Industry/ Company size/ Location
Operating variables:
Technology/User status/Customer
capabilities (financial)
Purchasing approaches
Organization of DMU/Purchasing
policies/Purchasing criteria
Situational factors
Urgency/Applications/Order size
Personal characteristics:
Motivation/Buyer-seller dyad/
Risk perceptions
General, observable
(Macro)
Specific, subtle
(Micro)
(Intermediate)
SEGMENTATION OF BUSINESS
CUSTOMERS
8/14/2012 Dr.Kartik Dave 100
Segment Attractiveness
Size and Growth
Structural Characteristics
Competition
Segment saturation
Profitability
Protectability
Environmental risk
FACTORS FOR SELECTING
MARKET SEGMENTS
Key Success Factors (KSF)
Product Quality
Brand Reputation
Technology Requirement
Cost Structure
Distribution System
Quality of Service
Financial Capacity
MARKET SEGMENTS
Company Objectives
Compatibility with company goals
Relationships with other segments
Profitability
Resources and Capabilities of the
Company and Competitors
Ability to conceive and design
R & D Capability
Existing Patents and Copyrights
Access to new technologies through
third parties
MARKET SEGMENTS
Ability to Produce (Quality & Quantity)
Production Technology
Production Capacity
Flexibility in Production
Cost Competitiveness
Ability to Market
Brand Reputation
Distribution Strength
Service Strength
MARKET SEGMENTS
Ability to Finance
Access to Capital from Operations
Ability to Use Debt & Equity Finance
Parents Willingness to Finance
Ability to Manage/Execute
Quality of Management
Quality of Decision Making
Innovativeness
Organization Culture
MARKET SEGMENTS
Selection of market segment to serve
has to be on the basis of the fit between:
the attractiveness of the segment,
the key success factors for operating in
the segment, and
the companys relative ability to
compete in the segment.
The company also needs to consider the
competitive reactions it might face if it
decides to compete for a segment.
SELECTING MARKET SEGMENTS
TO SERVE
THREE GENERIC
COMPETITIVE STRATEGIES
1. Cost
Leadership
2. Differentiation
3A. Cost
Focus
3B. Differentiation
Focus
Lower Cost Differentiation
Broad
Target
Narrow
Target
Competitive
Scope
Competitive Advantage
WHAT IS COST LEADERSHIP
STRATEGY?
In a cost leadership strategy, a firm
sets out to become a low-cost
producer in its industry.
The sources of cost advantage may
include the pursuit of economies of
scale, proprietary technology,
preferential access to raw materials,
locational advantage and other
factors.
A cost leader must achieve parity or
proximity in the bases of
differentiation relative to its
competitors to be an above-average
performer, even though it relies on
cost leadership for its competitive
advantage.
STRATEGY?
Proximity in differentiation means
that the price discount necessary to
achieve an acceptable market share
does not offset a cost leader cost
advantage and hence a cost leader
earns above average returns.
STRATEGY?
WHAT IS DIFFERENTIATION
STRATEGY?
In a differentiation strategy, a firm seeks to
be unique in its industry along some
dimensions/attributes that are widely
valued by buyers. It is rewarded for its
uniqueness with a premium price.
A firm pursuing differentiation strategy
must always seek ways of differentiating
that lead to price premium greater than the
cost of differentiating.
WHAT IS FOCUS STRATEGY?
The focuser selects a segment or a group
of segments in the industry and tailor its
strategy to serving them in a better way
than its competitors though it does not
possess an overall competitive advantage.
In a cost focus a firm seeks a cost
advantage in the target segment.
In a differentiation focus, a firm seeks
differentiation in its target segment.
AL RIES ON FOCUS
The sun is a powerful source of energy. ..
Yet with a hat and some sunscreen you
can bathe in the light of the sun for hours
at a time with a few ill effects.
A laser is a weak source of energy. .. But
with a laser you can drill a hole in a
diamond or wipe out a cancer.
When you focus a company, you create
the same effect. You create a powerful,
laser like ability to dominate a market.
All businesses is a niche business. The
question is what kind of niche do you
want to own?
Sacrifice is the essence of corporate
strategy. Without sacrifice there is no
strategy. Without sacrifice a company
becomes weak.
When you sacrifice youre not giving up
anything at all; what you are doing is
defining your position.
AL RIES ON FOCUS
114 DR. KARTIK DAVE

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