4.1 - Introduction to Marketing PDF

Marketing: Refers to making sure the right goods and services are provided to the right customers in the right place and the right time. Market Orientation: 1. It is an approach to marketing that is focused on market research. 2. market oriented businesses think about what to sell, not about...

Marketing: Refers to making sure the right goods and services are provided to the right customers in the right place and the right time. Market Orientation: 1. It is an approach to marketing that is focused on market research. 2. market oriented businesses think about what to sell, not about what to produce. 3. The main idea here is that market oriented businesses conduct market research in order to understand customers’ needs and wants and provide them with the desired goods and services. 4. This approach is outwards-looking, which means that it is not focused on the business and product, it is focused on the market 5. Usually asks “what to sell” 6. Advantage: market orientated approach helps the business to quickly reply to market/customer needs and wants because of continuous market research.Market oriented businesses always know what their customers want and their main goal is to make sure they are selling exactly what people need. 7. Disadvantage: market research is a time consuming and expensive process, so reliance on market research is costly for market-oriented businesses. Product Orientation: 1. is an approach to marketing that is focused on innovation. 2. The main idea here is that product oriented businesses try to develop unique innovative products that do not even have alternatives. 3. This approach is inwards-looking, which means that it is not focused on the customers and market research, it is focused on the business itself and the product. 4. Usually asks “what to produce” 5. Advantage: product oriented approach helps the business to avoid competition. Product oriented businesses provide unique products that have no alternatives, so they enjoy the first-mover advantage — being the first to create a market and thus enjoying the market leadership and market power. 6. Disadvantage: product-oriented approach is also time consuming and expensive (same as market oriented-approach), but for a different reason. Innovation requires constant research and development, which requires experienced well-paid specialists and a long time. On top of that, there are no guarantees that the newly-launched unique product will be successful, so maybe all the R&D may end up being useless. Market: can refer to many things: all the people that purchase a certain product, or a place where trade happens, or products that are offered by businesses. Market size: refers to the total sales in the industry. It can be measured by value (dollars, yuan, rupiah, etc.) or by volume (number of items sold, for example number of smartphones). - Market size = cumulative sales of all organizations in the industry Market share is the percentage of the total sales in a market that a business makes up, i.e. a firm’s portion in total sales in the market/industry.  - Even though market share is always expressed as a percentage, this percentage may refer to either value (dollars, yuan, pound, etc.) or to volume (number of smartphones, items of furniture, laptops, etc.). - Market share (%) = organisation’s sales ÷ total sales in the industry ⨉ 100 Usually, the higher the market share, the higher the market power (a firm’s ability to establish the “rules” in the market, for example manipulate the price by controlling the supply). Market growth is the percentage of the positive change in market size - Market growth (%) = (market size now – market size before) ÷ market size before ⨉ 100 1. market share is a firm’s portion in total sales in the market/industry. If you know market share of all firms in the industry/market, then you will be able to identify the market leader — the firm with the highest market share in the industry. Market leadership - Advantages 1. Market leaders enjoy high status and recognition as the top brand/firm in their industry, gaining access to more distribution channels (more stores want to sell your product) 2. Market leaders benefit from economies of scale through efficient large-scale production 3. Market leaders have high market power to influence prices, product innovation and act as a benchmark for competitors 4. Can have Price Leadership, but not always as sometimes companies gain market share from lowering their prices Maintaining market leadership challenges 1. Maintaining market leadership requires heavy investment in market research to understand evolving customer needs 2. Firms must constantly innovate and develop new products to fend off competition 3. Profitability must be maintained along with high market share as low prices can increase share but reduce profits 4. Market leaders lack competition incentives to innovate and are vulnerable if they rest on past successes 5. Market dominance can enable anti-competitive behavior like lobbying for favorable regulations BCG matrix is a product portfolio analysis tool that examines the products in terms of market share and market growth. The purpose of BCG matrix is to determine strategies for organisation’s products. Before determining strategies, BCG matrix breaks down all products in the product portfolio into 4 categories: 1. Star: Generate high incomes because have high market share but most of this income goes into sustaining the growth of the product. 2. Cash cow 3. Question mark 4. Dog products that are dogs: Generate little revenue as markets are declining. Products should be divested (i.e., dropped or discontinued). Products that are question marks: Have high potential but require substantial investment to develop into stars. Generate low revenue but incur high investment expenses. Need managers to decide which products to build and which to divest. Products that are stars: Are successful products that generate large revenue. Require large investment to develop and promote in order to harvest the most benefits (profits). Become cash cows as market growth slows. Products that are cash cows: Are mature and established products. Generate strong revenue and profits. Require minimal investment in order to hold their position in the market. Are used to maintain stars and grow question marks from sales revenues. Pros and cons of the BCG matrix Pros: 1. Identifies the need to rebalance portfolio. 2. It is a dynamic model as products can change categories. Limitations: 1. High market share does not always lead to profits. 2. Does not identify causes of product positions. 3. Should be used with other planning tools.