Question

Chapter 1

Explain fully superior customer value and synergies.

Explain fully corporate strategy and all the components of corporate strategy.

Explain fully strategic business unit.

Explain fully market segmentation and market segments.

Explain fully the designing of market driven strategy.

Chapter 2

Identify and explain fully each of Porter’s 5 Forces.

Explain fully relative market position and market potential.

Chapter 3

Explain fully marketing segmentation including the bases for segmentation.

Explain fully marketing sizing, market targeting, and market niche.

Answer 1

Chapter 1:

1. Superior customer value is defined as several sources of competitive advantage which a company would have to add value to their customers when compared to the competitors. For example, a company has several sources of competitive advantages such as R&D, scale of operations, technological superiority, more qualified personnel etc. Companies in the same industry usually have different sources of competitive advantage, which must provide superior customer value than the competition

Synergies would include building a winning business model, service & quality, price & image etc.

2. Strategic business unit:

Popularly known as SBU, strategic business unit is defined as a fully functional business unit that has its own vision & direction. The SBU operates as a separate business unit but is an important part of the company. the operational status of SBU is reported by the company to its headquarters. The concept of SBU is suitable for companies that have multiple product structure.

3. Market segmentation is defined as the process of dividing the potential customers into different segments or groups on the basis of different characteristics. The segments created consist of consumers who similarly respond to marketing strategies & share traits such as identical interests, needs or locations.

Different segments of market would include geographic segmentation, demographic segmentation, behavioral segmentation, firmographic segmentation, psychographic segmentation etc.

4. Designing market driven strategies

The market driven strategies provides the company a wide perspective which requires effective integration of activities & processes that has an impact on the customer value. The market driven strategies must be designed in such a manner that it must have the following characteristics:

• The strategy is market oriented.
• Have distinctive capabilities.
• Matches the customer value requirements to capabilities.
• Achieves superior performance.

Chapter 2:

1. Porter’s five forces model:

The porter’s five forces model helps in analyzing the competition within a industry.

Components of porter’s five forces model:

• Threat of new entrants: in this stage there is full of competition because there is threat not only from existing firms but also new entrants. The market is always open for entry & exits resulting in comparable profits to everyone.
• Threat of substitutes: the substitute product has the ability to satisfy similar needs. When price of the substitute changes, the demand for related product also fluctuates. The increase in number of substitutes increases the competition because the customers have more alternatives.
• Bargaining power of buyers: when there are many producers & a single buyer, the position of the buyer is very strong & he would set the price. This would compel the firm to provide high quality products at fewer prices.
• Bargaining power of suppliers: companies always depend on the suppliers for their raw material & are the supplier has more power he would sell the raw materials at higher prices.
• Industry rivalry: this is the major determinant for industry competition. Factors are:

• Competitive advantage through innovation.
• Level of advertising expense.
• Powerful competitive strategy
• Degree of transparency etc.

2. Relative market position: This particular brand’s share against that of its leading competitor. Market concentration is a metric that is used to measure how a small firm accounts for large proportion of market. These metrics are useful in comparing a firm’s or a brand’s relative position across different markets and in evaluating the type and degree of competition in those markets.

Market potential is defined as the entire size of the market for a given product at a given time. It represents the upper limits for a product in the market. Sales value or sales volume is the metric used to measure market potential.

Chapter 3:

1. Market segmentation already explained. There are totally seven bases of market segmentation.

• Geographic segmentation is segmenting the market based on location. People living in one region may have different purchasing & consuming habits when compared to people in other regions.
• Demographic segmentation is using demographic variables such as age, occupation, education, sex and income are commonly used for segmenting markets.
• Psychographic segmentation where people are segmented on the basis of their personality, attitude, lifestyle etc.
• Behavioral segmentation: In this method consumers are classified into market segments not the basis of their knowledge, attitude and use of actual products or product attributes.
• Volume segmentation: Consumers are classified light, medium and heavy users of a product. In some cases, 80 per cent of the product may be sold to only 20 per cent of the group.
• Product space segmentation: Here the buyers are asked to compare the existing brands according to their perceived similarity and in relation to their ideal brands. Then buyers are classified into groups each having a distinct ideal brand in mind. The distinctive characteristics of each group are ascertained.
• Benefit segmentation: Consumer behavior depends more on the benefit sought in product/service than on demographic factors. Each market segment is identified by the major benefits it is seeking. Most buyers seek as many benefits as possible.

2. Market sizing: this is nothing but estimating the market potential. Understanding the market potential is important for launching a new product or service.

Market targeting: this is selecting the target market from the entire market. Here the company selects a group of buyers whom it wants to satisfy.

Market niche: A niche market is the subset of the market on which a specific product is focused. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that it is intended to target.