CRAVENS
PIERCY
8/e
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
3-2
Chapter Three
Markets and
Competitive
Space
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
3-3
MARKETS AND
COMPETITIVE SPACE
 Markets and Strategies
 Product-Market Scope
and Structure
 Describing and
Analyzing End-Users
 Analyzing Competition
 Developing a Strategic
Vision about the Future
 Market Size Estimation
MARKETS AND
COMPETITIVE SPACE
3-4
The Challenges ―
Markets are increasingly complex,
turbulent, and interrelated.
Importance of a broad view of the
market.
Essential to develop a vision about
how the market is likely to change in
the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions
3-5
MARKETS AND
STRATEGIES
Markets and
Strategies are
Interlinked
Forming
a Shared
Vision
Value
Migration
Challenges
Markets Impact
Strategies
 Market
changes often
require altering strategies
 Forces of change create
both market opportunities
and threats
 Inherent danger in faulty
market sensing
3-6
3-7
Value Migrations
 Customers
shift
purchasing to new
business designs with
enhanced value offering
 Beware of disruptive
technologies
 Market sensing and
organizational learning are
essential
PRODUCT-MARKET
SCOPE AND
STRUCTURE
3-8
Matching Needs with Product
Benefits
Product-Market Boundaries and
Structure
Forming Product-Markets for
Analysis
The Changing Composition of
Markets
Matching Needs
with Product
Benefits

A product – market matches
people with needs to the
product benefits that satisfy
those needs
“A product – market is the set
of products judged to be
substitutes within those
usage situations in which
similar patterns of benefits
are sought by groups of
customers.”*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
3-9
INNOVATION
FEATURE
3-10
Progressive Insurance:
Customer Needs at the Center of Strategy






In the period 1994 to 2004, Progressive Insurance
increased sales from $1.3 billion to $9.5 billion, and ranks
high in the Business Week Top 50 U.S. companies for
shareholder value creation.
The company invents new ways of providing services to
save customers time, money and irritation, while often
lowering costs at the same time.
Loss adjusters are sent to the road accidents rather than
working at head office, and they have the power to write
checks on the spot.
Progressive reduced the time needed to see a damaged
automobile from seven days to nine hours.
Policy holders’ cars are repaired quicker, and the focus on
this central customer need has won much automobile
insurance business for Progressive.
These initiatives also enable Progressive to reduce its own
costs – the cost of storing a damaged automobile for a day
is $28, about the same as the profit from a six-month
policy.
Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
3-11
Product – Market
Boundaries and Structure

Determining Product-Market
Structure
1. Start with the generic need
satisfied by the product
category of interest to
management
2. Identify the product
categories (types) that can
satisfy the generic need
3. Form the specific product –
markets within the generic
product – market
3-12
Illustrative Fast-Food
Product-Market
Structure
SUPER
MARKETS
MICROWAVE
OVENS
FAST-FOOD
MARKET
CONVENIENCE
STORES
TRADITIONAL
RESTAURANTS
Forming Product –
Markets for
Analysis
Factors influencing
product – market
boundaries:
 Purpose of analysis
 Changing composition
of markets
 Extent of market
complexity
3-13
The Changing
Composition of
Markets
Change due to new
technologies and emerging
competition
 Consider existing and
emerging markets
 Identify alternative ways to
meet needs
 Extend product-market
analysis beyond industry
boundaries (e.g. Fast-foods)

3-14
Extent of
Market Complexity
 Three characteristics of
markets:
– 1. Functions or uses of
the product
– 2. The enabling
technology of the product
– 3. Customer segments in
the product-market
3-15
Illustrative Product
– Market Structure
Food and beverages
for breakfast meal
3-16
•Generic Product
Class
•Product Type
Cereals
•Variant A
Ready to eat
Regular
•Variant B
Natural
Nutritional
Life
Product 19
Pre-sweetened
Special K
•Brands
DEFINING AND
ANALYZING MARKETS
3-17
Define Product-Market
Boundaries and Structures
Identify and Describe End-Users
Analyze Industry and
Value Added Chain
Evaluate Key Competitors
Forecast Market Size
and Growth Trends
3-18
Identifying and
Describing Buyers
Building
Customer
Profiles
DESCRIBING
AND
ANALYZING
END-USERS
Environmental
Influences
How
Buyers
Make
Choices
Identifying and
Describing End-Users
3-19


Illustrative buyer
characteristics in
consumer markets:

Family size, age,
income, geographical
location, sex, and
occupation
Illustrative factors in
organizational markets:
 Type of industry
 Company size
 Location
 Type of products
How Buyers Make
Choices
 BUYING DECISION
PROCESS:
1. Problem recognition
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behavior
3-20
Environmental
Influences


External factors
influencing buyers’
needs and wants:
 Government, social
change, economic
shifts, technology etc.
These factors are often
non-controllable but can
have a major impact on
purchasing decisions
3-21
Building Customer
Profiles

Start with generic product
– market

Move next to producttype and variant profiles
>> increasingly more
specific

Customer profiles guide
decision making (e.g.
targeting, positioning,
market segmentation etc.)
3-22
ANALYZING
COMPETITION
3-23
1. Define Industry
Structure and
Characteristics
5. Identify
New
Competitors
4. Anticipate
Actions by
Competitors
PRODUCTMARKET
STRUCTURE
AND
MARKET
SEGMENTS
2. Identify
and
Describe
Key
Competitors
3. Evaluate
Key
Competitors
Examples of Levels
of Competition
Baseball
cards
Bottle
water
Video
Games
Fast
Food
Regular
colas
Beer
Diet lemon
limes
Ice
Cream
Diet-Rite
Cola
Fruit
flavored
colas
Diet
Coke
Diet
Pepsi
Product from
competition:
diet colas
Juices
Wine
Lemon
limes
Product category
competition:
soft drinks
Generic competition:
beverages
Budget competition:
food & entertainment
Coffee
3-24
3-25
Industry Analysis

Industry size, growth,
and composition

Typical marketing
practices

Industry changes that
are anticipated (e.g.
consolidation trends)

Industry strengths and
weaknesses

Strategic alliances
among competitors
Defining Industry
Structure &
Characteristics
3-26
SUPPLIERS
Industry Form
PRODUCERS
Industry
Environment
Competitive
WHOLESALERS/
Forces
DISTRIBUTORS
RETAILERS/
DEALERS
CONSUMER/
ORGANIZATIONAL
END USERS
Value
Added
Chain
Competitive
Forces
1. Rivalry among existing firms.
2. Threat of new entrants.
3. Threat of substitute products.
4. Bargaining power of
suppliers.
5. Bargaining power of buyers.
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
3-27
Key Competitor
Analysis







3-28
Business scope and
objectives
Management experience,
capabilities, and
weaknesses
Market position and trends
Market target(s) and
customer base
Marketing program
positioning strategy
Financial, technical, and
operating capabilities
Key competitive advantages
(e.g., access to resources,
patents)
3-29
Extent of
Market Coverage
Current
Capabilities
Competitor
Evaluation
Past
Performance
Customer
Satisfaction
DEVELOPING A
STRATEGIC VISION
ABOUT THE FUTURE
 Industry Boundaries Blurring
and Evolving
 Competitive Structure and
Players Changing
 Value Migration Paths
 Product Versus Business
Design Competition
 Firms are Collaborating to
Influence Industry Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
3-30
MARKET SIZE
ESTIMATION
3-31
Product-Market Forecast
Relationships
(area denotes sales in $’s)
Market Potential
Estimate
Unrealized
Potential
Company
Sales
Forecast
Industry
Sales
Forecast
Product-Market
Forecast
Relationships for
Industrial Painting
Units
3-32
Sales (in 1000s
of units)
900
800
Market
Potential
700
Sales Forecast
600
500
400
300
Company XYZ
Sales Forecast
200
100
0
2001
2002
2003
2004
2005
2006
2007 2008