Marketing Talk

Marketing Management

 

¥  What is an Industry?

Industry is the production of an economic good or service within an economy.^[1] Manufacturing industry became a key sector of production and labour in European and North American countries during the Industrial Revolution, upsetting previous mercantile and feudal economies. This occurred through many successive rapid advances in technology, such as the production of steel and coal. Following the Industrial Revolution, perhaps a third of the world's economic output is derived from manufacturing industries. Many developed countries and many developing/semi-developed countries (People's Republic of China, India etc.) depend significantly on industry. Industries, the countries they reside in, and the economies of those countries are interlinked in a complex web of interdependence.

¥  What is Porter’s 5 Forces and why is it called Porter’s 5 forces?

Porter five forces analysis is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit.

v  Threat of new entrants

Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will trend towards zero (perfect competition).

• The existence of barriers to entry (patents, rights, etc.) The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.
• Economies of product differences
• Brand equity
• Switching costs or sunk costs
• Capital requirements
• Access to distribution
• Customer loyalty to established brands
• Absolute cost
• Industry profitability; the more profitable the industry the more attractive it will be to new competitors.

Threat of new entrants, sources.1)Economies of scale, 2)Product differentiation, 3)Cost disadvantages independent of size, 4)Access to distribution channels, 5)Government Policy.

v  Threat of substitute products or services

The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. For example, tap water might be considered a substitute for Coke, whereas Pepsi is a competitor's similar product. Increased marketing for drinking tap water might "shrink the pie" for both Coke and Pepsi, whereas increased Pepsi advertising would likely "grow the pie" (increase consumption of all soft drinks), albeit while giving Pepsi a larger slice at Coke's expense. Another example is the substitute of traditional phone with VoIP phone.

• Buyer propensity to substitute
• Relative price performance of substitute
• Buyer switching costs
• Perceived level of product differentiation
• Number of substitute products available in the market
• Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.
• Substandard product
• Quality depreciation

v  Bargaining power of customers (buyers)

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.

• Buyer concentration to firmconcentration ratio
• Degree of dependency upon existing channels of distribution
• Bargaining leverage, particularly in industries with high fixed costs
• Buyer switching costs relative to firm switching costs
• Buyer information availability
• Force down prices
• Availability of existing substitute products
• Buyer price sensitivity
• Differential advantage (uniqueness) of industry products
• RFM Analysis

v  Bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.

• Supplier switching costs relative to firm switching costs
• Degree of differentiation of inputs
• Impact of inputs on cost or differentiation
• Presence of substitute inputs
• Strength of distribution channel
• Supplier concentration to firm concentration ratio
• Employee solidarity (e.g. labor unions)
• Supplier competition - ability to forward vertically integrate and cut out the BUYER

v  Intensity of competitive rivalry

For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

• Sustainable competitive advantage through innovation
• Competition between online and offline companies
• Level of advertising expense
• Powerful competitive strategy
• Firm concentration ratio

¥  What are the factors under internal environment?

Philosophy of management is the manager's set of personal beliefs and values about people and work and as such, is something that the manager can control.

Resources are the people, information, facilities, infrastructure, machinery, equipment, supplies, and finances at an organization's disposal. People are the paramount resource of all organizations.

A byproduct of the company's culture is the organizational climate. The overall tone of the workplace and the morale of its workers are elements of daily climate. Worker attitudes dictate the positive or negative “atmosphere” of the workplace.

The organizational culture is an organization's personality. Just as each person has a distinct personality, so does each organization. The culture of an organization distinguishes it from others and shapes the actions of its members.

The formal structure of an organization is the hierarchical arrangement of tasks and people. This structure determines how information flows within the organization, which departments are responsible for which activities, and where the decision‐making power rests.