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25.1 Marketing planning
Marketing plan sets out the marketing objectives (market share/ sales/ brand awareness), strategy, budget and the activities necessary to achieve objectives.
èOperational department: how much need to be available to sell at what times
èHuman resource: number of skills and staff needed at what times
èFinancial forecast: expected profits and cash flow
25.2 Elasticity of demand
Income elasticity: % change in quantity demanded divided by % change in income.
When income increases and demand increases more: income elastic, luxury product.
When income increases together with the demand: normal product.
When income increases but demand decreases: inferior product.
When demand changes less than income (in %) then it is income inelastic.
Cross-price elasticity of demand shows how much demand for product A changes when price of product B changes:
% change in quantity demanded of A divided by % change in price of B.
With substitutes customers will buy more of A when B increases in price.
With complements customers will buy less of A when B increases in price; cross-price elasticity is negative.
Promotional elasticity of demand shows the sensitivity of demand in relation to changes in promotional expenditure: % change in quantity demanded divided by % change in promotional expenditure.
Weather elasticity of demand shows sensitivity of demand in relation to changes in weather factors:
% change in quantity demanded divided by % change in (for example) rainfall.
25.4 the need to forecast marketing data
Companies want to analyse the market before setting out a market plan. It is about gaining understanding in the following:
–The market size (measured in value or volume of sales)
oValue of sales measures the amount of money spent on products in the market.
oVolume of sales measures the number of units sold in a market.
–Market share of firms within the market
–The likely costs and difficulties involved in entering the market
–The trends within the market (growth? Sales downwards or upwards? Etc)
It examines the changes in value and volume of sales.
–Patterns of sales (for example: are sales seasonal?)
–Substitute products (how likely are customers to switch)
Methods of analysing trends:
–Calculating moving averages
–Extrapolation: Identifying underlining patterns in past data and projecting this trend forwards.
–Correlation: occurs when there are apparent links between variables.
oPositive correlation, for example, between advertising and sales.
oNegative correlation, for example, between price and sales.
Other ways of estimating future sales:
–Using market research
oPrimary market research: uses data gathered for the first time.
oSecondary market research: uses data that has been gathered previously (2nd time).
–Using your best guess
oUsing your own experience or hire industry experts for their opinion of what is most likely to happen.
Benefits of sales forcasting:
–Better preparation for what is to come.
–Better planning.
–Forecast can be updated.
Gathering data has become easier due to developments in information technology.
Reliability of forecasts
Most likely to be correct when:
–Trend has ben extrapolated and market conditions have continued as before.
–Test market is truly representative of the target population.
–Forecast is made by experts.
–Firm is forecasting near future.
When can they be wrong:
–Sudden change in customer buying behaviour
–Original market research was poor
–Experts were wrong
–Looking too far ahead
25.5 the need for and development of a coordinated marketing mix.
When deciding on a marketing strategy many issues need to be considered, such as:
–Marketing objective
–Where should the business compete
–Which segments should it target
–What should it offer
–How should it compete and position itself against competitors
1.Set corporate objective
2.Set marketing objectives
3.Analyse the internal environment: Strengths and Weaknesses
4.Analyse the external environment: Opportunities and Threats
5.Produce marketing strategy
6.Implement marketing strategy
7.Review
Sometimes you need to change a marketing strategy:
–Objectives change
–Market condition change
–Competitors’ actions
26.2 international markets
Overseas expansion may be appealing because:
–Domestic market is saturated
–Market is subject to increasing competition or regulation
–Benefits of particular market overseas
Method of entry into international markets:
Start with exporting abroad; low risk strategy.
May start doing some marketing abroad.
When sales grow, firm might look for a representative overseas; low risk.
Finding a partner overseas; higher risk.
Taking over a foreign partner or invest to set up own operations; high risk.
Global strategy markets products in the same way in all markets.
Localised strategy adapts marketing mix for local conditions.
Factors to consider when going overseas:
–Costs
–Risk
–Competition
–Understanding of the market
–Time frame
–Strengths and experience
–How to enter
–Likely returns (profit)
35.2 Strategic analysis
SWOT:
–Strengths
–Weaknesses
–Opportunities
–Threats
PEST(EL)
Analysing external micro environment: political, economic, social, techonoligcal, environmental, legal factors.
Vision, mission and values.
Porter’s five forces analysis:
1.Rivalry; number of firms, competitors
2.Supplier power; if not many suppliers, supplier power is big. Their size & dependence on you.
3.Buyer power; if few buyers, buyer has power. Many potential alternative suppliers to switch to.
4.Entry threat; entry costs, brand loyalty, legal restrictions
5.Substitute threat; the ease with which a buyer can switch to an alternative type of product that performs the same function.
Actions to change the competitive environment:
–High barrier to entry so that other businesses will not enter the market.
–Few competitors and substitutes which keeps customers from finding alternatives easily.
–Lowe supplies power so that they have power over suppliers.
–Lower buyer power so that buyers are dependent on their products.
37.2 corporate culture
Types of culture:
–Power culture
oOne dominant person (or few key people)
oDecisive leadership, quick decision making, consistent approach
oIf company grows; overloaded boss, slower decision making, dependent employees.
–Role culture
oRules and procedures
oHierarchy
oFollow systems and do what is expected of you to do
oCommunication via channels
oPredictable outcomes in terms of performance; certainty.
oMight be inflexible to change.
–Task culture
oValue of an individual to a project depends on expertise rather than formal titles.
oExpert teams
oCoordinating this can be difficult
–Person culture
oWell-qualified individuals who respect each others’ skills and knowledge.
oSelf-reliant employees
oOperate independently, share expertise and knowledge when needed.
oMay lack consistency and may overlap
National culture (Hofstede)
–Power distance; distance between power in a company
–Uncertainty avoidance; the extent to which employees need to know exactly what they are supposed to do
–Individualism V collectivism; the extent to which people feel part of a team or whether they want to work on their own.
–Masculinity V femininity; the extent to which employees feel they need to be dominant and assertive or whether they feel that concern for others is more important.
–Long-term orientation: Extent to which individuals planned ahead.