Strategic Marketing: Cost Analysis, Product Launch & Market Strategies
Strategic Marketing
Strategy
The strategy is a response to external threats and opportunities, as well as internal strengths and weaknesses. It consists of a description of the marketing mix and actions that will be carried out to achieve the objectives. It is the most creative part of the marketing plan. There are three key strategic levels:
- Corporate Strategy: Affects the entire organization.
- Functional Strategy: Implemented by strategic business units.
- Product Strategy: Focuses on individual products or product lines.
Competitive Advantage
Competitive advantage is what a company possesses that its competitors lack. According to Michael Porter, this advantage can be achieved through:
- Product Differentiation: Making a product perceived by the customer as unique and preferable to competitive products.
- Cost Leadership: Bringing a product similar to the competition to market at a lower production cost, potentially leading a market segment.
Cost Classification
Costs can be classified based on several criteria:
Accuracy of Complaint
- Direct Costs: Costs that can be directly attributed to a specific product or cost center.
- Indirect Costs: Costs that are not directly related to a product. These costs affect the whole process and should be distributed among products using an allocation criterion.
Production Volume
- Total Cost: The monetary value of all inputs used to produce a certain quantity of product.
- Average Cost: Total cost divided by the number of units produced.
- Marginal Cost: The change in total cost resulting from increasing output by one unit.
- Incremental Cost: The average cost for a given increase in output.
Relationship to Production Volume
- Fixed Cost: Costs that do not vary with production volume.
- Variable Cost: Costs that depend on production volume. Variable costs can be proportional, progressive, or degressive, depending on how they vary with production.
Impact Timeframe
- Long-Term Cost: Costs that the company cannot alter in the short term. In the long term, all costs can be altered.
- Short-Term Cost: Costs that can be varied within a shorter time period.
The Experience Curve
The experience curve is a graphical representation of the evolution of unit costs based on the number of units produced. It reflects the learning effect on production costs, demonstrating how production costs decrease as production volume increases. Companies that choose to be first to market can benefit more from the experience curve, achieving a competitive advantage in costs, but they also face higher risks.
Calculation of Equilibrium
Calculating equilibrium involves determining the level of sales at which a company covers all its costs (fixed and variable) and begins to make a profit.
Benefit (B°) = (P – C)Q – C
Where:
- P = Price per unit
- C = Variable cost per unit
- Q = Quantity sold
Launching New Products
Launching new products can be driven by internal or external reasons. Internal reasons include filling market gaps, increasing market share, and enhancing prestige. External reasons include the need to replace declining products and adapting to market changes.
The process of launching new products typically involves several stages:
- Idea Selection
- Demand Verification
- Technical and Financial Viability Study
- Product Development
- Acceptance Testing
- Launch Guidelines
Baseline Analysis
Internal Analysis
Internal analysis is conducted by the company’s management by collecting data and opinions from various sources, including:
- Information about company ownership
- Data from different areas of the organization (production, marketing, finance)
- Information related to products, pricing, communication, and distribution
- Sales figures, market share, and performance data
- Production and distribution costs
- Personnel information
- Information on policies, objectives, and their achievement
External Analysis
External analysis examines the set of external variables that can directly or indirectly affect the company’s future trajectory. These factors are constantly evolving, and the only constant in the environment is change. These changes can pose threats to the company, which can only be mitigated by its ability to plan and coordinate its actions.
To facilitate environmental analysis, we distinguish between:
- The Macro-environment: The general environment that studies the influences on the company from a range of variables or factors.
- The Micro-environment: Refers to suppliers, distributors, and customers. It also includes the study of the market and sector in which the company operates, with particular attention to the competition. Its purpose is to identify threats and opportunities that changes may generate.
Competition and Sector
Competition consists of alternative products that consumers might choose instead of the products offered by the company. In intensely competitive industries, detailed knowledge of competitors is crucial, especially when the market cannot accommodate all players. This knowledge should encompass competitors’ businesses, prospects, goals, strategies, products, market shares, strengths, and weaknesses.
Analyzing the sector involves understanding:
- Structure: Understanding the organization of the sector, the number and characteristics of member companies, customer types, distribution channels, etc.
- Progress: Assessing the level of technology, materials, manufacturing processes, growth rate, etc., to anticipate the sector’s evolution.
- Barriers to Entry: Studying obstacles to entering the market, such as economies of scale, economies of learning, required investment, etc.