2. Situational Analysis in the Marketing Planning Process82 2.5 Comparing B2B and B2C Markets Areas of difference between the business and consumer markets can be summarized as follows (see Table 2.2). The Internet is playing an increasing role in both B-t-B and B-t-C markets. Web sites enable organisations to promote brand values, reduce printing costs, attract and qualify prospects and leads, and foster customer loyalty. Sites can also expand the customer database, provide customer service, and showcase and sell products. Online purchasing, often called e-procurement, is growing rapidly. E-procurement gives buyers access to new suppliers, lower purchasing costs, and hastens order processing and delivery. In turn, business marketers can connect with customers online to share marketing information, sell products and services, provide customer support, and maintain customer relationships (Kotler and Armstrong, 2009). 2.6 SWOT Analysis Successful SWOT analysis is basically a process of finding the optimum fit between the firm’s controllable strengths and weaknesses and uncontrollable opportunities and threats of the firm’s environment in which it operates; and not just today’s environment, but also that of the predictable future. This explains why charting a SWOT profile (strengths, weaknesses, opportunities and threats) is by one of the most popular marketing planning tools. It provides a means by which all the key internal (company- B-t-B market B-t-C market Market structure Geographically concentrated• Relatively few buyers • Oligopolistic competition • Geographically dispersed • mass markets (often millions) Pure competition • Size of purchase Often extremely large • Usually small • Buyer behaviour Functional involvement • Rational/task motives prevail • Stable relationships • Professionalism, expertise • Family involvement• Social/emotional motives • prevail Less buyer-seller loyalty• Less trained, often inexperi-• enced Buying influences Committees, technical • experts, and management are all involved in decision • making (buying centre) The individual, household • members, or friends and relatives Decision-making Distinct, observable stages• Often group decisions • Vague, mental stages• Usually individual decisions • Supplier relationship Long-term contracts and • supplier involvement Many single purchases • Table 2.2: Comparing B2B and B2C markets Kapitel_2.indd 82 03.08.2010 12:46:36 Uhr 2.6 SWOT Analysis 83 related) and external (environment-related) issues can be summarized at a glance. A sophisticated SWOT profile facilitates the development of a strategy that capitalizes on a company’s strengths, minimizes any weaknesses, exploits emerging opportunities and avoids, as far as possible, any threats. By carefully matching environmental trends to the firm’s own distinctive competences the strategic market planner is able to develop strategies that build on the company’s strengths, whilst at the same time minimizing its weaknesses. By doing so, the marketer aims to achieve what is called a ‘strategic fit’ (Hollensen, 2006). SWOT analysis originated from efforts at Harvard Business School to analyze case studies (Panagiotou, 2003). In the early 1950s, two Harvard business policy professors, George Albert Smith Jr and C Roland Christensen, started to investigate organisational strategies in relation to their environment. In the late 1950s, another HBS business policy professor, Kenneth Andrews, expanded on this thinking by stating that all organisations must have plainly defined objectives and keep up with them. In the early 1960s, classroom discussions in business schools were focusing on organisational strengths and weaknesses in relation to the opportunities and threats (or risks) in their business environments. In 1963, a business policy conference was held at Harvard, where SWOT analysis was widely discussed and seen as a major advance in strategic thinking (Hollensen, 2006). The SWOT framework became popular during the 1970s because of its inherent assumption that managers can plan the alignment of a firm’s resources with its environment. Subsequently, during the decade of the 1980s, Porter’s (1980) introduction of the industrial organisation paradigm with his five forces /diamond models gave dominance to a firm’s external environment, overshadowing the popularity of SWOT. In the 1990s, Barney reinvented SWOT as the foundation framework linking firm resources to sustained competitive advantage (Barney, 1991). Figure 2.10 illustrates the ‘roots’ back to the beginning of this book’s chapter 2, in which there was a comprehensive discussion of roots of the Resource Based View RBC (insideout) based on the firm’s strengths and weaknesses and Market Orientation View MOV (outside-in based on the opportunities and threats in the environment). These roots in Chapter 2 now end up in this section where everything is concluded in form of the SWOT-analysis. 2.6.1 Elements of a SWOT Analysis When implementing a SWOT analysis to devise a set of strategies, the following guidelines should be taken into account (Hollensen, 2006). Strengths• : Determine your organisation’s well-built points, from an internal perspective as well as from the perspective of the external customer. Key questions are as follows: Are there any unique or distinct advantages, which make the organisation stand out in the crowd? What makes the customers choose the organisation over the competition? Are there any products or services which the competition cannot imitate (both now and in the future)? Weaknesses• : Determine the organisation’s weaknesses, not only from an internal point of view, but also more importantly, from the external view of the customers. Key questions include: Are there any operations or procedures that can be streamlined? Kapitel_2.indd 83 03.08.2010 12:46:36 Uhr 2. Situational Analysis in the Marketing Planning Process84 How and why do competitors operate more effective and efficient? Does the competition have a certain market segment occupied? Opportunities• : Another key factor is to determine how the organisation can con tinue to grow within the marketplace. After all, opportunities are everywhere, such as changes in technology, government policy, social patterns, and so on. The most basic questions are as follows: Where and what are the attractive opportunities within the marketplace? Are there any new emerging trends within the market? What does the organisation predict in the future that may depict new opportunities? Threats• : Threats are external factors and per definition uncontrollable. However, they are instrumental in the design of a sophisticated analysis. It is vital to be prepared and face threats even during unstable situations. Central questions with respect to threats include the following: What is the competition doing that is offsetting the organisational development? Are there any changes in consumer demand, which call for new requirements of products or services? Is the changing technology hurting the organisation’s position within the marketplace? 2.6.2 Matching and Converging in the SWOT Matrix SWOT analysis should function as a catalyst to facilitate and guide the creation of marketing strategies that will produce the preferred results. The process of organizing information within the SWOT analysis enables the company to discern new opportunities. In many ways, good marketing is the art of finding, developing and profiting from Competences Capabilities Resources External Opportunities & threats Strengths Weaknesses Opportunities Threats Internal Strengths & weaknesses Resource based view Market orientation view RBV MOV PEST analysis ? Political/legal ? Economic ? Socio-cultural ? Technological Chapter 2: Chapter 2: Chapter 2: Chapter 2: + Competitor analysis Company analysis Convert AvoidMatch Desirable Undesirable Internal (controllable) External (uncontrollable) Source: Adapted from Hollensen, 2006, modified Figure 2.10: SWOT analysis and the structure of chapter 2 Kapitel_2.indd 84 03.08.2010 12:46:36 Uhr 2.6 SWOT Analysis 85 opportunities (Kotler, 1999). A marketing opportunity is an area of customer need and interest in which there is a high probability that a company can profitably satisfy that need (Kotler and Keller, 2006). To address these opportunities properly, the marketing manager should appraise every strength, weakness, opportunity, and threat to determine its total impact on the firm’s marketing efforts. This assessment will also give the manager an idea of the basic strategic options available. The following actions are those suggested by the SWOT matrix: 1. Make a match between strengths and opportunities 2. Convert weaknesses to strengths 3. Convert threats to opportunities 4. Minimize, if not avoid, weaknesses, and threats 2.6.3 Application of the SWOT Analysis The application of SWOT analysis is the matching of specific internal and external factors, which creates a strategic matrix. It is essential to emphasize that the internal factors are within the control of the organisation, such as operations, finance, marketing, and in other areas (See Figure 2.10). The external factors are out of the company’s control, such as political and economic factors, technology, and competition. The four combinations are called the Maxi-Maxi (Strengths/Opportunities), Maxi-Mini (Strengths/Threats), Mini-Maxi (Weakness/Opportunities), and Mini-Mini (Weaknesses/Threats). 1 Maxi-Maxi (S/O) : This combination shows the organisation’s strengths and opportunities. In essence, an organisation should strive to maximize its strengths to take advantage of new opportunities. 2 Maxi-Mini (S/T) : This combination shows the organisation’s strengths in consideration of threats, e.g. from competitors. In essence, an organisation should strive to use its strengths to evade or minimize threats. 3 Mini-Maxi (W/O) : This grouping displays the organisation’s weaknesses in tandem with opportunities. It is an exertion to conquer the organisation’s weaknesses by making the most out of new opportunities and challenges. Strengths (S) Weaknesses (W) Opportunities (O) S/O W/O Threats (T) S/T W/T Table 2.3: The application of the SWOT-matrix Kapitel_2.indd 85 03.08.2010 12:46:36 Uhr 2. Situational Analysis in the Marketing Planning Process86 4 Mini-Mini (W/T) : This combination shows the company’s weaknesses by comparison with the existing external threats. This is most definitely a protective strategy, to minimize an organisation’s internal weaknesses and avoid external threats (Hollensen, 2006). As mentioned earlier the SWOT analysis is the matching of specific internal and external factors. However, what about the matching items within internal factors and items within external factors. The primary reason this is not applied is that matching these factors will create strategies that do not make sense as strategies must have an external factor as a trigger in order for it to be feasible (Lee et al., 2000). 2.6.4 Required Analysis A sophisticated SWOT analysis depends on an extensive analysis of the company itself, its competitors and its environment (market and industry). An internal analysis involves a comprehensive appraisal of company strengths and weaknesses, and every aspect of the business must be assessed. For example, coverage should include financial capabilities, technical abilities, location, plant and equipment, personnel, distributor relationships and customer relationships. In particular, the company should try to identify its core competencies (Hamel and Prahalad, 1994). This concept is vital because it emphasizes the need to consider market opportunities in the light of a company’s fastidious skills relative to its actual or potential competitors. When analyzing actual or potential competitors, not only should their numbers be taken into reflection but also key competitors should be examined individually in an effort to identify the firm’s potential for creating a sustainable competitive advantage in the market (Hollensen, 2006). The main questions to ask about competitors are: What is their (marketing mix) offer?• What is their competitive advantage?• How well are they performing?• What does their SWOT profile look like?• How are they likely to compete in future?• In conducting a market analysis there are two types of ‘market’ which should be well thought-out: the ‘immediate market’ and the ‘wider world’. The immediate market refers to the specific market(s) in which the firm actually operates, with customers and other market characteristics comprising the most important aspects of this analysis. A customer analysis involves asking questions such as why customers buy and what benefits they seek, when and where they buy and who is involved in the purchase decision. Central to a customer analysis is the theory of market segmentation. This is the process of dividing a market into smaller groups of customers with similar needs and responsiveness to market offerings, which are, or may become, significant for planning a tailored target marketing strategy. Having defined market segments, a more general market analysis involves the assessment of the relative ‘attractiveness’ of each segment. This necessitates estimating their size, growth rates, competitive structure and potential for success. Ideally, a profile of each market should gradually be built up so that each segment can be evaluated in the light of the company’s particular strengths and weaknesses, and ability to compete. Finally, the ‘wider world’ comprises all those factors relating to the political, economic, social and technological environments surrounding Kapitel_2.indd 86 03.08.2010 12:46:36 Uhr 2.6 SWOT Analysis 87 a company which, albeit over the longer term, continually act to reshape both buyer and competitor behaviour. It is therefore important to analyze these factors so that any new opportunities or threats emanating from the wider world can be anticipated and acted on (Brooksbunk, 1996). 2.6.5 Benefits and Barriers for Conducting a SWOT Analysis To its credit, SWOT analysis is utterly simple and, possibly, its greatest advantage is that its use allows management to focus its attention on key issues that affect business development. The benefits of the SWOT analysis are not merely seen in its outputs (which may be used in the development of sound strategic plans) but also in the very process of carrying it out. SWOT is not only a static analytical tool which helps generate an understanding of business activity but, also, as a dynamic part of the management process which can facilitate management development. It can be seen as a valuable tool, which may be straightforwardly absorbed with good effect into the realities and practicalities of an organisation’s existing planning and strategy formulation processes (Hollensen, 2006). On the other hand, the reasons why so many organisations take the ‘ask the managers’ approach and not, a more analytical path in form of a SWOT analysis are numerous. They include the following: Lack of guidance on how to do it• : There are few books that attempt to explain how to undertake an integrated company analysis. It is also factual to state that many MBA programmes spend very little time on this. Being told that something is important but not the detail of how to do it certainly makes it harder to do the job well. Better management information systems• : Managers today have access to more comprehensive and up-to-date management information systems. This can significantly facilitate the corporate appraisal, provided the right information has been collected in the first place, which does not always happen. Regular access to information can mean that managers really are informed about every important aspect of their business and therefore do not require special exercises. It can also lead to complacency and a situation where critical factors are not related to each other or systematically understood and the view taken of the organisation is fragmented and purely functional. Pressure on managers• : The pressure on managers for immediate results has always been high but is now greater than ever. It is surely much faster to ask managers to define the corporate strengths and weaknesses than to spend precious time on special analyses. Therefore, managers have to be convinced that the extra time is vindicated. The pressure for a speedy fix means that managers will often be tempted to reach for a technique, instead of going back to basic principles, although this is rarely the most effective way to deal with a strategic problem. The complexity of many companies• : Many companies are very large and complex, which can make the task of carrying out a comprehensive appraisal rather cumbersome and with the decline of large strategic staff departments the task of organizing such a study is devolved to busy line managers. However, it is a task that lies within the competence of most managers and if approached in a sensible way it need not be overwhelming (Jenster and Hussey, 2001; Hussey, 2002). Kapitel_2.indd 87 03.08.2010 12:46:36 Uhr 2. Situational Analysis in the Marketing Planning Process88 2.6.6 Multilevel SWOT Analysis SWOT analysis may be undertaken on different organisational levels. When we talk about SWOT analysis we actually mean a sequence of analyses, each focusing on a specific organisational level or product/market combination. Of course, we can talk about a corporate SWOT analysis, but In Figure 2.11, we see that the following four combinations are possible: 1. Product 1 & Market 1 2. Product 1 & Market 2 3. Product 2 & Market 1 4. Product 2 & Market 2 In Figure 2.11 only the different combinations are shown for SBU 2. There would be similar combinations for the other SBUs. No matter how subjective or objective SWOT analysis becomes, it may be significantly enhanced by considering it as a management process in which the very activity of carrying out the analysis is as important as the final result (Hollensen, 2006). Source: Adapted from Hollensen, 2006 S = Strengths W = Weaknesses O = Opportunities T = Threats SBU = Strategic Business Unit Product 2: Product 1: SBU2: SBU3: 1 23 4 Market 1: Market 2: Corporate SBU Product/market level (only shown for SBU2) Strategic level: SBU1: S O W T S O W T S O W T S O W T S O W T S O W T S O W T Figure 2.11: Multilevel SWOT analysis Kapitel_2.indd 88 03.08.2010 12:46:36 Uhr Exhibit 2.1 89 Exhibit 2.1 SWOT analysis of Deichmann (see also Case study 4: Heinrich Deichmann-Schuhe GmbH) Heinrich Deichmann-Schuhe GmbH & Co. KG (www.deichmann.de) is a retailer of footwear. With its leading position in Germany and other European countries it is the third largest shoe brand in the world. Strengths (S) – Efficient Logistic Arm The company has an efficient logistic arm, that enables it to manage its business in a cost effective manner. Such efficiency in operations minimizes the company‘s cost and also provides timely delivery of merchandise to customers. The company operates distribution centres in Europe and also has wide supplier base. It operates four distribution centres in Germany. In addition, it has distribution centres in Switzerland, Denmark and Slovakia. Its distribution centres deliver 65 million pairs of shoes and 30 million accessories annually. The company‘s manufacturers include Gabor, Salamander, Ara and others. It also has a wide supplier base and buys shoes from more than 40 countries worldwide. Diversified Geographical Presence – The company operates in several geographical regions, across Europe through its wide store network. Such widespread presence enables it to reach a wide spectrum of customers, thereby enhancing its sales. The company operates about 2,546 stores under several banners in 19 countries across Europe. It has store operation in all the major European markets including Germany (1,085), Austria (120), Poland (140), Great Britain (33), Hungary (54), Czech (70), Denmark (20), Slovakia (23), Turkey (23), Slovenia (11), Sweden (15), Romania (14), Croatia (7), Italy (20), Lithuania (6) and Bulgaria (1). It operates 420 stores in Switzerland and 450 stores in the US. Strong Brand Portfolio – The company offers several brands through its stores and website. Such inclusion of wide brands in its stores attracts more customers to its stores, as it provides them with brand variety. The company offers several branded footwear for men, women and children. Its offers trekking shoes, leisure and sport shoes, comprising of about 19 brands. The ladies footwear section includes the brands Graceland, 5 th Avenue, Medicus, Ariane and Janet D. The men‘s footwear brands are AM, Memphis One, Gallus, Borelli, Falcon and Claudio Conti. The children‘s footwear brands are Elefanten, Kapitel_2.indd 89 03.08.2010 12:46:37 Uhr 2. Situational Analysis in the Marketing Planning Process90 Baren and Yorik. Its sports footwear brands include Adidas, Puma, Fila, Nike and Victory. Weaknesses (W) – High Dependency on the German market The company is highly dependent on the German market for its revenues, which makes it vulnerable to any potential risk associated to the German economy. The company is subject to various factors, adversely affecting the German economy such as lower demand, severe weather conditions, labour strikes, change in regulations and economic conditions. In fiscal year 2008, Germany accounted for almost 50 % of the company‘s sales, which subjects it to various challenges specific to that region and thereby, puts the company at a major risk. Moreover, some of its competitors have more diversified operations, thereby having wider customer base and generating higher revenues than the company. Hence, such widespread presence of the competitors might lower the company‘s competitiveness. Opportunities (O) Increasing Demand for Women‘s Athletic Footwear – The company can increase its athletic footwear collection for women and benefit from the growth trend of the segment in the US. As increasing number of women show interest in sports and fitness activities, the demand for women‘s athletic footwear is bound to grow. The company operates 450 stores in the US and can benefit from this opportunity. According to a report by National Sporting Goods Association, the average price point of women‘s athletic footwear is on a growth trend. Expansion to Other Regions – The company can foster its growth through expansion into other regions. As the company already has a strong presence in the European and the US markets, it can further broaden its customer base, by entering developing markets. With the economic slowdown in the advanced countries, the expansion of stores into developing Kapitel_2.indd 90 03.08.2010 12:46:37 Uhr Exhibit 2.1 91 markets might prove to be beneficial for the company in terms of higher revenue generation and protection against the setbacks in the European and the US markets. In addition, it can also take benefit of the increasing disposable incomes in these developing markets. According to IMF, in 2008, emerging and developing economies recorded a GDP growth rate of 6.3 %, but advanced economies contracted by 1.0 %. While the emerging markets are estimated to grow by 3.3 % in 2009, most of the advanced economies are estimated to show a negative growth. Additionally, factors like growing affluence, increasing brand-consciousness and low penetration of organized retailers in these countries make them attractive destinations for global retailers. According to A.T. Kearney‘s Global Retail Development Index, India is the most attractive emerging market followed by Russia, China and United Arab Emirates. Growing Trend of Online Retailing – The company has an opportunity to drive its sales amidst the rising trend of online retailing in Europe. Apart from retailing goods in-store, it also sells its merchandise through the website www.deichmann.de. Hence, it can make the maximum utilization of this opportunity and markets its presence across the globe. It can make internet purchases even more appealing by further enhancing its online services with technological and security protection improvements. Thus, with the increase in internet penetration in Europe, the company can enhance its revenues. According to Internet World Stats as on March 2009, the internet penetration in Europe is about 48.9 % of the total population and the user growth has been 274.3 % in the period from 2000 through 2008. In addition, in all the major market, where the company operates such as Germany, UK, Austria and Poland, the internet penetration is increasing. The internet penetration in these countries stands at 67.0 %, 70.9 %, 68.3 % and 52.0 %, respectively. Threats (T) Slowdown of the Advanced Economies – The company‘s sales might be adversely affected, owing to the economic slowdown in the advanced economies. The economic downturn in the Europe and the US has limited consumer spending, thereby restricting their purchases to essentials. So, the company‘s revenues might decline due to the setback in the economy. According to IMF, the GDP in Germany and other Euro areas is expected to contract by 6.2 % and 4.8 %, respectively in 2009. In addition, the GDP in the US is also expected to contract by 2.6 % in 2009. Further, according to National Sporting Goods Association, in 2008, the US athletic and sport footwear sales stood at $17.19 billion, a decrease of 1.9 % compared to the previous year. The Association is forecasting flat footwear sales for 2009. Hence, any further slowdown in the economy might aggravate the situation and adversely affect the group‘s business. Intensive competition – Competition in the industry is strong. There are a number of established players in the shoe industry with established market positions, brands and reputations. A department store often houses several shoe stores, mostly the major players. Major players in Kapitel_2.indd 91 03.08.2010 12:46:37 Uhr 2. Situational Analysis in the Marketing Planning Process92 this industry have numerous retail outlets throughout the US, while smaller players are generally independently owned and operated in one or two locations. Competition also comes from department stores with well-appointed shoe departments; discount shoe stores and outlets, as well as general merchandise discounters. The Internet is also emerging as a source of competition as a growing number of users are becoming more comfortable shopping shoes online. Concern of Internet Fraud for E-Retailers – The company‘s business might be adversely affected due to the increasing internet frauds. As the group is also an online retailer, such a situation may affect its profits, adversely. According to British Retail Consortium, 85 % of e-retailers had experienced internet fraud in the year 2008 and 64 % saw an increase in it. Internet fraud is growing as online retailing expands. Almost all retailers selling online suffered fraud in the year and are apprehensive of the same in the future. Further, government and cyber police do not have adequate mechanisms to deal with the increase in e-crime. Increase in Wage Rates – The company faces the challenge of the rising wage rates in Europe and might witness an increase in its operational cost. The labour costs in Europe have been witnessing an increase, due to the shortage of talented manpower and increasing government mandated minimum wages. The group employs a huge workforce of 42,100 people including 14,000 in Germany and 28,100 in other locations. According to the Federal Statistical Office, the cost of one hour worked in Europe increased by 5.8 % in the first quarter of 2009, as compared to the first quarter of 2008. In addition, similar trend is observed in Germany, whereby the cost of one hour worked increased by 4.8 % in the fourth quarter of 2008, as compared to the fourth quarter of 2007. Hence, any further increment in wage rates might adversely affect the company‘s business. Source: Adapted from various, e.g. Euromonitor Kapitel_2.indd 92 03.08.2010 12:46:37 Uhr Summary 93 Summary This chapter has looked at internal partnerships which also referred to as internal marketing. It emphasised the importance of the employee-customer interface and the development of an internal marketing approach to the overall success of relational strategies. It concluded the broader need to remove all functional barriers from the organisational environment. The importance of full-time and part-time marketers was also acknowledged and the means of implementing internal marketing was discussed. The essence of this chapter’s internal analysis is competitive advantage. Over time, as markets have developed and evolved, achieving competitive advantage has required an increasingly sophisticated response. Decades ago competitive advantage could be achieved through one product or market variable such as price or distribution control. Today, competitive advantage has taken on a multidimensional character – effective competitive advantage requires a coordinated combination of several product and market variables. Further, potential ingredients in competitive advantage have broadened to include such intangibles as time and information. Companies need to build their own competitive advantages rather than copy a competitor. The sources of tomorrow’s competitive advantages are the skills and assets of the organisation. Assets include patents, copyrights, locations, and equipment and technology that are superior to those of the competition. Skills are functions such as customer service and promotion that the firm performs better than its competitors. Each of the activities within the value chain, the primary activities and the support functions, can be used to add value to the ultimate product or service. The traditional Market Orientation View (MOV) or the outside-in perspective emphasizes the customers and places their needs and wants high in the priority ranking. Termed the Resource Based View (the inside-out perspective) of the firm or the focus on ‘core competencies’ this new approach suggests that performance is essentially driven by the resource profile of the organisation and that the source of superior performance lies in the possession and deployment of distinctive, hard to imitate or protected resources. Compared to its competitors the company is producing offerings with a higher perceived value (compared to the price) and/or lower relative costs is said to win the ‘competitive game’. The drivers for a better relative cost position are: Economies of scale (high volume) – Learning and experience curve – Outsourcing – Linkages and interrelationships – Timing – Location and governmental factors – The drivers for a better ‘perceived value’ position are: Product differentiation (more features) – Product quality (longer lifetime, superior design) – Service – Packaging – Branding – Price differentiation (lower prices/better credit terms) – Creating customer relationships – Time-based competition – Kapitel_2.indd 93 03.08.2010 12:46:37 Uhr 2. Situational Analysis in the Marketing Planning Process94 In this chapter, the influences from the environment are divided into three levels. Macro level: The most important changes taking place in the macro environment can be – summarized in the so-called PEST-analysis: P Political and legal factors E Economic factors S Socio-cultural factors T Technological factors Industry level/value net: The focal company’s most important actors/stakeholders at this – level are: suppliers, partners/complementors, competitors and of course the customers. The focal company: Understanding and analyzing the internal situation – This chapter states that it is not enough to discuss the activities that a single firm performs. We need to understand how these activities are linked to the activities in the firm’s value net, i.e. to the firm’s customers, suppliers, partners/complementors and competitors. Hence, companies are dependent for their success on the relationships with others. Many of the strategic choices that a company makes will be in response to the actions of these other companies. In this way a firm’s strategy may be thought of as a kind of game, because there is nothing predetermined about the various choices a firm might take. Relationships in the value net perspective enable firms to develop competitive advantage by leveraging the skills and capabilities of their partners to improve the performance of the total value chain. Firms do not only compete as individual companies; they also compete as group of companies that cooperate to bring value to the ultimate customer. In the next part of the chapter, we focused on the buying decision behaviour of the endconsumer (in the B2C market) and the direct business customer (in the B2B market). Re. B2C: End-consumers’ decision-making processes are classified largely on the basis of high and low- involvement with the product and the extensiveness of the search for information. High-involvement products or services are psychologically important to the consumer. To reduce the psychological and financial risks associated with buying a highinvolvement item, consumers engage in a complex decision-making process. The five major steps in the process are problem identification, information search, evaluation of alternatives, purchase, and post purchase evaluation. The way in which these steps are carried out differs between products and services. Most purchase decisions are low in consumer involvement. Therefore, consumers do not engage in an extensive search for information or make a detailed evaluation of alternative brands. Such search-and-evaluation behaviour is more likely to occur with products than with services. Buying behaviour is strongly influenced by psychological and personal characteristics that vary across individual consumers and countries. Information and social pressures received from other people influence consumers’ needs, wants, evaluations, and preferences for various products and brand names. Re. B2B: In B2B decision-making, two additional influences are included. These are group influences and organisational factors. The actual decision-making process will depend on whether the purchase is a new task, a modified re-buy or a straight re-buy for the organisation. The process involved is similar to the consumer decision-making process. The SWOT profile (strengths, weaknesses, opportunities and threats) is by far the most popular of all marketing planning tools. It provides a means by which all the key internal (company-related) and external (environment-related) issues can be summarized at a glance. A good SWOT profile facilitates the development of a strategy, which capitalizes on a company’s strengths, minimizes any weaknesses, exploits emerging opportunities and avoids, as far as possible, any threats. The internal (company) analysis involves a comprehensive appraisal of company strengths and weaknesses, and every aspect of the business should be assessed. For example, coverage should include financial capabilities, technical abilities, location, plant and equipment, personnel, distributor relationships, customer relationships, and so on. Kapitel_2.indd 94 03.08.2010 12:46:37 Uhr Summary 95 The external analysis helps identify market opportunities and threats and provides guidelines for the design of the marketing strategy. The most studied macro environmental forces are the so-called PEST-factors: political/legal, economic, socio-cultural and technological factors. Furthermore, we have of course ‘competition’, which is often a threat, but as we saw this chapter’s value net, it can also be an ‘opportunity’, where they can supplement each other’s competences. Therefore, the firm should try to identify its core competences. This concept is useful because it emphasizes the need to consider market opportunities in the light of a company’s particular skills relative to its actual or potential competitors. Questions for discussion 1. What are the basic concepts that underlie internal marketing strategies? 2. Suggest ways in which functional barriers (e.g. between marketing and finance) could be broken down! 3. What kind of organisational climate and culture might best suit the implementation of RM? 4. Explain the difference between the RBV and MOV. 5. What does it mean to be ‘market driven’ or ‘market driving’? 6. List the major sources for creating firm competitiveness? 7. Explain the idea behind the ‘competitive triangle’. 8. Which are the main value- and cost drivers in the ‘competitive triangle’? 9. Explain the importance of a common European currency (the Euro) to firms selling goods to the European market! 10. Why is the international marketer interested in the age distribution of the population in a market? 11. Why is political stability so important for international marketers? Find some recent examples from the press to underline your points. 12. How can the change of major political goals in a country have an impact on the potential for success of an international marketer? 13. Explain why a country’s balance of trade may be of interest to an international marketer. 14. Do you think that cultural differences between nations are more or less important than cultural variations within nations? Under what circumstances is each important? 15. What layers of culture have the strongest influence on business people’s behaviour? 16. Identify some constraints in marketing to a traditional Muslim society. 17. What are the major differences in buying behaviour on the main two markets: B2C and B2B? 18. What is the buying centre in a company? Describe its functions and the implications for the selling organisation. 19. Explain the idea behind the value net – model. 20. Why is it sometimes relevant to establish relationships to competitors? 21. What are the purposes of carrying out a SWOT analysis? 22. What are the major steps in a SWOT analysis? 23. What is the idea of matching firm strengths with opportunities in the market? 24. Why is the final result less important than the process in the SWOT analysis? Kapitel_2.indd 95 03.08.2010 12:46:38 Uhr 2. Situational Analysis in the Marketing Planning Process96 Case 2 BMW Motorcycles The German motorbike company is evaluating their key competences – The BMW Group The BMW Group is one of the most successful manufacturers of automobiles and motorcycles in the world with its BMW, MINI and Rolls-Royce brands. As a global company, the BMW Group operates 24 production facilities in 13 countries and has a global sales network in more than 140 countries. The BMW Group achieved a global sales volume of approximately 1.29 million automobiles and over 87,000 motorcycles for the 2009 financial year. Revenues for 2009 totalled 50.68 billion euro. At 31 December 2009, the company employed a global workforce of approximately 96,000 associates. BMW notes that the overall above 500cc motorcycle market (which eliminates the majority of small-displacement machines sold in the still robust Asian market) has seen a massive 40 % decline from a 1.5 million unit high in 2007 to 900,000 units in 2009 – with a more than 30 % decline last year alone. BMW posted sales of 87,306 for 2009, a 14,379 unit drop from 2008. According to BMW PR the 14.1 % drop not only reached the target it has set itself, but also achieved the second-lowest decline in sales amongst the competition. Only British Triumph has shown better sales results in this difficult market. The competition on the world motorbike market – The upand downturn of the Japanese manufacturers’ market shares In 1981 Japan’s motorbike industry was in a state of blissful ignorance. Its manufacturers had managed to dominate the world in not much over a decade and annual production had hit 7.4 million units. Although they did not know it, this was to be their best year. While they still loom large on the global motorbike market, 1981’s record domestic production has declined to just 2.4 million. This serves as a stark reminder of a painful trend for all types of Japanese manufacturers as their domestic costs have risen, their markets have matured and their rivals have sharpened their game. In 2001 two Japanese manufacturers – Suzuki and Kawasaki – joined forces to jointly produce and develop new bikes, marking the end of the ‘big four’ in Japan, where they ruled alongside much bigger rivals Honda and Yamaha. Kapitel_2.indd 96 03.08.2010 12:46:38 Uhr