ACCA Paper P3

1. ACCA Paper P3 Marketing And the value Of goods & services

2. Customers & Markets Critical Success Factors Value chain analysis Benchmarking

3. Customers & markets Market analysis Customer analysis Markets & segmentation Marketing mix strategies

4. Customers & markets Market analysis A key aspect of strategy development is the identification of, and then meeting of, customer needs Market analysis helps identify the appropriate marketing strategy – this analysis will include the following Appraisal & understanding of the present situation Definition of objective of profit, turnover, product image, market share & market position by segment Evaluation of the marketing strategies available to meet these objectives Definition of control methods to check progress against objectives & provide early warning There are two purposes of the analysis To identify gaps in the market where consumer needs are not being satisfied To look for opportunities that the organization can benefit from, in terms of sales or development of new products & services

5. Customers & markets Customer analysis A customer may be an organization, a business firm or an individual consumer There are three sets of strategic questions that are used to analyze customers – segmentation, motivation & unmet needs Segmentation – sets of strategic questions include the following: - Who are the biggest, most profitable existing customers & who are the most attractive potential customers? Do the customers fall into any logical groups on the basis of characteristics, needs or motivations? Can the market be segmented into groups requiring a unique business strategy? Motivation – concerns the customers’ selection & use of their favorite brands, the elements of the product of service that they value most, the customers’ objectives & the changes that are occurring in the customer motivation Unmet needs – considers why some customers are dissatisfied & some are changing brands or suppliers The analysis looks at the needs not being met that the customer is aware of

6. Customers & markets Markets & segmentation One aim of segmentation is to identify groups of customers who share similar needs for targeting Traditional segmentation focuses on identifying customer groups based on a number of variable that include: - Geographic variables Demographic variables Psychographic variables Behavioral variables looks at groups of customers in terms of the revenue they generate & the costs of establishing and maintaining relationships with them Value based segmentation

7. Customers & markets Marketing mix strategies Each market segment can become a target market & would required a unique marketing mix for the organization to exploit it properly The marketing mix is the set of controllable variables that the firm can use to influence the buyers’ responses (Kotler) The variables are commonly grouped into four classes the McCarthy refers to as ‘the four Ps’ – product, price, promotion & place Brand name Packaging Features Options Product Quality Warranty Service Style appeal Level Discounts Allowances Payment terms Price Delivery options Contd.

8. Customers & markets Marketing mix strategies Sales promotion Personal selling Publicity Advertising Promotion Distribution channels Distribution coverage Outlet locations Place Sales territories Inventory levels Inventory locations

9. Critical success factors What are critical success factors? Developing suitable critical success factors

10. Critical success factors What are critical success factors? Critical success factors (CSFs) are performance requirements that are fundamental to an organization’s success In this context CSGs should thus be viewed as those product features that are particularly valued by customers This is where the organization must outperform competition Measured targets for CSFs are called key performance indicators (KPIs)

11. Critical success factors Developing suitable critical success factors In developing CSFs from customer needs, the following issues should be borne in mind: - CSFs need to focus on the most important factors that ultimately determine the buying decision Many factors are taken for granted by customers – these give rise to threshold features, i.e. all products must have these simply to enter the market CSFs will vary from segment to segment The organization will need to assess its strategic capabilities to identify which segments it should regret Customers’ understanding of value can vary over time, so the organization needs to be open to changing the monitored CSFs

12. Value chain analysis The value chain Applying the value chain in a scenario Value networks

13. Value chain analysis The value chain Porter developed the value chain to help identify which activities within the firm were contributing to a competitive advantage & which were not The approach involves breaking down the firm into five ‘primary’ and four ‘support’ activities, & then looking at each to see if they give a cost advantage or quality advantage Contd.

14. Value chain analysis The value chain Primary activities Inbound logistics – receiving, storing & handling raw material inputs Operations – transformation of the raw materials into finished goods & services Outbound logistics – storing, distributing & delivering finished goods to customers Marketing & sales – e.g. sponsorship of a sports celebrity could enhance the image of the product Service – all activities that occur after the point of sale, such as installation, training and repair Support activities Firm infrastructure – how the firm is organized Technology development – how the firm uses technology Human resources development – how people contribute to competitive advantage Procurement – purchasing, but not just limited to materials Contd.

15. Value chain analysis The value chain All organizations in a particular industry will have a similar value chain, which will include activities such as: Obtaining raw materials Designing products Building manufacturing facilities Developing co-operative agreements Providing customer service It is vital that the linkages between the different elements of a value chain are considered Firstly this is to ensure consistency Secondly it may be that through linking separate activities more effectively than competitors, a firm can gain a competitive advantage

16. Value chain analysis Apply the value chain in a scenario To gain a competitive advantage over its rivals a company must either Perform value creation function at a lower cost than its rivals OR Perform them in a way that leads to differentiation & a premium price Value chain analysis looks at each of the processes that make up the chain of activity and: Rates how important it is in a given company’s production or service activity Rates how the company compares to its competitors Helps to decide how individual activities might be changed to reduce costs of operation Helps to improve the value of the organization’s offerings

17. Value chain analysis Value networks The organization’s value chain does not exist in isolation. There will be direct links between the inbound logistics of the firm and the outbound logistics of its suppliers, for example. An understanding of the value system & how the organization’s value chain fits in to it will therefore aid in the strategic planning process A value network is a web of relationships that generate economic value & other benefits through complex dynamic exchanges between two or more individuals, groups or organizations Tangible value exchanges – involve all exchanges of goods, services or revenue, including all transactions involving contracts & invoices, return receipt of orders, request for proposals, confirmations or payment Intangible knowledge exchanges – include strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc.

18. Benchmarking Why benchmarking? Types of benchmarking

19. Benchmarking Why benchmark? Benchmarking is the process of systematic comparison of a service, practice or process Its use is to provide a target for action in order to improve competitive position The main benefits include: Improved performance & added value Improved understanding of environmental pressures Improved competitive position A creative process of change A target to motivate & improve operations Increased rate of organizational learning Contd.

20. Benchmarking Why benchmark? • Assign responsibilities • Structure team • Clarify roles & authority • Collect internal, information • Select processes to be benchmarked • Critical • Significant • Analysis • Performance gap • Target future performances • Review • Appropriateness of measures/objectives • Benchmarking process • Identify potential partners • Benchmarking club • Successful partners • Known leaders • Implement • Establish new standards • Define objectives & time scale • Assign responsibility • Interaction • Visit • De-brief • Document

21. Benchmarking Types of benchmarking Managers compare the performance of their products or processes externally with those of competitors & best-in-class companies and internally with other operations within their own firms that perform similar activities Strategic benchmarking Involves considering high-level aspects such as core competencies, developed new products & services and improving capabilities for dealing with changes Historical benchmarking Internal benchmarking involves seeking partners from within the same organization Industry/sector benchmarking Performance benchmarking is used where organizations consider their positions in relation to performance characteristics of key products or services Functional benchmarking is used when organizations look to benchmark with partners drawn from different business sectors or areas of activity to find ways to improving similar functions or work processes Contd.

22. Benchmarking Types of benchmarking Best-in-class benchmarking External benchmarking involves seeking outside organizations that are known to be best-in-class Process benchmarking is used when the focus is on improving specific critical processes and operations International benchmarking Used where partners are sought from other countries because best practitioners are located elsewhere in the world and/or there are too few benchmarking partners within the same country to produce valid results

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