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Sunday, June 20, 2010

Ansoff Matrix - Tool for Analyzing Growth Strategy



The Ansoff Matrix was first published in the Harvard Business Review in 1957, and has strategic planning tool for a quick and simple way to develop a strategic approach to growth.

Ansoff Matrix is also known as Product/Market Expansion Grid, as it shows four growth options for business formed by matching up existing and new products and services with existing and new markets.

The Matrix essentially shows the risk that a particular strategy will expose you to, the idea being that each time you move into a new quadrant (horizontally or vertically) you increase risk (See Figure 1).

Market Development Quadrant

Here, you’re targeting new markets, or new areas of the market. You’re trying to sell more of the same things to different people. Below are the possible actions:

- Target different geographical markets at home or abroad
- Use different sales channels, such as online or direct sales if you are currently selling through the trade
- Target different groups of people, perhaps different age groups, genders or demographic profiles from your normal customers.

Diversification Quadrant

This strategy is risky: There’s often little scope for using existing expertise or achieving economies of scale, because you are trying to sell completely different products or services to different customers

Its main advantage is that, should one business suffer from adverse circumstances, the other is unlikely to be affected.

Market Penetration Quadrant

With this approach, you’re trying to sell more of the same things to the same people. Below are possible actions:

- Advertise, to encourage more people within your existing market to choose your product, or to use more of it.
- Introduce a loyalty scheme.
- Launch price or other special offer promotions.
- Increase your sales force activities, or
- Buy a competitor company (particularly in mature markets)

Product Development Quadrant

Here, you’re selling more things to the same people. Below are possible actions:

- Extend your product by producing different variants, or packaging existing products it in new ways.
- Develop related products or services.
- In a service industry, increase your time to market, customer service levels, or quality.


Application of the Ansoff Matrix

Corporate Ansoff Matrix

Viewing from a business perspective, staying with existing product in your existing market is a low risk option: You know the product works, and the market still accepts the product.

However, you expose yourself to a whole new level of risk either moving into a new market with an existing product, or developing a new product for an existing market. The market may turn out to have radically different needs and dynamics than you thought, or the new product may just not work or sell.

And by moving two quadrants and targeting a new market with a new product, you increase your risk to yet another level.

Personal Ansoff

Looking at it from a personal perspective, just staying where you are is a low risk option.

Switching to a new role in the same company, or changing to a similar job with a company in the same industry is a higher risk option. And switching to a new role in a new industry has an even higher level of risk.(See Figure 2)

Manage risk appropriately and if you're switching from one quadrant to another, prepare and practice the following: -

- Research/study the move carefully;
- Has built the capabilities needed to succeed in the new quadrant;
- Have sufficient resources to cover transition period while you're developing and learning how to sell the new product, or are learning what makes the new market tick; and
- Have firstly thought through what you have to do if things don't work out, and that failure won't "break" you.

Saturday, June 19, 2010

Boston Matrix and Investment Strategy


The Boston Matrix was developed in the 1970s by The Boston Consulting Group as a way of helping companies to decide on an appropriate investment strategy for their future.

The diagram shows how different products or parts of a company can be compared in terms of market growth and market share.

Cash Cow Section (High Market Share but Low Growth)
If a product or business unit is a cash cow then it has a large share of a market that is no longer growing. It produces a lot of revenue but most of this can be invested in other areas of the company as further investment in the cash cow would produce little or no extra profit.

Star Section (High Market Share and High Growth)
A star also has a large share of the market but, unlike the cash cow, it is growing quickly. In order to grow further, it requires more investment which it is often able to pay for from its own profits. When it stops growing, a star may become a cash cow.

Problem Child Section (Low Market Share but High Growth)
A problem child or question mark has a small share of a growing market; it needs considerable investment if it is to grow.

Dog Section (Low Market Share and Low Growth)
A dog has a small share of a market that is not growing. A dog is of little value to most companies and a decision must be taken whether to continue investing in it.

Understanding the Market Share and Relation to Market Growth Using Boston Matrix

Market share is the percentage of the total market that is being serviced by company, measured either in revenue unit volume terms. The higher your market share, the higher proportion of the market you control.

The Boston Matrix assumes that if you enjoy a high market share you will normally be making money (this assumption is based on the idea that you will have been in the market long enough to have learned how to be profitable, and will be enjoying scale economies that give you an advantage).

The question of whether the company need to use the available resources to invest in the profitable product is highly depends on the product life cycle stage, competition and forces of environment.

This is where market growth comes into play. Market growth is used as a measure of a market's attractiveness. Markets experiencing high growth are ones where the total market is expanding, which should provide the opportunity for businesses to make more money, even if their market share remains stable.

By contrast, competition in low growth markets is often bitter, and while you might have high market share now, what will the situation look like in a few months or a few years? This makes low growth markets less attractive.

Tuesday, June 8, 2010

Styles of Influencing Others

Influencing is a powerful tools that manager use in managing organization. Some of the way in which manager behave and the approach manager takes will have a marked effect on your ultimate success or failure.

Having a range of approaches and styles of behaviour gives you more flexibility. It increases your options - and your chances of success.

Natural Styles

Most managers have a natural style of influence which they prefer to use whenever possible. More flexible managers also keep in reserve a fall back style, used when the preferred style doesn't achieve the desired results.

However, there are at least eight identifiable styles of influence - not including aggression, manipulation or force.

Because you are influencing a wide range of people, proficiency in a wider range of styles will ensure more success. Step outside the comfort zone of your natural style and enjoy greater success by practising new ways of influencing.

However, do think carefully which influencing style has the greatest chance of succeeding. Varying your styles too much may give you a reputation for being unpredictable.

The Autocratic Approach

This approach works best when supported by power, authority, age, knowledge or wisdom. Resistance or objections are minimised. You tell others what you want them to do and they do it.

The Collaborative Approach

This approach works successfully without you having any power or authority.Include others in the decision-making process.

A word of caution, democracy takes time and can result in watered down solutions. Remain consistently collaborative. Don't give up too early. Avoid imposing too many parameters or conditions - these will create frustration in others.


The Logical Approach

You use clear logical, unassailable arguments, supported by proof.

This approach works best when the other person is a logical, linear thinker. Avoid exaggeration and unnecessary emotion. Offer instead facts and figures.

The Emotional Approach

You use your natural charm, charisma or enthusiasm.

This approach works when your influence becomes a genuine extension of your own feelings and beliefs. Appealing to the long-term effects of your ideas, you will reinforce their continuing value.

The Assertive Approach

You ask directly, clearly and confidently for what you want, or don't want.

Assertiveness can have a lasting effect, especially on those who least expect it from you. Any resistance is met by your persistence. Assertive influence carries little or no risk.

The Passive Approach

You win the day by being submissive, by not overtly influencing.

As you quietly demonstrate desired behaviours, others can see for themselves the value in following your lead. Many potential confrontations with power or authority demand submissive influence, which can pay positive dividends.

The Sales Approach

You use good old-fashioned salesmanship.

Draw out their point of view, understand their needs, demonstrate that you empathise; minimise resistance by showing how their ideas dovetail with your own; show how they will benefit.

The Bargaining Approach

You trade concessions in order to reach a mutually acceptable conclusion.

Don't just share the cake - make it a bigger one. Your success as a fair negotiator will help cement the relationship.

Aim too low and you'll end up even lower. Over collaborate and you may regret giving too much away. Always trade concessions.

Qualities of A Good Salesman

A good salesman should have the following qualities in order to achieve sales target and objectives.

A. Professional Qualities

Training and experience

A good salesman should be expert in his respective field. He should have knowledge about the technique of production and art of salesmanship. He must be trained in speaking regional and other languages. It is advisable for the successful result of the operation that a salesman must undergo on practical training before coming to the actual job.

B. Specific Qualities

Latest Information

A salesman must have up-to-date information in regarded to quality, nature, description, prices and importance of the dealing products. He should also have the knowledge of potential market, organization of his firm and taste of his consumers.

C. General Qualities

Psychological approach

A salesman should be in a position to follow the psychology of human nature. He must have ability of understand his customer's choice. So he should talk in terms of the customer's interest and he must create pleasant atmosphere to achieve favorable attention and interest on the part of the prospect buyer.

Convincing style

A good salesman should adopt convincing style in order to win prospect's confidence. He must persuade his prospect that the specific product being sold will best fill that need.

Sound appearance

A salesman should have the personality of good health and sound physique. He must be stalwart young man with pleasing manners and nice habits. He must possess the abilities of influencing and attracting other persons.

Honesty

It is a prominent quality of a good salesman. .In order to establish the goodwill of firm he must be honest and sincere in performing his duty. There is no place for dishonest salesman in any business.

Steady work

It is the most important trait of successful salesman that he should be industrious. He must show enthusiasm for his profession and constantly work hard to achieve more success in his field.

Courtesy

A salesman must be very polite. Courtesy in to business what oil is to machinery. It costs nothing but wins a reputation. So polite language should be used for the object of winning buyer's confidence. This will also help him to make regular and permanent customers. In addition to the foregoing qualities, a salesman should be sincere, self reliant, sociable, and tactful and diplomatic.

Sociability

A good salesman must keep in touch with the people of different nature in the world and not keep himself to himself. He should move about with a view to widen his range of acquaintances. Salesman should therefore, possess a quality of mixing freely with unknown person within a short time. He should be sociable and popular in order to win new friends.

Self Reliance and persistence

Another notable quality of the goods salesman is ability to convince the prospective customers with persistent efforts. In order to adequately satisfy customers demand he must be a man of self reliance. He should have perseverance and determination.

Dependability

The successful salesman should have the capacity of dependability. It keeps him much to win the heart of both customer and employer. A dependable salesman will remain loyal to firm. Thus he will be sincere in his approach to customer with a view to increase the volume of sales and enhances the firm’s reputation.

Others
Tolerate by Nature
Organized
Flexible
Enthusiasm

Sunday, May 2, 2010

SWOT Analysis

Strengths, Weaknesses, Opportunities and Threats (SWOT).

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.

In SWOT, strengths and weaknesses are internal factors.

For example:A strength (advantages) could be:
- Your specialist marketing expertise.
- A new, innovative product or service.
- Location of your business.
- Quality processes and procedures.
- Any other aspect of your business that adds value to your product or service.

A weakness (disadvantages) could be:
- Lack of marketing expertise.
- Undifferentiated products or services (i.e. in relation to your competitors).
- Poor quality goods or services.
- Damaged reputation.

In SWOT, opportunities and threats are external factors.

For example: An opportunity (potential) could be:
- A developing market such as the Internet.
- Mergers, joint ventures or strategic alliances.
- Moving into new market segments that offer improved profits.
- A new international market.
- A market vacated by an ineffective competitor.

A threat (challenges) could be:
- A new competitor in your home market.
- Price wars with competitors.
- A competitor has a new, innovative product or service.
- Competitors have superior access to channels of distribution.
- Taxation is introduced on your product or service.

Simple rules for successful SWOT analysis.

- Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
- SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
- SWOT should always be specific. Avoid grey areas.
- Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
- Keep your SWOT short and simple. Avoid complexity and over analysis
SWOT is subjective.
- Once key issues have been identified with your SWOT analysis, they feed into marketing objectives.

SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis.

Sunday, April 11, 2010

Marketing Mix



Marketing mix consists of elements like product, price, place and promotion, which are part of the tactical marketing plan.

A.Price
There are many ways to price a product. The following are strategies used to set price for product or service.

Premium Pricing.
Use a high price where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as JW Merriot, Ferrari sports car and QE2 cruise.


Penetration Pricing.
The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by companies offering new products.

Economy Pricing.
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands such as house brand like Tesco Choice.

Price Skimming.
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing.

Psychological Pricing.
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'free airline seats or huge discount on second purchase.

Product Line Pricing.
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.

Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing.
Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Promotional Pricing.
Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing.
Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price.

Value Pricing.
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

B.Product
For many a product is simply the tangible, phsysical entity that they may be buying or selling. You buy a new car and that's the product.

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However, CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products or services that customers NEED throughout their lives.

Strategies for the differing stages of the Product Life Cycle.

Introduction.
The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

Growth.
Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

Maturity.
Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

Decline.
At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

For many a product is simply the tangible, phsysical entity that they may be buying or selling. You buy a new car and that's the product - simple! Or maybe not. When you buy a car, is the product more complex than you first thought? In order to actively explore the nature of a product further, lets consider it as three different products - the CORE product, the ACTUAL product, and finally the AUGMENTED product.

The CORE product is NOT the tangible, physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly.

The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car example, it is the vehicle that you test drive, buy and then collect.

The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car's manufacture, and any after-sales service.

C.Place
Another element of marketing mix is Place. Place is also known as channel, distribution, or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.

There are six basic 'channel' decisions:

Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler).
Single or multiple channels.
Cumulative length of the multiple channels.
Types of intermediary (see later).
Number of intermediaries at each level (e.g. how many retailers in Southern Spain).
Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between local distributors).

Selection Consideration - how do we decide upon a distributor?

Market segment - the distributor must be familiar with your target consumer and segment.
Changes during the product life cycle - different channels can be exploited at different points in the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few specific stores.
Producer - distributor fit - Is there a match between their polices, strategies, image, and yours? Look for 'synergy'.
Qualification assessment - establish the experience and track record of your intermediary.

Types of Channel Intermediaries.
There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others. The main modes of distribution will be looked at in more detail.

1. Channel Intermediaries - Wholesalers
They break down 'bulk' into smaller packages for resale by a retailer.
They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas agents do not (see below).
They provide storage facilities. For example, cheese manufacturers seldom wait for their product to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
Wholesalers offer reduce the physical contact cost between the producer and consumer e.g. customer service costs, or sales force costs.
A wholesaler will often take on the some of the marketing responsibilities. Many produce their own brochures and use their own telesales operations.

2. Channel Intermediaries - Agents
Agents are mainly used in international markets.
An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist agent' will hold consignment stock (i.e. will store the stock, but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e.g. foodstuffs).
Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved. They are difficult to motivate.

3. Channel Intermediaries - Retailers
Retailers will have a much stronger personal relationship with the consumer.
The retailer will hold several other brands and products. A consumer will expect to be exposed to many products.
Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents.
Products and services are promoted and merchandised by the retailer.
The retailer will give the final selling price to the product.
Retailers often have a strong 'brand' themselves e.g. Ross and Wall-Mart in the USA, and Alisuper, Modelo, and Jumbo in Portugal.

4. Channel Intermediaries - Internet
The Internet has a geographically disperse market.
The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish Salmon direct from an Inverness fishery.
There are low barriers low barriers to entry as set up costs are low.
Use e-commerce technology (for payment, shopping software, etc)
There is a paradigm shift in commerce and consumption which benefits distribution via the Internet

D.Promotion.
Another one of the 4P's is 'promotion'. Products or services offered must be communicated to the target consumers in the right target markets. There are various communication tools available to communicate with the target consumers.

The elements of the promotions mix are:
- Personal Selling.
- Sales Promotion.
- Public Relations.
- Direct Mail.
- Trade Fairs and Exhibitions.
- Advertising.
- Sponsorship.

The elements of the promotions mix are integrated to form a coherent campaign. As with all forms of communication. The message from the marketer follows the 'communications process' as illustrated above. For example, a radio advert is made for a car manufacturer. The car manufacturer (sender) pays for a specific advert with contains a message specific to a target audience (encoding). It is transmitted during a set of commercials from a radio station (Message / media).

The message is decoded by a car radio (decoding) and the target consumer interprets the message (receiver). He or she might visit a dealership or seek further information from a web site (Response). The consumer might buy a car or express an interest or dislike (feedback). This information will inform future elements of an integrated promotional campaign. Perhaps a direct mail campaign would push the consumer to the point of purchase. Noise represent the thousand of marketing communications that a consumer is exposed to everyday, all competing for attention.

The Promotions Mix.
Let us look at the individual components of the promotions mix in more detail. Remember all of the elements are 'integrated' to form a specific communications campaign.

1. Personal Selling.
Personal Selling is an effective way to manage personal customer relationships. The sales person acts on behalf of the organization. They tend to be well trained in the approaches and techniques of personal selling. However sales people are very expensive and should only be used where there is a genuine return on investment. For example salesmen are often used to sell cars or home improvements where the margin is high.

2. Sales Promotion.
Sales promotion tend to be thought of as being all promotions apart from advertising, personal selling, and public relations. For example the BOGOF promotion, or Buy One Get One Free. Others include couponing, money-off promotions, competitions, free accessories (such as free blades with a new razor), introductory offers (such as buy digital TV and get free installation), and so on. Each sales promotion should be carefully costed and compared with the next best alternative.

3. Public Relations (PR).
Public Relations is defined as 'the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organization and its publics' (Institute of Public Relations). It is relatively cheap, but certainly not cheap. Successful strategies tend to be long-term and plan for all eventualities. All airlines exploit PR; just watch what happens when there is a disaster. The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan.

4. Direct Mail.
Direct mail is very highly focussed upon targeting consumers based upon a database. As with all marketing, the potential consumer is 'defined' based upon a series of attributes and similarities. Creative agencies work with marketers to design a highly focussed communication in the form of a mailing. The mail is sent out to the potential consumers and responses are carefully monitored. For example, if you are marketing medical text books, you would use a database of doctors' surgeries as the basis of your mail shot.

5. Trade Fairs and Exhibitions.
Such approaches are very good for making new contacts and renewing old ones. Companies will seldom sell much at such events. The purpose is to increase awareness and to encourage trial. They offer the opportunity for companies to meet with both the trade and the consumer. Expo has recently finish in Germany with the next one planned for Japan in 2005, despite a recent decline in interest in such events.

6. Advertising.
Advertising is a 'paid for' communication. It is used to develop attitudes, create awareness, and transmit information in order to gain a response from the target market. There are many advertising 'media' such as newspapers (local, national, free, trade), magazines and journals, television (local, national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides).

7. Sponsorship.
Sponsorship is where an organization pays to be associated with a particular event, cause or image. Companies will sponsor sports events such as the Olympics or Formula One. The attributes of the event are then associated with the sponsoring organization.

The elements of the promotional mix are then integrated to form a unique, but coherent campaign.

Apart from the marketing mix that consists of product, price, place and promotion, some authors will increase the marketing mix to the Five P's, to include people. Others may increase the mix to Seven P's, to include physical evidence(such as uniforms and facilities) and process (i.e. the whole customer experience e.g. a visit the London Bridge).

E.Physical evidence
Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following:

Packaging.
Internet/web pages.
Paperwork (such as invoices, tickets and despatch notes).
Brochures.
Furnishings.
Signage (such as those on aircraft and vehicles).
Uniforms.
Business cards.
The building itself

Some organisations depend heavily upon physical evidence as a means of marketing communications, for example tourism attractions and resorts (e.g. Disney World), parcel and mail services (e.g. UPS trucks), and large banks and insurance companies (e.g. Lloyds of London).

F.People
People are the most important element of any service or experience. Services tend to be produced and consumed at the same moment, and aspects of the customer experience are altered to meet the 'individual needs' of the person consuming it. Most of us can think of a situation where the personal service offered by individuals has made or tainted a tour, vacation or restaurant meal. Remember, people buy from people that they like, so the attitude, skills and appearance of all staff need to be first class. Here are some ways in which people add value to an experience, as part of the marketing mix - training, personal selling and customer service.

Training.
All customer facing personnel need to be trained and developed to maintain a high quality of personal service. Training should begin as soon as the individual starts working for an organization during an induction. The induction will involve the person in the organization's culture for the first time, as well as briefing him or her on day-to-day policies and procedures. At this very early stage the training needs of the individual are identified. A training and development plan is constructed for the individual which sets out personal goals that can be linked into future appraisals. In practice most training is either 'on-the-job' or 'off-the-job.' On-the-job training involves training whilst the job is being performed e.g. training of bar staff. Off-the-job training sees learning taking place at a college, training centre or conference facility. Attention needs to be paid to Continuing Professional Development (CPD) where employees see their professional learning as a lifelong process of training and development.

Personal Selling
There are different kinds of salesperson. There is the product delivery salesperson. His or her main task is to deliver the product, and selling is of less importance e.g. fast food, or mail. The second type is the order taker, and these may be either 'internal' or 'external.' The internal sales person would take an order by telephone, e-mail or over a counter. The external sales person would be working in the field. In both cases little selling is done. The next sort of sales person is the missionary.

Here, as with those missionaries that promote faith, the salesperson builds goodwill with customers with the longer-term aim of generating orders. Again, actually closing the sale is not of great importance at this early stage. The forth type is the technical salesperson, e.g. a technical sales engineer. Their in-depth knowledge supports them as they advise customers on the best purchase for their needs. Finally, there are creative sellers. Creative sellers work to persuade buyers to give them an order. This is tough selling, and tends to o ffer the biggest incentives. The skill is identifying the needs of a customer and persuading them that they need to satisfy their previously unidentified need by giving an order.

Customer Service
Many products, services and experiences are supported by customer services teams. Customer services provided expertise (e.g. on the selection of financial services), technical support(e.g. offering advice on IT and software) and coordinate the customer interface (e.g. controlling service engineers, or communicating with a salesman). The disposition and attitude of such people is vitally important to a company. The way in which a complaint is handled can mean the difference between retaining or losing a customer, or improving or ruining a company's reputation. Today, customer service can be face-to-face, over the telephone or using the Internet. People tend to buy from people that they like, and so effective customer service is vital. Customer services can add value by offering customers technical support and expertise and advice.

G.Process
Process is another element of the extended marketing mix, or 7P's.There are a number of perceptions of the concept of process within the business and marketing literature. Some see processes as a means to achieve an outcome, for example - to achieve a 30% market share a company implements a marketing planning process.

Another view is that marketing has a number of processes that integrate together to create an overall marketing process, for example - telemarketing and Internet marketing can be integrated. A further view is that marketing processes are used to control the marketing mix, i.e. processes that measure the achievement marketing objectives. All views are understandable, but not particularly customer focused.

For the purposes of the marketing mix, process is an element of service that sees the customer experiencing an organisation's offering. It's best viewed as something that your customer participates in at different points in time. Here are some examples to help your build a picture of marketing process, from the customer's point of view.

Going on a cruise - from the moment that you arrive at the dockside, you are greeted; your baggage is taken to your room. You have two weeks of services from restaurants and evening entertainment, to casinos and shopping. Finally, you arrive at your destination, and your baggage is delivered to you. This is a highly focused marketing process.

Booking a flight on the Internet - the process begins with you visiting an airline's website. You enter details of your flights and book them. Your ticket/booking reference arrive by e-mail or post. You catch your flight on time, and arrive refreshed at your destination. This is all part of the marketing process.

At each stage of the process, markets:

- Deliver value through all elements of the marketing mix. Process, physical evidence and people enhance services.
- Feedback can be taken and the mix can be altered.
- Customers are retained, and other serves or products are extended and marked to them.
- The process itself can be tailored to the needs of different individuals, experiencing a similar service at the same time.
- Processes essentially have inputs, throughputs and outputs (or outcomes). Marketing adds value to each of the stages.

PEST Analysis


PEST Analysis is a simple, useful and widely-used tool that helps you understand the "big picture" of your Political, Economic, Socio-Cultural and Technological environment. As such, it is used by business leaders worldwide to build their vision of the future.

It is important for these reasons:

First, by making effective use of PEST Analysis, you ensure that what you are doing is aligned positively with the powerful forces of change that are affecting our world. By taking advantage of change, you are much more likely to be successful than if your activities oppose it.

Second, good use of PEST Analysis helps you avoid taking action that is doomed to failure from the outset, for reasons beyond your control.

Third, PEST is useful when you start operating in a new country or region. Use of PEST helps you break free of unconscious assumptions, and helps you quickly adapt to the realities of the new environment.

Political:

- Government type and stability.
- Freedom of press, rule of law and levels of bureaucracy and corruption.
- Regulation and de-regulation trends.
- Social and employment legislation.
- Tax policy, and trade and tariff controls.
- Environmental and consumer-protection legislation.
- Likely changes in the political environment.

Economic:

- Stage of business cycle.
- Current and project economic growth, inflation and interest rates.
- Unemployment and labor supply.
- Labor costs.
- Levels of disposable income and income distribution.
- Impact of globalization.
- Likely impact of technological or other change on the economy.
- Likely changes in the economic environment.

Socio-Cultural:

- Population growth rate and age profile.
- Population health, education and social mobility, and attitudes to these.
- Population employment patterns, job market freedom and attitudes to work.
- Press attitudes, public opinion, social attitudes and social taboos.
- Lifestyle choices and attitudes to these.
- Socio-cultural changes.
- Technological Environment:

Impact of emerging technologies.

- Impact of Internet, reduction in communications costs and increased remote working.
- Research and development activity.
- Impact of technology transfer.

Other forms of PEST - PESTLE, PESTLIED, STEEPLE and SLEPT:

Some people prefer to use different flavors of PEST Analysis, using other factors for different situations. The variants are:

PESTLE/PESTEL: Political, Economic, Sociological, Technological, Legal, Environmental.

PESTLIED: Political, Economic, Social, Technological, Legal, International, Environmental, Demographic.

STEEPLE: Social/Demographic, Technological, Economic, Environmental, Political, Legal, Ethical.

SLEPT: Social, Legal, Economic, Political, Technological.



Source: http://www.mindtools.com/pages/article/newTMC_09.htm

The Five Competitive Forces - by Michael E. Porter


Bargaining Power of Suppliers

The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services.
Supplier bargaining power is likely to be high when:

•The market is dominated by a few large suppliers rather than a fragmented source of supply,
•There are no substitutes for the particular input,
•The suppliers customers are fragmented, so their bargaining power is low,
•The switching costs from one supplier to another are high,
•There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins. This threat is especially high when
•The buying industry has a higher profitability than the supplying industry,
•Forward integration provides economies of scale for the supplier,
•The buying industry hinders the supplying industry in their development (e.g. reluctance to accept new releases of products),
•The buying industry has low barriers to entry.

In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.

Bargaining Power of Customers

Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes.
Customers bargaining power is likely to be high when
•They buy large volumes, there is a concentration of buyers,
•The supplying industry comprises a large number of small operators
•The supplying industry operates with high fixed costs,
•The product is undifferentiated and can be replaces by substitutes,
•Switching to an alternative product is relatively simple and is not related to high costs,
•Customers have low margins and are price-sensitive,
•Customers could produce the product themselves,
•The product is not of strategical importance for the customer,
•The customer knows about the production costs of the product
•There is the possibility for the customer integrating backwards.


Threat of New Entrants

The competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry.
The threat of new entries will depend on the extent to which there are barriers to entry. These are typically:-

•Economies of scale (minimum size requirements for profitable operations),
•High initial investments and fixed costs,
•Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets,
•Brand loyalty of customers
•Protected intellectual property like patents, licenses etc,
•Scarcity of important resources, e.g. qualified expert staff
•Access to raw materials is controlled by existing players,
•Distribution channels are controlled by existing players,
•Existing players have close customer relations, e.g. from long-term service contracts,
•High switching costs for customers
•Legislation and government action

Threat of Substitutes

A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products.

Similarly to the threat of new entrants, the treat of substitutes is determined by factors like:-

•Brand loyalty of customers,
•Close customer relationships,
•Switching costs for customers,
•The relative price for performance of substitutes,
•Current trends.

Competitive Rivalry between Existing Players

This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.
Competition between existing players is likely to be high when:-

•There are many players of about the same size,
•Players have similar strategies
•There is not much differentiation between players and their products, hence, there is much price competition
•Low market growth rates (growth of a particular company is possible only at the expense of a competitor),
•Barriers for exit are high (e.g. expensive and highly specialized equipment).

Influencing the Power of Five Forces

After the analysis of current and potential future state of the five competitive forces, managers can search for options to influence these forces in their organization’s interest. Although industry-specific business models will limit options, the own strategy can change the impact of competitive forces on the organization. The objective is to reduce the power of competitive forces.

The following summary provides some solutions. They are of general nature. Hence, they have to be adjusted to each organization’s specific situation. The options of an organization are determined not only by the external market environment, but also by its own internal resources, competences and objectives.

Reducing the Bargaining Power of Suppliers

- Partnering
- Supply chain management
- Supply chain training
- Increase dependency
- Build knowledge of supplier costs and methods
- Take over a supplier

Reducing the Bargaining Power of Customers

- Partnering
- Supply chain management
- Increase loyalty
- Increase incentives and value added
- Move purchase decision away from price
- Cut put powerful intermediaries (go directly to customer)

Reducing the Treat of New Entrants

- Increase minimum efficient scales of operations
- Create a marketing / brand image (loyalty as a barrier)
- Patents, protection of intellectual property
- Alliances with linked products / services
- Tie up with suppliers
- Tie up with distributors
- Retaliation tactics

Reducing the Threat of Substitutes

- Legal actions
- Increase switching costs
- Alliances
- Customer surveys to learn about their preferences
- Enter substitute market and influence from within
- Accentuate differences (real or perceived)

Reducing the Competitive Rivalry between Existing Players

- Avoid price competition
- Differentiate your product
- Buy out competition
- Reduce industry over-capacity
- Focus on different segments
- Communicate with competitors


Source: http://www.mindtools.com/pages/article/newTMC_08.htm

Thursday, April 1, 2010

How to Implement TQM?

Many Quality efforts are missing a key ingredient: a set of meaningful measurements. The leaders of modern organizations typically believe that they have too many measurements. The fact is, people need training on how to choose and use this tool effectively. Here's a key opportunity to accelerate your quality activities and the results they produce.

What To Measure
Companies tend to measure certain areas:

• money- sales, costs, profits, assets
• activity - number of policies issued, units sold,
• sales calls made, etc.
• schedules - completion, delinquencies, deadlines
• "pain" - customer complaints, accidents, resignations, penalties

Managers are evaluated and rewarded according to "their numbers" in these areas, cutting costs, getting work out, meeting schedules, and avoiding pain. Quality is not really included as an integral part of departmental routines or managerial performance appraisals.

Properly selected measurements produce dramatic improvements in quality and profitability. Adequately-trained managers can use these measurements to tackle their assignments from a different perspective: focusing on the processes for accomplishing work, rather than "pointing fingers" at their co-workers. As an example, work groups could be measuring:

• Avoidable instances of overtime, express shipments or expediting
• Accuracy and completeness of outcomes or supplier inputs
• Delays, missing information, material shortages, changes in schedule
• Returned goods, lost time accidents or instances of employee dissatisfaction

The resulting information would demonstrate "Where, When and Why" quality isn't happening. This type of discovery leads to improvement. The company learns to operate better, faster and cheaper. Employees enjoy more satisfaction and less stress.

Use Of Measurements

Most of us have been raised in the traditional management system, shaping our expectations of what is measured and how the information should be used. Imagine a group of co-workers arriving at your office: "We're from the Measurement Committee and we're here to help you." How warmly would they be received? Like Internal Revenue Service auditors, most likely. Measurements have often been misapplied, in an effort to motivate people or place blame for problems.

Measurement should be used as a helpful tool, not a weapon. It can increase understanding of how processes are operating, and why operations are failing to produce expected results. Correct application of measurement helps answer the question "Where did the process break down?" Others to look at includes:

1. How many delays were encountered in entering or filling customer orders?
2. How often was the warehouse out of stock?
3. How much equipment downtime occurred on second shift?
4. What were the costs (and causes) of engineering changes?

These kinds of answers help employees learn about work processes, and lead to discovery of why problems occur.

The 10 Prerequisites For Successful Measurement

There are 10 preexisting conditions for successful measurement. The measurements are successful because the prerequisites for success have been provided. Has your operation developed the support necessary for successful measurement? It does if:

1. The areas being measured are important to the customers, employees or suppliers involved; i.e. timeliness, accuracy, completeness or cost.
2. Each measurement is part of a defined and documented process; i.e. clearly established methods, procedures, equipment, training.
3. The process is operated according to clear requirements; established for outcome, supplier inputs and sequence of operations.
4. The area being measured is important to managers or supervisors who control work group time and resources; i.e. improved performance pays personal benefits.
5. The employees involved believe they can do something to streamline or improve the process; knowledge and authority to make changes.
6. The measurement tools used are appropriate for the task at hand, i.e. not too simple or complex.
7. Measurement results are periodically reviewed; i.e. daily, weekly, monthly.
8. People use the measurements to stimulate thought, discussion and actions.
9. Employees trust that actions will be focused on the process, not the people involved; "How can we improve the process" versus "Who screwed up?"
10. Everyone is recognized for their efforts and rewarded for progress; a small celebration, pat on the back, or better bonus at the end of the year.

Total Quality Management

Total Quality Management is a management style based upon producing quality service as defined by the customer. TQM is defined as a quality-centered, customer-focused, fact-based, team-driven, senior-management-led process to achieve an organization’s strategic imperative through continuous process improvement. TQM principles are also known as total quality improvement, world-class quality, continuous quality improvement, total service quality, and total quality leadership.

The word "total" in Total Quality Management means that everyone in the organization must be involved in the continuous improvement effort, the word "quality" shows a concern for customer satisfaction, and the word "management" refers to the people and processes needed to achieve the quality.

Total Quality Management is not a program; it is a systematic, integrated, and organizational way-of-life directed at the continuous improvement of an organization. It is not a management fad; it is a proven management style used successfully for decades in organizations around the world. TQM is not an end in itself; it is a means to an organizational end. Total Quality Management must not be the primary focus of an organization; it should merely be the means to achieve organizational goals.

Total Quality Management differs from other management styles in that it is more concerned with quality during production than it is with the quality of the result of production. Other management styles have different concerns. Some major styles are compared with TQM as follows.

Management-by-Objectives (MBO) emphasizes achieving specified objectives, under the control of individual managers. This approach works against multi-functional process performance and interferes with teamwork and quality. TQM is not objective-oriented, except for its one goal of achieving continuous quality improvement.

Management-by-Results (MBR) is management by viewing past results as an indication of future results. It has been compared to driving an automobile in a forward direction while looking in the rear view mirror. In today’s fast-paced, quick-changing business environment, managers cannot rely on past results as a predictor of future performance. In contrast, TQM is only concerned with current results and ways to improve them.

Management-by-Exception (MBE) is management by identifying specific targets for management attention and action. It produces short-term results by reacting to immediate problems, but there is no analysis of the processes that produced the problems, so long-term benefits are lost. On the other hand, TQM is more concerned with correcting processes that produce problems than it is with responding to individual problems.

Total Quality Management is very different from these and other management systems. It recognizes that quality as determined by the service provider might be much different from quality as perceived by the service receiver. If the customer is not satisfied with a service, then the service does not have quality and the processes that produced the service have failed.

Total Quality Management requires an organizational transformation-a totally new and different way of thinking and behaving. This transformation is not easy to achieve; it is not for the weak or the statistically untrained. At first glance, many TQM techniques may seem simple and based on common sense, but they must be understood and used correctly for TQM to function properly. Knowing the history of Total Quality Management may help in understanding its techniques.