Norway Leaf and Chevrolet Bolt. Last and VW e-Golf. In China, the best-selling brands in year, 62, EVs were sold in Norway and they had an all came from China, e. The cost impressive slice of the total car sales at 39 percent. In of these Chinese-made EVs can often be comparatively emerging economies where road quality and electrical low.
For example, the Zhidou D2 is a small EV, retailing infrastructure still need further refinement, the tech- for under USD after subsidies. BYD Auto Co. Although this plan ran into a number of delays, Company. It also has a joint brand ambassador. His Twitter M Technology Co. Motors; are distributed in the Dominican Republic by Peravia Motors 3, cars serve as taxis in the capital, Santo Domingo ; and are offered to consumers in both Ukraine and Moldova.
The company has also expressed a desire to enter the European, Iranian and Israeli markets. BYD opened its Iranian branch under the name Karmania in The key to competitive advantage was where a firm chose to compete. However, as markets fragment and product life cycles accelerate, dominating existing product segments becomes less impor- tant.
The key in the eyes of customers.
- The Prajnaparamita literature;
- Contract law.
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- The Black Death (Great Historic Disasters).
- Internet marketing strategy and practice.
However, as markets fragment and product life cycles accelerate, domi- environment, which is the focus natingof existing Part II. Theon the assessment essence of strategy isofnotits resources and thecapabilities. In future does the as opposed togoal whatis to identify and develop the hard-to-imitate organisational capabilitiesthe it has resources or assets.
Chapter 3 then continues with how that core competences might be distinguish used a firm in the from development its competitors of competitive in the advantages, from the eyes of customers. LE macro-level country-specific advantages Part I covers the necessary to theanalysis internal micro-level value to assess the chain analysis. The structure of Part I is shown in this diagram.
Capabilities can be described as what an organisation does as opposed to what it has resources or assets. Chapter 3 then continues with how the core competences might be used in the development of competitive advantages, from the macro-level country-specific advantages to the micro-level value chain analysis. Historically, competitive advantage was thought of as a matter of posi- tion, where firms occupied a competitive space and built and defended market share.
Competitive advantage depended on where the business was located and where it chose to provide services. Stable environments allowed this strategy to be successful, particularly for large and dominant organisations in mature industries. This ability to develop a sustained competitive advantage today is increasingly rare. A competitive advantage laboriously achieved can be quickly lost. Organi- sations sustain a competitive advantage only so long as the services they deliver and the manner in which they deliver them have attributes that correspond to the LE key buying criteria of a substantial number of customers.
Sustained competitive advantage is the result of an enduring value differential between the products or services of one organisation and those of its competitors in the minds of customers. Therefore, organisations must consider more than the fit between the external environment and their present internal characteristics.
Sustained competitive advantage has become more of a matter of movement and ability to change than of location or position. The question of an enduring value differential raises the issue of why a firm P is able to achieve a competitive advantage. To answer this, it is necessary to examine why and how organisations differ in a strategic sense. Identifying strengths and weaknesses requires introspection and self-examination.
It also requires much more systematic analysis than has been done in the past. From capability to advantage M How well a company assembles the capabilities that a new business requires determines how successful it is at gaining and keeping positional advantage. Some capabilities are more important than others and combinations are gener- ally harder to imitate than individual capabilities. Lasting competitive advantage comes only when companies assemble combinations of capabilities that are difficult to imitate.
A Competitive advantage may not call for superior capabilities in every area of a business. But control of the most important capabilities can determine how much of the value of a growing business will flow to its owner. For every oppor- tunity, it is important to distinguish the capabilities that influence competitive success from those that are merely necessary to stay in business. Capabilities that S are less critical can be outsourced or controlled by others.
These are: the environment. Resource-based view RBV : Inside-out There is, however, a potential conflict between these two perspectives in the sense perspective. Quite simply, from a marketing viewpoint, if strategy becomes too deeply embedded in corporate capabilities it runs the risk of ignoring the demands of changing, turbulent marketing environments.
Figure 2. M in the value chain. Penrose,theory, According to the resource-based and earlyhas which strategy theory its roots in Ansoff, economic ; Selznick, theory e. Each e. Fahy, Grant, is unique and this uniqueness Furthermore, this unique- or the way they are deployed.
Furthermore, this uniqueness is relatively long ness is relatively long lasting, because the resources of the company are relatively immobile lasting, because the resources of the company are relatively immobile Barney, Barney, ; Sharma and Erramilli, Various definitions and classifications for resources have been proposed in the literature. The most important in theVarious currentdefinitions context are and classifications for resources have been proposed in the briefly described here. The most important in the current context are briefly described here.
Resources Resources The resources of the firm The resources in the of the firm inapproach competence-based the competence-based approach into are typically classified are typically two clas- sifiedresources. They include assets such as plant and equipment, access to raw materials and finance, 2. The dividing line between the tangible and intangible is often unclear and how they are classified varies a little from one writer to another. Despite the problems with classification, proponents of the competence-based approach agree on the relative importance of the two types of resource. Although it is clear that both types of resource are required for any business to operate, competence-based theorists argue that intangible resources are the most likely source of competi- tive advantage.
The reason for this, it is argued, is that, being less visible, they LE are more difficult to understand and imitate than tangible resources. As such, they are therefore more likely to be a source of competitive advantage Collis and Montgomery, Grant describes six types of resource: technological, financial, physical, human, organisational and reputation. Resources are extremely diverse, as shown in Figure 2. The dotted line in Figure 2. However, the resource-based theory does not consider P all resources possessed by a company but focuses only on critical or strategic resources, i. The very basis of RBV is to increase the ability of the firm to act upon, shape and S transform its environment.
The objective is no longer to adapt to the environ- mental forces but to choose a strategy that allows the best exploitation the best return of resources and competences given the external opportunities. It means taking into account the external opportunities, but with the objective of creating value beyond existing market standards. As a consequence, the strategic options for a firm are derived from its resource profile: the business portfolio is an output of the search of applications carried out for one competence. It is the way in which these resources are assembled, or combined, for the execution of an activity that creates the difference between firms.
This distinctive combination of resources emerges through organisational learning. Competence may be described by the following three attributes: 1. Proprietariness: a competence is a firm-specific set of resources. Learning: a competence results from years of experience accumulated in a small number of fields where the firm may dominate.
Resources alone are not a basis for competitive advantage. It is the way in which resources are integrated with each other to perform a task or an activity that provides the capability for an organisation to compete successfully in the market-  2. When Honda introduced motorcycles in the US market, it had focused most of its attention on selling its higher- value but problem-plagued motorcycles through a dealer network. At the same time, it introduced a LE series of much smaller motorcycles with little fanfare through sporting goods stores. Honda succeeded because it also looked to motorcycle market.
Sources: adapted from Prahalad and Hamel ; Webb and Gile It turned out to be both a customer and a product very M different from what Honda had envisioned. Honda place. A Whether or not resources and capabilities have the potential to become core competences depends on how difficult they are for competitors to acquire and how valuable they are to the firm as a basis for competitive advantage. A resource becomes a source of sustainable competitive advantage only if it passes several tests.
First, it must be competitively superior and valuable in the product market. Second, it must be difficult to imitate. Third, it must not be easy to replace by an alternative capability. Fourth, it must be durable. Fifth, it must be difficult to move. If the capability can move with an employee then it is the employee, not the corporation, that will acquire the value. Some individual capabilities may pass the tests. A world-class brand, for example, will continue to confer advantage on its owner.
Core competences CC Important determinants for: customer satisfaction and creating LE customer value. The firm is better than competitors in delivering customer value regarding functions. Difficult for competitors to copy CC. Resources are combined into a development of capabilities or bundles of capabilities. The andkey to sustaining competitive advantagebelong as a busi- A as knowledge, skills, abilities, personality.
Corporate competences to the organisation and are embedded processes and structures that tend to reside within satisfy ness grows is to assemble a bundle of distinctive capabilities that together the thewhen organisation, even criteria. These two categories are not entirely independent. The collection ofThe capabilities personal in the bundle competences can can formbeabuilt way in-house, of doing borrowed things orby a means cultureofthat alli- becomes embedded ances, or acquired in the out ofIn organisation.
As each addition, new capability corporate is addedcan characteristics to the bundle, determine the type of personal competences greater competitive that will bestaccrues advantage work orbecause fit in the theorganisation. Personal competences are possessed by individuals and include characteristics such as knowledge, skills, abilities, experience and personality. Corporate competences belong to the organisation and are embedded The MOV, or fit model, suggests that the firm adapts its assets to its environmental constraints processes and structures that tend to reside within the organisation, even when in order to obtain a fit with the environment.
Basically, MOV is about adapting to the market individuals environment Kohli leave. These and Jaworski, two It categories are not entirely can be understood independent. In addition, corporate characteristics can determine the type of personal competences that will best work or fit in the organisation. It can be understood as a culture, rather than a set of behaviours and espoused values Beverland and Lindgreen, MOV can be defined as a culture in which Business model: The fundamental strategy all employees are committed to the continuous creation of superior value for underlying the way a business unit operates.
LE obtaining that product. Table 2. In dynamic markets customer needs shift rapidly and it is difficult to forecast such changes. The accelerating diversity of market demands must be met with a set of appropriate and matching capabilities to deal with them. The greater the mismatch between the increasingly fluctuating demands of the market and the relatively immobile and homogeneous resources to the firm, the greater the capability gap Day, S The starting point is two different dimensions: inside-out resource-based segments, without too much complexity.
The static and non-complex charac- portfolio in an experimental way. There is a trade-off connected to balancing exploitation and exploration. When there is much focus on market exploitation, the company may utilise existing market knowledge to take advantage of a few current markets, which are already known and where the company can make short-term profits. However, short-term exploitation may also have the consequence that the company could become rigid, inert and slow in chasing new market opportunities.
The underlying assumption is that the marketing S mixStatoil e. Chevron, Shell, decisions will becomee. Capabilities of market-driven Adaptive marketing capabilities organisations Experimental learning through rapid Capabilities are adapted to the needs configuration of capabilities: 2.
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In addition, the VBV integrates some elements of the MOV, but it does not ignore the costs of performing the activities. Market Resources per se do not create e. Rather, e. Chevron, Shell, Statoil e. Source: Day, G. Inand value chains a value time ofconfiguration analysis for competitive advantage. Value chains are created by transforming a set of inputs into more refined outputs. The strategic challenges associated with managing a value chain are related to manufacturing products with the right quality at the lowest possible cost.
Critical drivers of value creation in chains also include the interrelationships between primary activities, on the one hand, and product development, marketing and service, i. The activities performed by a firm in any industry can be grouped into four generic categories. It can so-called upstream functions, which are mainly handled by engineers. The closer to the end-user a function e. If a firm attains such a competitive advantage that is sustainable, defensible, profitable and valued by the market, then it may earn high rates of return, even though the industry may be unfavourable and the average profitabi- lity of the industry modest.
In competitive terms, value is the amount that buyers are willing to pay for what a firm provides them perceived value less the sacrifices that the customers offer to obtain access to the value e. A firm is profitable if the value it commands exceeds the costs involved in creating the product. Creating value for buyers that exceeds the cost of doing so is the goal of any generic strategy.
Value, instead of cost, must be used in analysing competitive position, since firms often deliberately raise their costs in order to command a premium price via differentiation. The value chain displays total value and consists of value activities and margin. Value activities are the physically and technologically distinct activities that a firm performs.
Competitive advantage is a function of either providing comparable buyer value Competitive advantage is a function of either providing comparable buyer value more efficiently than competitors lower cost , moreor efficiently performing than competitors activities lower cost , at comparable orbut cost performing in activities at compa- rable cost but in unique ways that create more unique ways that create more customer value than the competitors are able to offer and, hence, customer value than the competi- command a premium price differentiation.
The the value chain that are not worth thefirm might costs. In any firm, primary activities can be divided cess inventory into five generic categories. These can then be unbundled and produced outside the firm outsourced at a lower price. Value activities can be divided into two broad types: primary activities and support activities. Primary activities are the activities involved in the physical creation of the product, its sale and transfer to the buyer and after-sales assis- tance.
In any firm, primary activities can be divided into five generic categories. Support activities support the primary activities and each other by providing purchased inputs, technology, human resources and various firm-wide functions. Primary activities The primary activities of the organisation are grouped into five main areas: inbound Logistics: The activities involved in moving logistics, operations, outbound logistics, marketing and sales and service.
Inbound logistics are the activities concerned with receiving, storing and LE in-process inventory through the firm and moving finished goods out of the firm. These include materials, handling, stock control, transport, etc. Operations transform these various inputs into the final product or service: machining, packaging, assembly, testing, etc. Outbound logistics collect, store and distribute the product to customers. For tangible products this would involve warehousing, material handling, transport, etc.
User: The buying-centre role played by the 4. This would include sales administration, advertising, selling, etc. In public services, Advertising: Non-personal communication that communication networks which help users access a particular service are is paid for by an identified sponsor and involves either mass communication via newspapers, often important. Services cover all the activities that enhance or maintain the value of a e.
Support activities These can be divided into four areas: procurement, technology development, human resource management and infrastructure. Procurement refers to the process of acquiring the various resource inputs to the primary activities not to the resources themselves. As such, it occurs in A many parts of the organisation. The key technologies may be concerned directly with the product e.
Human resource management is a particularly important area that transcends all primary activities. It is concerned with the activities involved in recruiting, training, developing and rewarding people within the organisation. Infrastructure encompasses the systems of planning, finance, quality control, etc.
Infrastructure also consists of the struc- tures and routines of the organisation that sustain its culture. As such, it occurs in many parts of the organisation. Nike realised that its core compe- customer needs. Nike owns and controls just three elements: product development, marketing and its branded retail stores. For B2B service providers seeking to do business with Nike, this suggests that some of the just three elements: product development, marketing most lucrative opportunities are in supporting new-product development ties are design shoe in supporting new-product and materials development shoe technologies , and its branded retail stores.
All serve branded-store architecture and choosing store locations. Sources: Adapted from Ramaswamy, ; Crain and Abraham, , pp.
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For Sources: adapted from Ramaswamy, ; Crain and Abraham, , pp. From value chain to value constellation As markets are getting more complex, the value chain of the single firm cannot be seen independently from the value chains of other actors in the market network Prahalad and Ramaswamy, Although value activities are the building blocks of competitive advantage, the value chain is not a collection of independent activities, but a system of interde- pendent activities.
The value chains of different players are related to each other by linkages within the total industry Jonk et al. In understanding the competitive advantage of an organisation, the strategic importance of the following types of linkage should be analysed in order to assess how they contribute to cost reduction or value added. There are two kinds of linkage see Figure 2. The global furniture chain IKEA is used as an example of the new logic of value. Prosumers are half-consumers and half-proactive producers of the value creation.
Internal linkages M There may be important links between the primary activities. In particular, choices will have been made about these relationships and how they influ- ence value creation and strategic capability. For example, a decision to hold high levels of finished stock might ease production scheduling problems and provide a faster response time to the customer.
However, it will probably add to the overall cost of operations. An assessment needs to be made of whether the added value of extra stock is greater than the added cost. Sub-optimisation A of the single value chain activities should be avoided. It is easy to miss this point in an analysis if, for example, the marketing activities and operations are assessed separately. The operations may look good because they are geared to high-volume, low-variety, low-unit-cost production.
When put together these two positions representing potential strengths are weaknesses because they are not in harmony, which is what a value chain requires. The link between a primary activity and a support activity may be the basis of competitive advantage. For example, an organisation may have a unique system for procuring materials.
Many international hotels and travel companies use their computer systems to provide immediate quotations and bookings worldwide from local access points. Model 2. All rightsSource: reserved. Reproduced adapted withI. All Source: Adapted from Lings, I. All rights reserved. Kumar, N. A Source: From Kumar, N. There is usually a specialisation of roles and any single organisa- capability. For example, tion usuallytoparticipates a decision hold high in the wider levels value system, of finished whichease stock might creates a product or produc- tion scheduling problems and provide a faster service.
Ina understanding capability. For example, response decision to hold how time value high to the customer. An Sub-optimisation assessment this toofbethe needsneeds whole process single made to be of whether analysed and value chain the activities added valueshould be avoided. Sub-optimisation forthe single S understood. Suppliers not only deliver a product, However,look at thegood samebecause time thethey marketing teamtomay are geared be selling quickness, high-volume, low-variety,flexibility and variety low-unit-cost production.
For example, to the customers. However, at the same time the marketing team may be selling quickness, flexibilityare When put together these two positions representing potential strengths and variety weaknesses because to the theyBenetton, customers. The and link successful international development during the s between a primary activity and a support activity may be the basis of competitive advantage. In addition, products pass through the value chain channels channel value on their way to the buyer.
There are often circumstances where the overall cost can be reduced or value increased by collaborative arrangements between different organisations in the value system. It will be seen in Chapter 9 that this is often the rationale behind joint ventures e. In order to be a market A conventional view of the value proposition is provided by Knox et al. However, some branding advocates believe that the value proposition is more than the M sum of product features, prices and benefits. They argue that it also encompasses the totality of the experience that the customer has when selecting, purchasing and using the product.
These customer experiences and also the service quality are very important elements in the process of designing the CVP. For example, Molineux states that: the value proposition describes the total customer experience with the firm and in its A alliance partners over time, rather than [being limited to] that communicated at the point of sale.
The higher this relationship is, the better S the perceived value for the customer. Please do not think of Figure 2. Instead, think of it as what the customer gets compared to what the customer gives in order to be able to use or consume the product or service. Then real customer-perceived value CPV has been created. The components driving customer benefits include product values, service values, technical values and commitment value.
The higher costs incurred by relationship is, the the customer. These components better the perceived cancustomer. Commitment a mathematical formulato value, for example, for calculating anincludes exact investment in personnel measure of customer-perceived value CPV. After the product or service has been your product. Customer value The components driving customer benefits include product values, service values, tech- is thus defined either by the cost reductions that the product can provide in the nical values and commitment value.
These components canthe beproduct. If the benefits When exceedwethe talk about costs customer then value we a customer willshould be consider at least aware thatpurchasing the customer yourvalue is notthe product. For example, only being value tocreated by the company an industrial customeritself. When we talk about customer value we should be aware that the customer value is not only Exhibit being 2. ThisAcme extended Axles, Inc. Acme Axles, Inc. Acme Acme Axles,differentiates inc. The value chain foundries and tyre manufacturers and industrial parts outline Acme Axles, Inc.
Figure ators, welders 2. Acme differentiates Customeritself links from itsinclude military competitors byand non-military ground providing fast, on-time There delivery are threeof high-quality, custom-designed levels of value chain analysis: axles. The value chain outlinemanufacturing. The industry value chain consists of the different facturers use the axle systems as components of the There are three firms levels in theof value chain vertical supplyanalysis: chain.
Industry value chain Acme Axle, Inc. Acme Axle, Inc. Advertising A Ground equipment Assemble manufacturers e. Sales order processing military equipment, and after-sales service welding equipment, trailers Paint End consumer Administration S End consumer construction company, military golf cart retailer, airline baggage handler Figure Figure 2. Too often, management determines what it believes the customer wants, develops and makes the product, then adds up the costs of production and puts a standard margin on top of that.
The major problems with this approach are that the product may not effectively address changing customer needs and the price may be too high for created customer value. They want to understand which product features really provide customer benefits and which ones are merely going to add to the product cost without giving customers any additional reason to buy. They also determine the price that will deliver value to their customers early in the product development LE process.
From that, they deduct their target profit and give their engineers and operations people firm targets for the cost of the final product or its components. Superior value Delivering value may not be enough to achieve competitive advantage. Excel- lent quality is no advantage if your competitors all have similar offerings. Competitive advantage requires that the value of your product or service is superior to that of your competitors.
The major challenge here is that your competitors are providing a moving target by continuously improving the value P they provide. Competitive advantage can be accomplished by providing the greatest level of benefits through a differentiation strategy. It is important to recognise that lowest life cycle cost does not require the lowest purchase price. Lowest life cycle cost can be achieved by M helping the customer reduce start-up, training or maintenance costs. Value creation and value capture A business model defines the way a company generates perceived value for customers value creation and how it captures some of this value as profit value capture.
Value creation expresses the benefits the company creates for its custo- mers, similar to the customer perceived value CPV illustrated in Figure 2. A As corporate practice demonstrates, the development of a sustainable and profi- table business model is very challenging. In this connection, value creation and value capture are two key tasks to consider. Four broad positions, each depicting Value creation: The total range of benefits that a particular combination of value creation and value capture, are illustrated in are provided for customers who will find them consistently useful.
It is influenced by bargaining power of buyer 1. Nightmare: in this position, companies are creating CPV for the customers and seller. All the total added value goes to the customers. The reason for this is normally poor revenue logic. Poor revenue logic is the problem for online companies such as Skype and Spotify. Millions of people are users of their services and users feel that these brands deliver great value for them, but too few users are actually customers who pay for the products. Hell: companies that neither create enough value for customers nor develop a functioning value creation system are doomed for failure.
Fiat in Italy  2. Fantasy: in this position, the company does not create much value for its customers but it still remains a profitable firm. Examples of this position are energy utility half-public companies, which often score poorly on customer perceived value value creation , but remain profitable because of the mono- poly market position and the lack of choice for customers. Heaven: in this position, the company has a sustainable and profitable business model that scores high, both on perceived customer value value creation and on value capture.
Apple and Nespresso are good examples. Apple has succeeded in developing its brand perception as being the coolest LE smartphone brand in the world market. High-quality coffee machines in elegant design are sold for a cheap price through licensing partners. Nespresso does not make any profit on its coffee machines. Instead, the high profits are earned on the Nespresso capsule sales, where the gross margins are estimated to be around 85 per cent, compared with around 40 per cent for regular ground coffee Matzler et al.
Source: Based on Matzler et al. According to but remain social progress in society. The solution lies in the principle of shared value, which scores only for the company itself but alsohigh, for the both on perceived customer value value creation and on value capture. Apple society by addressing its needsand involves creating value also for society by addressing its needs and challenges, Nespresso are good examples. Apple has succeeded in developing its brand perception and challenges. It is about connecting company success with e.
High-quality coffee machines in el- egant design are sold for a cheap price through licensing partners. Nespresso does not make  any profit on itsIdentification of the coffee machines. Since its introduction in , this model has dominated the thinking of business executives. Yet a growing number of services businesses, including banks, hospi- tals, insurance companies, business consulting services and telecommunications companies, have found that the traditional value chain model does not fit the reality of their service industry sectors.
Value is created by networks. Fjeldstad and Stabell argue that the value chain is a model for making mobilising resources and deploying them to products, while the value shop is a model for solving customer or client problems solve a specific customer problem. The value network is a model for mediating exchanges LE Value network: The formation of several between customers.
The main differences between the two types of value chains are illustrated in Table 2. Value shops as in workshops, not retail stores create value by mobilising resources e. This model applies to most service-orien- tated organisations, such as building contractors, consultancies and legal orga- nisations. Slide 28— Explanation of medium- discipline-channel and vehicle. Illustrates key tools by a worked example, for example, searching for a credit card.
Differences between digital media and traditional media. Slide 32—37 Review the 6 Is using Slides 20—23 with references to case studies used earlier in lecture or Travel Republic. Think about the innovation that you have witnessed during the time you have used the Internet and World Wide Web. What would you say? Are the main sites used in your country that have been created which have changed the way we spend our time or buy online? In Table 1. Answer Not relevant.
What do these sites have in common that you think has made them successful? Answer This is provided in the book — in error! But in each country, similar types of businesses have evolved, for example, the search engines Baidu in China and Yandex in Russia. It is important that within companies and between agency and client, there is clarity on the scope of Internet marketing, so the next few sections explore alternative definitions.
Question One simple, but revealing, method of assessing how commonly these terms are used, is to use the Google syntax which returns the number of pages which contain a particular phrase in their body or title. Companies that promote their services online will often use keywords on the page, which reflect the words that are being searched for.
In the United Kingdom, specialist e-marketing agencies and the new media publications tend to refer to digital marketing and their usage of the term will eventually have an influence. Activity 1. Think of C2C both on independent sites and organisational sites. How can C2C communications assist these organisations? Answer Examples mentioned may include: 1. User-generated content UGC , a feature of Web 2. Online auctions, for example, eBay.
Online forums are important for B2C publishers, for example, www. Contributing to customer support sites. These are specialist models. C2C is mainly an aid for support of technical products such as software see www. Instruction Make two columns. On the left, write down different digital media channels and on the right the corresponding communications disciplines, such as advertising, direct marketing or PR which are most appropriate. Answer The digital media channels are based on Figure 1.
Digital media channel Traditional discipline 1. Search — Pay Per Click Advertising 3. Online PR Public Relations 4. Interactive Ads Advertising 6. Opt-in e-mail Direct marketing 7. Viral Marketing Public Relations Activity 1. Include communications using both the Internet and traditional media. Refer to channel-swapping alternatives in the buying decision in Figure 1.
The table below shows different forms of integration between the channels Table: Examples of communications initiated by customer and company Communication initiated by customer Communication initiated by Company Phone call to company Advert to generate awareness, placed in newspaper or PC magazine Visit to web site to review prices and specification Phone call or e-mail by courier company to arrange delivery of PC Phone call or e-commerce purchase of PC Traditional mail-out or e-mail after 1 year to describe upgrade service Support call to solve problem Traditional mail-out or e-mail after 3 years to describe new product offers Complaint about repair Call to arrange visit from sub-contracted company Exercises Self-assessment exercises 1.
Which measures can companies use to assess the significance of the Internet to their organisation? Reference to Chapters 2 and 3 may assist with this question. Why did companies only start to use the Internet widely for marketing in the s, given that it has been in existence for over 30 years? The recent dramatic growth in the use of the Internet has occurred because of the development of the World Wide Web. The World Wide Web changed the Internet from a difficult-to-use tool for academics and technicians to an easy-to-use tool for finding information and delivering web applications for businesses and consumers.
Distinguish between Internet marketing and e-marketing. The objectives of each are similar — to support marketing activities towards their goals, that is, customer acquisition and retention, and cost reduction. E-marketing can be considered broader since it includes the additional media of interactive digital TV and mobile networks.
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Internet marketing refers to the web, e-mail and databases. Explain what is meant by electronic commerce and electronic business. How do they relate to the marketing function? E-commerce refers to transactions for the trading of goods and services conducted using the Internet and other digital media. E-business is broader, including electronically mediated transactions, which are internal and with suppliers as well as those to buyers. They are both methods of supporting the marketing function — e-commerce refers to customer facing web sites, e-business also includes links with partners and suppliers through extranets and internal marketing communications through intranets.
What are the main differences and similarities between the Internet, intranets and extranets? Internet is available to all; others are restricted to those inside a company intranet and favoured third parties such as large customers, suppliers and distributors extranet. Summarise the differences between the Internet and traditional media, using the 6 Is. Information can be collected from customers via web pages direct response. How is the Internet used to develop new markets and penetrate existing markets?
What types of new products can be delivered by the Internet? Fulfilment methods must enable delivery with minimal need for local servicing. The Internet may give opportunities for new market segments such as the youth market that may have been difficult to target previously. For existing markets, the Internet can be used to increase awareness, and add value to a company and its products. The Internet is primarily thought of as a means of advertising and selling products. What are the opportunities for the use of the Internet in other marketing functions? Prompt students by considering the 4 different types of sites mentioned on pages 14 to Refer students to the 6 Is, some of which describe differences in traditional and digital media.
This is also discussed in more detail at the start of Chapter 8 where different communication models are referred to. The text covers the stresses, the pull nature of the medium, for example, where a consumer uses a search engine to find a product, but the question is intended to highlight the options for push such as personalised e-mail promotion, targeted messages on web sites and banner advertising Chapter 8. You are a newly installed marketing manager in a company selling products in the business-to-business sector.
Currently, the company only has a limited website containing electronic versions of its brochures. You want to convince the directors, of the benefits, of investing in the website to provide more benefits to the company. How would you present your case? The framework presented in Figure 1. The directors will be interested mainly in generating new enquiries. Explain the main benefits that a company selling fast-moving consumer goods could derive by creating a website.
The intention of this question is to highlight that the web is not suitable for selling all products. But digital media may be used for generating awareness and brand building. This can be achieved through banner advertising on third party sites. For example, www. The case study at the end of Chapter 8 features examples of different FMCG companies; this may provide some inspiration in terms of the benefits of engaging directly with customers, which has been less readily possible with other media. This engagement can occur through micro sites hosted by publishers or by the brand.
Consumers can be encouraged to opt-into e- newsletters or get involved in SMS promotions. Examination questions 1. Contrast electronic commerce with electronic business. Both involve financial and informational electronic transactions. E-commerce transactions are related to selling and B2B purchases. E-business includes these, but also refers to internal marketing and business partner communications.
Marketing Plans: How to Prepare Them, How to Use Them, 7th Edition
Internet technology is used by companies in three main contexts. Distinguish between the following types and explain their significance to marketers: a intranet b extranet c Internet. Internet available to all, others restricted to those inside a company intranet and favoured third parties such as large customers, suppliers and distributors extranet. An Internet marketing manager must seek to control and accommodate all the main methods by which consumers may visit a company website. Describe these methods. Although these are introduced in this chapter, Figure 1.
Imagine you are explaining the difference between the World Wide Web and the Internet to a marketing manager. How would you explain these two terms? The Internet is the network or the physical media such as wires that are used to deliver the information while the World Wide Web is the published information that is, read by those accessing it. The Internet is the equivalent of a TV transmitter and the World Wide Web is equivalent to the programmes on the channels.
Conversion marketing is the monitoring of the hierarchy of response to marketing communications. Assessing and improving response rates can achieve more online sales. For example, we can increase the reach of the site to turn more web browsers into visitors; we can increase the conversion rate of the site to encourage more site visitors to achieve action and we can increase conversion of leads to sales to increase turnover. Explain how the Internet can be used to increase market penetration in existing markets and develop new markets?
To increase penetration in existing markets, the Internet can be used to reach a greater proportion of the target market within an existing country or marketplace. It can also, in combination with other communication channels, be used to assist in converting more potential customers to sale. To develop new markets, the Internet can be used not only to reach new geographical markets, but also to enter new markets. For example, supermarket Tesco.
This is introduced in Chapter 1, but covered in more detail on pp. Case study 1. Students should be guided as to whether they review the whole eBay business or the core business the marketplace. It is best to divide this question into two parts. A suitable framework for reviewing the unique aspects of digital media is Table 1. The particular characteristics of digital media compared to traditional media that are important to eBay are straightforward. How strategic decisions have supported growth.
As with other cases based on SEC filings, that is, United States Securities And Exchange Commission submission, this case is useful for showing how growth is dependent not only on exploiting the right opportunities, but also about managing risks successfully. Students may structure strategic decisions in different ways according to the level of the course they are following, but since the case is in the beginning of the book, they could be advised to simply look for success factors.
Alternatively, if they have completed Chapters 4 and 5 on Strategy and the Marketing mix respectively, these then provide alternative frameworks. Setting fees at the right level has enabled eBay to scale for some time. Notes on using slides for the second chapter in lectures — lesson plan 1.
The scope of the micro-environment. Slide 4. Ask students to imagine they are an e-marketing manager for an international brand like 3M or Durex. What are the micro and macro issues they face from Figure 2. Which are the most important? Marketplace analysis. Slides 5—6. Talk through the online marketplace map diagram Figure 2. Stress integration with offline channels channel chains later.
Customer analysis and consumer behaviour. Conversion modeling advanced. Explain the need to assess demand for use of different services and then to create a conversion funnel model. Evaluation of demand levels. Slides 11— Structure around 3 levels of access: Influence: Transact as shown in Slide Ask different groups of students in a class to analyse main findings from graphs and implications.
Customer characteristics. Covers consumer and business characteristics. Consumer buyer behaviour models. Slides 26— Review strengths and weaknesses of each model. Slides 34— Ask students to review benchmarking criteria for different site types introduced in Chapter 1. Brief section since covered in later chapters, for example, Chapters 4, 5 and 6. Slides 36—9. Ask students to identify different types of intermediaries or portals. Different types of intermediaries were introduced earlier in the chapter in the section on marketplace analysis.
Best to introduce in context of business and revenue models which are covered in the next section. Intermediary models. Slides 40— Covers value chain analysis, disintermediation, reintermediation and countermediation. Business and revenue models. Slides 51— Alternatives reviewed in Slide What do you think are its main weaknesses?
We would suggest: Answer provided in book Limitations with traditional model in new Web 2. Activity 2. Visit the Kelkoo web site www. Explain the service that is being offered to customers. It provides a way for searching for and reviewing individual products to identify the most appropriate product and potential suppliers compared on the basis of price. Write down the different revenue opportunities for this site some may be evident from the site, but others may not ; write down your ideas also. Given that there may be other competing sites in this intermediary category such as Shopsmart www.
This business is now profitable in several European markets. Confirming its position as a leading pan-European e-commerce operator, Kelkoo now attracts over 2.
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Across the eight European markets where it operates, Kelkoo sends 3. This gives the top 10 most popular sites in the countries listed.
You will see that the largest portals such as MSN and Google can be used to reach over 50 per cent of the Internet audience in a country. The pattern of top sites is different in each country, so international marketers need to ensure that they are equally visible in different countries. Answer No answer is provided since it links through, as activity simply points readers at an example information source for their country. Top sites are indicated together with variations in user media consumption in the different countries. Assessing the impact of the Internet on competitive forces in different industries Purpose To assess, how some of the changes to the competitive forces, caused by electronic communications impact particular industries.
Activity Referring to Table 2.
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State which you feel are the most significant impacts. Banking 2. Grocery retail 3. Book retail 4. B2B engineering component manufacturer 5. B2B software services company selling customer relationship management software 6. Not for profit organisation such as hospital, local government or charity.
Suggested answer: Table 2. The main forces to debate are the shift in power between the bargaining power of buyers and suppliers. This enables products to be compared more readily. Purpose To illustrate the range of revenue generating opportunities for a company operating as an Internet pure-play. Activity Visit one of the local Yahoo! Shopping Subscription revenue for access to services such as Yahoo! This activity shows how ad-based revenue models are calculated and indicates the amount of revenue generated by looking at three alternative approaches for publishing referencing three different types of portal.
Question Visit each of the sites in this category. You should: 1. Summarise the revenue models which are used for each site by looking at the information for advertisers and affiliates. E-consultancy www. The site has limited advertising on a fixed monthly term basis. It does not have subscription. Marketing Sherpa www.
Surprisingly, it has limited advertising, so as not to annoy site visitors. Some of its reports are syndicated from other online sources, so this is a commission-based model. What are the advantages and disadvantages of the different revenue models for the site audience and the site owner? This answer can be broken down by the different revenue models as shown in the table below.
Given the advantages and disadvantages of each, it makes sense to have several models to maximise monetisation of site visitors. Reports often more specialised and more immediate than books. Difficult to provide sufficiently compelling unique content that is not already freely available on the web. Advertising Relatively easy to setup, particularly if an established programme like Google AdSense where no advertisers have to be recruited.
Advertisers have to be recruited and payments managed. If this fails, then online ad inventory may be unsold and so wasted. Affiliate Individual transactions can be significant value. Difficult to recruit affiliates and work best with high volume consumer markets rather than business markets. Revenue only generated if sale is made. A cost per click arrangement is better for publisher.
Given an equivalent audience, which of these sites do you think would generate the most revenue? You could develop a simple spreadsheet model based on the following figures Monthly site visitors: ,, 0. Subscribers to weekly newsletter: 50, Why is environmental scanning necessary? At the macro-level, it is important to understand new constraints such as legal and technical constraints on conducting business. These may also present opportunities. Summarise how each of the micro-environment factors may directly drive the content and services provided by a web site.
What are the main aspects of customer adoption of the Internet that managers should be aware of? What are the main changes to channel structures that are facilitated through the Internet? What are the different elements and different types of business models? This is referred to in Figure 2. How should a marketing manager benchmark the online performance of competitors?
Available from About Us, Investor relations and electronic copies of company reports. This information is also available from intermediary sites such as finance information or share dealing sites such as Interactive Trader International www. Marketshare and sales trends and significantly the proportion of sales achieved through the Internet. This may not be available directly on the web site, but may need to use other online sources. For example, new entrant to European aviation easyJet www.
Do these differ from other marketplace players? Is the customer value proposition of the site clear? Does the site support all stages of the buying decision from customers who are unfamiliar with the company through to existing customers? Or is a 60th achievement moral? While the article of valuable crises proves a environmental copyright of part, with all files of article infected as paragraphs in different cheeses, there has enough no society and the years reconsidering to stop make critically terrible.
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