Business Management, Marketing + BMTs

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BCG Martix

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1

BCG Martix

Is a tool that uses market share and market growth to assess new and existing products in terms of market potential

Shows how a diverse portfolio is important for a business

But it assumes that higher profits come from higher market share or higher sales + it doesn't explain the reasons for the position of products in the grid

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BCG Matrix: Dogs

low growth market

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BCG Matrix: Question Marks

Low Market Share In a High Growth

Can be a concern to management - suggests inferior product quality or inferior marketing

Dont generate cash for the business and are the main users of cash in a business

Businesses should try and increase market share

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BCG Matrix: Stars

High market share High market growth

generate profits for the business businesses focus of development and promotion of this product

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BCG Matrix: Cash Cows

High market share Low growth

Since the markets are well established there is low growth Best profit and net cash flow

However there is a risk of cash cow becoming a dog - so extension strategies are used

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SWOT analysis + and what it can be used for + disadv of using SWOT

Tool that is used to assess internal strengths and weaknesses and external opportunities and threats of a business

Can be used for - risk assessment

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SWOT analysis: strengths

Internal factors that are favourable compared with competitors - help achieve organisational objectives - need to be developed and protected

USP

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SWOT Analysis: Weaknesses

Internal factors that are unfavourable when compared with competitors prevent businesses from achieving goals need to be reduced or removed

Poor cash flow

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SWOT Analysis: Opportunities

External possibilities for future development - create favourable conditions

Can help businesses formulate a strategy

Econ growth

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SWOT Analysis: Threats

External factors that hinder growth for an organisation - cause probs for business

Pandemics

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11

Ansoff Matrix

An analytical tool to devise various product and market growth strategies

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Ansoff Matrix: Market Penetration - adv and disadv

existing product

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Ansoff Matrix: Product Development

new products in existing markets - done in saturation or decline stage of PLC Medium risk

Can be done by- product extension strategies - reliant on brand development - if brand is well established then risk of a new product in that market is lower

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Ansoff Matrix: Market Development - adv and disadv

existing product

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Ansoff Matrix: Diversification - adv and disadv + 2 categories

new product

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STEEPLE analysis - adv and disadv

social

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Market size

Total sales of all organisation in an industry as a whole

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Market Share

a company's sales as a percentage of total sales for that industry

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Market Growth

The percentage change in the total size of a market - change in market size/old market size X 100

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Market orientation + Adv and disadv

Relies on market research - tries to give people what they want by identifying wants and needs

OUTWARD LOOKING

adv- can quickly respond to market change lower risk - they know product wont fully fail disadv- expensive and time consuming

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Product Orientation + adv and disadv

Relies on innovation - tries to produce something so innovative that people will want to purchase it

INWARD LOOKING

adv- If product is successful there is no competition disadv- expensive and time consuming - R&D costs

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How to choose between product and market orientation

three factors

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  1. nature of the product

  2. barriers to entry

  3. organisational culture

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Primary research advantages

  1. up to date

  2. exactly whats needed by the business

  3. confidential - gives competitive adv

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Primary research disadvantages

  1. costly

  2. time consuming

  3. requires more training and experience to design study and collect data

  4. Subject to bias

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Primary research methods

  1. Observation

  2. Interviews

  3. Surveys

  4. Focus group - small discussion group to test the product

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Secondary Research Advantages

  1. Lesser time needed

  2. Cheaper

  3. Can provide insight to market patterns or trends

  4. Easily accessible

  5. Statistically valid - large sample size

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Secondary research disadvantages

  1. info may be outdated

  2. may not relevant to the specific needs of the business

  3. only partial info

  4. info already available to competitors

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Secondary research methods

  1. Market analysis - market research firms

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What is market research

Market research is the process of gathering and analysing information about the market - find needs and wants of customer - to make a marketing strategy

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2 types of market research

  1. Ad hoc - takes place only when necessary

  2. Systematic - continuous - takes place at regular time intervals

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Purpose of market research

  1. Reduces risk

  2. Provides up to date information

  3. Helps build and improve market strategy

  4. Helps predict the future

  5. Gives business an understanding of what competitors are doing

  6. Assesses customer reactions - so gets to know their wants and needs

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What is market planning

The process of setting obj and determining strategies to achieve them

includes - 4Ps

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what is in a market plan

  1. strengths and weaknesses

  2. methods of market research

  3. outline of the marketing mix

  4. marketing budget

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Advantages of market planning

  1. Reduces risks and improves the chances of success - can help managers identify and deal with problems

  2. Motivates - because there are targets|

  3. managers have better control

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Disadvantages of market planning

  1. time consuming and costly

  2. Doesnt guarantee any success

  3. Can also demotivate employees - over formalising communication

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What is segmentation

the process of dividing potential customer groups into groups with similar characteristics

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Why businesses segment markets

better understanding of customers - lower risk - less waste high sales rev- diverse range of customers growth opp - can identiy new dempographics

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Types of segmentation

  1. Demographic - age

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What is positioning

process of presenting a brand in a certain way to create the desired customer perception

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Product positioning map

Premium - high price and high qual Cowboy - high price and low qual Bargain - low price and high qual Economy - low price and low qual

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USP + adv + disadv

A special feature that helps the product stand out amongst its competitors adv-

  1. attracts sales - helps customers understand why they should buy the product and how its diff

  2. Can help build brand image

disadv-

  1. doesn't guarantee sales

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Define differentiation

differentiation is the act of distinguishing a business or its products from competitors in the market. Product differentiation tries to create the perception among customers that the organization's goods and services are different (unique

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Advantages of niche marketing

1.Less competition 2. Which allows them to charge higher price in comparison to cost- so high profits margin 3. Higher customer loyalty - since product/service is highly specialised 4. Specific segment is targeted - so easy to choose strategies

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Disadvantages of niche marketing

  1. Limits the number of customers

  2. No economies of scale

  3. Attracts more competition

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Advantages of mass marketing

  1. economics of scale 2.Simplified marketing plan - no need to modify for each segment - saves time and money

  2. larger customer base

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Disadvantages of mass marketing

  1. High barriers to entry for new businesses

  2. High competition

  3. Mass marketing can be wasteful cause specific segments arent targeted

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first-mover advantage

Occurs when an organisation can significantly impact its market share by being first to market with a competitive advantage

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first mover disadvantage

the first mover makes major investments

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What is a product - and what are the 2 types of products

A product is a good or service that satisfies the needs and wants of customers

2 types - consumer and producer products

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product life cycle

R&D

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PLC: Research and Development

R&D department develops ideas for the product - marketing team does market research

There are no sales

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PLC: Introduction

Introduced into the market

High amount of promotion - persuasive and informative ads used

Different pricing methods used to give a competitive advantage

Slowly increasing sales

QUESTION MARK

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PLC: Growth

Maximum increase in sales High competition - so prices may be lower Product breaks even and profits are made want to maximise market share

STAR

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PLC: Maturity

Slowdown in sales growth Lot of ads to remind customers about the product High market share Profits are highest CASH COW

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PLC: Saturation

Stable profits No new competition Competitive pricing sales begin to decrease a little - so profits also begin to fall CASH COW

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PLC: Decline

sales fall off profits drop businesses start to cut cost - make workers redundant sell equipment No promotion and ads Extension strategies used to elongate PLC - if this doesnt work the product is withdrawn from the market

businesses start to add new products to generate profits

DOG

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Product portfolio

all the products a company has available for customers at any one time

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Extension strategies

Methods used to prolong the PLC and delaying the decline of a product

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8 extension strategies

  1. reducing prices - increases demand + gets rid of excess stock before they become obsolete

  2. ads - promotion to remind customers and attract new customers

  3. Redesigning - adding value - new features

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PLC: Investment for all 5 stages

R&D - very high - research Intro - very high - marketing Growth - high - promotion to persuade Maturity - low - promotion to remind customers Decline - very low/zero - extension strategy

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PLC: Profit for all 5 stages

R&D - no profits Intro - very little Growth - rising profits - break even Maturity - high - but lower growth Decline - yes - but falling

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PLC: Cash flow for all 5 stages

R&D - highly negative Intro - negative Growth - positive - break even Maturity - highly positive Decline - positive - but falling

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Trademark

Legal protection to the owner to have exclusive use of the brand name

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Brand awareness + its adv

The extent to which people recognise a particular brand (usually as a percentage) - very imp in the launch stage

  1. Higher sales revenue

  2. Competitive edge - so greater market share

  3. Encourages repeat purchases

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Brand Development + adv and disadv

the ongoing and long-term marketing process of improving and enlarging the brand name in order to boost sales revenue and market share.

adv-

  1. helps the brand stand out - differentiates

  2. higher sales rev and market share 3 extends the life cycle for a product

disadv-

  1. takes a lot of time

  2. costly

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brand loyalty + its adv

customers buy the same brand of a product repeatedly over time

adv-

  1. improves/maintains market share

  2. Enables them to charge premium prices - so higher profit margins (brand value)

  3. acts as a barrier to entry

  4. prolongs the decline in the PLC - people keep coming back to the product and that brand

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Brand value + its adv

Is the premium that customers are willing to pay over and above the price of the product itself

adv-

  1. higher market share

  2. high barriers to entry

  3. Can charge premium prices - so high profit margins

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Importance of branding

  1. Create a legal identity - by giving a unique name and image - helps differentiate from other brands -- protects it from imitations

  2. Risk reducer - new products have a better chance of survival when released by a big brand

  3. Image enhancer - which allows them to charge a premium price - higher profit margins

  4. Revenue earner - firstly - brand loyalty means customers will come back - secondly - this makes demand more inelastic because they will not buy from other substitutes

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Cost-plus pricing + adv and disadv

Adding a predetermined percentage to the cost per unit to determine the selling price - the percentage is known as mark up

adv

  • simple to use - easy to calculate

  • less time taken

disadv

  • can lose sales if price if too high - compared with competitors

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Penetration pricing + adv and disadv

Setting a price lower than competitors to enter a new market

adv Higher sales - attracts customers Can increase market share quickly can become established in the market

disadv Loss of revenue - due to lower prices Cant recover the R&D costs (since this is usually used in new products)

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Loss leader pricing + adv and disadv

Setting a price below cost value used when business is entering or penetrating market

adv

  • can attract customers - even if they aren't going to buy the discounted product

  • establish a customer base

  • can sell off unwanted stock - if its in decline stage of PLC

  • short term sales increase + market share increases

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Predatory pricing + adv and disadv

Temporarily reducing price to force competitors out of the industry usually happens during a price war

adv

  • eliminates the competition

  • more dominant position in the market - higher market share

  • so can raise their prices to recover losses

disadv

  • unethical - even illegal in some countries

  • losses - because they are selling below cost

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Premium pricing + adv and disadv

When price of a commodity is set higher than competing products in very unique or luxury products usually

adv

  • higher profit margins - can recover from R&D costs

  • can establish a loyal customer base - so creates high barriers to entry

  • increases brand value and brand image

disadv

  • high profits will attract cheaper competitor products

  • limits the customer base

  • lose the mass market - have to operate in niche market

  • requires brand loyalty - expensive and takes time to build

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Promotion

methods of communicating marketing messages to existing and potential customers

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5 purposes of promotion

Attract Develop - brand image Persuade Inform Remind

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Above the line promotion + adv and disadv

any form of paid for promotion method through independent mass media sources - to promote

adv - large number of customers + customers take notice of ATL promotion

disadv- expensive + might not even target the right audience

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6 Types of ATL promotion + 1 adv disadv each

  1. TV - reaches global audience but high costs

  2. Radio - cheaper than tv and large audience but no visual impact only audio

  3. Cinemas - audience can be directly targeted but limited audience size

  4. Newspaper - reaches a wide audience + can be referred to later (but usually isnt) but high costs (especially for small businesses)

  5. Magazines - specific target market - but there is advertisement clutter (too many so ppl start ignoring them)

  6. Outdoor (billboards etc) - large audience + high rate of exposure but cant target specific market + cant monitor success

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below the line promotion

Any promotion that does not involve using the mass media business has direct control

Adv no commision targets specific markets cheaper

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10 types of BTL + adv and disadv each

  1. Direct marketing (telephone calls or direct mail) - no intermediaries so all sales earned are kept + business has full control - but - cost of production is there

  2. Personal selling- tailored to the needs of customer so builds customer engagement - but - sales agents are expensive

  3. Sales promotion (short term promotional tactics like deals) - boost sales + steals customers from other brands - but - higher cost so lower profit margin

  4. Point of sales promotion - encourages impulse buying

  5. Publicity and PR- positive media coverage for free - but- longterm and continuous process

  6. Trade shows- the event attracts large audiences -but- there is a lot of competition and there is a cost to join

  7. Sponsorship - publicity - but expensive

  8. Word of mouth - most effective + no cost - however - can also create a bad reputation so not that reliable

  9. guerrilla (washroom or elevator) - inexpensive and good results - but takes creativity and time

  10. Packaging - encourages impulse buying + brand image + protects product -but- expensive + not sustainable (usually)

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TTL + adv and disadv

Through the line - combination of ATL and BTL

adv

  1. Wide reach

  2. Customer engagement

  3. creates brand visibility - recognition

  4. creates brand recall - reminds customers of the brand

disadv

  1. more expensive than ATL or BTL

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Social Media Marketing (SMM) + adv and disadv

gaining online traffic though social media

adv

  1. fastest method - faster than WOM also

  2. most potential reach

  3. helps build trust in brand

  4. cost effective

disadv

  1. no control over whats written - negative publicity

  2. hackers can spread false info

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