PBM Session 1- Intro, Scope, Role, Competition

8/11/2019 PBM Session 1- Intro, Scope, Role, Competition

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Michael Baker and Susan Hart, Product Strategy and Management, 2ndEdition, Pearson Education Limited 2007

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Slide 1.1

Product & BrandManagement


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Slide 1.2

Stephen Chau

Senior Product Manager, Google

The Essence of Product Management


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Slide 1.3

Role of PBM in Your Career

Comes into play about 3-4 years after you join an

organization

Besides academic theory, the first 3-4 years will build your

base in the field


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Slide 1.4

Careers


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Slide 1.5

Course Objectives

The course is designed to help students:

Understand the role of the product and the various stages of a product

life cycle

Apply the understanding of product management concepts to business

decisions

Understand the concepts of brand, brand equity and the different

approaches to measuring brand equity

Understand the concepts of brand identity, brand image and brand

positioning and the complexity of issues involved in launching andsustaining new brands.

To apply their understanding of the movement from product to brand

through adoption of various brand architectures.


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Slide 1.6

Session 1

Competition and product

strategy


7/33Michael Baker and Susan Hart, Product Strategy and Management, 2ndEdition, Pearson Education Limited 2007

Slide 1.7

Level of course

Foundation

Core

Foundation

Skill

Professional

Core

Professional

Skill

Premier Skill

Foundat ion Core [generally core courses of first year, which focus on

basic knowledge/understanding required]

Foundat ion Ski ll [skill-oriented core courses, such as financial

accounting]

Professional Core [core elective, less skill-dominant, such as mergersand acquisitions in finance]

Professional Ski l l [skill-dominant electives, e.g. six sigma]

Premier Skil l [skill-dominant elective which the Area perceives as a

differentiator of FIIB offerings, such as social media marketing].)



Slide 1.8

Course Learning Outcomes

Students, who successfully complete this course, should be able to:

L1. Explain the nature of a product and the role of product in an

organizations marketing strategy

L2. Apply new product development concepts and theories to real lifesituations

L3. Understand how to evaluate market performance of a product and

create a product strategy with respect to the products life cycle stage

L4.Perform a comparative analysis of the various competing brands in any

product category by employing models of brand equity, brand identity and

brand positioning.

L5: Apply frameworks to analyse launches and rejuvenation of brands and

brand architecture adopted by a market player.



Slide 1.9

Todays Agenda

Session

No.

Session Topic Required

Readings1 Topic: Introduction to Product Management

Sub-topic description: Course coverage:Importanceof product management; Why product management system?

Role and scope of product management : functions , tasks and

challenges

MBSH Ch-1, pp 5-9, 12-

14; 19-24; 27-33


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Slide 1.10

What is competition?

It is the invisible hand of the market which seeks to

solve the basic problem of maximizing satisfaction from

the consumption of scarce resources.

Managing scarcity has been the biggest challenge since

the beginning of time.

Organizational innovation (task specialization/div oflabor), social innovation (markets and exchange) and

technological innovation (energy harnessing, creation of

tools)- helped us manage

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Slide 1.11

The Rediscovery of Marketing

The problem of supply exceeding demand showed up in the 1920s-1930s

depression

Outbreak of war solved the problem of unemployment and underutilized

manufacturing facilities.

Post WW1, pent-up demand helped keep major industrial economies

occupied till the 1950s.

Post 1950s: supply again started running ahead of demand.

Aggressive salesmen started foisting goods on unsuspecting customers.

This resulted in widespread criticism. Materialism / consumerism became

a bad word. At this point, Peter Drucker announced that Marketing is the

distinguishing, unique function of business.

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Slide 1.12

The history of human development is based on the

twin concepts of Task specialisation and exchange.

Task specialisation increasesproductivityand value addition,

but specialists must be able to exchange surpluses of

their output for other goods and services. The means of doing

this is through the establishment of marketsboth real and virtual.

Technological innovation, entrepreneurship, the division of

labourandprofessional managementincrease both the

volume and variety of goods and services available for exchange.

International trade, based on the Theory of comparative advantage,

leads toglobal competition and further increases in productivity.

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Slide 1.13

Success in business is success in a market.Firms go out of business not by closing factories

but by unprofitable marketing. Firms usually enter

a business by creating products (i.e. goods and

services) but stay in business only by creatingand retaining customers at a profit.

[OShaughnessy]

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Slide 1.14

The changing business environment

Accelerating technological change Globalisation

Mergers, acquisitions and strategic alliances

Demographics Deregulation and privatisation

Changes in business practicesdownsizing,

outsourcing, re-engineering etc.

Ethical and ecological concerns

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Slide 1.15

Adam Smith & Ricardo

The sole purpose of production is consumption

This led to the interest of the consumer becoming

dominant

Customer oriented/ market driven became buzzwords

Significant change in past 50 years : global competition

turned Ricardos comparative advantage idea on its head.

CA: Economic efficiency would be optimized when

nations produce what they have a natural advantage inover other producers and then engage in international

exchange for mutual benefit.

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Slide 1.16

Problems with Ricardos Idea

National pride and national security

Example: NAFTA (US, Canada and Mexico)

Porter: competitive advantage is createdby firms by discovering new ways of

innovating products and processes

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Definition of Industry and Markets

The challenge is to define properly the boundaries of an

industry or a market

For instance: pet foods market; aviation industry

This defining of the boundaries is essential in building asuccessful strategy

Ultimate aim of every strategist should be : to be the most

effective firm in the most efficient industry. Why?

Forces of competition work to move capital from the lessefficient to the more efficient firms and industries

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Slide 1.18

Differentiation

As a result of competition, differentiationbecomes the means of

competitive advantage and survival for most companies.

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Under modern conditions of competition it isbecoming increasingly risky not to innovate.

At the same time it is extremely expensive

and risky to innovate:

Most product ideas which go into development

never reach the market.

Many of the products which reach the market fail.

Successful products have shorter life cycles.

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It is accepted that, at the national level,

more than 90% of all economic growth

and progress is due to innovation.

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BUT.

Most new products fail!

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Three roads to competitive success:

Build a better product at the market price.

Build the same product at a lower price.

Create a monopoly through a customer franchise.

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All firms compete within the same macro-environment.

The nature of this environment is determined by

a wide variety of factors usually summarised as:

Political and legal

Economic

Social

Technological

Hence, PEST analysis

Environmental change

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Technological innovation is both an evolutionaryand a revolutionaryprocess.

Evolution is essentially a gradual and cyclical

process whereby more successful species displace

less successful onesthe survival of the fittest.

However, this cycle may bepunctuatedby dis-

continuitieswhich have a major impact on the process.

A consequence of this is that all phenomena have a

Life cycle.

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In business the survival of the fittest is determined

by the forces of competition.

These forces have been summarised by Porter(1979) as:

1. The threat of new entrants

2. The threat of substitution

3. The bargaining power of suppliers

4. The bargaining power of customers

5. Rivalry between current competitors

Analysis of these forces confirms that differentiationis the key to survival.

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Slide 1.27


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In competing with one another, firms have only a limited number of

strategic options available to them. These were identified by Ansoff

(1957) in a Growth Vector Matrix.

Diversification

Market

development

New product

development

Market

penetration

Existing NewProduct

Exisiting

New

Market

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Market

development

Product

development

Market

penetration

Present NewProduct

Present

New

Market

Studies have shown that the most successful companies pursued strategies

of market penetration, market development and new product development

simultaneously to maintain competitive advantage.

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In seeking to develop and maintain a sustainable competitive

advantage (SCA) firms compete through cost leadership or

differentiation.

Cost leadership is only possible for very large firms.

Differentiation is the preferred approach for the vast majority

and it is this that has resulted in the emphasis on innovation

and new product development as the favoured strategy.

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Why Do Companies Diversify?

Survival

Stability

Productive utilization of resources

Adaptation to changing customer needs

Growth

Any other?

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When the shouting is over, one factor is clear:

what differentiates perennially great companies

from the others is the product they sell.

Nayak and Deschamps state that the successfulcompanies realize that there is no such thing as a

commodity product. Everything can be

differentiated and therefore branded and

marketed differently.

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Five alternatives are open to the firm when

competing through products based on:

Product proliferation: GM vs Ford 1920s/1930sscattershotapproach compared to a rifle shot approach; Honda vs Yamaha; Sony

Value: high quality at low cost: ultimate strategy. Ford. Continuous

improvement (Toyota) vs radical restructuring (IKEA)

Design: competing through design excellence: Apple, Sony; it is not a

cosmetic add-on, it is something much more strategic

Innovation: B&D, Canon, 3M, Apple; Samsung; fast-followers vs true

innovators; incremental vs disruptive; top-down vs bottom-up Service: products backed by services is gaining importance

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Strategy Product Price Place

(Distribution)

Promotion

Undifferentiated

(cost leadership)

Standardized Low Intensive Mass

Differentiated Different foreach market

segment

What themarket will

bear

Extensive Targeted bysegment

Concentrated

(Focus/Niche)

Customized Premium Selective Direct

Marketing Mix Strategies

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Documents

PBM Session 1- Intro, Scope, Role, Competition