Chapter–by–chapter aids: : Chapter 3
Instructor’s Manual to Accompany Essentials of Marketing IV-3-5
short–term but softer in the long term. Makers of other products may want to have a longer–
term plan to evolve their product lines as this group ages. This group is made up of many
connect with friends via social networking tools, and they actively avoid advertising. Their
digital lifestyles will have an important influence on marketing.
citizens include: financial services firms (mutual fund companies, banks, brokerage houses)
who are offering a variety of retirement planning products; companies in the health care
business (including insurance companies, hospitals, HMO, life–time care facilities);
they once were. Example of firms that are appealing to teens include: transportation
companies (automobiles); entertainment companies (movies, music CDs, TV programming);
food companies (snack foods, candy, fast food); educational services (colleges, music lessons,
3-17. See section “Using Screening Criteria to Narrow Down to Strategies.” ” A set of product–market
screening criteria should include both quantitative and qualitative components. The quantitative
components state explicitly the objectives of the firm, while the qualitative criteria describe the
building upon current strengths rather that starting anew, and going with trends rather than
bucking them.
uses a nine–box matrix and tries to work with many more variables. The thing that makes this
practical is that many of the variables are interrelated – and using many of them helps to
deepen understanding. The authors’ feeling is that the GE matrix is more useful for
summarizing a firm’s position in a particular product–market than for deciding future strategies.
This requires a deeper understanding of the relevant product–market and what the future holds
for that product–market.
DISCUSSION OF COMPUTER-AIDED PROBLEM 3: COMPETITOR ANALYSIS
In this problem, a marketing manager is evaluating a new opportunity. He wants to see who will have the
competitive advantage. The student analyzes the competition, competitive advantage, marketing
strengths, pricing, and how changes in technology may result in new opportunities. The problem links
directly to many of the ideas discussed in Chapter 3 of the text. This spreadsheet could also be used in
the chapter dealing with personal selling – since much of Mediquip’s advantage here is based on its sales
force strength.
This problem deepens student understanding of how a company’s strengths – and weaknesses – can
influence its competitive advantage, its evaluation of market opportunities, and its strategy planning. The
case highlights that advantages may come from different sources – not just from “economies of scale” in
production. Another aspect of this problem is that it highlights the importance of thinking about
competition. A marketing manager can’t plan strategies in a vacuum. An opportunity might look quite
attractive if the manager thinks that he has his own “little monopoly” – but profits from that opportunity
may be directly affected by what current or potential competitors decide to do. This is especially hard
because it is often difficult to predict how a competitor will react.
The initial spreadsheet for the problem is presented below:
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Part IV
P L U S – Spreadsheet
Mediquip
Laser Tech
Total Units All Hospitals Likely to Buy
200
*
200
Each Supplier’s Share (percent) of Total
50.00
*
50.00
*
Each Supplier’s Likely Unit Sales
100
100
“Front–end” Design Costs
28000.00
*
19000.00
*
Cost of Producing One Unit
7000.00
*
5875.00
*
Total Cost of Producing Units to be Sold
700000.00
587500.00
Cost per Sales Rep
25000.00
*
25000.00
*
Number of Additional Sales Reps Needed
5
*
14
*
Total Added Personal Selling Cost
125000.00
350000.00
Total Design, Producing & Selling Costs
853000.00
956500.00
Average Total Cost per Machine
8530.00
9565.00
Desired Profit Contribution per Machine
1000.00
*
1000.00
*
Price that would cover Costs and Profit
9530.00
10565.00
Total Profit Contribution
100000.00
100000.00
Answers to Computer–Aided Problem 3:
a. It appears that Mediquip does have a competitive advantage. Assuming that Mediquip can capture a
50 percent share of the market (that is, it could sell 100 units), Mediquip would be able to make a
target profit of $1,000 and charge only $9,530.00 per unit. This could give the firm a significant price
advantage over Laser Tech in this price–sensitive market. If Laser Tech sells the other 100 units, its
price would need to be $10,565.00 to make $1,000 per unit. In net, it appears that Mediquip‘s
marketing strength would give it cost advantages and more generally a competitive advantage. That
is in spite of the likelihood that Laser Tech would have a significant cost advantage in actually
producing the units. This initial spreadsheet (given above) can be used effectively to highlight the fact
that different companies may have different strengths and weaknesses. Looking at only one element
of a company’s resources might provide a misleading picture.
b. This analysis shows the student that a firm’s assumptions can make a big difference in how attractive
an opportunity is. The two spreadsheets below summarize the different market share situations
discussed in the question. In this case, Mediquip appears to have a price advantage over Laser Tech
even at a lower sales volume. The implication is that Mediquip should be able to compete effectively
– perhaps even able to keep Laser Tech out of the market – by offering a price that earns a good
profit for Mediquip, yet is not be profitable for Laser Tech. The costs for the two firms in the two
Chapter–by–chapter aids: : Chapter 3
c. The spreadsheet for this particular analysis (below) reveals that in this situation customers get a
better product at a lower price—Mediquip’s costs are lower, and it also makes more money.
Everybody wins! ! Being able to identify attractive new market opportunities where a firm can
successfully meet customers‘ needs helps both the firm and customers. It can also give the firm a
“pioneer’s advantage”; by being first in the market it can do such a good job that it is hard for other
competitors to catch up. Of course, markets are dynamic – so a firm can’t rest on its successes.
Part IV
This case can be used primarily to demonstrate the challenges of marketing in a developing country. The
depth of discussion is likely to be relatively shallow, given that students have only limited knowledge of
marketing strategy (at this point). However, this does not stop students from being fascinated by the
opportunity and suggesting ideas. Exhibit 3-4 shows demographic data on many different countries,
including some very poor countries with high rates of illiteracy like Nepal, the proposed target market for
this product. Comparing some of the key indicators in this table starkly illustrates some of the challenges
This case can be used to provide a good vehicle for discussion of competitor analysis and how a
S.W.O.T. analysis can be helpful in evaluating potential opportunities or planning new strategies.
Differences between physical goods and services are not explicitly discussed until Chapter 8. However,
this case also provides a way to preview some of that thinking and show how it relates to the choice of
screening criteria. For example, the demand for the firm’s services is at present highly seasonal, so one
criterion in evaluating alternatives is that new strategies (marketing mixes, target markets, or both) should
Chapter–by–chapter aids: : Chapter 3
Video Case 4: Potbelly Sandwich
This video summarizes the marketing strategy of Potbelly Sandwich Works, Inc. along the 4Ps and
features interview footage with Bryant Keil, Chairman and CEO of the company. Chicago–based Potbelly
Video Case 5: Suburban Regional Shopping Malls
This video focuses on the current problems of suburban regional and superregional shopping centers.
Southdale Center located in suburban Minneapolis is considered to be the prototype for most of the
CHAPTER 3 – COMMENTS ON USE OF ETHICS QUESTION WITH THIS CHAPTER
Situation: You are a salesperson for a company that manufactures industrial lighting used in factories.
During a recent sales call, an engineer at your customer firm comments about a new lighting product that
his company is testing for a competing supplier. Your company was not aware of the competitor’s new
product—which you think may make one of your product lines obsolete. Should you pass this competitive
intelligence to your sales manager? Should you question the engineer or others at the customer firm to
learn more? If you gather more information, should you share that with your company?
This scenario describes a general situation that occurs quite frequently. Salespeople often obtain
information about competitors’ new products before they actually hit the market. Many companies
encourage salespeople to report back on competitive activities they observe in the field. The AMA’s
Statement of Ethics (Exhibit 1–7) suggests that marketers should not encourage others to engage in
unethical behavior. Therefore, a salesperson’s actions may depend upon whether the customer was
asked by the competitor to not disclose information about its new product line. The case has variations
more interesting discussion.
CHAPTER 3 – COMMENTS ON USE OF CREATING MARKETING PLANS
Part IV
Appendix B of the Hillside Veterinary Clinic marketing plan provides a competitor matrix – it includes a
comparison of four major competitors with HVC. The different dimensions examined include: 1) target
market (nature of practice is a rough approximation), 2) pricing for key services, 3) types of services
offered, 4) location, and 5) hours of operation. There is also an attempt to infer positioning, primarily
through a subjective assessment of a clinic’s website or Yellow Pages ad. The analysis could have done
a better job trying to determine the nature of the target market and a more in–depth comparison of
The marketing plan notes that competitor information was gathered primarily by looking at the Yellow
Pages and by making phone calls to competitors. Competitive information might also be gathered from: 1)
websites (although, as shown in the competitor matrix, only two of the chosen competitors have websites
and these sites have relatively few pages), 2) brochures and prices lists collected from competitors, and
3) surveys or interviews with customers who use other vet clinics.
Chapter–by–chapter aids: : Chapter 3
Chapter–by–chapter aids: Chapter 3