LO4: Week 7Analysing Performance• Competitors Analysis• A strategy for a company to identify major competitors in theindustry and research their products, sales, and marketingstrategies.• This allows the company to create solid business strategies toimprove upon the competitor’s.• A competitive analysis enable a company to learn the good and badof the competition• To identify what the competitors are doing right and opportunitieswhere the business can easily take advantage ofLO3 Week 6Competitors AnalysisHow to conduct a competitive analysis• Identify the competitors• Identify competitors products• Find out competitors sales tactics and results• Analyze the way competitors market their products• Note competitors content strategy• Analyze the level of competitors engagement on their content• Find out the way competitors promote marketing content• Observe competitors social media content• Conduct a SWOT analysis on the competitorsCompetitors Analysis• Identify the competitors (Direct and indirect competitors)• Identify competitors products (Product line and quality of product)• Find out competitors sales tactics and results (Sales process, channel• Analyze the way competitors market their products (Blogs, videos, e-books,podcasts)• Note competitors content strategy (Blog post, e-books, podcasts and theirfrequency)• Analyze the level of competitors engagement on their content (Contentresonation)• Find out the way competitors promote marketing content (Internet linking.Use of keyword)• Observe competitors social media content( Facebook and other platforms)• Conduct a SWOT analysis on the competitorsCustomer Profitability• To segment the customer base to find out the income and costs from eachsegment.• Once the profitable and non-profitable segments are identified, profitablesegments are maximized while non-profitable segments are reduced oreliminated• Steps of customer profitability• Customer segment (Demographic, psychographic)• Income from each segment• Find out the profitable and less-profitable customer segment• Strategies to generate income from profitable customers and reduce lessprofitable customers• Review impact of new strategies on performance of profitable customerAdvantages and Disadvantages of Customer Profitability AnalysisAdvantages• Improved profitability by removing non-profitable customers and maximisingsales or services to profitable customers.• An understanding of the true costs of each customer segment, includingtaking into account non-production costs when determining profitability.Disadvantages• Companies may not have the data capture systems to produce an accurateestimation of customer segmental revenues and costs• There may be practical difficulties in calculating costs attributable to eachsegmentNon- Financial Measures of Performance•Balance score card• balanced scorecard (BSC) is a strategic planning andmanagement system that organizations use to:•Communicate what they are trying to accomplish•Align the day-to-day work that everyone is doing with strategy•Prioritize projects, products, and services•Measure and monitor progress towards strategic target•To monitor a company / unit’s progress and performanceagainst its strategic goalsPerspective of Balance score cardBalance score card Perspective• In what way is the scorecard a balance?• The scorecard produces a balance between:• Four key business perspectives: financial, customer, internal processesand innovation.• How the organization sees itself and how others see it.• The short run and the long run• The situation at a moment in time and change over timeBalance score card PerspectiveMain merits of using the balanced scorecard• Helps companies focus on what has to be done in order to create a breakthroughperformance• Acts as an integrating device for a variety of corporate program• Makes strategy operational by translating it into performance measures andtargets• Helps break down corporate level measures so that local managers and employeescan see what they need to do well if they want to improve organizationaleffectiveness• Provides a comprehensive view that overturns the traditional idea of theorganization as a collection of isolated, independent functions and departmentsBalance score card PerspectiveSome demerits of the balanced scorecard model• A danger that a business will have too many performance indicators• Need to have balance between the four perspectives – not easy• Senior management may still be too concerned with financial performance• Needs to be updated regularly to be usefulBSC Model PerspectiveShareholders Value• Shareholder value is the value enjoyed by a shareholder by possessingshares of a company.• It is the value delivered by the company to the shareholder.• Increasing the shareholder value is of prime importance for themanagement of a company.• Management must have the interests of shareholders in mind while makingdecisions.• The higher the shareholder value, the better it is for the company andmanagement.Measuring Shareholders ValueEconomic Value Added• Economic value added is to measure the surplus value created by an investment ora portfolio of investments.• EVA has been considered as a better measure of divisional performance ascompared to the Return on Assets ROA or ROI• It is also being used to determine whether and investment positively contributes tothe shareholders wealth.• The economic value added of an investment is simply equal to the after taxoperating profits generated by the investment minus the cost of funds used tofinance the investment.Determination of EVA.• An investment can be accepted only if the surplus (EVA) is positive.• It is only the positive EVA that will add value and enhance the shareholders wealth..Pricing Decisions and Pricing StrategiesPricing Decisions• Pricing decisions are the choices businesses make when setting prices fortheir products or services.• Pricing is part of a company’s marketing strategy because it influences itsrelationship with customers:• When prices are fair and competitive, customers come back, increasing theprofitability of the business.Pricing StrategiesSimple pricing• This involves charging what competitors charge for similar goods and services.• This strategy is often used by retailers and wholesalers selling commodities.• Companies that make simple pricing decisions often try to increase sales bymaking small, competitive adjustments such as purchase discounts, volumediscounts and purchase allowances.Complex pricing• This is based on the originality of a product or service and what customers arewilling to pay for it.• This type of pricing is determined through negotiation with the customer and iscommon for custom furniture, artworks and consulting services.
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