1. Welcome to MKT 100-021Week 5 - Marketing ETHICS & SOCIAL RESPONSIBILITY Anthony Francescucci Assistant Professor, Marketing Please ensure all electronic devices are in “silent mode”, “vibrate mode” or “turned off” 1
6. Market Share 6 Calculate the Unit and Revenue Market Shares for the automakers: Unit Sales (#) 25,000 Unit Market Share (%) = X 100 Total Market Unit Sales (#) 50,000 Sales Revenue ($) $375,000,000 Revenue Market Share (%) = X 100 Total Market Revenue ($) $937,500,000 50% 40.0% 21.3% 20.0% 13.3% 5.3% 100% 20% 15% 10% 5% 100%
7. Relative Market Share 7 The market for small urban cars consists of five players: In the market for small urban cars, managers at A-One want to know their firm’s market position relative to its largest competitor on the basis of revenues and unit sales: Brand’s Market Share ($, #) 7,500 $187,500,000 Relative Market Share A-One (Units) Relative Market Share A-One (Revenue) Relative Market Share (I) = = 0.30 0.5 Largest Competitor’s Market Share ($,#) 25,000 $375,000,000
8. Four Firm Concentration Ratio = Sum (Market Share of top Four competitors) Four Firm Concentration Ratio (in Unit terms) 50% + 20% + 15% + 10% 95% Four Firm Concentration Ratio (in Revenue terms) 40% + 21.3% + 20%+13.3% 94.6% Market Concentration 8 = =
12. Remember Acme Coach Company Variable costs: $ 60 Raw materials and components + $240 Labour (6 labour hours @ $40/hour) $300 Total Variable Cost per Unit Monthly fixed operating costs: Yearly fixed operating costs: $600 Rent $100 Insurance ($1200 / 12 months) + $300 Salary $1000 Total Fixed Costs per Month $12, 000 FC / year One time capital costs: $1000 Crane + $2500 Tooling $3500 Total One Time Fixed Costs
13. Contribution Margin % Contrib Margin $ Revenue Contribution Margin % What is the Cm at acme 13 $150 $450 $300 Contribution Margin Revenue COGS or Variable Costs $150 * 100 = $15,000 $450 * 100 $45,000 300 X 100 $30,000 33.3 % 100%
14. What does a contribution of $15,000 mean for Acme? Variable costs: $ 60 Raw materials and components + $240 Labour (6 labour hours @ $40/hour) $300 Total Variable Cost per Unit Monthly fixed operating costs: Yearly fixed operating costs: $600 Rent $100 Insurance ($1200 / 12 months) + $300 Salary $1000 Total Fixed Costs per Month $12, 000 FC / year One time capital costs: $1000 Crane + $2500 Tooling $3500 Total One Time Fixed Costs
15. Contribution Margin % Contrib Margin $ Revenue Contribution Margin % Second Example: Bottled Water 15 $0.75 $1.00 $0.25 Contribution Margin Revenue COGS or Variable Costs $0.75 x 50K $37,500 $1 X 50K $50,000 .25 x 50K $12,500 75 % 100%
17. Some additional concepts These concepts are not covered in the online modules so I’ve added some additional readings on blackboard located at; Course Info & Materials/Lecture Materials/Week 5/ MKT100 – Week 5 – Additional readings.pdf 17
18. ANSOFF’s Matrix 18 Existing Products New Products Framework for developing intensive growth strategies Market Penetration Product Development Existing Markets Market Development Diversification New Markets
22. Consider this scenario A professor, who teaches a marketing course, saw one of his students photocopying the textbook for his course and then this same student sent an e-mail blast to everyone in the course that he had copies of the textbook for sale. Of course the professor was on the class email distribution list. A fellow student responded to the email and purchased the textbook for 1/3 of the price of the bookstore copy. 22
40. Case #1 Your supervisor enters your office and asks you for a check for $150.00 for expenses he tells you he incurred entertaining a client last night. He submits receipts from a restaurant and lounge. At lunch your supervisor’s girlfriend stops by to pick him up for lunch and you overhear her telling the receptionist what a great time she had at dinner and dancing with your supervisor the night before. Was the supervisor unethical? If you do nothing are you unethical? 40
41. Case #2 You have worked as a bank teller for several months when one of the other tellers who has become a good friend tells you that her daughter is extremely ill and that she must have an operation to survive. She also tells you that she has no insurance and the operation will cost $10,000. Sometime later you ask her about her daughter and she tells you she is just fine now. She then confides in you that she took $10,000.00 from a dormant account at the bank to pay for the operation. She assures you that she has already started paying it back and will continue to do so until it is all returned. Was the “other teller” unethical? If you do nothing are you unethical? 41
42. Case #3 Your newspaper has published a report on a national study, which concluded that bottled water has virtually no health advantages over the tap water in more cities, including yours. The study included comments from local health storeowners and water distributors challenging the study. The AquaPure Bottled Water Company, advertising account worth over $75,000. a year, has threatened to pull its account with your newspaper unless you run another story of equal prominence, focusing on the benefits of bottled water. Was AquaPure Company unethical? If your newspaper does nothing are they unethical? If your newspaper runs the second story with equal prominence are they unethical? 42
43. Case #4 You are interviewing to hire a CFO position. You have a complicated business that requires expertise that most candidates do not have. You finally decide on the best candidate. He does not have the exact experience you were hoping for, but he says he can figure it out. You offer him the job, and he accepts. He quits his job. Three days later you find the dream candidate and they also want work, they are far superior. You withdraw you offer to the first candidate and hire the dream candidate? Are you unethical? Is the dream candidate unethical, if he accepts the offer knowing the situation? 43
44. Case #5 You are a member of the TTC advertising review committee considering a $200K deal from Ashley Madison.com (a dating site which promotes having affairs) to wrap 10 streetcars with an ad saying “Life is Short. Have An Affair. www.ashleymadison.com”. The TTC is cash strapped, and $200K plus a 50¢ drop in fare for people who ride the streetcars. Do you accept the money and run the ads? Are you ethical? 44
50. Assignment # 1 Due Tuesday March 1st, 2011 by 11:59pm 50 Assignment must be posted to blackboard & Peer group evaluation completed See course outline for late penalties
51. Preliminary details Must work in groups of 4 to 5 people (you select your own groups) Use discussion board if you are searching for a group or need people to join your group. Topic is on the internet-based video streaming industry SWOT analysis and recommendation on whether Bell should enter this market? 51
53. Formatting Double-spaced Put your charts / tables in appendices Save the body of the report for text In body, make sure you refer to the appendices APA formatting for in-text citations and references list 53
Market Share: The percentage of a market accounted for by a specific entity. Market Share, supplemented by changes in sales revenue, helps managers evaluate both primary and selective demand in their market. That is, it enables them to judge not only total market growth or decline but also trends in customers’ selections amongst competitors. Unit Market Share: The units sold by a particular company as a percentage of total market sales, measured in the same units. Revenue Market Share: Revenue market share differs from unit market share in that it reflects the prices at which goods are sold. Relative Market Share: Indexes a firm’s or a brand’s market share against that of its leading competitor. It is used to assess a firm’s or a brand’s success and its position in the market. Three (Four) Firm Concentration Ratio: The total (sum) of the market shares held by the leading three (four) competitors in a market.Herfindahl Index: a market concentration metric derived by adding the squares of the individual market shares of all the players in the market. As a sum of squares, this index tends to rise in markets dominated by large players.The lower the Hefindahl Index , the higher the competitiveness of the market. According to the Antitrust Division of the U.S. Department of Justice a score of 0.18 or above indicates a concentrated market.
The higher the ratio, the greater the level of concentration Thus the market for small cars is slightly more concentrated in unit terms than in revenue terms.
The higher the index value, the greater the level of concentration As demonstrated by the Herfindahl Index the market for small urban cars is slightly more concentrated in unit terms than in revenue terms. The reason for this is straightforward,: Higher priced cars in this market sell fewer units.- NOTICE THAT USING EITHER METRIC, THE MARKET WOULD BE CONSIDERED CONCENTRATED BY THE ANTI-TRUST DIVISION OF THE US DEPT. OF JUSTICE
Contribution Margin can be expressed as either a % or $ amount. Contribution Margin (%) is defined as the contribution per unit divided by unit price. Contribution Margin (%) = Contribution per Unit ($) / Selling Price per Unit ($) where Contribution per Unit is defined as the unit price less unit variable cost. Contribution Margin ($) is defined as the difference between revenue and the cost of goods sold (or variable costs) Contribution Margin ($) = Revenue - COGS
Means that they will cover all of their recurring fixed costs, and almost all of the one time fixed investment.How might they pay off their entire investment in the first year?Increase the price of each bus to $455 or sell 4 more busses!
Categories – Types Of Customers:Innovators- Typically very well informed, in-the-know risk takers who will try a new product usually at a higher price. It’s about being cool – a trend setter. They love to tell people the new things they are doing. Critical to begin your product marketing them on board as leaders in your tribe. Pricing is not an issue with this group.Early Adopters – Based upon the “buzz” and recommendation from the Innovator – they accept early on take some risk, tend to be more educated. They are definitely opinion leaders respected for what they do and how they do things.Early Majority- Careful consumers – avoid risk – purchase after it has been proven by early adopters. Do seek out and rely on recommendations from early adopters who have proven the product.Late Majority- can be skeptical, pragmatic, acknowledge they require proof. Acquire after it has become commonplace.Laggards – Avoid change only adopt/purchase when there is no other alternative.
