Core Business Fundamentals: Supply Chain, Market Segmentation, Product Lifecycle

Understanding the Supply Function

The supply function involves comparing the materials required for a company's operations and managing their storage, initiating every production or marketing process. It encompasses three key aspects: purchasing, storage, and inventory management.

Key Aspects of Supply

• Purchasing: The responsibility for making purchases lies with the production or sales department, considering factors such as price, quality, delivery time, payment terms, and service.
• Storage: This role involves having warehouses to store purchased products until needed by the production department. An organized space is essential to keep purchased or manufactured products.
• Inventory Management: Developing an inventory management system is crucial for determining optimal stock levels.

The procurement function operates within a specific timeframe, known as the supply cycle. This cycle represents the period between the completion of a purchase and the delivery of products to customers.

Supply Cycles Explained

• Production Company Cycle: Buy → Stock → Production → Inventory → Sales
• Business Cycle: Stock → Purchase → Sales

Market Segmentation Strategies

Market segmentation is the process of dividing a broad consumer or business market into sub-groups of consumers (known as segments) based on some type of shared characteristics.

Types of Market Segmentation

• Sex Segmentation: Divides the market into two roughly equal groups. Some products have different characteristics based on the consumer's sex.
• Age Segmentation: Presentation and advertising slogans often vary based on consumers' age.
• Income Level Segmentation: Products are targeted at consumers within a specific income bracket.
• Family Type Segmentation: Distinguishes between families with no children, one or two children, or large families.
• Education Level Segmentation: Differentiates consumers based on their education level, such as primary school or college education.
• Residence Segmentation: Differentiates by geographic location. Customers can be classified as local, national, European, or worldwide.
• Product Loyalty Segmentation: Customers can be impulsive or rational. Impulsive buyers make quick purchases, while rational buyers make thoughtful decisions.
• Residence Type Segmentation: Classifies customers based on their dwelling type, such as a small apartment, a large house, or a townhouse.

Product Life Cycle Stages

Products undergo a life cycle, a period of varying length during which they are introduced, grow, mature, and eventually decline. Understanding these stages is crucial for strategic planning.

Stages of a Product's Life Cycle

• Introduction or Launch Stage: This stage involves bringing a new product to market. It could be an entirely new product or a significant innovation.
• Growth Stage: The product gains recognition and experiences strong sales growth.
• Maturity Stage: Sales growth begins to stabilize. Advertising efforts often focus on attracting new customers.
• Decline or Saturation Stage: Sales drop significantly. Efforts are made to minimize negative impact on customers or the company.