marketing strategy development 20 feb 2011

8/7/2019 Marketing Strategy Development 20 Feb 2011

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MARKETING MANAGEMENT

UMI

MBA 2(WKD)

Marketing Strategy DevelopmentFebruary 20th

2011

By

Kennedy Ssejjemba


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Introduction

Quote

Competition is not between whatcompanies produce in their

factories/offices, but between what theyadd to their output in form of packaging,services, advertising, customer advice,

financing, delivery arrangements,warehousing, and other things that people

value.Theodore Levitt, The marketing Mode


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The Process of Formulating and

Implementing Marketing Strategy

External

Environment

Corporate Objectives and Strategy

Business-Level Objectives & Strategy

Market Opportunity AnalysisEnvironmental and Competitor AnalysisMarketing informationIndustry dynamicsCustomer analysis, segmentation & targeting decisionsPositioning decisions

Formulating strategies for specific market situationsStrategies for new market entriesStrategies for growth marketsStrategies for mature and declining markets

Implementation & Control

Implementing business & marketing strategiesControlling marketing strategies and programmes


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Marketing Strategy

A strategy consists of a well thought out

series of tactics to make a marketing plan

more effective. Marketing strategies serve

as the fundamental underpinning by

marketing plans designed to fill market

needs and reach marketing objectives
http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Marketing


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Interrelationships between different

levels of strategy

Marketing strategy should be aligned

with corporate and business level

strategies

The marketing program for an individual

product must be consistent with the

strategic direction, competitive thrust and

resources allocations decided on at ahigher management level


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Translating corporate objectives

into functional objectives

Corporate

Objective (s)

Operations

Objectives

Marketing

Objectives

Financial

Objectives

Human Resource

Strategies

Operations

Strategies

Marketing

Strategies

Financial

Strategies

Human Resource

Objectives

Marketingtactics


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Translating corporate objectives into SBU objectives

Corporate

Objective (s)

SBU 3

Objectives

SBU 2

Objectives

SBU 1

Objectives

Financial

Objectives

Operations

Objectives

Human Resource

Objectives

Marketing

Objectives

OperationsStrategiesHuman ResourceStrategiesMarketingStrategiesFinancialStrategies

Marketing

tactics


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Identifying Alternative Strategies

(Porters Competitive Strategies)

Porter (1980), identified threegeneric types of strategy

(overall cost leadership,differentiation and focus) thatprovide a meaningful basis

for strategic thinking


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Porters three generic strategies

Middle of

the road

CostDifferentiation

Focus

Source: Adopted from Porter (1980)

Stuck in the

middle


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The generic strategy framework

Cost leadership Differentiation

Cost focus Differentiation

focus

Strate

gic

scope

Broad scope-

targets whole

market

Narrow scope

targets only one

segment

Low cost Differentiation

Michael Porter, 1980


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Porters three generic strategies

Type ofstrategy

Ways to achieve the strategy Benefits Possible problems

Costleadership

Size and economies of scale

Globalization

Relocating to low-cost parts of

the worldModification/simplification ofdesigns

Greater labour effectiveness

Greater operatingeffectiveness

Strategic alliances

New sources of supply

The ability to:

Outperformrivals, erect

barriers to entryand resist thefive forces

Vulnerability toeven lower costoperators

Possible price warsThe difficulty ofsustaining it in thelong term


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Porters three generic strategiescontd

Type ofstrategy

Ways to achieve thestrategy

Benefits Possible problems

Focus

(Bestsuited for

smallfirms)

Concentration uponone or a small numberof segments

The creation of astrong and specialistreputation

A more detailedunderstanding ofparticular segments

The creation ofbarriers to entry

A reputation forspecialization

The ability toconcentrate efforts

Limited opportunities forsector growth

The possibility of

outgrowing the marketThe decline of the sector

A reputation forspecialization whichultimately inhibits growthand development into

other sectors


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Porters three generic strategiescontd

Type of strategy Ways to achieve thestrategy

Benefits Possible problems

Differentiation The creation ofstrong brandidentities

The consistentpursuit of thosefactors whichcustomers perceiveto be important

High performance in

one or more of aspectrum of activities

A distancing fromothers in the market

The creation of a

major competitiveadvantage

flexibility

The difficulties ofsustaining the basesfor differentiation

Possibly higher costsThe difficulty ofachieving true andmeaningfuldifferentiation


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Differentiation variables

Superior quality

Superior levels of service

Strong brand names High levels of brand loyalty

Distribution strengths


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Absolute Cost Variables

Consistently high investment in R&D

High levels of process technology and productionefficiency

Patents

Privileged access to scarce resources

Vertical integration

Tariff barriers

Distribution access and efficiency

Cartels


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Influence of market position on

strategy

Market leader in an industry, is the firm which is

generally recognized to be the leader

Market challenger and followers firms with a

slightly smaller market share Market nichers small firms which survive and

indeed often prosper, by choosing to specialize in

parts of the market which are too limited in size

and potential to be of real interest to larger firms


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Strategies for market leaders

1. Expansion of the overall market

Targeting groups which currently are

non-users

Identifying new uses for the

product/service

Increasing usage rates


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Strategies for market leaderscontd

2. Guarding the existing market share

Strong market positioning

Continuous product and process innovation

Being proactive

Heavy advertising

Strong customer relations

Strong distribution relations


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Strategies for market leaderscontd

3. Expansion of the current market share

Heavy advertising

Improved distribution

Price incentives New product development

Mergers

Takeovers

Geographic expansion

Distribution expansion


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Options for market challengers

1. Attack the market leader

2. Attacking firms of similar size to itself but which areeither under-financed or reactive

3. Attacking smaller regional firms

No.1 requires the challenger to: Have a sustainable competitive advantage either in

terms of cost or differentiation

To be able to partly or wholly neutralize the leaders

advantages There must be some impediment to the leaderretaliating


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Attack strategies for market challengers

Price discounting Cheaper goods Product innovation

Improved services Distribution innovation Intensive advertising Market development

Prestige image Product proliferation Cost reduction


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Strategies for market followers

Following closely with as similar a marketing

mix and market segmentation combination as

possible

Following at a distance so that although thereare obvious similarities, there are also areas of

differentiation between the two

Following selectively both in product and

market terms so that the likelihood of direct

competition is minimized


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Strategies for market nichers

Specializing:

Geographically

By the type of end user

By product or product line

On quality/price spectrum

By service

By size of customer

By product features


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Growth Strategies

Are intended to provide basic direction

for strategic actions

They are seen as the basis of

coordinated and sustained efforts

directed toward achieving long-term

business objectives

They indicate how long-range objectives

will be achieved


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Generic growth direction that the organization will

pursue grand strategies

Ansoff Product/Market Matrix(1987)

Markets

Products


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Market penetration

Market penetration is the name given to agrowth strategy where the business focuses onselling existing products into existing markets

Market penetration seeks to achieve four mainobjectives:1. Maintain or increase the market share of current

products this can be achieved by a combination ofcompetitive pricing strategies, advertising, sales

promotion and perhaps more resources dedicated topersonal selling

2. Secure dominance of growth markets


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Market penetrationcontd

3. Restructure a mature market by driving out

competitors; this would require a much more

aggressive promotional campaign, supported

by a pricing strategy designed to make themarket unattractive for competitors

4. Increase usage by existing customers for

example by introducing loyalty schemes


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Market development

Market development is the name given to agrowth strategy where the business seeks tosell its existing products into new markets

There are many possible ways of attaining thisstrategy, including:

New geographical markets; for example exportingthe product to a new country

New product dimensions or packaging: for example

New distribution channels

Different pricing policies to attract differentcustomers or create new market segments


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Market Development

Commonly ranks second only toconcentration as the least costly and listrisky of the 12 grand strategies

It consists of selling present products innew markets

Opening additional geographical markets

Attracting other market segments;developing product versions, entering otherchannels of distribution, advertising in othermedia, etc


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Product development

Product development is the name given

to a growth strategy where a business

aims to introduce new products into

existing markets. This strategy mayrequire the development of new

competencies and requires the business

to develop modified products which canappeal to existing markets.


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Product Development

Developing new products features Adapt (to other ideas, developments)

Modify (change color, motion, sound, odor, form, shape)

Magnify (stronger, longer, thicker, extra value)

Minify (smaller, shorter, lighter) Substitute (other ingredients, process, power)

Rearrange (other patterns, layout, sequence, components)

Reverse (inside out)

Combine ( blend, assortment, appeals, ideas)

Developing quality variations Developing additional models and sizes


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Diversification

Diversification is the name given to the growthstrategy where a business markets newproducts in new markets.

This is an inherently more risk strategybecause the business is moving into marketsin which it has little or no experience.

For a business to adopt a diversification

strategy, therefore, it must have a clear ideaabout what it expects to gain from the strategyand an honest assessment of the risks


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Other Growth Strategies

1. Concentration

2. Innovation

3. Horizontal integration4. Vertical integration

5. Joint venture


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Grand Strategiescontd

6. Concentric diversification

7. Conglomerate diversification

8. Retrenchment/turnaround9. Divestiture

10.Liquidation


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Concentration

The most common strategy used on thecurrent business

The firm directs its resources to the profitablegrowth of a single product, in a single market,

and with a single technology A firm can gain competitive advantages over its

more diversified competitors in production skill,marketing know-how, customer sensitivity andreputation

However, concentration tends to result in steadybut slow increases in growth and profitabilityand a narrow range of investment options


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Innovation

Creating a new product life cycle, therebymaking any similar existing products obsolete

This approach differs from the productdevelopment strategy of extending an existing

products life cycle The automobile industry provides many

excellent examples Few innovative ideas prove profitable

because research, development, and pre-marketing costs incurred in converting apromising idea into a profitable product areextremely high!!


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Horizontal Integration

When the long-term strategy of a firm isbased on growth through the acquisitionof one or more similar businesses

operating at the same stage of theproduction-marketing chain, its grandstrategy is calledhorizontal integration

Such acquisitions provide access to newmarkets for the acquiring firm andeliminate competitors


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Vertical Integration

When the grand strategy of a firm involves the

acquisition of businesses that either supply the

firm with inputs or serve as a customer for the

firms outputs (e.g warehouses for finishedproducts) , vertical integration is involved a

shirt manufacturer acquiring a textile producer

(backward vertical integration)shirt

manufacturer merging with a clothing store(forward vertical integration)


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Joint Venture

Increasing nationalism in many foreignmarkets may require greater consideration ofthe joint venture approach if a firm intends todiversify internationally

This approach presents new opportunities withrisks that can be shared

However, joint ventures often limit partner

discretion, control and profit potential whiledemanding managerial attention and otherresources that might otherwise be directedtoward mainstream activities of the firm


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Concentric Diversification

It represents distinctive departures from afirms existing base of operations

It may relate to the acquisition or internalgeneration (spin off) of a separate businesswith synergistic possibilities counterbalancingthe two businesses strengths and weaknesses

When diversification involves the addition of a

business related to the firm in terms oftechnology, markets or products, it isconcentric diversification


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Conglomerate Diversification

There is little concern given to creating

product/market synergy with existing

businesses

A business is acquired because it

represents the most promising

investment opportunity available


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Retrenchment/Turnaround

For a number of reasons a business canfind itself with declining profits due toeconomic recessions, production

inefficiencies, and innovativebreakthroughs by competitors

The firm may be able to survive andeventually recover if a concerted effort ismade over a period of a few years tofortify basic distinctive competencies


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Retrenchment/Turnaroundcontd

Retrenchment can be done through 2 ways:

1. Cost reduction- decrease workforce throughemployee attrition, leasing rather thanpurchasing equipment, extending the life ofmachinery, and eliminating elaboratepromotional activities

2. Asset reduction sale of land, buildings,equipment not essential to basic businessactivities and elimination of perks like thecompany airplane and executive cars


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Retrenchment/Turnaroundcontd

Since the underlying purpose ofretrenchment is to reverse currentnegative trends, the method is often

referred to as a turnaround strategy Interestingly the turnaround most

commonly associated with this approachis in management positions!!!


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Divestiture

A divestiture strategy involves the sale of

a business or a major business

component

When retrenchment fails to accomplish

the desired turnaround, strategic

managers often decide to sell the

business


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Liquidation

The business is typically sold in parts, onlyoccasionally as a whole, but for its tangibleasset value and not as a going concern

In selecting this strategy, owners and strategic

managers of a business are admitting failureand recognize that this action is likely to resultin great hardships to themselves and theiremployees

For the above reasons, liquidation is seen asthe least attractive of all grand strategies.However, as a long term strategy, it minimizesthe loss to all stakeholders


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Dangers of strategic wear out

Regardless of whether the company is a leader,

follower, challenger or nicher, the marketing

strategist needs to recognize that even the

most successful of strategies will, sooner orlater, begin to wear out and lose its impact

Therefore, strategies should be modified both

to anticipate and meet changing competitive

challenges and consumer needs


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Causes of strategic wear out

Changes in market structure as competitors exit

or enter

Changes in competitors stances

Competitive innovations Changes in consumers expectations

Economic changes

Legislative changes


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Causes of strategic wear outcontd

Technology changes

Distribution changes

Supplier changes

A lack of internal investment

Poor control of company costs

A tired and uncertain managerialphilosophy


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Competitive strategies for leaders, followers

and challengersStrategicposition ofthe firm

Growth Maturity Decline

Leader Keep ahead of thefield

Discourage other

possible entrants

Raise entry barriers

Build loyalty

Advertise extensively

Develop a strongselling proposition

Hit back at challengers

Manage costs aggressively

Raise entry barriers further

Increase differentiation

Encourage greater usage

Search for new uses

Harass competitors

Develop new markets andproduct variations

Tighten control over distributors

Redefine scope

Divest peripherals

Encouragedepartures

Squeeze distributors

Manage costsaggressively

Increase profitmargins


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and challengers..contdStrategicposition ofthe firm


Challenger Enter early

Price aggressively

Develop a strongalternative sellingproposition

Search for the leadersweaknesses

Constantly challenge theleader

Identify possible new

segmentsAdvertise aggressively

Harass the leader andfollowers

Exploit the weaknesses ofleaders and followers

Challenge the leader

Leapfrog technologically

Maintain high levels ofadvertising

Price aggressively

Use short-term promotions

Develop alternativedistributors

Take over smallercompanies

If the challengingstrategy has not beensuccessful, managethe withdrawal in the

least costly way to youbut in the most costlyway to others


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and challengers..contdStrategicposition ofthe firm


Follower Imitate at lower cost ifpossible

Search for joint ventures

Maintain vigilance andguard against competitiveattacks

Look for unexploitedopportunities

Search for possiblecompetitive advantages inthe form of focus ordifferentiation

Manage costs aggressivelyLook for unexploitedopportunities

Monitor product and marketdevelopments

Search foropportunities createdby the withdrawal ofothers

Manage costsaggressively

Prepare to withdrawal


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Market Entry Strategies

Exporting

Piggybacking

Foreign production

Licensing

Joint ventures

Ownership

Export Processing Zones (EPZ)

marketing strategy development 20 feb 2011

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