subject business economics paper no and title 3...

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BUSINESS ECONOMICS

PAPER No. 3: Business Ecosystem and Enterpreneurship

MODULE No. 25: Marketing Strategies

Subject BUSINESS ECONOMICS

Paper No and Title 3, Business Ecosystem and Entrepreneurship

Module No and Title 25, Marketing Strategies

Module Tag BSE_P3_M25

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BUSINESS ECONOMICS



TABLE OF CONTENTS

1. Learning Outcomes

2. Introduction

2.1 Meaning of marketing strategy

2.2 Salient features of a good marketing strategy

3. Objectives of marketing strategy

3.1 Competitive advantage

3.1.1 Sources of competitive advantage

3.1.1.1 Cost leadership

3.1.1.2 Differentiation

3.1.1.3 Focus

4. Phases of strategic marketing

4.1 Strategic analysis

4.1.1 External analysis

4.1.2 Customer analysis

4.1.3 Internal analysis

4.2 Formulating strategy

4.2.1 Market segmentation

4.2.2 Targeting

4.2.3 Positioning

4.2.4 Product development and innovation

4.3 Implementation and control

4.3.1 Control

5. Summary

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1. Learning Outcomes

After studying this module, you shall be able to understand:

The meaning and importance of marketing strategy.

The Objectives of marketing strategy

The different phases while formulating strategic marketing.

2. Introduction

The modern marketing concept has a very clear objective- satisfy customer needs in a profitable

manner. And, this should be done by staying ahead of competitors. However, achievement of this

humble objective is not simple. Often, it involves extremely complex and conflicting tasks.

Changes in the external environment bring unexpected situations which need instant responses.

Globalization has brought severe competition in the market and has made rapid diffusion of best

practices. Rivals can quickly imitate technical know how, management practices, and can quickly

bring superior offerings in the market. Staying ahead of rivals gets harder every day. Moreover,

scarce resources and incomplete data make the organization’s decision making process extremely

tough.

This confirms that organizations can not succeed accidently, at least in the long run.

Successful organizations have to cope up with such situations at daily basis. Objectives might

differ (survival or staying ahead) but the fight remains. And for this they need the right plan of

actions which can restore the simplicity in the picture.

Organizational strategy is the means by which the resources of the organizations are

tuned with the requirements of the environment. It is basically concerned with effectiveness

(doing he right things) rather than efficiency (doing what you do well). On the other hand, by its

nature, marketing defines how the organization interacts with its market place. Therefore, all

strategic planning requires an element of marketing.

In a strategic role, marketing aims to transform corporate objectives and business strategy

into a competitive market position. It ensures that organization’s capabilities are matched to the

competitive environment in which it operates, not just for today but into the coming future.

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2.1 Meaning of Marketing Strategy

Strategy is the means to achieve the desired objectives. Marketing strategy is the process by

which an organization engages with everyone within it and focus all its activities to satisfy

customers’ needs and wants. It translates the business objectives and strategies into a competitive

market position and, this way, it creates pathways to a desired future. Essentially, the aim is to

differentiate company’s offerings by meeting customer needs more effectively than competitors

and generate smart profit.

According to Kotler (1997), “The marketing strategy is the way in which the marketing function

organizes its activities to achieve a profitable growth in sales at a marketing mix level”.

According to McDonald (1999), “The term marketing strategy reflects the company’s best

opinion as to how it can most profitably apply its skills and resources to the marketplace”.

2.2 Salient Features of a Good Marketing Strategy

The elements of marketing strategy; customers, competitors and internal corporate factors, are

dynamic in nature and, to a certain extent, unpredictable. This requires organizations to develop

and deploy processes, procedures and techniques that ensure the market strategy should:

1. Be as per the present and future requirement of the business.

2. Relative to the current/ future business environment.

3. Be based on the assessment of reality, not just on hopes or wishful thinking.

4. Capable of implementation.

5. Generate optimal benefits to both the organization and customers.

3. Objectives of Marketing strategy

Marketing strategy aims to generate sustainable competitive advantage. The accomplishment of

competitive advantage is accepted as an important aspect of a successful marketing strategy. For

every organization, it is crucial to understand how strategies can lead to the development of

sustainable competitive advantages.

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3.1 Competitive Advantage

Competitive advantage is the process of identifying a fundamental and sustainable advantage on

the basis of which a company compete and try to maintain an upper hand in the target market. It

is achieved when it has a substantial and sustainable edge over its competitors while targeting

customers. Eventually, marketing strategies aim to deliver competitive advantage to the company

in the target market. Some companies achieve such advantage because of their reputation in the

market. Others achieve it by having crucial and unique attributes which can not be copied for a

particular time period due to patents and copyright acts.

3.1.1 Sources of Competitive Advantage

Porter (1980) identifies three fundamental sources of competitive advantage. He termed these

sources as ‘generic strategies’ of competitive advantage. These sources are as follows:

3.1.1.1 Cost leadership

One potential source of competitive advantage is to become an overall cost leader in an industry.

Here marketing strategies attempt to gain and maintain a low cost structure. It is achieved through

continuously following policies such as controlling overhead cost, economies of scale, cost

minimization through outsourcing of some activities. However, cost leadership does not always

mean a lower price. Still, lower prices are often used to attract buyers. The lowest cost structure

allows companies to offer standard quality product at a reasonable price, still able to earn higher

profit margins. This makes the particular market less attractive for new entrants and compels

existing competitors to re-design its strategies or leave the market.

3.1.1.2. Differentiation

Here, the company attempts to offer unique product distinct from competitor’s offering. A

product can be differentiated on the basis of performance, perception, etc. Each element of the

marketing mix can provide the mean for successful and sustainable differentiation. However, any

such differentiation must be on the basis of value to the customers. The product or the extra value

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provided with it should be perceived unique and useful by the target buyers. Then only it

commands a premium price. For example, Starbucks coffee successfully differentiated its brand

and, consumers of all over the world are ready to pay higher prices to enjoy the experience of

Starbucks. This further leads to a higher level of brand loyalty.

However, charging premium price is not necessary to achieve product differentiation.

Even a company can charge the normal price to further restrengthen its position. For example,

Dominos differentiated itself from other pizza providers by promising free delivery of tasty pizza

within 30 minutes without any extra charge. Moreover, differentiation can be attained by low

prices. The success of low-cost airlines is a good example of attaining a distinct position in the

market.

3.1.1.3. Focus

Competitive advantage can also be achieved by gaining specialization in a specific market

segment. Here, the company focus on a narrower range of business activities targeted towards a

small section of customers. The aim is to get detailed customer knowledge and thus, gain

specialization of that market. This focus can also generate the benefits of cost leadership and/or

differentiation within that particular market. A company can focus on the basis of geographic area

or particular end-user requirement or becoming specialist of a particular product/ product line.

Earlier, it was advocated to pursue one generic strategy consistently. However, now companies

have been successfully mixing these strategies to follow hybrid strategies. Their main intention is

to exploit all the available sources of competitive advantage in the wake of tough competition.

4. Phases of Strategic Marketing

Strategic marketing has three distinct phases. These phases are as follows:

4.1. Strategic Analysis

Undertaking a strategic analysis is the foundation upon which strategic decisions are constructed.

This stage comprises a detailed examination of the external business environment, customers and

an internal review of the organization itself. The strategic analysis is broken down into the

following three constituent elements:

4.1.1. External Analysis

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An analysis of the external environment is undertaken in order to detect the opportunities and

treats that are evolving and need immediate actions by the organization. The external

environment consists of the actors and forces outside the organization that affect marketing

management’s ability to build and maintain successful relationships with target customers. The

marketing manager must be the environmental trend trackers and opportunity seekers. And,

this requires a proper analysis of the external forces. The external environment is made up of:

1. Microenvironment: It consists of the actors close to the organization that affects its ability to

serve its customers. This includes customers, suppliers, intermediaries, competitors etc.

2. Macroenvironment: It consists of the broad range of environmental forces that affect the

microenvironment and so the organization. It includes demographic forces,social and cultural

forces, economic issues, technological developments, political and legal forces etc.

4.1.2. Customer Analysis

The marketing objectives of an organization become a decision about which product or service it

is going to deliver into which market. The market consists of customers. Therefore, it is utmost

important, to know how individuals, groups and organizations select, buy, use and dispose of

goods and services to satisfy their needs and wants. Consumer behavior is a complex and

multidimensional process. Only proper knowledge of it can reduce the chances of bad decisions.

4.1.3. Internal Analysis

It is very important for an organization to evaluate its relative abilities (and limitations) to

compete and satisfy target customers. The internal analysis aims to identify and evaluate the

capabilities of the organization. These capabilities are the combination of assets and

competencies that denote the organization’s competitive capacity. Assets include both the

tangible and intangible capital owned by the organization. These include financial assets, physical

assets (like land, building, vehicles, machines, etc.), human resources hired by the company and,

legally enforceable assets like, patents, copyrights, licensing agreements etc. Competencies are

the skills that are contained within the company to effectively utilize the assets. This delivers

strategic capabilities of the company in the market.

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It is crucial for any organization to know well its strengths and weaknesses. Also, its

management should able to detect opportunities and threats to the company well before time.

Strengths and weaknesses relate to the internal capabilities and resources of the organization, as

perceived by customers (Piercy, 2002). On the other hand, opportunities and threats are externally

oriented issues.

4.2. Formulating Strategy

Strategies are developed to attain the mission and objectives of the organization. Marketing

strategies transforms the business objectives and strategy into market terms and marketing

activities. Therefore, an organization needs a mission statement and key objectives that lay down

the arms that strategy tries to attain. The mission statement is the key statement upon which

objectives and strategies are based. It is basically a rationale behind the existence of the

organization and distinguishes it from other entities. It further leads to the formation of

objectives. Objectives specifically state what is to be achieved. They are quantifiable and given a

specific time scale.

4.2.1. Market Segmentation

Markets consist of consumers and consumers differ. Marketers are mainly interested in that set of

people in the population who could be their potential customers. Therefore, it is utmost important

to identify those groups of customers, which can be termed as potential customers and can be

kept in mind while designing the company’s offering. Market segmentation aims to identify

segments of customers with similar features and needs.

According to Stanton, “Market segmentation is the process of dividing the total heterogeneous

market for a good or service into different segments, each of which tends to be homogeneous in

all significant aspects.”

Segmentation helps the firm to identify and select the most suitable market as per it’s capabilities.

This way the firm gain better understanding of the market and can become a specialist in the

chosen market. Knowledge of consumer behavior is crucial to gain market understanding.

4.2.2. Targeting

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Targeting involves aiming to please a particular segment of customers by providing products and

services that are carefully tailored as per the requirements of the segment. This involves

assessing the sales potential and future growth of each segment and selecting the

segment/segments that is/are most suitable for the firm to serve.

4.2.3. Positioning

After selecting a particular market or markets to target, the organization has to decide how and

on what basis it will position its’ offering and compete in the chosen market or markets. The

positioning means presenting the offer to the consumer.The main intention is to create a

distinctive offering in the market which can occupy a high rank in target consumers’ mind when

compared to its’ nearest competitors. Choosing a particular position is an important element of

marketing strategy. Products and can be positioned using a range of associations such as, by user,

by usage, by price, on the basis of attributes or benefits, origin, etc. BMW, the german carmaker

positions its vehicle by using two associations; German engineering and performance.

4.2.4. Product Development and Innovation

Development and innovation of product are very crucial strategic activities which shape the

future of the organization. In the light of the intense competition and rapid diffusion of technical

know how, continuous upgradation of the existing product is very crucial as it is not possible for

any entity to bring new products in the sense of being innovative, and unique. Most ‘new’

products are actually updates and improvements of the existing offerings.

The process of product development is not just limited to innovation of the core product.

Innovation is also necessary in areas of manufacturing processes, support services and delivery

mechanism, etc. And all this requires a right balance of creative, technical and managerial skills.

4.3. Implementation and Control

Two dimensions basically decide the success of any strategy; first, the strategy itself and, second,

the ability of an organization to implement it properly. Proper implementation is a necessary

condition for the success of any strategy. Without implementation, the plan remains an abstract

idea and, the poor execution of the strategy makes the whole process a wasteful exercise.

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Bonoma (1984) established four general positions by examining the appropriateness of

the strategy and the effectiveness of execution skills of the management .Success, the ideal

situation for any entity is the result of appropriate strategy with proper implementation. An

effective execution of a poor strategy may save the organization, but this position always

brings a high degree of risk. The third position is ‘problem’ which is the result of poor

execution of a good strategy. Here, the true value of the strategy is not fully understood.

Failure, the fourth position is a no-win situation. It is just ‘ throwing good money after

bad’.

4.3.1. Control

Even a flawless marketing plan with proper implementation cannot guarantee to deliver

the desired performance. The different forces of the business environment are dynamic and

most of them are beyond the control of the organization. Such forces can have a positive or

negative impact on the successful implementation of any strategic plan. To ensure the success of

any strategic planning, there is a need for proper control during the whole period of execution and

taking prompt response in the wake of unanticipated changing conditions. Furthermore, a control

system should be able to detect and rectify problems well before they become significant as

prevention is always better than cure. This way, it attempts to guarantee that corporate actions

and systems conform to its predetermined objectives.

The basis of control is the ability to measure as it tries to compare what should happen

with what actually happened and, then changing or modifying the current strategy. Marketing

managers must be aware of a range of control variables.

5. Summary

Marketing strategy is the process by which organizations align themselves with the target market.

It aims to successfully match the internal corporate capabilities with customer needs. The main

objective is to achieve a sustainable superior competitive advantage by satisfying customers

better than competitors do and earn profit. In the current competitive business environment a

proper formulation and implementation of marketing strategies is very crucial.

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