Download 2016-03-01 1 Strategic Marketing Management

2016-03-01
Course Outline - 1
Strategic Marketing Management
Strategic Marketing vs. Marketing Planning –
Introduction
Mission & Objectives
establishing the corporate mission
influences on objectives and strategy
guidelines for establishing objectives and setting goals
Analysing the Product Portfolio
models of portfolio analysis
market attractiveness and business position assessment
criticism of portfolio analysis
2
Course Outline - 2
Course Outline - 3
Strategic Gap Analysis and Growth&Consolidation
Strategies
Allocation Strategies
Demand Growth Strategies
types of the strategic gap
growth strategies
consolidation strategies
Strategies for Market Leaders
growth
fast growth
selective growth
aliance
optimalization
market position defence
market exit strategies
3
strategies based on the number of buyers
strategies based on the level of consumption
selective demand growth strategies
position defence
flanking defence
preemptive defence
counteroffensive defence
mobile defence
contraction defence
4
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Course Outline - 4
Strategies for Market-Challengers
frontal attack
flank attack
encirclement attack
bypass attack
guerilla attack
Strategies for Market-Followers& Nichers
Assignment
following closely
following at a distance
following selectively
70% final exam (test with open-ended
questions)
30% case study/ies: (written
preparation: 2-5 pages; case is to be
done in groups: 2-3 persons)
Strategies for different PLC stages
strategies
strategies
strategies
strategies
in
in
in
in
the
the
the
the
introduction stage
growth stage
maturity stage
decline stage
5
Lesson 1.
Designing Marketing Strategies
Lesson 1.
Designing Marketing
Strategies
Outline
Strategic Marketing vs. Marketing
Planning – Introduction
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Levels of strategy (1/2)
Strategic Marketing
vs.
Marketing Planning.
An Introduction
Levels of strategy (2/2)
Corporate strategy
Business strategies
Operational & functional strategies
‘Corporate’ or ‘Marketing’?
Vision
Corporate
strategy
Mission
Business
strategy
(SBU 1)
Business
strategy
(SBU 3)
Operations Objectives
Corporate Objectives
Business
strategy
(SBU 3)
Corporate Strategy
Functional
strategies
Marketing Objectives
HRM Objectives
Marketing Strategy
Logistics Objectives
R&D
Operations
Marketing
HRM
Finance
Marketing Tactics
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Source: Weitz & Wensley,1998
Strategy / Tactics
Corporate versus Marketing
Strategy
Tactics
Importance
More importance
Less importance
Corporate strategy
Conducted by
Senior managers
Junior managers
Concerned with overall, long
term organisational direction
Concerned with day-to-day
performance and results
Timeframe
Long term
Short term
Frequency
Continuous
Periodic
Provides the long-term
framework for the organisation
Represents only one stage in the
organisation’s development
Problem
Unstructured / unique
high risk / low certainty
Structured
repetitive
Functional and professional
orientation tends to predominate.
Information
External, subjective
futuristic
Accounting &
marketing research
Overall orientation needed to
match the organisation to its
environment
Detail
Broad
Specific
Goals and strategies are
evaluated from an overall
perspective.
Goals are subdivided into specific
targets
Ease of evaluation
Difficult
Easy (relative)
Relevance of goals and
strategies is only evident in the
long-term
Relevance of goals and strategies
is immediately evident
Corporate Strategic Planning
defining the corporate mission
(vision)
establishing SBU
assigning resources to each SBU
planning new business, downsizing
& terminating older businesses
Marketing
Marketing Planning
Analysis
Planning
Implementation
Control
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The Organisation’s Marketing
Environment
Analysis
The economy
Analysis
External
Demography
Cultural
forces
Suppliers
Internal
Distributors
& dealers
Market
demands
Macroenvironment
Microenvironment
SWOT
The
organisation
Social
factors
Competitors
Customers
Legal
structures
Political
structures
Technology
References
Armstrong
G.,
P.
Kotler:
Marketing.
Wprowadzenie, Wolters Kluwer, Warszawa
2012
Gilian C., R. Wilson, Strategic Marketing
Management. Planning, impementatiom and
control, Butterworth Heinemann, 1999
Kotler P. Marketing Management. Eleventh
Ed., Prentice-Hall, Englewood Cliffs, 2003
Porter M., Competitive Advantage, 1998
Strategic Marketing Management: Planning
and Control, BPP Professional Education, 2003
Lesson 2.
Designing Marketing
Strategies
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Lesson 2.
Designing Marketing Strategies
Outline
Mission & Objectives
Mission
Mission & Objectives
establishing the corporate mission
influences on objectives and strategy
guidelines for establishing objectives and
setting goals
describes
the
organisation’s
basic
function in society
explains why the company exists
provides the commercial logic for the
company
needs to be converted into everyday
performance
is a cultural glue that enables the
organisation to function as a unity
Corporate Mission - Fundamental
Questions
What is our business?
Who is the customer?
What is of value to our customer?
What will our business be?
What should our business be?
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Infuences on the mission statement
company’s history
preferences, values and expectations of
managers & owners
environmental factors
available resources
distinctive competences
Mission or/and vision
vision gives general sense of direction to
the company, is the orientation point that
guides the company
vision ignores real. practical problems,
vision can degenerate to wishful thinking
mission is about here and now, vision
refers to the future,
mission is designed to motivate, vision –
not!
Workable mission
brief – easy to understand and
remember
flexible – to accomodate change
distinctive – to make the firm stand out
Objectives
S Specific - descriptive, succinct and provide clarity
throughout the organization as to what is to be
achieved
M Measurable - clearly state tangible targets that can be
measured in the future
A Aspirational - challenging but achievable, motivational
R Realistic - based on sound market analysis, financial,
human & physical resources should underpin the
objectives
T Timebound - a timescale should be set against the
achievment of each objective in order for performance
measurement to be undertaken
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Marketing Objectives e.g.
Objectives hierarchy
Corporate objectives – increase profits
rate of return on investment
net profits
cash flow
total sales revenue
sales volume
market share
consumer awareness
number of distribution outlets
average realized price
Production
objectives
– cut costs
Personnel
objectives
– reduce
headcount
Marketing obejctives – increase revenue
Objectives for the mix
Product
(10% of
revenue )
Price
(skimming)
Promotion
(recall)
Place
(coverage)
Eight strategic trade-offs facing firms
(1/2)
short term profits vs. long term growth
profit margins vs. competitive position
direct
sales
effort
development effort
vs.
market
penetration of existing markets vs. the
development of new markets
Eight strategic trade-offs facing firms
(2/2)
related vs. non-related new
opportunities as a source of long-term
growth
profit vs. non-profit goals
growth vs. stability
‘riskless’ environment vs. high-risk
environment
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References
Armstrong
G.,
P.
Kotler:
Marketing.
Wprowadzenie, Wolters Kluwer, Warszawa
2012
Gilian C., R. Wilson, Strategic Marketing
Management. Planning, impementatiom and
control, Butterworth Heinemann, 1999
Kotler P. Marketing Management. Eleventh
Ed., Prentice-Hall, Englewood Cliffs, 2003
Porter M., Competitive Advantage, 1998
Strategic Marketing Management: Planning
and Control, BPP Professional Education, 2003
Lesson 3 & 4
Designing Marketing Strategies
Outline
Analysing the Product Portfolio
- models of portfolio analysis
- market attractiveness and business
position assessment
- criticism of portfolio analysis
Lesson 3 & 4
Designing Marketing
Strategies
Corporate Strategic Planning
defining the corporate mission
(vision)
---------------------------------------- establishing SBU
assigning resources to each SBU
planning new business, downsizing
& terminating older businesses
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SBU - Main Characteristics
SBU Defining
SBU is a pasrt of the company that for all
intents and purposes has its own distinct
products, markets and assets
single business (or collection of related
businesses) that can be planned separately
from the rest of company
has its own competitors
has its own manager.......
Portfolio Evaluation Frameworks
Analysing the Product
Portfolio
BCG’s Growth Share Matrix
GE Multifactor Matrix
Shell Directional Policy Matrix
----------------------------------------------------
Abell & Hammond’s Investment Opportunity
Matrix
Arthur D. Little Strategic Condition Matrix
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BCG’s Growth Share Matrix
(traditional approach)
Taking a Portfolio Approach
100 %
analysis based around evaluating SBU activities
models help you think strategically about the
business and its resources and provide analytical
frameworks. But:
Question marks
Stars
Market
growth 10 %
rate
Cash cows
Dogs
0%
1x
O,5 x
0x
Relative market share
BCG Matrix & PLC
introduction
growth
Stars
High share,
high growth,
still needs
support
Infants
Neg. Cash flow
Question
marks
Low share,
high
growth,
large neg.
Cash flow(
maturity
Determinants of market attractiveness
decline
Cash Cows
War horses
high share, low
growth, large
positive Cash flow
high share, negative
growth, positive
Cash flow
Dogs
Low share,
Low growth,
+/- Cash flow
they are over-simplified
cannot incorporate ‘risk’
often offer misleading representations of strategic
options
use over generous measures
assume market leadership = benefit
ignores competitive strategic factors
Market factors (eg size, growth)
Competitors
Investment factors
Technological change
Other PEST factors
Dodos
Low share, negative
growth, negative
Cash flow
time
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GE Multifactor Matrix
Determinants of business strenght
Product quality
Distribution
Brand reputation
Production capacity
Management skill
High
Medium
Product
attractiveness
Low
Invest for
growth
Invest
selectively for
growth
?
Strong
Invest
selectively for
growth
?
Harvesting
Average
?
Harvesting
Divest
Weak
Competitive position
More Pros & Cons of taking a
Portfolio Approach
Shell Directional Policy Matrix
Disinvest
Phased
withdrawal
Double or quit
Phased
withdrawal
Custodial
Growth
Try harder
Cash
generation
Growth
Leader
Leader
Unattractive
Average
Attractive
Weak
Average
Enterprise’s
competitive
capabilities
Strong
BCG at individual SBUs, other matrices look at
company’c competences in market sectors,
without references to individual products
They
ignore
opportunities
of
creative
segmentation or identifying new niches
They assume market is given rather than can be
created
Markets can be unattractive because has not
been analysed sufficiently
Marketers must come up with relavant data
(decide if the industry is attractive or not)
Prospects for sector profitability
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BCG’s Growth Share Matrix
(practical approach)
References
100
Stars
Question marks
Market 50
attractiveness
Dogs
Cash cows
0
0
50
100
Competitive position
Armstrong
G.,
P.
Kotler:
Marketing.
Wprowadzenie, Wolters Kluwer, Warszawa
2012
Gilian C., R. Wilson, Strategic Marketing
Management. Planning, impementatiom and
control, Butterworth Heinemann, 1999
Kotler P. Marketing Management. Eleventh
Ed., Prentice-Hall, Englewood Cliffs, 2003
Porter M., Competitive Advantage, 1998
Strategic Marketing Management: Planning
and Control, BPP Professional Education, 2003
Lesson 5, 6 & 7.
Strategic Gap Analysis and Growth &
Consolidation Strategies
Lesson 5, 6 & 7.
Strategic Gap Analysis
and
Growth & Consolidation
Strategies
Outline
types of the strategic gap
growth strategies
consolidation strategies
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Gap Analysis
Gap Analysis
Desired sales
Diversification growth
Diagrammatical approach to viewing the
difference between:
Integrative growth
Intensive growth
Sales
The planning
gap
Where we are going? (in the current
way)
Current portfolio
Where we want to be? (targets for
achievement)
Time
Intensive Growth
Ansoff’s Product - Market Matrix
Intensive Growth Strategies
Product
Current
Current
Market
penetration
strategy
New
Product
development
strategy
market penetration strategy
market development strategy
product development strategy
Market
New
Market
development
strategy
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Market penetration strategy
more purchasing and usage form
existing customers
Market penetration tools
gain customers form competitors
convert non-users into users
Market penetration strategy goals
to increase market share through
competitive pricing, advertising and
sales promotion
To secure dominance of growth
markets
To restructure a mature market by
driving out competitors
To increase usage by exusting
custromers
Loyalty programs,
Commercial claims
New opportunities to use
Suggesting additional benefits
Price cuts
Distribution intensifying
Establishing or joining new distribution
channels
Market penetration strategy
Advantages:
Synergy effect (marketing synergy,
operating synergy, management
synergy)
Total Cost
Time needed
Disadvantages:
Scale of incerase
Predictibility
Customer & technology dependance
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Market development strategy
new market segments
Market development tools
new distribution chanells
new geographic areas
Market development strategy
Advantages:
Use of existing resources
Capacity utilization
Know-how and experience utilization
Disadvantages:
Level of risk (new customers, new
business context)
Lack of management knowlegde
New targeting
New positioning of the product
and/or brand
Commercial claims
New distribution channels
International expansion
Price adapted to new clients’
requirements
Product development strategy
product modifications via new
features
different quality levels
‘new’ product
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Product development strategy
Product development strategy
Advantages:
Forces competitors to innovate
Creates bariers for new entrants
Capacity utilization
More options for customers
Stronger barganing position towards
distributors
Disadvantages:
Additional costs
Limitations based on Pareto rule
Time needed
Integrative Growth Strategies
Factors stimulating the need for
integration:
Scarce resources
Increased competition
Higher customer expectations
Pressures form strog distributors
Internationalization of markets
Changing markets and technologies
Turbulent and upredictable markets
Source: Hooley, et al. 1998
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Integrative Growth Strategies
Integrative Growth Strategies
Development beyond the present
product market, but still within the
same market system
Horizontal integration (HMS)
Vertical integration (VMS)
- backward
- forward
Horizontal integration
Horizontal integration
S
M
W
R
M
W
R
R
Refers to development into activities
which are competitive or directly
complimentary to company’s present
activities
Horizontal = the same level of
marketing system!
S
M
W
R
M
W
R
R
R
W
R
R
Customers
W
R
R
S – supplier, M – manufacturer, W – wholesaler, R - retailer
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Horizontal integration - advantages
Horizontal integration - disadvantages
Acces to competitors clients,
distributors, markets, brands….
Cooperation instead of competition on
markets
Reduction of R&D costs
Strenghtening barganing power
Vertical integration
Corporate culture maladjustment,
Strategy redefinition
Schizophrenic corporate identity
Vertical integration
Company becomes its own:
S
S
M
W
R
M
W
R
R
M
W
R
M
W
R
R
R
W
R
R
Customers
supplier of raw materials, components
or
services
(backward
vertical
integration)
distributor or sales agent (forward
vertical integration)
W
R
R
S – supplier, M – manufacturer, W – wholesaler, R - retailer
Vertical = between different levels of MS!
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Vertical integration advantages
Secure supply of components or raw
materials with more control
Reduction of supplier barganing power
Strenghten
the
relationships
and
contacts of the manufacturer with the
final consumer of the product
Raise barriers to entry
New business opportunities
Vertical integration disadvantages
Diversification Growth Strategies
Overconcentration (‘more eggs in the
same basket’)
Inflexible policy, more sensitive to
instabilities
Increases the firm’s dependence on
particular aspect of economic demand
Lack of know-how and experience
High risk
Diversification Growth Strategies
Development beyond the present
industry (marketing system)
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Diversification Growth Strategies
Concentric diversification
New client
New product
Technological consistency
concentric diversification
horizontal diversification
conglomerate (lateral) diversification
Concentric diversification - advantages
Knowledge & experience
Well established cooperation with
suppliers & distributors
Increasing potential demand thanks to
new customers
Better adjustment to customer
needs&preferences
Concentric diversification disadvantages
Technological overconcentration
Level of risk as a consequence of
‘unknown’ customer
New market reality - new
competitors
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Horizontal diversification
The same customer
Completely new (unrelated) product
Horizontal diversification disadvantages
High risk in case of customer
unsatisfaction
Need to invest into new technology
or konw-how
Necessity of establishing new
business relations
Time & costs
Horizontal diversification advantages
Well recognized customer’s needs,
wants & preferencess
High level of customer satisfaction
and loyalty
Can use company’s image and
reputation
Lateral diversification
New clients
New products
Completely unrelated businesses
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Lateral diversification - advantages
Risk spreading (protects against the
failure of current products& markets)
Creates additional souces of profits
Helps escape from present business
Offer the chance of growth without
creating a monopoly
Exploit under-utilised resources
Can use company’s image and
reputation
Methods of growth
Acqusitions/ mergers
Organic growth (achived through the
development of internal resources)
Corporate:
Lateral diversification - disadvantages
Acquisition
Merger
Joint venture
Contracual:
Dilution of shareholders’ earnings
Lack of the common identity and
purpose
Lack of management experience
Costs & risk & time
Acquiring already existing businesses
from their current owners via the
purchase of a controlling interest in
another company
Joining of two or more separate
companies to form a single one
Cooperation
Licencing
Franchising
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Acqusitions – advantages (1/2)
Buy new product range
Buy a market presence
Rationalisation of distribution and promotion
Eliminate competition
Current market protection
Higher ulitisation of production facilities
‘buy in’ technologies and skills
Obtaining greater production capacity
Joint-venture
Is a separate business unit created by
two or more firms
Share funding, cut risk, synergies,
technology, learning
But also…
Conficts of interests, disagreements
over profit shares, money invested,
management & strategy
Acqusitions – advantages (2/2)
‘buy in’ technologies and skills
Obtaining greater production capacity
Improve purchasing by buying in bulk
Safeguard future supplies of raw materials
Accesing high quality management
Obtain cach resources
Obtain tax advantages
Overcome barriers of entry
Cooperation
Firms share data, resource and
activities to achieve mutually
beneficial objectives
Agreements to co-operate on
variuos issues, shared research &
development, supply chain
rationalisation, synergy effects
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Licensing
A commercial contract whereby the
licenser gives something of value to the
licensee in exchange for certain
performances and payments
The royalty for:rights to produce
patented product, manufacturing konwhow, technical & marketing advice &
assistance, right to use brand…
Franchising
A method of expanding the business on
less capital then would otherwise be
possible
The franchiser offers: name, googwill,
systems & business method, support
services
The
franchisee:
provides
capital,
personal involvement & local market
knowledge, takes risk
Consolidation/limitation strategies
Deinwestment
De(z)integration
References
Prunning
Reduction
Harvesting
Armstrong G., P. Kotler: Marketing.
Wprowadzenie,
Wolters
Kluwer,
Warszawa 2012
Kotler P. Marketing Management.
Eleventh Ed., Prentice-Hall, Englewood
Cliffs, 2003
Strategic
Marketing
Management:
Planning and Control, BPP Professional
Education, 2003
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Case study
Lesson 8
Allocation strategies
Allocation strategies
Portfolio Analysis – Allocation
Strategies
Competitive position
To assign company’s resources
(money!) to each SBU
To settle objectives for each SBU
due to company’s strategic goals in
accordance with growth or
consolidation strategies
Weak
Market
High
Attractiveness
Low
Strong
Alliance
Fast growth
Growth
Selective growth
Fast growth
Growth
Selective growth
Market position
defence
Optimization
Market exit
(gradual)
Market exit
Market position
defence
Optimization
Selective growth
Growth
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Allocation Strategies - 1
Allocation strategies - 2
Type of strategy
Main objectives
Investments
Growth & Consollidation
Strategies
Type of strategy
Main objectives
Investments
Growth & Consollidation
Strategies
Fast growth
Increase market
share (offensively)
and negative
profitabilty
Increase marketing as
well as R&D investments
Diversification
Intensive growth
Integrative growth
Market position
defence
increase profitability
& maintain market
share
Maintain marketing
investments and limit
R&D investments
Market penetration
Harvesting
Optimization
Growth
Increase market
share and decrease
of profitability
Increase marketing as
well as R&D investments
Intensive growth
Integrative growth
Increase profitability
& reduction of the
market share
Decrease of total
marketing and R&D
investments
Harvesting
Reduction
Pruning
Disintegration
Selective growth
Increase market
share and maintain
profitability
Increase marketing and
R&D investments (for
selected market segments
and products)
Intensive growth
Integrative growth
Market exit (gradual)
Alliance
Parter for alliance
search and increase
market share
Redused marketing and
R& D investments through
alliance
HMS
Diversification
VMS
Intensive growth
Increase profitability
& considerable
reduction of the
market share (sales)
Decrease of marketing
investments, no R&D
financial support
Reduction
Pruning
Disintegration
Deinvstment
Market exit
Withdrawal
Minimal marketing and
R&D investments to
maintain the value of the
business
Dezinvestment
Allocation strategies – an example
Lesson 9
Competitive position
Weak
Strong
Demand Growth
Strategies
Selective growth
Market
High
attractiveness
SBU3
Growth
SBU4
SBU2
SBU1
Low
Optimization
Market position defence
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Process of marketing strategy
creation (product level)
Corporate strategy general findings (SBU)
Determinants of
product marketing
strategy
Analysis of the
market situation
Marketing goals
Marketing strategies
(level of product)
Expanding
the total market
Analysis of market
situation
Selective demand
growth strategies
Strategies based on
the company’s competitive position
Marketing budget
Strategies for different PLC stages
Analysis of market situation – typical
components
Analysis
of
market 1. customer analysis
situation - external
2. demand analysis
3. competitors analysis
4. distribution analysis
5. suppliers analysis
6. macroenvironment analysis
Marketing Objectives
Analysis
of
market 1. former marketing activities analysis
situation - internal
2. company’s market position assesment
3. sales analysis
4. marketing costs analysis
5. profitability analysis
6. marketing effectiveness & efficiency analysis
7.customer satisfaction analysis
Analysis
of
situation - outputs
market 1. SWOT analysis
2. market segments attractiveness assesment
3.perceptual map
4. PLC assesment
5. sales forecasts
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Marketing Budget - dimensions
Marketing Budget
What costs are included in the
marketing budget?
Value (total value of financial
support in a specific period of time)
Percent of the value of sales (it
shows the level of intensity of
marketing activities)
Factors influencing the marketing
budget for the product
Product innovations
Marketing
communication
Market research
Distribution
(logistics)
Sales
Additional services
Price discounts
Intermediary margins
Financial position of the company
Scope of common marketing activities
Marketing objectives and programs
Former marketing budgets
Sales forecasts
Competitors marketing spendings
Average expenditure of the industry
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Marketing budget and strategy
for the product
High budget:
Market development
product differentiation
Offensive strategies
First or second phase
of the PLC
Product development
Low budget:
Cost leader
Defensive strategies
Neutral strategies
Third or fourth phase
of the PLC
Reduction as well as
pruning strategy
Process of marketing strategy
creation (product level)
Corporate strategy general findings (SBU)
Determinants of
product marketing
strategy
Analysis of the
market situation
Marketing goals
Marketing strategies
(level of product)
Expanding
the total market
Selective demand
growth strategies
Strategies based on
the company’s competitive position
Marketing budget
Strategies for different PLC stages
Expanding the total market
All activities and marketing tools
which leads to total market
expansion
Typically initiated by market leaders
and pretenders
Effective and efficient in the first
and second phase of PLC
Expanding the total market
Expanding
the total
market
Expanding the
number of
customers
Increasing the
scale of usage
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Expanding the number of customers
Increasing the scale of usage
Expanding the number of
customers
Awareness
Average
usage
/consumption
Availability
New
opportunities
Ability to
Use
Increasing the scale of usage
Benefit
Deficiency
Increasing the
value of the
product (and
price)
Faster product
replacement
Affordability
New
applications
Sea food and fish consumption in
Poland
Sea food and fish consumption in
Poland
Total market worth 6.6 billion PLN
Average for UE: 21.4 kg,
Average consumption 12 kg per person
in the year, 60% fresh warter fish, 40%
salt water,
3.9 kg Romania, 5kg Bulgaria, 6 kg
Slovakia, 17kg Germany, 25kg Italy,
46kg Norway, 37kg Lithuania, 39kg
Spain, 56.9kg Portugal
Codfish, herring, plaice, trout, salmon, tuna,
mackerel
As a leading producer suggest different
marketing activities and tools increasing
total market.
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Expanding the number of customers
Awareness
Additional potential customers would buy the product
if they knew it was available and accurately
understood its benefits
Availability
Lack of availability of products that may be in short
supply, or difficult to make available, or lack services
to support their use
Ability to Use
These customers lack the knowledge, lack other
resources (electricity), and /or requirement to make
the product or service workable
Benefit Deficiency
The key benefits of product or service are not
important (or even unattractive) to a subset of
potential customer.
Affordability
The cost of products is too high for some consumers
Expanding the number of customers
Benefit
Deficiency
Affordability
• New positioning
• New RTB
• New marketing communication
• Cheap, basic versions of the product
• New financing solutions and programs
• Alternative methods of access
Expanding the number of customers
Awareness
• Collaborative efford of entire industry
• Intensive marketing communication
•Training addressed to customers
Availability
• New distribution channels
• Vending machines
• More intensive distribution
• Special events
Ability to Use
• training addressed to potential
customers
• simpler products
• additional support
Increasing the scale of usage
Increasing the average usage
Encouraging customers to use more of the product at every
opportunity
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Increasing the scale of usage
Increasing the scale of usage
New opportunities
use after every meal (chewing gum)
new opportunities to celebrate (Valentine’s Day)
Increasing the scale of usage
Faster product replacement
Shortening of PLC (new versions of the product, product
modifications),
New product offered at lower price,
Aternative options of financing the purchase (leasing, favorable
credit),
Promotion facused on creating the NEED of using latest, better
version of the product
Increasing the value of the product
(as well as the price)
Product ‘upgrading’
New additional benefits
Increasing the scale of usage
New usage of the product
This strategy leads to the new market
creation!
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Selective demand growth
strategies
Selective demand growth strategies are
creating and sustaining competitive
advantage
Selective demand
growth strategies
There are two main strategic options:
Cost leadership strategy
A cost leadership strategy seeks to
achieve the position of lowest-cost
producer in the industry.
By producing at the lowest cost,
the manufacturer can compete on
price with any other producer in the
industry.
Cost leadership
Offer differentiation
Cost leadership strategy
Economy of scale
Internal focus
Learning curve effect
Improving productivity
Only one firm
Low margins
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Cost leadership strategy
Mass marketing
Avoiding niches and small market segments
Product standarization
Limited augmented product
Intensive distribution
Effective logistics
Limited promotional spendings
Low prices
Standarization of marketing strategies and
efforts
Differentiation strategy
The influence of market position on
strategy
Lesson 10, 11 &12
Strategies based on
the company’s
competitive position
Brand image and reputation
Market segmentation
Targeting
Focus on customers (needs, preferences, etc.)
Product differentiation
Intensive
marketing
efforts
including
marketing communication
Prices higher than avarage
Augmented products
High costs
R&D investments
Market leader – has the largest market
share, it determines the nature, pace and
bases of competition, typically is the
benchmark for other companies in the
industry
Market challengers & followers – firms
with slightly smaller market share can adopt
one of two stances.
they may choose to adopt aggressive stance and
attack other firms, including the market leader, to
gain share are dominance (challengers)
or adopt less aggressive stance in order to maintain
the status quo (followers).
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The influence of market position on
strategy
The influence of market position on
strategy
Market nichers – small firms which survive
and 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;
nichers are able to build up specialist market
knowledge and avoid expensive fights with
larger companies
•Expand the market
•Protect the current share
•Expand share
Leaders
Challengers
Nichers
Followers
Get smart!
Strategies for market leaders
How best to expand the total
market?
How to protect the organization’s
current share of the market?
How to increase market share?
•Dicsount or cut prices
•Cheap goods
•Innovative products and
distribution
•Improve services
•Advertise heavily
•Proliferate the range
•Reduce costs
•Segment carefully
•Use R&D cleverely
•Challenge conventional
wisdoms
Market leadership
Guarding the
existing market
Expansion of the
current market
share
Strong market positioning
Heavy advertising
Development and refinement
of meaninful competitive
advantage
Improved distribution
Price incentives
Continuous product and
process innovation
New product development
Proactive stance
Takeovers
Heavy advertising
Geographic expansion
Strong customer and
ditributionrelations
Distributor expansion
Mergers
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Marketing strategy and military
analogies
Strategies based on
the company’s competitive position
Offensive strategies
Frontal attack
Offensive warfare – first of all for
market challengers
Defensive warfare – for market
leaders guarding the market
position
Neutral strategies – for market
nichers and followers
Flanking attack
Encirlement
attack
Defensive strategies
Neutral strategies
Position defence
Following
Flank position
defence
Specialization
Mobile defence
Byepass attack
Counteroffensive defence
Guerrilla warfare
Pre-emptive
defence
Cantratiction
defence
Strategic
withdrawal
Defensive warefare
Strategy
Comment
Position defence
Static defence of a current position, retaining
current product-market by consolodating
resources within existing areas. Exclusive raliance
on a position defence effectively means that a
business is a sitting target for competition.
Mobile defence
A high degree of mobility prevents the attacker’s
chances of lacalising defence and accumulating its
forces for a decisive battle. A business should seek
market development, product development and
diversification to create a stronger base.
Pre-emptive defence
Attack is the best form of defence. Pre-emptive
defence is launched in a segment where an attack
is anticipated instead of a move into related or
new segments.
Defensive warefare
Strategy
Comment
Flanking defence
This is used to occupy a position of
potential future importance in order to
deny that position to the opponent.
Leaders need to develop and hold
secondary markets to prevent
competitors using them as a spring board
into the primary market.
Contraction defence
Company has little hope of defending
itself fully. It concentrates its resources in
areas considered to be less vulnerable.
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Defensive warefare
Strategy
Comment
Counter-offensive defence
This is attacking where one is being
attacked. This required immediate
response to any competitor entering a
segment or initiating new moves.
Examples are price wars, where firms try
to undercut each other.
Strategic withdrawal
Position defence (fortress)
May be a last resort, but ‘cutting your
losses’ can be the best option in the long
run. Management resistance to what it
seen as a drastic step is likely to be the
biggest barrier.
Position defence (fortress)
Company attempting fortress defence
will find retreating form line after line of
fortification into shrinking product
markets
Even a dominant leader cannot afford to
maintain static defence, it must
continually engage in product
improvement, line extensions and
product proliferations
One of the last successful methods of
defence
Relies on the apparent impregnability of
a fixed position
To overcome a position defence the
attacker adopts on indirect approach
rather than head-on attack that the
defender expects
Mobile defence
Rather than becoming preoccupied with
the defence of current products and
markets firms concentrates upon market
broadening and diversification
Companies cover new territories that
might in the future serve as focal points
both for offence and defence
The need for management to define and
redefine the business it’s in
Involves diversification into unrelated
industries
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Pre-emptive defence
Mobile defence
Market broadening and market
diversification
To major principles for market broadening:
principle of the objective – clearly defined and
realistic objective)
&
principle of mass (focus efforts upon the enemy’s
point of weakness)
FUD marketing
Guerilla actions – hitting one
competitor here, another there to keep
everyone off balance
Dissuade competitors form attacking
(bluff)
Companies with strong assets may
prefere to entice the opponents into
expensive and costly attacks that will
not pay off in long run
Involves gathering information on
potential attacks and then capitalizing
upon competitive advantages, striking
first
Two broad forms: the company behaves
aggressively or uses psychological
warfare by letting it be known how it will
behave if a competitors acts in a specific
way (FUD marketing – fear uncertainty
and despair)
Pre-emptive defence
Company should never rest even
after it has achieved domination
Should replace products frequently
and support them aggressively
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Flanking defence
Contraction defence
Flank is often less protected than
other parts of the organization
(market)
Secondary markets shouldn’t be
ignored
Company has little hope of defending
itself fully.
Opts for withdrawal from segments and
geographical areas with higher threat
It concentrates its resources in areas
considered to be less vulnerable.
Planned contraction – giving up the
weaker territories and reassigning forces
to stronger territories, to consolidate
competitive strenght
Strategic withdrawal
Counter-offensive defence
Market leader needs to respond
competitor’s attacks in order to minimize
the threat
May be a last resort, but ‘cutting
your losses’ can be the best option
in the long run.
This response can take one of three
forms:
Management resistance to what it
seen as a drastic step is likely to be
the biggest barrier.
Meet the attack head-on
Attack the attacker’s flank
Develop a pincer movement in an attempt to
cut off attacker’s operational base
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Strategies for market pretenders
Basic conditions:
Who to attack?
Challenger must have a sustainable
advantage either in terms of cost or
differentiation
Challenger must be able to partly or
wholly neutralize the leader’s
advantages, typically by doing
almost as well as the leader which
the leader does best
Frontal attack
Attacking the market leader
Outcome depends on who has the
greater strenght and endurance
Attacking firms of similiar size to
itself but which are either underfinanced or reactive
For a pure frontal attack to succeed
the aggresor needs a strenght
advantage over competitor (at least
3:1)
Attacking smaller regional firms
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Frontal attack
Modified frontal attack can take
two forms:
Flankinng attack
To match the leader’s offer on other
counts and beat it on price (it works when the
leader does not retaliate by cutting price, when competitor
convinces the market that its product is equal to competitot’s
or at a lower price it is a real value)
To invest heavily in research to achive
lower production costs and then attacks
competitors on a price basis
Flankinng attack
Direct flan attack: geografpical
(spotting areas in the country or the
world in which the opponent is not
performing at high levels) or
segmental (spotting uncovered
market needs not being served by
the leaders)
Higher probability of being
successful than frontal attacks!
The strategy of ‘indirect approach’
The agresor will act as if it will attack
the strong side to tie up the defender’s
troops but will launch the real attack at
the side or rear
Attack on those areas where the leader
is geographically weak and in market
segments or areas of technology which
have been neglected
Encirclement attack
An attempt to capture a wide slice
of the enemy’s territory through a
‘blitzkrieg’ attack
It’s a grand offensive on several
fronts, enemy must protect its
front, sides and rear simultanously!
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Bypass attack
The most indirect offensive
strategy.
It means bypassing the enemy and
attacking easier markets to broaden
resources base
Three lines of approach:
Diversification into unrelated products
Geographical diversification
Leapfrogging into new technologies
Guerilla attack
Typically short promotional and
price attacks in random corners of
the larger oponent calculated to
gradually weaken the oponent’s
market power.
A continual stream of minor attack
creates cumulative impact,
disorganization and confusion
Guerilla attack
Available also to smaller
undercapitalized aggressors.
Making small attacks on different
territories of the oponent, with the
aim of harassing and demoralizing
the oponent.
The key is to focus the attack on a
narrow territory
Neutral strategies
For market followers
Following closely
Following at a distance
Following selectively
Three broad followership strategies:
Cloner
Imitator
Adapter
For market nichers
Specialization
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Following
Broad followership strategies
Closely – by emulating the leaders in as
many market segments and marketing mix
areas as possible
Cloner
At a distance – following the leader in
Imitator
Adapter
terms of major markets and product
innovations, price level & distribution with
more differentiating factors
Selectively – to avoid direct competition,
often grows into the future challenger
Cloner
Is a parasite that lives off the
investment made by the leader in
the marketing mix (such as in
product or distribution).
An extreme version of the cloner is
counterfeiter, who produces fakes
of the original.
Imitator
Copies some elements but
differentiates on others
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Adapter
Takes leader’s products and adapts
or even improves them regarding
market requirements.
The adapter may grow to challenge
the leader.
Market nicher strategies
Ideal niche:
Sufficient size and purchasing power
Growth potential
Negligible interest of major competotors
Firm has skills and resources to serve the
niche effectively
Firm’s godwill can help to defend the
market position in case of major competitor
attack
Market nicher strategies
End-user specialist – specialising in
Market nicher strategies
Geographic specialist – selling to one
Product or service specialist –
one type of customer
Vertical-level specialist – specialising
locality
at one particular point of the
production/distribution chain
Customer-size specialist – mostly to
small customers who are neglected by the
majors
Specific-customer specialist – to one
offerning specialised services not available
form other firms
Quality/price specialist – operating at
low or high end of the market
Channel specialist – concentrating on
just one channel of distribuion
or a few major customers only
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Lesson 13 &14
The Product Life Cycle
Strategies for different
PLC stages
ALL products have a finite life-cycle and
will eventually die
During this cycle they will move through
distinct phases, requiring different
strategies to exploit
Profit potential from each stage will vary
Common Curves
introduction
growth
maturity
decline
sales
sales
Cycle - Profit Relationship
Cycle - recycle
fashion
emphasises continual need to review objectives and
strategies
highlights need for balanced portfolio of products
keeps focus on short term potential of innovation
time
time
scallop
sales
sales
growth-slump-maturity
time
profit
time
time
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Source: Wilson & Gilligan, 2001
Product Life Cycle - Implications
Introduction
Growth
Maturity
Decline
Sales
low
rapid increase
peaking
declining
Costs
high
average
low
low
Profit
negative
increasing
high
declining
Competition
few
increasing
high
shake-out
Goal
creating
product
awarness
& trial
market share
maximization
profit
maximization
expenditure
reduction
Product
basic
developing
modify
phase out weak
Price
low….
penetration
competition
reducing
Place
selective
intensive
heavy discount selective
Promotion
heavy spend
Segment?
Manage costs
Modify?
Enhance?
Rejuvenate?
moderate/mass
brand
differentiation
focussed to
retain loyalty
Rejuvenate?
Kill?
Market penetration
or Market skimming?
Intensity of
marketing
support?
Manage decline / resources
Innovators - Followers
Promotion
Are we pioneers
(innovators) or
followers (copying
competitors)?
Question
Answer
Decision
intensive
weak
How long is probabale product
category life time?
Long PLC
Short PLC
Follower
Innovator
high
Rapid
skimming
strategy
Slow
skimming
strategy
What is predicted market penetration
level?
Low
High
Follower
Innovator
low
Rapid
market
penetration
Slow
market
penetration
What are estimated costs of
imitation?
Low
high
Follower
Innovator
What are company’s resources?
Big
Small
Follower
Innovator
What are costs of deliverer change?
Low
High
Follower
Innovator
How important is a brand as a
purchase decision factor?
Less important
Very important
Follower
Innovator
What is the level of clients education
costs?
High
Low
Follower
Innovator
Price
How to expand the
total market?
Stage Considerations
Competitive strategy?
Differentiation
Strategies for introduction phase
Are we innovators
or followers?
How to grow selective
demand?
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Rapid skimming strategy
Firm charges high price in order to
recover as much gross profit per unit as
possible
Intensive promotion to convince the
market of the product’s merits & to
accelerate the rate of market penetration
Reasonable when:
A large part of the market is unaware of the product
Aware people are eager to get the product & are able to
pay for it
Firm wants to build up brand preference
Rapid penetration strategy
Promises to bring about the fastest
market penetration and the largest
market share
Resonable when:
Market is large
Market is unaware of the product
Most buyers are price sensitive
There is strong potential competition
Company’s costs fall with the scale of production
and accumulated manufacturing experience
Slow skimming strategy
Firm charges high price in order to
recover as much gross profit per unit
as possible
Low level of promotion keeps
marketing expenses down
Reasonable when:
Market is limited in size
Most of the market id aware of product
Buyers are willing to pay high price
Potential competition is not imminent
Slow penetration strategy
Company believes that market
demand is highly price elastic but
minimally promotion elastic
Reasonable when:
The market is large
The market id highly aware of the product
The market is price sensitive
There is some potential competition
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Strategies for growth phase
How to grow selective
demand?
Growth stage strategies
Which strategies based
on
the company’s
competitive position?
How to expand the
total market?
Strategies for maturity phase
How to grow selective
demand?
Improve product quality, add new product
features, improve the style of the product
Add new models
Enter new market segments
Enter new distribution channels
Shifts advertisinig from creating product
awarness to bring product conviction and
purchase
Lower price to attract the nest layer of
price-sensitive buyers
Market modification
Market modification
Product modification
Marketing-mix
modification
Which strategies
based on
the company’s
competitive position?
Convert nonusers
Enter new market segments
Win competitors’ customers
More frequent use
More usage per occasion
New and more varied uses
How to expand the
total market?
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Product modification – new features
Marketing mix modification
Bulid a company image of
progressiveness and leadership
Can be adapted quickly, dropped
quickly and made optional at little
expence
Can win the loyalty of customers
Can bring free publicity
Generate sales-force and dictributors’
enthusiasm
Strategies for decline phase
Readings
Leadership
Niche
Harvesting
Drop decision
Which strategies
based on
the company’s
competitive position?
Prices
Distribution
Advertising
Sales promotion
Personal selling
Services
P. Kotler, Marketing Management. Analysis,
Planning, Implementation and Control, Chapter
11, p. 318-365
Strategic Marketing Management: Planning &
Control, Professional Education, 2003
R. M. S. Wilson, C. Gilligan, Strategic Marketing
Management: Planning, Implementation and
Control, Butterworth Heinemann , Chapter 10,
p. 326 - 388
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