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MARKETING STRATEGY NOVEMBER 2014 MODEL ANSWERS Question One (a) Mission statement is a broad statement that indicates the main reason/purpose of why an organization exist. It also indicates the main values of the organization. The mission statement is important in helping and organization develop and overall direction (b) The vision refers to where the organization would like to see itself in the future. The vision contributes to the development of the overall direction of the organization (c) Strategies refer to the means of achieving objectives. Strategies determines the type of resources that an organization uses.Strategies also contributes to the overall direction of the organization (d) Goals refer to the future state of affairs of an organization. They can also simply be referred to as the long term aims of the organization. Objective refers to anything that an organization would like to achieve. Goals and objectives determine the allocation of resources of an organization. They give an organization a sense of purpose. (e) Marketing Tactics are the action programs that help to implement the marketing strategies. The marketing tactics are mainly the marketing mix elements [7Ps]. Question Two. Define marketing orientation. Marketing orientation means focusing on the needs and wants of customers and satisfying them and show that a marketing orientated organisation devotes resources to understanding the needs and buying behaviour of customers, competitors’ activities and strategies, market trends and other external forces and inter-functional coordination to ensure that the organisation’s activities are aligned to this market intelligence. • Within the context chosen, illustrate and discuss that by focusing on customer orientation, competitor orientation and inter-departmental orientation, substantial benefits have been achieved which will help drive long-term profits. Amongst the issues discussed, may be that marketing orientation is organisational wide and that everybody in the business should become more market-led, that everybody in the company is now a part-time marketer and must become customer-focused. • Then show that to become marketing orientated, a number of issues need to be addressed. These will include: top management commitment, cooperation and understanding across functions, appropriate structures, processes and systems for gathering and disseminating information and effective communication and training throughout the organisation. • Discuss how a marketing orientation approach can be implemented across functions/into a new organisation and how the necessary ‘change’ can be achieved within the context chosen. Reference is likely to be made to internal marketing and the need for an internal marketing plan. • Conclude with a statement re-iterating that by adopting a marketing orientation approach, the business will better understand the needs of their customers, is better able to identify opportunities and threats and is better able to marshal all its resources to achieve sustainable competitive advantage. Question Three (a) Resistance to change Any new method of management thinking can experience some resistance from established managers. This resistance may be due to concern to protect status quo, or because managers are ignorant f the new thinking. Integrating marketing communications seems so obvious that it may be overlooked or seem as a superficial approach. (b) Old planning systems Old planning systems have sometimes downgraded marketing decisions to the tactical level. Advertising expenditure is decided on the basis of what the company can afford rather than what is strategically required. Promotion is seen as a series of short-term actions rather than as a long-term investment. (c) Old structures/functional specialists Complementing traditional planning systems are traditional organisation structures. These structures freeze out new thinking on integrated marketing strategy. Individuals have limited specific responsibilities – just for advertising, say, or just for public relations – and this inhibits new thinking on integration. (d) Centralised control If the chief executive keeps tight control of the organisation and of its planning and is unconvinced of the benefits of innovation then it will not happen. (e) Cost considerations Innovation usually requires investment. OVERCOMING BARRIERS TO INNOVATION (a) Top management commitment The most effective way of overcoming these barriers to change is through the commitment of top management. The chief executive in particular needs to be convinced of the appropriateness of the new thinking and be enthusiastic about its implementation throughout the organisation. (b) Marketing reorganisation One way in which the chief executive can take advice is through a reorganisation of the marketing function in the organisation. (c) Training and development It is one thing to change attitudes. It is another thing to be in a position to know exactly what to do. It needs the services of the individuals trained in strategic thinking. The individuals chosen to implement ant new programme must be enthusiasts capable of overcoming resistance to change. (d) Marketing as a competitive advantage Those with responsibility for implementing an integrated marketing programme must do with the objective of developing it as a sustainable, long-term competitive advantage. (e) Producing the results Nothing succeeds like success. Producing the business results as a consequence of effective marketing communications will boost confidence and gain management converts to the new thinking on an integrated approach. Question Four Market Penetration This strategy – same product/same market – will be appropriate when a market is growing and not yet saturated. Penetration can be achieved by: (a) Attracting non-users of a product (b) Increasing the usage, or purchasing rate, of existing customers. The strategy will often be implemented by increasing activity on one or more of the mix elements – for example, using more intensive distribution, aggressive promotion, pricing, etc. Market Development This strategy – same product/new market – is often found when a regional business wishes to expand or if new markets are emerging because of changes in consumer habits. It can also occur when a new use has been discovered for an existing product. Implementation of this strategy involves appealing to market sectors (or geographical regions) not currently catered for and many mean a repositioning of products as well as, very often, new distribution methods or channels. Product Development With this strategy – new product/existing market – an organisation develops new products to appeal to its existing markets. It may simply be a product "refinement" – for example, change of packaging or taste, etc. Product development is most prevalent when branding exists. Promotional aspects will emphasise the added qualities of the "new" product and link it specifically to the security of, and confidence in, the brand. This strategy builds on customer loyalty and the benefits to be gained by purchase. Other mix elements, such as distribution, may remain unchanged. Diversification This strategy – new products/new market – is sometimes introduced so that a company does not become too dependent on its existing SBUs. It can be a form of "insurance" against potential disasters that could occur in the event of drastic environmental changes. It can also simply be a means of growth and expansion of power, etc. "New" might be a totally innovative product, which has never been seen in the marketplace, or it can be a product which is already available in the market but is new to the firm. In either case, Diversification means catering for market sectors which are also new to the firm. If a new product is developed for the existing market it is Product Development and not Diversification. Firms can diversify by producing their own new products or by taking over some other product. In the latter case there are two main types of diversification – integration (which may be vertical or horizontal) or conglomeration. Question five External environment Political factors Govt policies, action of politicians, political stability etc Economic factors Inflation, interest rates, unemployment, exchange rates, GNP per capita Social factors Demographic factors, culture, changes in tastes and preferences Technological factors New developments in technology Environmental factors Pollution issues, chemical wastes issues, green house gas emissions issues, climate change Ethical factors Fair trading, CSR Legal factors Laws, rules and regulations Internal environment (a) (b) (c) (d) (e) Employees Customers Shareholders Organizational structure Organizational culture b.SWOT Strengths Skilled employees More resources More customers Weaknesses Unskilled employees Less resources Less customers c. Smart objectives To grow customer base by 50% by 31/12/14 Opportunities Low interest rates Low inflation Political stability Threats High interest rates Unstable political environments High inflation Question Six define marketing orientation and show that a marketing orientatedorganisation devotes resources to understanding the needs and buying behaviour of customers, competitors’ activities and strategies, market trends and other external forces and inter-functional coordination to ensure that the organisation’s activities are aligned to this market intelligence. • Within the context chosen, illustrate and discuss that by focusing on customer orientation, competitor orientation and inter-departmental orientation, substantial benefits have been achieved which will help drive long-term profits. Amongst the issues discussed, may be that marketing orientation is organisational wide and that everybody in the business should become more market-led, that everybody in the company is now a part-time marketer and must become customer-focused. • Then show that to become marketing orientated, a number of issues need to be addressed. These will include: top management commitment, cooperation and understanding across functions, appropriate structures, processes and systems for gathering and disseminating information and effective communication and training throughout the organisation. • Discuss how a marketing orientation approach can be implemented across functions/into a new organisation and how the necessary ‘change’ can be achieved within the context chosen. Reference is likely to be made to internal marketing and the need for an internal marketing plan. • Conclude with a statement re-iterating that by adopting a marketing orientation approach, the business will better understand the needs of their customers, is better able to identify opportunities and threats and is better able to marshal all its resources to achieve sustainable competitive advantage. Question seven a. Segmentation Segmentation is the process of grouping customers according to their similar characteristics and needs. A market segment therefore share the same need and wants, buying behavior and other characteristics. This means that each segment can be targeted and reached using a particular strategy and marketing mix. Segmentation can use a number of bases e.g. demographic segmentation, geographic segmentation. Segmentation can use criteria of profitability, sustainability e.t.c. b. Demographic & Geographic segmentation & segmentation strategies Demographic segmentation This is people-based segmentation, where the market is divided on criteria such as age, sex, family size, family life-cycle, job type, income, etc. Geographic segmentation Here the market is divided into geographic units: a nation, a country, a city, a town. This is more likely, now, to be a TV area – certainly an area for which secondary data sources exist. Segmentation strategies Concentrated segmentation One special and unique marketing mix is applied to one particular segment and the rest of the segment use the same marketing mix Undifferentiated segmentation The same marketing mix is used for all the segments of the organisation c. Role of targeting and positioning Targeting Once the markets have been segmented, targeting follows and involves two steps. The first is to select segments that are going to yield the highest results and the second step is to target the selected segments using undifferentiated strategy, differentiated strategy and concentrated strategy. The choice of the strategy will depend on the characteristics of the segments. Positioning Positioning refers to the process of placing the product at the right place in the mind of the customer. It involves the creation of the mental image of the product offering and its distinct features in the mind of the targeted customers. This is usually done using perceptual maps. Question Eight Begin by defining the market audit and show that it is a systematic, critical and impartial examination of the marketing function’s objectives, strategies, programmes, organisation and performance and how it links with the strategic marketing process. • Show that it is an important precursor to undertaking marketing planning. • Show that the marketing audit does not concern itself with the company’s marketing position but rather it is designed to identify the strengths and weaknesses of a marketing function or department as it performs its assigned responsibilities and actions. • Identify and discuss the dimensions that a marketing audit will examine. These are likely to include a marketing organisation audit, a marketing system audit, a marketing productivity audit and marketing function audits. It may examine activities such as: structure, efficiency, MIS, planning and control, NPD, profitability analysis, cost effectiveness, products and services, price, distribution, the promotional mix and the sales force. • Discuss and explain how an audit might be undertaken. It can be managed by internal staff or external consultants, it needs to have top management and cross functional support, it should involve a wide range of staff from throughout the business, it is usually a step by step process undertaken by a series of questions and structured questionnaires, it is designed to diagnose the reasons for success or failure. The findings must be communicated to all those involved and presented ideally in a written report. Finally a detailed action plan should be developed with clear time lines and allocated responsibility. • Identify and discuss the challenges and problems associated with marketing audits. These will include the need to conduct them regularly. However, some businesses find it difficult to select and make auditors available because of the time involved and cost, it may be disruptive and may create a fear culture. There is therefore reluctance by some to undertake marketing audits (especially within SMEs). • Finally we need to consider why a marketing audit is valuable to the strategic marketing manager. It is an important precursor to the marketing plan and should help to enhance effective deployment of a meaningful plan. It is an insightful technique designed to reveal successes, deficiencies and poor practices that need to be addressed. A regular ongoing audit will also help the strategic marketing manager because it is a robust method of monitoring and measuring the successful implementation of marketing strategies, policies and standards.