MARKETING STRATEGY

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Eight M’s of Management

» Men » Money» Materials» Machines» Methods» Market» Milieu» Minutes

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“Optimum Utilization

of these resources (8 M)

is

Management .”

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Marketing Strategy

STRATEGY

A strategy is a fundamental pattern of present and planned

objectives, resource deployments and interactions of an

organization with markets, competitors and other environmental

factors.

Strategy should specify

• What

• Where

• How

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Components of Strategy

Components or Sets of issues:

• Scope

• Goals and Objectives

• Resource deployments

• Identification of sustainable competitive advantage.

• Synergy.

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Hierarchy of Strategy

Corporate Mission

Corporate goals & Objectives

Corporate Development Strategy

Deployment of resources

SBU – I SBU - nSBU – II

Business Unit’sObjectives

Deployment of ResourcesAcross product-markets

And functionsCompetitive Strategy

Marketing strategyFor product

Market entry R&D

Strategy &Plans

Tactical marketing Plan for product

Market entry

HRMStrategy &

Plans

OperationStrategy &

plans

Environmental factors

Corporate Strategy

Business Strategy

Functional Strategy

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Porter Model of Competitive Industry Structure

Industry Competition

Intensity of Rivalry

Suppliers Buyers

New Entrants

Substitute

Power ofSuppliers

Power ofBuyers

Threat ofSubstitutes

Threat ofNew Entrants

Bargaining Bargaining

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Threat of New Entrants

• Economies of Scale.

• Capital requirements

• Switching costs

• Access to distribution

• Expected retaliation

• Brand equity

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Bargaining Power of Suppliers

• Many buyers and few sellers

• Differentiated supplies

• Crucial supplies

• Forward Integration

• Backward Integration

• Level of dependence

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Bargaining Power of Customers

• Few dominant customers

• Non-differentiated products

• Small portion of customer’s total purchase

• Backward integration

• Forward integration

• Key supplies

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Threat of Substitutes

• Buyer’s willingness to substitute

• Relative price and performance of substitutes

• Cost of switching over to substitutes

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Industry competitors

• Structure of Competition

• Structure of costs

• Degree of differentiation

• Switching Costs

• Strategic objectives

• Exit barriers

COMPETITORANALYSIS

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Answer five key question

1. Who are the competitors?

2. What are their strengths and weakness?– Identify key factors for success in the

industry– Rate one’s company and competitors on

each key success factor using a rating scale– Consumer implications for competitive

strategy

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Answer five key question

3. What are the strategic objectives and thrusts of competitors?

4. What are their strengths?

5. What are their response patterns?

COMPETITIVE ADVANTAGEby

COMPETITIVE STRATEGY

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Creating A Differential Advantage

• Product

• Distribution

• Promotion

• Price

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Hierarchy of goals and objectives

Porter’s Economic Theory of Profits

– Barriers to Entry

– Competition

– Substitutes

– Customers

– Suppliers

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Generic Marketing Strategies– Cost Leadership

• Lower costs of production and distribution

– Differentiation• Unique product or brand

– Focus• Focus on customer needs in a few segments

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Product Mix StrategiesMarket penetration versus market skimming

QualityHigh

Medium

Low

Price

High Medium Low

PremiumGoods

Penetra-tion

SuperBargain

Over-Pricing

AverageQuality

Bargain

Hit andRun

ShoddyGoods

CheapGoods

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Product Market Growth Strategies

Market Penetration(increase usage)

Product Development(new uses)

Market Development(new users)

Diversification(new users, new uses)

Markets

Products

Old

Old

New

New

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Boston Consulting Group Strategy:Relative Market Share

Market Growth Rate

Problems with BCG Approach

Difficult to estimate relative market share in rapidly growing markets

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BCG Matrix:

StarsSome cash use

Future cash cow

Cash CowsGenerate cash for

?, Stars

DogsLow or no cash use

When to divest

?High cash use

? Is to build or not

Relative Market Share10x 1..5x .1x (log scale)

Market GrowthRate

22%

10%

0%

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Market Leader StrategiesIncrease Size of Total Market

Product-Market Growth Strategies

Protect Market Share

Fortification

Assortment of brands, sizes

Innovation

Best defense is a good offense

Counteroffensive

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Market Leader Strategies (cont.)Increase Market Share

BCG

Antitrust constraints

Market Share

Marketing Effort ($)

100%

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Market Challenger StrategiesFrontal Attack

Out-innovate leader

Tough to do, easier to defend

Flanking/Bypass Attack

Attack where leader is not looking

Find a new market segment

Price Discount Strategy

Buyers are sensitive to price

Works if leader does not cut price

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Market Challenger Strategies (cont.)Cheaper Goods Strategy

Lower quality but much lower price

Vulnerable to still cheaper goods

Prestige Goods Strategy

Increase both quality and price

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Market Follower StrategiesConscious Parallelism

Similar products, prices

Avoid unprofitable segments

Market Niche

Specialize in a very small group of customers

Concentrated segmentation strategy……

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Attacker(smaller)

Defender(bigger)

PositionDefense

PreemptiveDefense

Counteroffensive

ContractionDefense

Flanking Defense

Mobile Defense

Flank Attack

Frontal

Attack

Encirclement

Bypass

Guerilla Attack

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eMarketing

Is eMarketing anything new?…or just an adaptation of existing strategy?

Addressability – ability to identify customer prior to purchase

Marketers could always do this.

So why is web different? Is it more efficient…?

…only if you do not delete your cookies…?…or they keep extensive files on you…

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eMarketing

Interactivity – customers can express their needs and wants directly to the firm

Marketers could always do this too. So what is new?

…another efficiency argument…?

Memory – ability to access individual customer profiles and purchase histories

This is probably valid. Information existed before butwas hard to access

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eMarketing

Control – customer’s ability to control flow and sequence of information

Pull versus push medium…web versus television.Who control’s the flow?

Definitely an eMarketing characteristic, but a two-edged sword.

Why? Customers control the flow……

Accessibility – ability to obtain information…..

“Retrieving info from the Internet is like trying to drink from a

fire hose.” You could always do this, web may be easier for some users.

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eMarketing

Digitilization – can the product or benefits be represented digitally?

Does the media match the product’s attributes?

…a problem for all media…?

So, does eMarketing exist? Maybe, or maybe it is just another information flow/distribution system touse in designing a marketing strategy to meet customer needs…(and maximize profits).

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Marketing Strategy

Bear Theory

Differential versus Absolute Advantage