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Strategic Marketing Principles

“all men can see are the tactics by

which I conquer . . .

what none can see is the strategy

from which it evolves.” - Art of war



Basics of strategy

1. What needs to be achieved?

2. Where it needs to be achieved?

3. How it needs to be achieved?



Definitions of Strategy

“ A strategy is a fundamental pattern of present &

planned objectives, resource deployments &

interactions of an organization with markets,

competitors & other environmental factors”



Strategy defined by Michael

Porter • Strategy helps a business to develop & sustain

its

• Competitive Advantage

• Build brand image• Enhance performance

• Define market position

• Create USP



Concept of strategic marketing

• Within a given environment, marketing strategy dealsessentially with the interplay of three forces known as thestrategic three Cs: – the consumer

– the competition

– the corporation

• Marketing strategies focus on ways in which the corporationcan differentiate itself • effectively from its competitors and

• capitalizing on its distinctiveness

• by providing value to its customers



Components of Marketing

Strategy

• a clear market definition;

• a good match between corporate

strengths and the needs of the market;

• and superior performance, relative to the

competition.



Components of a Strategy

• Scope

• Goals

• Resource allocation• Sustainable competitive advantage

• Synergy



Levels of Strategy-Making

in a Diversified Company

Corporate

Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level

Managers

Business-Level

Managers

FunctionalManagers

Operating

Managers



Levels of Strategy-Making in

a Single-Business Company

Business

Strategy

Two-Way Influence

Functional Strategies

Operating Strategies

Business-Level

Managers

Operating

Managers

Functional

Managers

Two-Way Influence



Corporate Strategy.

Over all attitude of corporation towards its various

businesses and product lines in terms of stability

growth & management. e.g.. Corporate Strategy of growth diversifying base in retailing into delivery

business.



Business Strategy.

Usually occurs at business unit & product level.

It is composed of Competitive & Cooperative

Strategies e.g..

Competitive strategy emphasizes innovative products with creative design,

change in marketing mix etc.

Cooperative Strategies promotes alliance, technical collaborations, etc.



Functional Strategy

It is the approach taken by a functional area,

such as Marketing or R&D to achieve

corporate and business unit Objectives &strategies by maximizing resources and

increasing productivity..

e.g..

Dell directly selling Computers to consumers to reduce

distribution cost & increase customer service.



STRATEGIC MANAGEMENTPROCESS

STRATEGIC

ANALYSIS

STRATEGICCHOICE

STRATEGICIMPLEMENTATION



Strategic marketing

• Strategic marketing is the dynamic

process of strategy development taking

into consideration the constantly changing

market environment & the vital factor of customer satisfaction.



Characteristics of Strategic

Marketing

• Emphasis on Long-Term Implications. – Strategic marketing is a commitment, not an act.

• Varying Roles for different products or Markets. – Strategic marketing starts from the premise that different products

have varying roles in the company.

• Organizational Level. – Strategic marketing is conducted primarily at the business unit level

in the organization.




Marketing

• Corporate Inputs:

– Corporate culture ~ refers to the style,

whims, traits, taboos, customs, and rituals of top management.

– Corporate publics ~ are the various

stakeholders with governments and society

constitute and organization’s stakeholders. – Corporate resources ~ include the human,

financial, physical, and technological

assets/experience of the company.




Marketing• Relationship to Finance.

– Closely related to the finance function.

– Maintaining a close relationship between

marketing and finance.

– Relate marketing to finance in making

strategic decisions.



Strategic Marketing Process

Marketing Analysis (Internal)

Marketing Analysis (External)

Formulating Marketing strategy

Marketing Program development

Implementing & Managing Marketing Strategy



Marketing analysis ( Internal)

• Marketing Audit & SWOT Analysis

• Marketing Costs & Financial analysis



Analysis of Marketing situation

(External)

• Market & environment analysis

• Competitor analysis

• Customer analysis

• Learning market organization



Strategic Tools for Internal And

External Analysis

• PEST Analysis

• ADL Matrix

• Ansoff’s Product/Market Matrix

• Balanced Scorecard

• Benchmarking

• BCG Matrix

• Core Competencies

• Michael Porter’s Generic Strategies

• Value Chain Analysis

• SWOT

• Porter’s 5 forces Model



External Analysis: PEST

Organization

Specific EnvironmentIndustry-Competitors

Substitute

ProductsBargaini

ngPower of Supplier

s

Bargaining

Power of Buyers

Potenti

alEntrants

CurrentRivalry

GeneralEnvironment

Technologi

cal

Political-Legal

Sociocultural

Demographic

Economi

c

Contd



PEST: Political Legal Environment

• Center, state, and local – Laws

– Regulations

– Judicial decisions

– Political forces



PEST: Economic Environment

• Interest rates

• Monetary exchange rates

• Inflation rates

• GNP or GDP

• Consumer income, spending, and debt levels

• Unemployment levels

• Workforce productivity



PEST: Socio-Cultural Environment

• Country’s culture

• Social Values – Traditions

– Values

– Attitudes

– Beliefs

– Tastes

– Patterns of behavior



PEST: Technical Environment

• Communications

• Computing

• Transportation

• Robotics

• Biotechnology

• Medicine and medical

• Telecommunications

• Consumer electronics



Competitive position: ADL Matrix

• Arthur D Little (ADL) Strategic Condition Matrixoffers a different perspective on strategyformulation. ADL has two main dimensions -competitive position and industry maturity .

• From here the strategic position of anorganisation can be established. Managers thenneed to decide upon the best strategic directionfor the business.



The ADL Matrix

1. Dominant - This is a particularly extraordinary positionassociated with some form of monopoly position or customer lock-in e.g. Microsoft Windows being thedominant global operating system.

2. Strong - Here companies have a lot of freedom sinceposition in an industry is comparatively powerful e.g.Apple's iPod products.

3. Favourable - Companies with a favourable position tendto have competitive strengths in segments of a

fragmented market place. No single player controls allsegments. Here product strengths and geographicaladvantages come into play. E.g. Reality Industry



The ADL Matrix

4. Tenable - Here companies may face erosion by stronger competitors that have a favourable, strong or competitiveposition. It is difficult for them to compete since they donot have a sustainable competitive advantage. E.g.

Single screen theaters5. Weak - As the term suggests companies in thisundesirable space are in an unenviable position. Of course there are opportunities to change and improve,and therefore to take an organization to a more

favourable, strong or even dominant position. E.g. MTNLLandline business



Ansoff's Product/Market Matrix

• This well known marketing tool was first published in theHarvard Business Review (1957) in an article called'Strategies for Diversification'.

• It is used by marketers who have objectives for growth.• Ansoff's matrix offers strategic choices to achieve the

objectives.• Ansoff's matrix is one of the most well know frameworks

for deciding upon strategies for growth.



Contd




• Market Penetration – Here we market our existing products to our existing customers.

This means increasing our revenue by, for example, promotingthe product, repositioning the brand, and so on.

– However, the product is not altered and we do not seek any new

customers. E.g. FMCG

• Market Development – Here we market our existing product range in a new market.

– This means that the product remains the same, but it ismarketed to a new audience.

– E.g. Exporting the product, or marketing it in a new region, Fair and Handsome – fairness cream for men




• Product Development – This is a new product to be marketed to our existing customers. – Here we develop and innovate new product offerings to replace existing

ones. – Such products are then marketed to our existing customers. E.g.

Automobiles, cotton shirts to wrinkle free shirts to stain free shirts

• Diversification – This is where we market completely new products to new customers. – There are two types of diversification, namely related and unrelated

diversification. – Related diversification means that we remain in a market or industry

with which we are familiar. For example, a soup manufacturer diversifies

into cake manufacture (i.e. the food industry). – Unrelated diversification is where we have no previous industry nor

market experience. For example a soup manufacturer invests in the railbusiness.



Balanced Scorecard

• The Balanced Scorecard is an approach that can beused by strategic marketing managers to control, andkeep track of, key performance indicators.

• The scorecard itself is designed to be wholly strategic

since it contains long-term outcomes and drivers of success.

• There are four zones in a balanced scorecard namelyfinancial, customers, business processes (or simplyprocesses), and learning and growth.

• The benefit of the scorecard is that it overcomes short-term quick fixes, and gives the strategic marketingmanager a straightforward overview of the organisation



Contd



Balanced Scorecard

• Learning and Growth. – Learning and Growth deals with measures of corporate success

in relation to how it learns as it develops over time. – So if the company makes mistakes in any way, then it must learn

from them and there must be mechanisms in place to make sure

that happens. – Growth also includes the way in which it generates leaders for the future and equips employees with the necessary skills thatwill ultimately sustain its business.

– Examples include skills sets, employee relations andsatisfaction, and staff competences.



Balanced Scorecard

• Internal Business Processes. – Internal business processes include all operations within the

organisation. – The measures would cover whether or not value is being

delivered to target segments, and the value chain is tracked. – Innovation and new product development would also be

measured. – Examples of internal business processes include Information

Technology, manufacturing, marketing operations such ascustomer service, procurement and quality processes.



Balanced Scorecard

• Customers. – As marketers we are very concerned with our customers. We need to

make sure that they are satisfied with every aspect of their experiencewith our organisation.

– We need to make sure that we not only recruit more new customers, butthat we also retain them and extend new products and services to them.

– We also need to make sure that we are meeting the needs of our targetsegments. Examples of customer measures include customer retentionand recruitment, their satisfaction and so on.

• Financial. – Financial measures are vitally important for any business. – They include major financial ratios

• Resources, individuals and teams within a business are thenResources, individuals and teams within a business are thenaligned with the scorecard objectives, measures, targets andaligned with the scorecard objectives, measures, targets andinitiatives for each of the four areas of measurement.initiatives for each of the four areas of measurement.



Benchmarking

• Benchmarking relies upon a comparison

between the activities of your own organization

and those of another.

• Originally benchmarking was used inmanufacturing operations where one process

could be compared and contrasted with another.

• More recently the definition has broadened to

include all business processes, competitive

advantages, performance and strategies



Basic types of benchmark

• Competitive or Industry/sector benchmarking enables anorganization to compare its performance with competitors trading inthe same industry or sector.

• Best-in-class benchmarking is similar to industry or sector benchmarking. However managers would compare their organization to the market or sector leader i.e. the best-in-class.

• Internal or historical benchmarking is the internal procedure for comparing results from past performance to current or forecastedperformance.

• Functional or external benchmarking involves comparing your business activities with those of companies from other industries/sectors with similar processes.

• Collaborative benchmarking involves two phases; firstly betweentwo voluntary collaborators within a sector, then secondly betweenthe two collaborators and a party outside the current sphere of competition.



Benefits of benchmarking

• It is an effective approach for achieving operational change.Benchmarks are the catalyst that moves an organization to higher levels of performance.

• Since customer requirements are so rigorously defined,benchmarking improves customer orientation.

• It focuses upon the processes that improve results - not simplyresults.

• Performance measures are often improved as a result of benchmarking.

• Decision making improves because the organization has enhancedcustomer knowledge, process focus, and performance measures.

• Benchmarking improves innovation and creativity since self-imposed barriers to success are removed.



Marketing benchmarking

• Applying benchmarking techniques to an organization's marketingactivities is comparing one or a number of your company'smarketing activities to those of – another part of the business, – a competitor or a business that operates in another industry.

• It can be applied to: – Pricing – Product Development – Channel Management – Marketing Communications – Selling – Market Information Systems – Marketing Planning – Marketing Implementation

• Essentially they focus upon the marketing mix, marketinginformation, planning and operations.

The Boston Matrix



The Boston Matrix

The Boston Consulting Group's Product

Portfolio Matrix

• Like Ansoff's matrix, the Boston Matrix is a well knowntool for the marketing manager.

• It was developed by the large US consulting group and isan approach to product portfolio planning.

• It has two controlling aspect namely relative marketshare (meaning relative to your competition) and marketgrowth.

• You would look at each individual product in your range(or portfolio) and place it onto the matrix. You would dothis for every product in the range. You can then plot theproducts of your rivals to give relative market share.

Contd



Contd



The Boston Matrix

• Dogs. – These are products with a low share of a low growth market. They do not

generate cash for the company, they tend to absorb it. Get rid of theseproducts.

• Cash Cows. – These are products with a high share of a slow growth market.

– Cash Cows generate more than is invested in them.Keep them in your portfolio of products for the time being.

• Problem Children. – These are products with a low share of a high growth market.

– They consume resources and generate little in return.

– They absorb most money as you attempt to increase market share. Convertthem into stars.

• Stars. – These are products that are in high growth markets with a relatively high

share of that market.

– Stars tend to generate high amounts of income. Keep and build your stars.



The Boston Matrix

• Look for some kind of balance within your portfolio.• Try not to have any Dogs.• Cash Cows, Problem Children and Stars need to be kept

in a kind of equilibrium.• The funds generated by your Cash Cows is used to turn

problem children into Stars, which may eventuallybecome Cash Cows.

• Some of the Problem Children will become Dogs, and

this means that you will need a larger contribution fromthe successful products to compensate for the failures.



Core Competences

• A core competence is the result of a specific

unique set of skills or production techniques

that deliver value to the customer. Such

competences give an organization access toa wide variety of markets.

• core competences give a business a competitive

advantage in a number of markets, markets

where customers perceive a benefit from theproduct



Three tests of core competence.

• Provides potential access to a wide variety of markets.

• Should make a significant contribution to the perceivedcustomer benefits of the end product.

• Should be difficult for competitors to imitate. – For example, Microsoft has expertise in many IT-based

innovations and technologies.

– Customers perceive many benefits in relation to Microsoft'sproducts.

– For a variety of reasons including unique skills, it is difficult for competitors to imitate Microsoft's core competences.



Generic Strategies - Michael Porter

• Generic strategies were used initially in the early 1980s, and seemto be even more popular today.

• They outline the three main strategic options open to organizationthat wish to achieve a sustainable competitive advantage.

• Each of the three options are considered within the context of twoaspects of the competitive environment:1. Sources of competitive advantage - are the products differentiated in any way,

or are they the lowest cost producer in an industry?

2. Competitive scope of the market - does the company target a wide market, or does it focus on a very narrow, niche market?

• The generic strategies are:

– 1. Cost leadership, 2. Differentiation, and 3. Focus.



Generic Strategies

OVERALL

COST LEADERSHIPDIFFERENTIATION

Low Cost Position

Uniqueness Perceivedby the Customer

Industry wide

Particular

Segment only

STRATEGIC ADVANTAGE

STRAT

EGIC

TARGE

T

Source: Michael Porter, Competitive Strategy , 1980

FOCUS

3



1. Cost Leadership.

• The low cost leader in any market gainscompetitive advantage from being able toproduce at the lowest cost.

• Factories are built and maintained, labor isrecruited and trained to deliver the lowestpossible costs of production.

• 'cost advantage' is the focus.

• Costs are shaved off every element of the valuechain. (print your own ticket for flight booking)



1. Cost Leadership.

• Products tend to be 'no frills.'• However, low cost does not always lead to low

price.• Producers could price at competitive parity,

exploiting the benefits of a bigger margin thancompetitors.

• E.g. Toyota, is very good at not only atproducing high quality autos at a low price, but

has the brand and marketing skills to use apremium pricing policy.



2. Differentiation

• Differentiated goods and services satisfy theneeds of customers through a sustainablecompetitive advantage.

• This allows companies to desensitize prices and

focus on value that generates a comparativelyhigher price and a better margin.• The benefits of differentiation require producers

to segment markets in order to target goods andservices at specific segments, generating ahigher than average price.

• For example, British Airways differentiates itsservice.



2. Differentiation

• The differentiating organization will incur additional costs in creating their competitiveadvantage.

• These costs must be offset by the increase inrevenue generated by sales.

• Costs must be recovered.• There is also the chance that any differentiation

could be copied by competitors. Therefore thereis always an incentive to innovate andcontinuously improve.



3. Focus or Niche strategy

• The focus strategy is also known as a 'niche' strategy.• Where an organization can afford neither a wide scope

cost leadership nor a wide scope differentiation strategy,a niche strategy could be more suitable.

• Here an organization focuses effort and resources on a

narrow, defined segment of a market.• Competitive advantage is generated specifically for the

niche. A niche strategy is often used by smaller firms. Acompany could use either a cost focus or a differentiationfocus.



Generic Strategies

• With a cost focus a firm aims at being the lowest costproducer in that niche or segment.

• With a differentiation focus a firm creates competitiveadvantage through differentiation within the niche or segment.

• There are potentially problems with the niche approach.Small, specialist niches could disappear in the long term.

• Cost focus is unachievable with an industry dependingupon economies of scale e.g. telecommunications.



Generic Strategies

• The danger of being 'stuck in the middle.' – Make sure that you select one generic strategy.

– If you select one or more approaches, and then fail to achievethem, then your organization gets stuck in the middle without acompetitive advantage.

• What is the Generic strategy of – Reid and Taylor

– Peter England

– Ritu Beri

– Tanishque

– Big Bazaar – Shoppers Stop



Value Chain Analysis.

• The value chain is a systematic approach to examiningthe development of competitive advantage.

• It was created by M. E. Porter in his book, CompetitiveAdvantage (1980).

• The chain consists of a series of activities that createand build value.

• They culminate in the total value delivered by anorganisation.

• The 'margin' depicted in the diagram is the same asadded value.

• The organisation is split into 'primary activities' and'support activities.'



Value Chain Analysis

M A R G I N

M A R

G I N

Support

Activities{Procurement

Technological Development

Human Resource Management

Firm Infrastructure

Primary Activities {

Inbo

und

Logist

ics

Opera

tions

Outbo

und

Logist

ics

Mar

ke

ting

and

Sales

Servic

e

Contd

Primary Activities



Primary Activities.

• Inbound Logistics. – Here goods are received from a company's suppliers. They are stored

until they are needed on the production/assembly line. Goods aremoved around the organisation.

• Operations. – This is where goods are manufactured or assembled.

• Outbound Logistics. – The goods are now finished, and they need to be sent along the supply

chain to wholesalers, retailers or the final consumer.

• Marketing and Sales. – In true customer orientated fashion, at this stage the organisation

prepares the offering to meet the needs of targeted customers. This

area focuses strongly upon marketing communications and thepromotions mix.

• Service. – This includes all areas of service such as installation, after-sales

service, complaints handling, training and so on.



Support Activities.• Procurement.

– This function is responsible for purchasing of goods, services andmaterials.

– The aim is to secure the lowest possible price for purchases of thehighest possible quality.

– They will be responsible for outsourcing (components or operations thatwould normally be done in-house are done by other organisations), andePurchasing (using IT and web-based technologies to achieveprocurement aims).

• Technology Development. – Technology is an important source of competitive advantage. – Companies need to innovate to reduce costs and to protect and sustain

competitive advantage. – This could include production technology, Internet marketing activities,

lean manufacturing, Customer Relationship Management (CRM), andmany other technological developments.



Support Activities.• Human Resource Management (HRM).

– Employees are an expensive and vital resource. An organisation wouldmanage recruitment and selection, training and development, andrewards and remuneration. The mission and objectives of theorganisation would be driving force behind the HRM strategy.

• Firm Infrastructure. – This activity includes and is driven by corporate or strategic planning. It

includes the Management Information System (MIS), and other mechanisms for planning and control such as the accountingdepartment.



SWOT Analysis

OrganizationStrengthWeakness

Opportunity

Threat

Identifying Resource Strengths



Identifying Resource Strengths

and Competitive Capabilities

• A strength is something a firm does well or an

attribute that enhances its competitiveness – Valuable

• competencies or know-how

• physical assets• human assets

• organizational assets

• intangible assets

– Important competitive capabilities

– An attribute that places a company in a position of marketadvantage

– Alliances or cooperative ventures with partners

Identifying Resource WeaknessesIdentifying Resource Weaknesses



• A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage

• Resource weaknesses relate to

– Inferior or unproven skills,

expertise, or intellectual capital

– Lack of important physical,

organizational, or intangible assets

– Missing capabilities in key areas

Identifying Resource Weaknesses

and Competitive Deficiencies

Identifying Resource Weaknesses

and Competitive Deficiencies

Identifying a Company’sIdentifying a Company’s



• Opportunities most relevant to acompany are those offering

– Good match with its financial and

organizational resource capabilities

– Best prospects for profitable

long-term growth

– Potential for competitive advantage

Identifying a Company sMarket Opportunities

Identifying a Company sMarket Opportunities



Identifying External Threats

• Emergence of cheaper/better technologies

• Introduction of better products by rivals

• Entry of lower-cost foreign competitors

• Onerous regulations

• Rise in interest rates

• Potential of a hostile takeover

• Unfavorable demographic shifts

• Adverse shifts in foreign exchange rates

• Political upheaval in a country

Role of SWOT Analysis in



Role of SWOT Analysis inCrafting a Better Strategy

• The most important part of S W O TS W O T analysis is notdeveloping the 4 lists of strengths, weaknesses,

opportunities, and threats, but rather

– Using the 4 lists to draw conclusions

about a company’s overall situation and

– Acting on the conclusions to

• Better match a company’s strategy to its

resource strengths and market opportunities,

• Correct the important weaknesses, and

• Defend against external threats

P ’ (1980) Fi F



Porter’s (1980) Five Forces

Model of Competition

Threat of

Substitute

Products

Threat

of New

Entrants

Threat of New

Entrants

Rivalry Among

Competing Firms in

Industry

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

f l A



Cutthroat competition is more likely to occur when:

Numerous or equally balanced competitors

Slow growth industry

High fixed costs

Lack of differentiation or switching costs

High storage costs

Capacity added in large increments

High strategic stakes

High exit barriers

Diverse competitors

Intensity of Rivalry Among Existing

Competitors


Competitors

I f R l A E



High Exit Barriers are economic, strategic and

emotional factors which cause companies to remain in

an industry even when future profitability is

questionable. Specialized assets

Fixed cost of exit (e.g., labour agreements)

Emotional barriers

Government restrictions

Strategic interrelationships


Competitors


Competitors



Bargaining Power of Buyers Bargaining Power of Buyers

Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases are large

relative to seller’s sales

Purchase accounts for a significant fraction of

supplier’s sales

Products are undifferentiated

Buyers face few switching costs

Buyers’ industry earns low profits

Buyer presents a credible threat of backward

integration

Product unimportant to quality

Buyer has full information

Buyers compete

with the supplying

industry by:

Bargaining down prices

Forcing higher quality

Playing firms off of

each other



Threat of Substitute ProductsThreat of Substitute Products

Products

with similar

function

limit the

prices firms

can charge

Products with improving

price/performance tradeoffs relative to

present industry products

For Example:

Keys to evaluate substitute products:

Electronic security systems in place of securityguards

Fax machines in place of overnight mail delivery

5 Forces correlation



5 Forces correlation

Business

power

Power of the

Five forces

• Power of forces are mutually exclusive of each

other- Their combined power inverses the power

of the business

• Their probability of occurrence and the power

of their impact change over time

• They determine the relative bargaining power

of the business and the businesses ability to

augment its market share and or its profitability

F l i M k i



Formulating Marketing strategy

• Types of strategies – Segmentation

– Target market

– Positioning

– 4 Ps• Product, price, promotion, place (channel)

• Current strategies – Relationship marketing

– Database marketing• Planning for new products.

Marketing program



Marketing program

development

• Product branding & customer servicestrategies

• Pricing strategy

• Advertising & sales promotion strategies.• Public relations & direct marketing

strategies

• Sales force strategies• Distribution strategies

Implementing & Managing



Implementing & Managing

marketing strategy

• Strategic issues in marketing

• Designing an effective marketingorganization

• Marketing strategy implementation &control

Th B W



The Browser War

• What is the level of strategy of the two companies described in the video?• Differentiate between the corporate cultures of Microsoft and Netscape• Describe the Legal environment which proved to be a challenge to Microsoft• Fit Microsoft and Google in the A D Little Matrix• Fit Introduction of Explorer by Microsoft in Ansoff’s Matrix• Fit Windows O/s and Explorer in the BCG Matrix

• What is the core competency of Microsoft and Netscape as shown in thevideo?

• What generic strategies were followed by Microsoft and Netscape?• What was the strength of Netscape?• What was the biggest opportunity that Microsoft did not see?• Which amongst the 5 of Michael Porter’s Competing forces affected

Microsoft, the most?