Transcript No Slide Title

AN INTRODUCTION TO
MARKETING STRATEGY
A presentation to
AUT Marketing Management
Roger Marshall, Semester 2, 2008
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Marketing as a Process
Corporate
objectives
Corporate
grand
strategy
Tactical
expediency
Marketing
management
Consumer
whims
Marketing as a Process
Corporate
objectives
Portfolio
planning
Consumer
segments
Target
market(s)
Marketing
mix:
Product
Distribution
Promotion
Resource Environmental
Constraints
factors
Price
M
o
n
i
t
o
r
Marketing as a Process
Corporate level
Strategy
* Objective
setting.
* Portfolio
planning.
* Resource
assessment.
Functional level
* Segmentation.
Tactics
* Environmental
scanning.
* Marketing mix
decisions.
* Monitoring.
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Objectives...
Alice: “Which turning should I take?”
Cheshire Cat: “Where do you want to go?”
Alice: “I don’t know.”
Cheshire Cat: “Then it doesn’t much matter
what turning you take!”
(From Alice in Wonderland”, by Lewis Carrol.)
Objectives...
Alice: “Which turning should I take?”
To provide an operational guide
Cheshire Cat: “Where do you want to go?”
Alice: “I don’t know.”
Cheshire Cat: “Then it doesn’t much matter
You cannot judge “success”
what turning you take!”
unless there is some objective
to achieve.
(From Alice in Wonderland”,
by Lewis Carrol.)
Objectives...
Constraints
imposed by
Corporate
objectives
Objectives:
Growth, profit,
prestige
H
P i
r
i L
c o
e w
levels of objectives…
 Corporate-level goals are rather general
in nature, even visionary, and provide a
long-term “sign-post”. Usually called a
“Mission Statement.”
 Business unit-level goals are operational
statements and are much more specific.
 Functional-level goals are very specific,
and are usually short-term.
An example
UNIVERSITY
close to home...
BUSINESS
AUT Mission Statement
“Foster excellence, equity and ethics in
learning, teaching, research and
scholarship and in so doing serve our
regional, national and international
communities.”
Strategic themes
Five key strategic themes guide the future
development of the University:
 AUT University will provide excellent education
that inspires students to reach their full
potential.
 AUT University will conduct excellent research,
advancing knowledge and practice in its areas of
expertise and supporting its higher education
programmes.
Strategic themes
 AUT University will actively engage with the
communities it serves, and contribute to their
social and economic development.
 AUT University will attract, develop and retain
excellent staff.
 AUT University will ensure its sustainability
through good management, strong performance
and reputation.
Objectives to attain Theme 1
1. To ensure that AUT graduates are
knowledgeable, sought after and
inspirational
AUT
University
2. To enhance curriculum flexibility and
will provide
education
increase
studentexcellent
choice
that
inspires
students
to reach
their
3.
To build
and broaden
discipline
strengths
potential.
4. To encouragefull
students
to progress to, and
be successful in, higher education programs
5. To ensure that the student learning
experience is of high quality
Objectives to attain Theme 1
1. To ensure that AUT graduates are
knowledgeable, sought after and
inspirational
2. To enhance curriculum flexibility and
increase student choice
3. To build and broaden discipline strengths
4. To encourage students to progress to, and
be successful in, higher education programs
5. To ensure that the student learning
experience is of high quality
Tactics to attain Objective 3
To build and broaden discipline strengths
 Developing a wider range of new programmes,
majors and minors
 Extending the range of professional
qualifications, particularly at postgraduatelevel
 Identifying and developing curriculum
opportunities in new subject areas, while
reinforcing current areas
Tactics to attain Objective 3
Professor Graydon, Dean of Business, among
other things, hired me and gave me a brief.
In the last two years the Marketing
Discipline has
launched the first Sales major in NZ
will launch a Retailing major this year
will launch a new marketing research paper
and graduate diploma next year
has increased the Masters intake x 3
has introduced a PhD scholarship program
increased the PhD numbers x 3
A logical, hierarchical process
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
The Experience curve
Two major influences
on strategy were growth
(Product Life Cycle)
and market share...
The Experience curve
$ cost
Declining costs caused by:
 Bulk buying
 Spreading fixed costs
 Learning to do it better….
Accumulated
experience
The Experience curve
$ cost
Profit
Loss!
Coy A
Price
} Profit
Coy B
}
Coy C
Profit
Accumulated
experience
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
The BCG Matrix
High
Market
growth
Low
10x
?
(Net user
of funds)
(Expensive
to grow)
(Cash
generator)
(Unlikely to be
contributing)
1:1
0.10x
Market share (sales in proportion to top 3)
An industrial equipment company has the
following Strategic Business Units (SBUs):
SBU Sales($m) Sales of top 3($m) Mkt growth
A
0.5
2.0, 0.7, 0.5
15%
B
3.5
3.5, 1.0, 0.5
18%
C
1.8
1.8, 1.2, 1.0
7%
D
4.2
4.2, 0.8, 0.7
4%
E
0.5
4.5, 1.8, 0.5
2%
 Is this a healthy portfolio?
 What are the strategic implications?
15%
B
A
Growth
Divestment
Harvest
Maintain
10%
C
5%
10X
D
1:1
E
0.10X
The GE Matrix
1, Grow, invest
2, Selective
investment
3, Harvest/divest
Industry Attractiveness
High
Medium
Low
1
1
2
1
2
3
2
3
3
High
Business
position:
Ability
to
compete
Medium
Low
Embryonic Growth Mature Aging
Dominant
Strong
Favorable
Tenable
Weak
This matrix plots maturity (life cycle stage)
against the estimated competitive strength
(technology, share, cost advantage etc).
Circles represent products – bigger circles more
dollar value. Products move left to right by
nature, up and down through strategic effort.
Embryonic Growth Mature Aging
Dominant
SVI
Strong
IT
Favorable
Tenable
Key
Weak
DE
AM
SVI = Standard Visual Identification
IT = Insecticide tag DE = Dairy Equipment
AM = Animal Management
Embryonic Growth Mature Aging
Dominant
Strong
SVI
SVI
Favorable
Tenable
Weak
SVI
Grow through export to the US
Embryonic Growth Mature Aging
Dominant
Strong
IT
Favorable
Tenable
Weak
IT
Maintain through promotion
IT
Embryonic Growth Mature Aging
Dominant
Strong
DE
Favorable
Tenable
DE
Weak
DE
Grow through product line extension
Embryonic Growth Mature Aging
Dominant
Strong
AM
Favorable
Tenable
Weak
AM
AM
Grow through technical innovation
Embryonic Growth Mature Aging
Dominant
SVI
Strong
IT
Favorable
Tenable
Key
Weak
DE
AM
SVI = Standard Visual Identification
IT = Insecticide tag DE = Dairy Equipment
AM = Animal Management
Embryonic Growth Mature Aging
Dominant
Strong
Favorable
SVI
AM
IT
DE
Tenable
Key
Weak
SVI = Standard Visual Identification
IT = Insecticide tag DE = Dairy Equipment
AM = Animal Management
Marketing Strategy
The major strategies all require more detail...
Current
products
Major strategies:
 Growth
 Maintain
 Harvest
 Divest
Current
Markets
(1)
Market
penetration
(2)
New
Market
Markets development
New
products
(3)
Product
development
(4)
Diversify
(Ansoff)
An interesting view of strategic
planning (Hamel, HBR ‘96)
Strategy as revolution
1) 10 principles
3)
The bottleneck is
at the top of the
bottle
2) Strategymaking must
be subversive
1) Strategic
planning isn’t
strategic
4)
Revolutionaries
exist in every
company
5) Change is not
a problem,
engagement is
Strategy as revolution...
6) Strategy
must be
democratic
7) Anyone
can be a
strategic
activist
8) Perspective
is worth 50 IQ
points
9) Top-down
and bottomup are not
alternatives
10) You
can’t see
the end
from the
beginning
Drucker, 1992, Managing
for the future
Why the uncertainty - the lack of rules?
1) Changing World economy (trading blocs)
2) Emergence of the “Knowledge Society”
3) Changing society - decline of the servant
(the farmer, the blue-collar worker)
4) The learning society is taking over, but
most education does not deliver knowledge
so organizations must do it themselves
More from Peter Drucker...
5) Innovation becomes central (last Century’s
lesson) and requires:
 Organised abandonment
 Seeing change as opportunity
 Hard work rather than high IQ
The implications for strategy simply reinforce
the earlier suggestions - teaching you formulae
will stifle your strategic ideas - differentiate
strategy from planning!
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Marketing Strategy
 Recap – where it all fits
 Sorting out objectives from rhetoric
 The earlier strategic devices
 Portfolio planning
o The Boston Consulting Group matrix
o Attractiveness analysis
o Life cycle/competitive position
 A fantasy model
 Summary and endnotes
Strategy models...
The Western
Military model:
Useful conceptually,
e.g.
The Eastern Military
model is also useful
conceptually. E.g.,
Sun Tzu in Bing Fa
recognized he
Different attack
importance
of
moral
modes depending on
influence (morale)
relative strengths
of the competitors. within an army (org.).
But he grossly
But the objective is underestimates the
importance of soldiers
to annihilate the
vs. generals…
enemy…?
Strategy models...
A possibly better, simpler, model (that I
dreamed up) doesn’t feature in any text
book I have ever read, I call it:
The “biological survival” model.
This is “extra-curricular”, simply a thought
of mine after struggling to find a useful,
practical model to work with in many
different competitive situations – i.e. you
don’t have to remember this one!
Strategy models...
1) Gause’s Principle of Mutual Exclusion
“All competitors who persist and survive
have a unique advantage over others.
If they did not then others would
crowd them out”
The survival of Homo Sapiens,
- the development of the cerebral cortex?
- the opposing thumb?
Strategy models...
2) Darwin, The Similarity Principle:
“The more similar competitors
are to each other, the more
severe the competition”
Man’s greatest
competitor is other men
A company’s greatest competitor
is another company serving the
same market segment
Strategy models...
3) Competitive Equilibrium:
There are conditions
under which competitors
can co-exist:
Each will have an
advantage over the
other, relative to the
environment
They must be
in equilibrium
There will be a point
(or series of points)
where neither has an
advantage - this
defines the
competitive segment
boundary More
Strategy models...
4) Maintenance of Advantage
“Failure to maintain a competitive advantage
within that segment will lead to extinction.”
This,
in Nature, is
the survival of
the fittest the basic law
of natural
selection
This all points to the
fundamental rule of Business
strategy - Differentiation
(segmentation) is a
requirement of survival
Strategy, endnotes…
Competitive power comes from three sources:
Economic:
Operational efficiency can lead to power:
 Consolidation of the Unit’s competitive
advantage through “doing it better
than others can.
 By the generation of resources that
can then be used for research,
development and defense.
Strategy, endnotes…
Political:
Political leverage can be gained several ways:
 With knowledge (of the industry).
 By providing leadership.
 By making friends, and
 forming liaisons.
Strategy, endnotes…
Marketing:
Ultimately, power in any business situation
will devolve upon the party that has what
others want. So,
 Select (a) target market(s) and
provide for their specific need in a
unique way.
 Foster two-way relations with all
significant industry players.
Summary
The implications for strategy are as
follows:
1) The strategy devices are useful as
a framework for thought and
analysis of market forces.
2) Teaching you formulae will stifle
your strategic ideas differentiate strategy from
planning!