Transcript Topic 3- Strategic Marketing Decisions, Choices Mistakes. File

Strategic Marketing
Topic 3: Strategic marketing
decisions, choices, and mistakes
Structure
A. INTRODUCTION
1. Overview and Strategy Blueprint
2. Marketing Strategy: Analysis &
perspectives
C. WHERE DO WE WANT TO BE?
B. WHERE ARE WE NOW?
3. Environmental & Internal Analysis:
Market Information & Intelligence
4. Strategic Marketing Decisions,
Choices & Mistakes
5. Segmentation, Targeting
& Positioning Strategies
6. Branding Strategies
7. Relational & Sustainability
Strategies
D. HOW WILL WE GET THERE?
E. DID WE GET THERE?
14. Strategy Implementation, Control
& Metrics
8. Product Innovation & Development
Strategies
9. Service Marketing Strategies
10. Pricing & Distribution
11. Marketing Communications
12. E-Marketing Strategies
13. Social and Ethical Strategies
Learning Objectives
 To define ‘strategic choice’
 To outline strategic decisions taken at the corporate,
SBU and functional levels
 To review the strategic marketing decisions including
products to offer, markets to target and competitive
position strategies
 To review the analytical models and frameworks that
can be used by organisations to make their strategic
choices for the future
Marketing Mix – 7 P
Consumer Good Type
Strategic choice
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Strategic choice involves generating a welljustified set of interrelated strategic alternatives
 and choose from them the ones that will
contribute to the achievement of the corporate
overall goals and strategic objectives
Marketing Strategy Process
WHERE DO WE WANT TO BE?
Strategic Decisions
Strategic decisions at the corporate level
Developing mission statement
Directional strategy
Resource allocation
Strategic decisions at the SBU level
Choosing generic strategy (strategic orientation):
Cost leadership strategy
Differentiation strategy
Focus strategy: Cost focus & Differentiation focus
Strategic decisions at the functional level
Products to offer
Market segments to target
Market position tactics
Directional (grand) strategies
Growth Strategies Stability Strategies
Retrenchment strategies
Concentration
Turnaround
Captive Company
Sell-Out/Divestment
Bankruptcy/Liquidation
Vertical Growth
Horizontal Growth
Diversification
Concentric
Conglomerate
Pause/Proceed with
Caution
No Change
Profit
Resource allocation: BCG matrix
Boston Consulting Group
General electric model
Strong
Business Position
Medium
Weak
Industry Attractiveness
High
Medium
Low
Most attractive: Investment for Growth
Least attractive: Harvesting/Divesting
Medium attractiveness: Selectivity
Shell Directional matrix
Competitive position tactics
Porter’s generic competitive strategies
Cost
Leadership
strategy
Differentiation
strategy
Cost focus
strategy
Focused
differentiation
strategy
Customer Information systems
Requirements for generic competitive strategies
Generic Strategy
Commonly required
skills and resources
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Overall Cost
Leadership
Differentiation
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Focus
Common organizational
requirements
Sustained Capital investment and
access to capital
Process engineering skills
Intense supervision of labour
Products designed for ease of
manufacture
Low cost distribution system
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Strong marketing abilities
Product engineering
Creative flair
Strong capability in basic research
Corporate reputation for quality of
technological leadership
Long tradition in the industry or unique
combination of skills drawn from
another businesses.
Strong co-operation from channels
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Combination of the above policies
directed at the particular strategic
target
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Tight cost control
Frequent, detailed control reports
Structured organisation and
responsibilities
Incentives based on meeting strict
quantitative targets
Strong co-ordination among functions in
R & D, product development, and
marketing
Subjective measurement and incentives
instead of quantitative measures
Amenities to attract highly skilled labor,
scientists or creative people.
Combination of the above policies
directed at the particular strategic target
Setting Marketing Objectives
• Hierarchical – Objectives should go from most to least important
• Quantitative- In order to avoid ambiguity, marketing managers
must turn objectives in to measurable targets with respect top time and size
• Realistic – Objectives should be developed based on the result of a
detailed analysis of the firm’s capability, its competitive strengths, and
external opportunities
• Consistent – To avoid confusion, marketing managers have to
pursue compatible marketing objectives. It is obviously unrealistic to aim for
substantial gains in both market share and profitability at same time.
Selecting and developing marketing strategies for different market and
competitive situations
Major decision/actions
Important Issues
Product Market definition and
analysis
Market Segmentation
• Evaluating the complexity of the product
– market structure
• Establishing product-market boundaries
• Deciding which level of the productmarket to segment
Define and analyze industry
structure
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Competitive advantage
• Deciding when, where, and how to
compete
Market targeting and
positioning strategies
• Deciding market scope
• Good/better/best brand positioning
strategy
Determining how to segment the market
Defining the competitive area
Understanding competitive structure
Anticipating changes in industry
structure
• Defining product market structure
• Customer profiles
• Industry / distribution/competitor
analysis
• Market size estimation
• Selecting the basis of segmentation
• Forming segments
• Analyzing Segments
• Sources of competition
• Industry structure
• Strategic group analysis
• Finding opportunity gaps
• Cost/differentiation strategy/focus
• Good/better/best brand positioning
strategy
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Selecting targets
Positioning of each target
Positioning concept
Marketing mix integration
Functional Strategies
• Marketing Strategy
• Other functional Strategies
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Manufacturing strategy
Research and Development (R&D) Strategy
Human Resources management
Information based strategy
Internet strategy
Ansoff’s product / market matrix
• Market Penetration
• Market penetration strategy, according to Ansoff, carries
the lowest risk in comparison to the other strategies. This
strategy is termed to be the least risky because of its use
by a firm to advertise existing products and luring its
existing customers to buy more products/services from
them. For example, a company could advertise to its
existing customers the benefits of upgrading their club
membership from regular to VIP. By doing so, the
amount of time and effort spent on selling a VIP based
club membership is significantly reduced
• Market Development
• The market development strategy is significantly riskier
in comparison to the Market Penetration Strategy. If a
firm wants to acquire new customers and increase its
market share, it will need to adopt the market
development strategy. In this strategy, a firm does not
sell new products to its new customers but just sells
them its existing ones. For example, consider an electric
car manufacturing company who has its base set up in
Europe and opens a branch in Asia to increase the
number of car sales and acquire new customers.
• Product Development
• Most firms do not try to build new products and sell them in the
existing markets unless the credibility of a firm is established with its
existing customers. This type of strategy is used generally used by
the firms who are well established in the market and enjoy
significant market share in comparison to the new entrants in the
market. If a new entrant adopts this strategy, then it takes a higher
risk approach as it is highly likely to experience fall in the market
share of its existing products by selling new ones. One example of
this is if an electric car manufacturing company based in Europe
wants to develop and sell electric bikes in its existing market, i.e.
Europe.
• Diversification
• This is the most risky strategy of all strategies in the Ansoff
Matrix. The reason behind its higher risk is because of the
risk it carries to diversify the market share due to
development of new products and entry into new markets.
The expenses in adopting this strategy are high as well,
mainly due to the investment required in developing new
products and also the additional advertising budget needed
to sell them to a new and existing market. For example, an
electric car manufacturing company based in Europe may
want to develop and sell electric bikes and electric cars in
its existing market (Europe) as well as to a new market
(Asia).
Competitive timing / direction matrix
Goal
Move before
competition
Move with
competition
Move away from
Competition
Market Share
protection (hold
defend)
• Mix
adjustments
• Deterrent
action
• Imitate
• Compensate
• Merger
• Acquisition
• Collusion
Market share
advancement (
growth)
• New areas
• New segments
• Additional
channels
• Penetration
pricing
Capitalize
Leapfrog
• New offerings
• Reciprocal
agreements
Competitive position tactics
• Market Leader –
The firm with the largest market share and, by
virtue of its pricing, advertising intensity,
distribution coverage, technological advance, and
rate of new product introduction, it determine the
nature, pace, and bases of competition. To remain
number one, leading firms may implement both
offensive and defensive tactics.
Competitive position tactics
• Market Challenger
A runner up firm that is fighting hard to increase its
market share. It may adopt to choose an
aggressive stance and attack other firms, including
the market leader. Therefore, it will normally
implement offensive tactics.
Competitive position tactics. Continued
• Market Follower
Another runner-up firm that wants to hold its share
without rocking the boat. It may adopt a less
aggressive stance and defensive tactics in order to
maintain the status quo, but at the same time to
follow the leader.
Competitive position tactics..continued
• Market Nichers:
Firms that serve the smaller segments not being
pursued by other firms. By concentrating their
efforts in this way, market nichers are able to build
up specialist market knowledge and avoid
expensive head-on fights with larger companies.
We can discriminate between segmenters and
nichers in a few words.
Expanding market share
• Position Defence
– Company build s fortifications around its current
position, but simply defending a current position or
product rarely works.
• Flanking Defence
– In which the company carefully checks its flanks and
attempts to protect the weaker one.
Expanding market share…Contd.
• Pre-emptive Defence
– Where, in contrast to a flanking defence, the leader
firm can be more aggressive, striking competitors
before they can move against it.
• Counter-offensive Defence
– Where despite its flanking or pre-emptive efforts, a
market leader company could be attracted, so it
needs to respond to minimize the threat. Counter
attack is particularly important in those market that
are crucial to the leader. Therefore the leader must
act decisively and swiftly.
Expanding market share…Contd.
• Mobile Defence
– Involves more than aggressively defending a current
market position; the leader extends itself to new
markets that can serve as a future bases for defence
or offence.
• Contraction Defence – When firm find its resources are spread too thinly and
competitors are nibbling away on several fronts, so it
opts to withdraw from those segments in which it is
most vulnerable or in which it feels there is the least
potential. It then concentrates its resources in other
segments in order to be less vulnerable.
Competitive tactics for the market challenger
• Frontal attack
– Consists of opposing the competitor directly by using
its own weapons, and without trying to use its weak
point
Flanking attack
As an alternative to a costly and risky frontal
attack, the challenger can focus its strength
against the competitors weaker flanks or on
gaps in the competitors market coverage.
Competitive tactics for the market
challenger
• Encirclement attack
– Involves attacking from the front and sides. A
challenger encircles the competitors position in terms
of products or markets both.
Bypass attack
The challenger chooses to change the rules of the
game. It might diversify into unrelated products, move
into new geographic markets, or leapfrog into new
technologies to replace existing products.
Competitive tactics for the market
challenger
• Guerrilla attack
– This tactic open to a challenger is in many ways best
suited to smaller companies with a relatively limited
resource base. The challenger might use selective
price cuts, executive raids, intense promotional
outbursts, or assorted legal actions.
Competitive tactics for the market Follower
• Following closely
– With similar marketing mix and segmentation.
Following at a distance
The follower can flag up some area of differentiation,
and diminish the obvious similarities with leader.
Following selectively
Both in product and market terms so that the
likelihood of direct competition is minimized.
Competitive tactics for the market nicher
• A nicher is interested in one or two niches, but
not in a whole market. The objectives is to be a
large fish in a small pond rather than a small fish
in large pond. The key idea in nichemanship is
specialization. A market nicher can specialize in
serving one type of end user , specializing in
serving a given customer size group, or focus on
one of few specific customers.
Conclusion
• Strategic choice involves understanding the underlying bases guiding
future strategy, and generating strategic options for evaluation and
selecting from among them.
• Strategic decisions are usually taken at corporate level (e.g.,
directional strategy, resource allocation), at SBU level (e.g., generic
strategy), and at functional level in relation to various functional areas
(e.g., marketing, R&D, finance, HR, production, etc.).
• Strategic marketing decisions include products to offer, market
segments to target, and positioning strategies.
• Organisational failure is arguably a product of repeated strategic
mistakes and unsuccessful interactions between the firm and its
environment.