Strategic Marketing Management · 2018-02-27 · Strategic Marketing Management ... BCG’s Growth Share Matrix GE Multifactor Matrix ... difference between: Where we are going?(in

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Strategic Marketing Management

Course Outline - 1

� Strategic Marketing vs. Marketing Planning –Introduction

� Mission & Objectives� establishing the corporate mission

� influences on objectives and strategy

� guidelines for establishing objectives and setting goals

� Analysing the Product Portfolio� models of portfolio analysis

� market attractiveness and business position assessment

� criticism of portfolio analysis

2

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Course Outline - 2

� Strategic Gap Analysis and Growth&ConsolidationStrategies� types of the strategic gap

� growth strategies

� consolidation strategies

� Allocation Strategies� growth

� fast growth

� selective growth

� aliance

� optimalization

� market position defence

� market exit strategies

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Course Outline - 3

� Demand Growth Strategies� strategies based on the number of buyers

� strategies based on the level of consumption

� selective demand growth strategies

� Strategies for Market Leaders� position defence

� flanking defence

� preemptive defence

� counteroffensive defence

� mobile defence

� contraction defence

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Course Outline - 4

� Strategies for Market-Challengers� frontal attack

� flank attack

� encirclement attack

� bypass attack

� guerilla attack

� Strategies for Market-Followers& Nichers� following closely

� following at a distance

� following selectively

� Strategies for different PLC stages� strategies in the introduction stage

� strategies in the growth stage

� strategies in the maturity stage

� strategies in the decline stage

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Assignment

� 70% final exam (test with open-endedquestions)

� 30% case study/ies: (written preparation: 2-5 pages; case is to be done in groups: 2-3 persons)

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Lesson 1.

Designing Marketing Strategies

Lesson 1.


Outline

� Strategic Marketing vs. Marketing Planning – Introduction

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Strategic Marketingvs.

Marketing Planning.An Introduction

Levels of strategy (1/2)

� Corporate strategy

� Business strategies

� Operational & functional strategies

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Levels of strategy (2/2)

Corporatestrategy

Business strategy(SBU 1)


Functionalstrategies

R&D Operations Marketing HRM Finance


‘Corporate’ or ‘Marketing’?

Vision

Mission

Corporate Objectives

Corporate Strategy

Marketing Objectives

Marketing Strategy

Marketing Tactics

Operations Objectives

Logistics Objectives

HRM Objectives

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Strategy / Tactics

Strategy Tactics

Importance More importance Less importance

Conducted by Senior managers Junior managers

Timeframe Long term Short term

Frequency Continuous Periodic

Problem Unstructured / unique Structuredhigh risk / low certainty repetitive

Information External, subjective Accounting &futuristic marketing research

Detail Broad Specific

Ease of evaluation Difficult Easy (relative)

Source: Weitz & Wensley,1998

Corporate versus Marketing

Corporate strategy

Concerned with overall, long term organisational direction

Provides the long-term framework for the organisation

Overall orientation needed to match the organisation to its environment

Goals and strategies are evaluated from an overall perspective.

Relevance of goals and strategies is only evident in the long-term

Marketing

Concerned with day-to-day performance and results

Represents only one stage in the organisation’s development

Functional and professional orientation tends to predominate.

Goals are subdivided into specific targets

Relevance of goals and strategies is immediately evident

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Corporate Strategic Planning

� defining the corporate mission (vision)

� establishing SBU

� assigning resources to each SBU

� planning new business, downsizing & terminating older businesses

Marketing Planning

Analysis

Planning

Implementation

Control

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Analysis

Analysis

External

Macroenvironment Microenvironment

SWOT

Internal

The Organisation’s Marketing

Environment

Theorganisation

The economy

Socialfactors

Culturalforces

Technology

Political structures

Legalstructures

Demography

Suppliers

Distributors& dealersMarket

demands

CompetitorsCustomers

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References

� Armstrong G., P. Kotler: Marketing.Wprowadzenie, Wolters Kluwer, Warszawa2012

� Gilian C., R. Wilson, Strategic MarketingManagement. Planning, impementatiom andcontrol, Butterworth Heinemann, 1999

� Kotler P. Marketing Management. EleventhEd., Prentice-Hall, Englewood Cliffs, 2003

� Porter M., Competitive Advantage, 1998

� Strategic Marketing Management: Planningand Control, BPP Professional Education, 2003

Lesson 2.


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Lesson 2.


Outline

� Mission & Objectives

� establishing the corporate mission

� influences on objectives and strategy

� guidelines for establishing objectives and setting goals

Mission & Objectives

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Mission

� describes the organisation’s basicfunction in society

� explains why the company exists

� provides the commercial logic for thecompany

� needs to be converted into everydayperformance

� is a cultural glue that enables theorganisation to function as a unity

Corporate Mission - Fundamental

Questions

� What is our business?

� Who is the customer?

� What is of value to our customer?

� What will our business be?

� What should our business be?

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Infuences on the mission statement

� company’s history

� preferences, values and expectations ofmanagers & owners

� environmental factors

� available resources

� distinctive competences

Workable mission

� brief – easy to understand and remember

� flexible – to accomodate change

� distinctive – to make the firm stand out

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Mission or/and vision

� vision gives general sense of direction to the company, is the orientation point thatguides the company

� vision ignores real. practical problems, vision can degenerate to wishful thinking

� mission is about here and now, visionrefers to the future,

� mission is designed to motivate, vision –not!

Objectives

S Specific - descriptive, succinct and provide claritythroughout the organization as to what is to beachieved

M Measurable - clearly state tangible targets that can bemeasured in the future

A Aspirational - challenging but achievable, motivational

R Realistic - based on sound market analysis, financial,human & physical resources should underpin theobjectives

T Timebound - a timescale should be set against theachievment of each objective in order for performancemeasurement to be undertaken

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Objectives hierarchy

Corporate objectives – increase profits

Productionobjectives– cut costs

Personnelobjectives– reduce

headcount

Marketing obejctives – increase revenue

Objectives for the mix

Product(10% of

revenue )

Price(skimming)

Promotion(recall)

Place (coverage)

Marketing Objectives e.g.

� rate of return on investment

� net profits

� cash flow

� total sales revenue

� sales volume

� market share

� consumer awareness

� number of distribution outlets

� average realized price

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Eight strategic trade-offs facing firms

(1/2)

� short term profits vs. long term growth

� profit margins vs. competitive position

� direct sales effort vs. marketdevelopment effort

� penetration of existing markets vs. thedevelopment of new markets

Eight strategic trade-offs facing firms

(2/2)

� related vs. non-related newopportunities as a source of long-term growth

� profit vs. non-profit goals

� growth vs. stability

� ‘riskless’ environment vs. high-riskenvironment

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References






Lesson 3 & 4


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Lesson 3 & 4


Outline

� Analysing the Product Portfolio

- models of portfolio analysis

- market attractiveness and business

position assessment

- criticism of portfolio analysis

Corporate Strategic Planning

� defining the corporate mission (vision)

-----------------------------------------

� establishing SBU

� assigning resources to each SBU

� planning new business, downsizing & terminating older businesses

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SBU Defining

SBU - Main Characteristics

� SBU is a pasrt of the company that for allintents and purposes has its own distinctproducts, markets and assets

� single business (or collection of relatedbusinesses) that can be planned separatelyfrom the rest of company

� has its own competitors

� has its own manager.......

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Analysing the Product Portfolio

Portfolio Evaluation Frameworks

� BCG’s Growth Share Matrix

� GE Multifactor Matrix

� Shell Directional Policy Matrix

-----------------------------------------------------

� Abell & Hammond’s Investment Opportunity Matrix

� Arthur D. Little Strategic Condition Matrix

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BCG’s Growth Share Matrix

(traditional approach)

Market

growth

rate

Relative market share

Stars Question marks

Cash cows Dogs

0 xO,5 x1 x

0 %

10 %

100 %

Taking a Portfolio Approach

� analysis based around evaluating SBU activities

� models help you think strategically about the business and its resources and provide analytical frameworks. But:

� they are over-simplified

� cannot incorporate ‘risk’

� often offer misleading representations of strategic options

� use over generous measures

� assume market leadership = benefit

� ignores competitive strategic factors

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time

introduction growth maturity decline

InfantsNeg. Cash flow

BCG Matrix & PLC

QuestionmarksLow share, high growth, large neg. Cash flow(

StarsHigh share, high growth, still needssupport

DogsLow share, Low growth, +/- Cash flow

DodosLow share, negativegrowth, negativeCash flow

Cash Cowshigh share, lowgrowth, largepositive Cash flow

War horseshigh share, negativegrowth, positiveCash flow

Determinants of market attractiveness

� Market factors (eg size, growth)

� Competitors

� Investment factors

� Technological change

� Other PEST factors

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Determinants of business strenght

� Product quality

� Distribution

� Brand reputation

� Production capacity

� Management skill

GE Multifactor Matrix

Invest for growth

Invest selectively for

growth ?Invest

selectively for growth ?

Harvesting

?Harvesting Divest

Competitive position

Strong Average Weak

High

MediumProductattractiveness

Low

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Shell Directional Policy Matrix

Disinvest Phasedwithdrawal

Double or quit

Phasedwithdrawal

CustodialGrowth

Try harder

Cash generation

GrowthLeader

Leader

Prospects for sector profitability

Unattractive Average Attractive

Weak

AverageEnterprise’scompetitivecapabilities

Strong

More Pros & Cons of taking a

Portfolio Approach

� BCG at individual SBUs, other matrices look atcompany’c competences in market sectors,without references to individual products

� They ignore opportunities of creativesegmentation or identifying new niches

� They assume market is given rather than can becreated

� Markets can be unattractive because has notbeen analysed sufficiently

� Marketers must come up with relavant data(decide if the industry is attractive or not)

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BCG’s Growth Share Matrix

(practical approach)

Market

attractiveness


Question marks Stars

Dogs Cash cows

100500

0

50

100

References






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Lesson 5, 6 & 7.

Strategic Gap Analysis

and

Growth & Consolidation Strategies

Lesson 5, 6 & 7.

Strategic Gap Analysis and Growth &

Consolidation Strategies

Outline

� types of the strategic gap

� growth strategies

� consolidation strategies

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Gap Analysis

� Diagrammatical approach to viewing the difference between:

� Where we are going? (in the currentway)

� Where we want to be? (targets for achievement)

Gap Analysis

Time

Sales

Desired sales

Current portfolio

Diversification growth

Integrative growth

Intensive growth

The planning

gap

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Intensive Growth

Ansoff’s Product - Market Matrix

Product

Current New

Current

New

Market

Market penetration strategy

Market development strategy

Product development strategy

Intensive Growth Strategies

� market penetration strategy

� market development strategy

� product development strategy

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� more purchasing and usage form existing customers

� gain customers form competitors

� convert non-users into users

Market penetration tools

� Loyalty programs,

� Commercial claims

� New opportunities to use

� Suggesting additional benefits

� Price cuts

� Distribution intensifying

� Establishing or joining new distributionchannels

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Market penetration strategy goals

� to increase market share throughcompetitive pricing, advertising and sales promotion

� To secure dominance of growth markets

� To restructure a mature market by driving out competitors

� To increase usage by exustingcustromers


Advantages:

� Synergy effect (marketing synergy, operating synergy, management synergy)

� Total Cost

� Time needed

Disadvantages:

� Scale of incerase

� Predictibility

� Customer & technology dependance

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� new market segments

� new distribution chanells

� new geographic areas

Market development tools

� New targeting

� New positioning of the productand/or brand

� Commercial claims

� New distribution channels

� International expansion

� Price adapted to new clients’ requirements

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Advantages:

� Use of existing resources

� Capacity utilization

� Know-how and experience utilization

Disadvantages:

� Level of risk (new customers, newbusiness context)

� Lack of management knowlegde


� product modifications via newfeatures

� different quality levels

� ‘new’ product

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Advantages:

� Forces competitors to innovate

� Creates bariers for new entrants

� Capacity utilization

� More options for customers

� Stronger barganing position towardsdistributors


Disadvantages:

� Additional costs

� Limitations based on Pareto rule

� Time needed

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Integrative Growth Strategies

Factors stimulating the need for

integration:

� Scarce resources

� Increased competition

� Higher customer expectations

� Pressures form strog distributors

� Internationalization of markets

� Changing markets and technologies

� Turbulent and upredictable markets

Source: Hooley, et al. 1998

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� Development beyond the presentproduct market, but still within thesame market system


� Horizontal integration (HMS)

� Vertical integration (VMS)

- backward

- forward

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Horizontal integration

S

M

W

R R

W

R

M

W

R R

S

M

W

R

Customers

R R

M

W

R

W

R R

S – supplier, M – manufacturer, W – wholesaler, R - retailer

Horizontal integration

� Refers to development into activitieswhich are competitive or directlycomplimentary to company’s presentactivities

� Horizontal = the same level of marketing system!

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Horizontal integration - advantages

� Acces to competitors clients, distributors, markets, brands….

� Cooperation instead of competition on markets

� Reduction of R&D costs

� Strenghtening barganing power

Horizontal integration - disadvantages

� Corporate culture maladjustment,

� Strategy redefinition

� Schizophrenic corporate identity

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Vertical integration

S

M

W

R R

W

R

M

W

R R

S

M

W

R

Customers

R R

M

W

R

W

R R

S – supplier, M – manufacturer, W – wholesaler, R - retailer

Vertical integration

Company becomes its own:

� supplier of raw materials, componentsor services (backward verticalintegration)

� distributor or sales agent (forwardvertical integration)

Vertical = between different levels of MS!

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Vertical integration advantages

� Secure supply of components or rawmaterials with more control

� Reduction of supplier barganing power

� Strenghten the relationships andcontacts of the manufacturer with thefinal consumer of the product

� Raise barriers to entry

� New business opportunities

Vertical integration disadvantages

� Overconcentration (‘more eggs in thesame basket’)

� Inflexible policy, more sensitive to instabilities

� Increases the firm’s dependence on particular aspect of economic demand

� Lack of know-how and experience

� High risk

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Diversification Growth Strategies


� Development beyond the presentindustry (marketing system)

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� concentric diversification

� horizontal diversification

� conglomerate (lateral) diversification

Concentric diversification

� New client

� New product

� Technological consistency

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Concentric diversification - advantages

� Knowledge & experience

� Well established cooperation withsuppliers & distributors

� Increasing potential demand thanks to new customers

� Better adjustment to customerneeds&preferences

Concentric diversification -

disadvantages

� Technological overconcentration

� Level of risk as a consequence of ‘unknown’ customer

� New market reality - newcompetitors

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Horizontal diversification

� The same customer

� Completely new (unrelated) product

Horizontal diversification -

advantages

� Well recognized customer’s needs, wants & preferencess

� High level of customer satisfactionand loyalty

� Can use company’s image and reputation

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Horizontal diversification -

disadvantages

� High risk in case of customerunsatisfaction

� Need to invest into new technology or konw-how

� Necessity of establishing newbusiness relations

� Time & costs

Lateral diversification

� New clients

� New products

� Completely unrelated businesses

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Lateral diversification - advantages

� Risk spreading (protects against thefailure of current products& markets)

� Creates additional souces of profits

� Helps escape from present business

� Offer the chance of growth withoutcreating a monopoly

� Exploit under-utilised resources

� Can use company’s image and reputation

Lateral diversification - disadvantages

� Dilution of shareholders’ earnings

� Lack of the common identity and purpose

� Lack of management experience

� Costs & risk & time

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Methods of growth

� Organic growth (achived through the

development of internal resources)

� Corporate:

� Acquisition

� Merger

� Joint venture

� Contracual:

� Cooperation

� Licencing

� Franchising

Acqusitions/ mergers

� Acquiring already existing businessesfrom their current owners via thepurchase of a controlling interest inanother company

� Joining of two or more separatecompanies to form a single one

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Acqusitions – advantages (1/2)

� Buy new product range

� Buy a market presence

� Rationalisation of distribution and promotion

� Eliminate competition

� Current market protection

� Higher ulitisation of production facilities

� ‘buy in’ technologies and skills

� Obtaining greater production capacity

Acqusitions – advantages (2/2)

� ‘buy in’ technologies and skills

� Obtaining greater production capacity

� Improve purchasing by buying in bulk

� Safeguard future supplies of raw materials

� Accesing high quality management

� Obtain cach resources

� Obtain tax advantages

� Overcome barriers of entry

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Joint-venture

Is a separate business unit created by two or more firms

� Share funding, cut risk, synergies, technology, learning

But also…

� Conficts of interests, disagreementsover profit shares, money invested, management & strategy

Cooperation

� Firms share data, resource and activities to achieve mutuallybeneficial objectives

� Agreements to co-operate on variuos issues, shared research & development, supply chainrationalisation, synergy effects

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Licensing

� A commercial contract whereby thelicenser gives something of value to thelicensee in exchange for certainperformances and payments

� The royalty for:rights to producepatented product, manufacturing konw-how, technical & marketing advice &assistance, right to use brand…

Franchising

� A method of expanding the business onless capital then would otherwise bepossible

� The franchiser offers: name, googwill,systems & business method, supportservices

� The franchisee: provides capital,personal involvement & local marketknowledge, takes risk

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Consolidation/limitation strategies

� Deinvestment

� De(z)integration

� Prunning

� Reduction

� Harvesting

References

� Armstrong G., P. Kotler: Marketing.Wprowadzenie, Wolters Kluwer,Warszawa 2012

� Kotler P. Marketing Management.Eleventh Ed., Prentice-Hall, EnglewoodCliffs, 2003

� Strategic Marketing Management:Planning and Control, BPP ProfessionalEducation, 2003

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Case study

Lesson 8

Allocation strategies

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Allocation strategies

� To assign company’s resources (money!) to each SBU

� To settle objectives for each SBU due to company’s strategic goals in accordance with growth or consolidation strategies

Portfolio Analysis – Allocation

Strategies


Weak Strong

Market Attractiveness

High

Alliance

Fast growth

Growth

Selective growth

Fast growth

Growth

Selective growth

Market position defence

Low

Optimization

Market exit (gradual)

Market exit

Market position defence

Optimization

Selective growth

Growth

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Allocation Strategies - 1Type of strategy Main objectives Investments Growth & Consollidation

Strategies

Fast growth Increase market

share (offensively)

and negative

profitabilty

Increase marketing as

well as R&D investments

Diversification

Intensive growth

Integrative growth

Growth Increase market

share and decrease

of profitability

Increase marketing as

well as R&D investments

Intensive growth

Integrative growth

Selective growth Increase market

share and maintain

profitability

Increase marketing and

R&D investments (for

selected market segments

and products)

Intensive growth

Integrative growth

Alliance Parter for alliance

search and increase

market share

Redused marketing and

R& D investments through

alliance

HMS

Diversification

VMS

Intensive growth

Allocation strategies - 2Type of strategy Main objectives Investments Growth & Consollidation

Strategies

Market position

defence

increase profitability

& maintain market

share

Maintain marketing

investments and limit

R&D investments

Market penetration

Harvesting

Optimization Increase profitability

& reduction of the

market share

Decrease of total

marketing and R&D

investments

Harvesting

Reduction

Pruning

Disintegration

Market exit (gradual) Increase profitability

& considerable

reduction of the

market share (sales)

Decrease of marketing

investments, no R&D

financial support

Reduction

Pruning

Disintegration

Deinvstment

Market exit Withdrawal Minimal marketing and

R&D investments to

maintain the value of the

business

Dezinvestment

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Allocation strategies – an example


Weak Strong

Market attractiveness

High

Low

SBU1SBU2

SBU3

SBU4

Market position defenceOptimization

Growth

Selective growth

Lesson 9

Demand GrowthStrategies

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Process of marketing strategy

creation (product level)

Corporate strategy general findings (SBU)

Determinants of product marketing

strategy

Analysis of themarket situation

Marketing goals

Marketing budget

Marketing strategies (level of product)

Expanding the total market

Selective demand growth strategies

Strategies based on the company’s competitive position

Strategies for different PLC stages

Analysis of market situation

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Analysis of market situation – main

components

Analysis of market

situation - external

1. customer analysis

2. demand analysis

3. competitors analysis

4. distribution analysis

5. suppliers analysis

6. macroenvironment analysis

Analysis of market

situation - internal

1. former marketing activities analysis

2. company’s market position assesment

3. sales analysis

4. marketing costs analysis

5. profitability analysis

6. marketing effectiveness & efficiency analysis

7.customer satisfaction analysis

Analysis of market

situation - outputs

1. SWOT analysis

2. market segments attractiveness assesment

3.perceptual map

4. PLC assesment

5. sales forecasts

Marketing Budget

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Marketing Budget - dimensions

� Value (total value of financialsupport in a specific period of time)

� Percent of the value of sales (itshows the level of intensity ofmarketing activities)

What costs are included in the

marketing budget?

Marketing

communication

Market research

Distribution

(logistics)

Sales

Product innovations

Additional services

Price discounts

Intermediary margins

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Factors influencing the marketing

budget for the product

� Financial position of the company

� Scope of common marketing activities

� Marketing objectives and programs

� Former marketing budgets

� Sales forecasts

� Competitors marketing spendings

� Average expenditure of the industry

Marketing budget and strategy

for the product High budget:

� Market development

� product differentiation

� Offensive strategies

� First or second phase of the PLC

� Product development

Low budget:

� Cost leader

� Defensive strategies

� Neutral strategies

� Third or fourth phase of the PLC

� Reduction as well as pruning strategy

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Process of marketing strategy

creation (product level)

Corporate strategy general findings (SBU)

Determinants of product marketing

strategy

Analysis of themarket situation

Marketing goals

Marketing budget

Marketing strategies (level of product)




Strategies for different PLC stages


� All activities and marketing tools which leads to total market expansion

� Typically initiated by market leaders and pretenders

� Effective and efficient in the first and second phase of PLC

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Expanding

the total market

Expanding the number of customers

Increasing the scale of usage



Awareness

Availability

Ability to Use

Benefit Deficiency

Affordability

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Average usage

/consumption

New opportunities

Increasing the value of the product (and

price)

Faster product replacement

New applications


Awareness Additional potential customers would buy the product

if they knew it was available and accurately

understood its benefits

Availability Lack of availability of products that may be in short

supply, or difficult to make available, or lack services

to support their use

Ability to Use These customers lack the knowledge, lack other

resources (electricity), and /or requirement to make

the product or service workable

Benefit Deficiency The key benefits of product or service are not

important (or even unattractive) to a subset of

potential customer.

Affordability The cost of products is too high for some consumers

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Awareness • Collaborative efford of entire industry

• Intensive marketing communication

•Training addressed to customers

Availability • New distribution channels

• Vending machines

• More intensive distribution

• Special events

Ability to Use • training addressed to potential

customers

• simpler products

• additional support


Benefit

Deficiency

• New positioning

• New RTB

• New marketing communication

Affordability • Cheap, basic versions of the product

• New financing solutions and programs

• Alternative methods of access

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Increasing the average usage

Encouraging customers to use more of the product at everyopportunity


New opportunities

� use after every meal (chewing gum)

� new opportunities to celebrate (Valentine’s Day)

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Increasing the value of the product

(as well as the price)

� Product ‘upgrading’

� New additional benefits


Faster product replacement

� Shortening of PLC (new versions of the product, product modifications),

� New product offered at lower price,

� Alternative options of financing the purchase (leasing, favorable credit),

� Promotion focused on creating the NEED of using latest, better version of the product

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New usage of the product

This strategy leads to the new marketcreation!


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Selective demand growth

strategies

Selective demand growth strategies are creating and sustaining competitive advantage

There are two main strategic options:

� Cost leadership

� Offer differentiation

Cost leadership strategy

� A cost leadership strategy seeks to achieve the position of lowest-cost producer in the industry.

� By producing at the lowest cost, the manufacturer can compete on price with any other producer in the industry.

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� Economy of scale

� Internal focus

� Learning curve effect

� Improving productivity

� Only one firm

� Low margins


� Mass marketing� Avoiding niches and small market segments� Product standarization� Limited augmented product� Intensive distribution� Effective logistics� Limited promotional spendings� Low prices

� Standarization of marketing strategies and efforts

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Differentiation strategy

� Brand image and reputation� Market segmentation� Targeting� Focus on customers (needs, preferences, etc.)� Product differentiation� Intensive marketing efforts including

marketing communication� Prices higher than average� Augmented products� High costs� R&D investments

Lesson 10, 11 &12


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The influence of market position on

strategy

� Market leader – has the largest marketshare, it determines the nature, pace andbases of competition, typically is thebenchmark for other companies in theindustry

� Market challengers & followers – firmswith slightly smaller market share can adoptone of two stances.� they may choose to adopt aggressive stance and

attack other firms, including the market leader, togain share are dominance (challengers)

� or adopt less aggressive stance in order to maintainthe status quo (followers).


strategy

� Market nichers – small firms which surviveand prosper by choosing to specialize in partsof the market which are too limited in size andpotential to be of real interest to larger firms;nichers are able to build up specialist marketknowledge and avoid expensive fights withlarger companies

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strategy

Leaders

Challengers

Nichers Followers

•Expand the market•Protect the current share•Expand share

•Dicsount or cut prices•Cheap goods•Innovative products and distribution•Improve services•Advertise heavily•Proliferate the range•Reduce costs

•Segment carefully•Use R&D cleverely•Challenge conventionalwisdomsGet smart!

Strategies for market leaders

� How best to expand the total market?

� How to protect the organization’s current share of the market?

� How to increase market share?

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Market leadership

Guarding theexisting market

Strong market positioning

Development and refinement of meaningful competitive

advantage

Continuous product and process innovation

Proactive stance

Heavy advertising

Strong customer and ditribution relations

Expansion of thecurrent market

share

Heavy advertising

Improved distribution

Price incentives

New product development

Mergers

Takeovers

Geographic expansion

Distributor expansion

Marketing strategy and military

analogies

� Offensive warfare – first of all for market challengers

� Defensive warfare – for market leaders guarding the market position

� Neutral strategies – for market nichers and followers

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Strategies based on

the company’s competitive position

Offensive strategies

Frontal attack

Flanking attack

Encirlement

attack

Byepass attack

Guerrilla warfare

Defensive strategies

Position defence

Flank position

defence

Mobile defence

Counter-

offensive defence

Pre-emptive

defence

Cantratiction

defence

Strategic

withdrawal

Neutral strategies

Following

Specialization

Defensive warefareStrategy Comment

Position defence Static defence of a current position, retaining current product-market by consolodating resources within existing areas. Exclusive raliance on a position defence effectively means that a business is a sitting target for competition.

Mobile defence A high degree of mobility prevents the attacker’s chances of lacalising defence and accumulating its forces for a decisive battle. A business should seek market development, product development and diversification to create a stronger base.

Pre-emptive defence Attack is the best form of defence. Pre-emptive defence is launched in a segment where an attack is anticipated instead of a move into related or new segments.

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Defensive warefare

Strategy Comment

Flanking defence This is used to occupy a position of potential future importance in order to deny that position to the opponent. Leaders need to develop and hold secondary markets to prevent competitors using them as a spring board into the primary market.

Contraction defence Company has little hope of defending itself fully. It concentrates its resources in areas considered to be less vulnerable.

Defensive warefare

Strategy Comment

Counter-offensive defence This is attacking where one is being attacked. This required immediate response to any competitor entering a segment or initiating new moves. Examples are price wars, where firms try to undercut each other.

Strategic withdrawal May be a last resort, but ‘cutting your losses’ can be the best option in the long run. Management resistance to what it seen as a drastic step is likely to be the biggest barrier.

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Position defence (fortress)

� One of the last successful methods of defence

� Relies on the apparent impregnability of a fixed position

� To overcome a position defence the attacker adopts on indirect approach rather than head-on attack that the defender expects

Position defence (fortress)

� Company attempting fortress defencewill find retreating form line after line of fortification into shrinking product markets

� Even a dominant leader cannot afford to maintain static defence, it must continually engage in product improvement, line extensions and product proliferations

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Mobile defence

� Rather than becoming preoccupied with the defence of current products and markets firms concentrates upon market broadening and diversification

� Companies cover new territories that might in the future serve as focal points both for offence and defence

� The need for management to define and redefine the business it’s in

� Involves diversification into unrelated industries

Mobile defence

� Market broadening and market diversification

� To major principles for market broadening:

principle of the objective – clearly defined and realistic objective)

&

principle of mass (focus efforts upon the enemy’s point of weakness)

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Pre-emptive defence

� Involves gathering information on potential attacks and then capitalizing upon competitive advantages, striking first

� Two broad forms: the company behaves aggressively or uses psychological warfare by letting it be known how it will behave if a competitors acts in a specific way (FUD marketing – fear uncertainty and despair)

FUD marketing

� Guerilla actions – hitting one competitor here, another there to keep everyone off balance

� Dissuade competitors form attacking (bluff)

� Companies with strong assets may prefere to entice the opponents into expensive and costly attacks that will not pay off in long run

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Pre-emptive defence

� Company should never rest even after it has achieved domination

� Should replace products frequently and support them aggressively

Flanking defence

� Flank is often less protected than other parts of the organization (market)

� Secondary markets shouldn’t be ignored

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Contraction defence

� Company has little hope of defending itself fully.

� Opts for withdrawal from segments and geographical areas with higher threat

� It concentrates its resources in areas considered to be less vulnerable.

� Planned contraction – giving up the weaker territories and reassigning forces to stronger territories, to consolidate competitive strenght

Counter-offensive defence

� Market leader needs to respond competitor’s attacks in order to minimize the threat

� This response can take one of three forms:

� Meet the attack head-on

� Attack the attacker’s flank

� Develop a pincer movement in an attempt to cut off attacker’s operational base

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Strategic withdrawal

� May be a last resort, but ‘cutting your losses’ can be the best option in the long run.

� Management resistance to what it seen as a drastic step is likely to be the biggest barrier.

Strategies for market pretenders

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Basic conditions:

� Challenger must have a sustainableadvantage either in terms of cost ordifferentiation

� Challenger must be able to partly orwholly neutralize the leader’sadvantages, typically by doingalmost as well as the leader whichthe leader does best

Who to attack?

� Attacking the market leader

� Attacking firms of similiar size to itself but which are either under-financed or reactive

� Attacking smaller regional firms

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Frontal attack

� Outcome depends on who has thegreater strenght and endurance

� For a pure frontal attack to succeedthe aggresor needs a strenghtadvantage over competitor (at least3:1)

Frontal attack

� Modified frontal attack can taketwo forms:

� To match the leader’s offer on othercounts and beat it on price (it works when the

leader does not retaliate by cutting price, when competitorconvinces the market that its product is equal to competitot’sor at a lower price it is a real value)

� To invest heavily in research to achivelower production costs and then attackscompetitors on a price basis

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Flankinng attack

� The strategy of ‘indirect approach’

� The agresor will act as if it will attackthe strong side to tie up the defender’stroops but will launch the real attack atthe side or rear

� Attack on those areas where the leader is geographically weak and in market segments or areas of technology whichhave been neglected

Flankinng attack

� Direct flan attack: geografpical(spotting areas in the country or theworld in which the opponent is not performing at high levels) orsegmental (spotting uncoveredmarket needs not being served by the leaders)

� Higher probability of beingsuccessful than frontal attacks!

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Encirclement attack

� An attempt to capture a wide sliceof the enemy’s territory through a ‘blitzkrieg’ attack

� It’s a grand offensive on severalfronts, enemy must protect itsfront, sides and rear simultanously!

Bypass attack

� The most indirect offensivestrategy.

� It means bypassing the enemy and attacking easier markets to broadenresources base

� Three lines of approach:� Diversification into unrelated products

� Geographical diversification

� Leapfrogging into new technologies

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Guerilla attack

� Available also to smallerundercapitalized aggressors.

� Making small attacks on differentterritories of the oponent, with theaim of harassing and demoralizingthe oponent.

� The key is to focus the attack on a narrow territory

Guerilla attack

� Typically short promotional and price attacks in random corners of the larger oponent calculated to gradually weaken the oponent’smarket power.

� A continual stream of minor attackcreates cumulative impact, disorganization and confusion

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Neutral strategies

� For market followers� Following closely

� Following at a distance

� Following selectively

Three broad followership strategies:� Cloner

� Imitator

� Adapter

� For market nichers� Specialization

Following

� Closely – by emulating the leaders in as

many market segments and marketing mix areas as possible

� At a distance – following the leader in

terms of major markets and productinnovations, price level & distribution withmore differentiating factors

� Selectively – to avoid direct competition,

often grows into the future challenger

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Broad followership strategies

� Cloner

� Imitator

� Adapter

Cloner

� Is a parasite that lives off theinvestment made by the leader inthe marketing mix (such as inproduct or distribution).

� An extreme version of the cloner iscounterfeiter, who produces fakesof the original.

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Imitator

� Copies some elements but differentiates on others

Adapter

� Takes leader’s products and adaptsor even improves them regardingmarket requirements.

� The adapter may grow to challenge the leader.

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Market nicher strategies

Ideal niche:

� Sufficient size and purchasing power

� Growth potential

� Negligible interest of major competotors

� Firm has skills and resources to serve theniche effectively

� Firm’s godwill can help to defend themarket position in case of major competitorattack


� End-user specialist – specialising in

one type of customer

� Vertical-level specialist – specialising

at one particular point of theproduction/distribution chain

� Customer-size specialist – mostly to

small customers who are neglected by themajors

� Specific-customer specialist – to one

or a few major customers only

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� Geographic specialist – selling to one

locality

� Product or service specialist –offerning specialised services not availableform other firms

� Quality/price specialist – operating at

low or high end of the market

� Channel specialist – concentrating on

just one channel of distribuion

Lesson 13 &14

Strategies for differentPLC stages

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The Product Life Cycle

� ALL products have a finite life-cycle and will eventually die

� During this cycle they will move through distinct phases, requiring different strategies to exploit

� Profit potential from each stage will vary� emphasises continual need to review objectives and

strategies

� highlights need for balanced portfolio of products

� keeps focus on short term potential of innovation

sale

ssale

s

sale

ssale

s

timetime

timetime

fashion

scallop

Cycle - recycle

growth-slump-maturity

Common Curves

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time

introduction growth maturity decline

profit

Cycle - Profit Relationship

Introduction Growth Maturity Decline

Sales

Costs

Profit

Competition

Goal

Product

Price

Place

Promotion

Source: Wilson & Gilligan, 2001

low

high

negative

few

creatingproduct

awarness& trial

basic

low….

selective

heavy spend

rapid increase

average

increasing

increasing

market sharemaximization

developing

penetration

intensive

moderate/mass

peaking

low

high

high

profit maximization

modify

competition

heavy discount

brand differentiation

declining

low

declining

shake-out

expenditurereduction

phase out weak

reducing

selective

focussed toretain loyalty

Product Life Cycle - Implications

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Stage ConsiderationsAre we innovatorsor followers?

Market penetrationor Market skimming?

Competitive strategy?

Differentiation

Intensity ofmarketingsupport?

Segment?

Modify?

Enhance?

Rejuvenate?

Kill?

Manage costs

Manage decline / resources

Rejuvenate?

Strategies for introduction phase

� Are we pioneers(innovators) or followers (copyingcompetitors)?

Promotion

intensive weak

Price

high Rapidskimmingstrategy

Slow

skimmingstrategy

low Rapidmarket penetration

Slow market penetration

How to expand thetotal market?

How to grow selectivedemand?

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Innovators - FollowersQuestion Answer Decision

How long is probabale productcategory life time?

Long PLC

Short PLC

Follower

Innovator

What is predicted market penetrationlevel?

Low

High

Follower

Innovator

What are estimated costs of imitation?

Low

high

Follower

Innovator

What are company’s resources? Big

Small

Follower

Innovator

What are costs of deliverer change? Low

High

Follower

Innovator

How important is a brand as a purchase decision factor?

Less important

Very important

Follower

Innovator

What is the level of clients educationcosts?

High

Low

Follower

Innovator

Rapid skimming strategy

� Firm charges high price in order to recover as much gross profit per unit as possible

� Intensive promotion to convince themarket of the product’s merits & to accelerate the rate of market penetration

� Reasonable when:� A large part of the market is unaware of the product

� Aware people are eager to get the product & are able to pay for it

� Firm wants to build up brand preference

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Slow skimming strategy

� Firm charges high price in order to recover as much gross profit per unit as possible

� Low level of promotion keepsmarketing expenses down

� Reasonable when:� Market is limited in size

� Most of the market id aware of product

� Buyers are willing to pay high price

� Potential competition is not imminent

Rapid penetration strategy

� Promises to bring about the fastestmarket penetration and the largestmarket share

� Resonable when:� Market is large

� Market is unaware of the product

� Most buyers are price sensitive

� There is strong potential competition

� Company’s costs fall with the scale of productionand accumulated manufacturing experience

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Slow penetration strategy

� Company believes that market demand is highly price elastic but minimally promotion elastic

� Reasonable when:� The market is large

� The market id highly aware of the product

� The market is price sensitive

� There is some potential competition

Strategies for growth phase



Which strategies based on

the company’s competitive position?

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Growth stage strategies

� Improve product quality, add new productfeatures, improve the style of the product

� Add new models

� Enter new market segments

� Enter new distribution channels

� Shifts advertisinig from creating productawarness to bring product conviction and purchase

� Lower price to attract the nest layer of price-sensitive buyers

Strategies for maturity phase



Which strategiesbased on


Market modification

Product modification

Marketing-mixmodification

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Market modification

� Convert nonusers

� Enter new market segments

� Win competitors’ customers

� More frequent use

� More usage per occasion

� New and more varied uses

Product modification – new features

� Bulid a company image of progressiveness and leadership

� Can be adapted quickly, droppedquickly and made optional at littleexpence

� Can win the loyalty of customers

� Can bring free publicity

� Generate sales-force and dictributors’ enthusiasm

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Marketing mix modification

� Prices

� Distribution

� Advertising

� Sales promotion

� Personal selling

� Services

Strategies for decline phase

Which strategiesbased on


Leadership

Niche

Harvesting

Drop decision

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Readings

� P. Kotler, Marketing Management. Analysis, Planning, Implementation and Control, Chapter11, p. 318-365

� Strategic Marketing Management: Planning & Control, Professional Education, 2003

� R. M. S. Wilson, C. Gilligan, Strategic Marketing Management: Planning, Implementation and Control, Butterworth Heinemann , Chapter 10, p. 326 - 388

Strategic Marketing Management · 2018-02-27 · Strategic Marketing Management ... BCG’s Growth Share Matrix GE Multifactor Matrix ... difference between: Where we are going?(in

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