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Prof. Shailja Bhakar
Unit 3: Decisions in Marketing Stra
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Prof. Shailja Bhakar
Unit 3 Part A: Corporate Objectives an
Growth
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Corporate Objectives and Growth St
Formal objective provide decision criteria th
organizations business units and employespecific dimensions and levels of performan
Objectives also provide the benchmarks fothe subsequent outcomes
Each objective should contain four compone
1. A performance dimension or attribute soug
2. A measure or index for evaluating progress
3. A target or hurdle level to be achieved
4. A time frame within which the target is to b
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Enhancing Shareholder Value: The UltimaObjective
For Increasing shareholders value Management musinterest of various corporate constituencies such as:
1. Employees: Competitive wages2. Customers: High Quality and Competitive Price
3. Suppliers/Debt holders: Financial Claims that must becash when they fall due
4. Stock holders: Look for cash dividends and the pros
dividends reflected in stocks market price Shareholders value can be stated in terms of tar
shareholder equity, increase in the stock price or earnRecently such objectives are stated in terms of EVA or
MVA= (Debt + Market Value)- Capital invested in the com
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Enhancing Shareholder Value: The UltiObjective
Disadvantages of these kind of objectives are:
1. Do not always provide guidance for a firmmanagers or benchmarks for evaluating performan
2. Standard Accounting measures such as earning return on investment can not be always linked tofirms share
3. Finally there is a danger that a narrow focus financial, shareholder objectives may lead managattention to actions necessary to provide valuecustomers and sustain a competitive advantage
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Multiple ObjectivesCorporate generally have multiple objectives such as:
1. Growth (sales $, market share %)
2. Competitive strength (brand awareness, market share)
3. Innovation (New product sales results, new process savings
4. Profitability (ROI (return on investment), RONA (return on ne(return on equity))
5. Resource utility (return on capital equipment or fixed assets)
6. Shareholder returns (returns paid to owners, earnings per sh
(price to earnings))7. Contribution to customers (competitiveness, product quality
proposition, customer loyalty)
8. Contribution to employees (salaries paid, personnel developrates)
9. Contribution to society (Charitable or social and environmen
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Corporate Development Strategies
Expansion
1. Market Penetration2. Product Development
3. Market Development
Diversification
1. Vertical Integration: Forward and Backward
2. Related Diversification3. Unrelated Diversification
4. Diversification Through organizational relationship
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Corporate Development Strategies
Current Products New Produc
CurrentMarkets
Market PenetrationStrategies:Increase Market ShareIncrease Product Usage1. Increase Frequency of
Use2. Increase Quantity3. New Application
Product Development StrategiesProduct ImprovementsProduct Line ExtensionNew Products for Same Market
NewMarkets
Market DevelopmentStrategiesExpand Market for ExistingProduct1. Geographic Expansion2. Target New Segment
Diversification StrategiesVertical Integration1. Forward Integration2. Backward IntegrationDiversification into related businessDiversification)Diversification into unrelated busine
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Allocating Corporate Resources
Stars Question C
Cash Cows
High
Lo
w
MarketGrowth
Rate
Competitive Position (Ratios of Share to Share of Large
10 High 1.0
0.1
Fig 3.1:BostonConsultingGroups
(BCG)Growth
Sh M t i
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Resource Allocation and Strategy Imp
Question Marks: Low market share and high growth ind
large amount of cash not only for expansion to keep
growing market but also for marketing activities. To i
share and catch industry leader. The strategic imp
management must select the question marks carefully
future growth. The firm is advised to divest or harvest
before its resources are drained
Stars: It is the market leader in high growth market. Th
users of cash rather suppliers. The firm must contin
these businesses to maintain their market share. Sha
in important for star businesses to become cash cows r
as their ind stries mat re
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Resource Allocation and Strategy Imp
Cash Cows: Businesses of high relative share of low-gr
Generate cash to support stars and question marks. Wh
to harvest too much of cash from such businesses they
from premature decline.
Dogs: Low-Share businesses with low growth markets.
one of the options for these businesses or harvesting is
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Resource Allocation and Strategy Imp
Question
Marks
Stars
Cash
Cows
Dogs
Stars Qu
Cash Cows
High
Low
Market
Growth
Rate
Competitive Position (Ratios of Share to Share
Competitor)
10 High 1.0
0.1
CashFlows
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Limitations of Growth Share Matrix
Market Growth rate is an inadequate descrip
industry attractiveness Relative market share is inadequate as a d
overall competitive strength
The outcomes of a growth-share analysis are hito variations in how growth and share are m
While the matrix specifies appropriate investmfor each business, it provides little guidance onimplement those strategies
The model implicitly assumes that all busineindependent of one another except for the flow o
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The Industry Attractiveness- Business Pos
Matrix
Business competitive position Evaluating Market Attractiv
SizeGrowth
Share By Segment
Customer Loyalty
Margins
Distribution
Technology SkillsPatents
Marketing
Flexibility
SizeGrowth
Customer Satisfaction L
Competitions: Quantity,
Effectiveness, Commitm
Price Levels
ProfitabilityTechnology
Governmental Regulatio
Sensitivity to Economic
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Alternative Portfolio Models
1 1 2
1 2 3
2 3 3
High Medium Low
High
Medium
Low
Market
Attractiveness
BusinessPosition:Its AbilitytoCompete
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Value Based Planning Value based planning is a resource allocation tool t
overcome the shortcomings and unanswered questio
analysis by assessing the shareholder value a given strcreate. Helps in identifying economic gain from invesbusinesses
A number of value-based planning methods are currentshare three basic features:
1. They assess the economic value a strategy is likely
examining the cash flows it will generate rather tdistorted accounting measures such as return on inve
2. They estimate the shareholder value that a strategy discounting its forecasted cash flows by the businesscost of capital
3. They evaluate strategies based on the likelihood that
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Value based planning (Discounted Cash Flow Alfred Rappaport and the Alcar Group I
Creating shareholder
value
Shareholder return
Dividends
Capital Gains
Ma
Discount RateCash flow from
operations
Working capitalinvestment
Fixed capital
investment
Sales growthOperating profit
margin
Income tax rate
Value growth duration
Operating Investment
Corporate
Objective
Valuation
Component
ValueDrivers
Management
Decision
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Limitations of Value based planning
Value based planning is not substitute to strategic plannevaluates strategy alternatives
Inaccurate forecast of cash flows can create problems i
value based planning
Some kind of strategic alternatives are undervalued
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Prof. Shailja Bhakar
Unit 3 Part B: Business Strategies an
Impact on Marketing Strategies
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Strategic Decisions at the Business-U
Where a firm is organized into separate divisions eng
industries and/or marketing activities, these divisions arebusiness units or SBUs.
It is the responsibility of the SBU manager to develop marke
analyzing their specific market, determining objectives and
plans in line with the corporate directives and goals.
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Defining Strategic Business Units
SBUs typically feature the following traits:-
They service an homogenous set of markets with a limtechnologies
They offer unique products or services from other SBUs within th
They are in control of the factors required for success within tfinancial, R&D, equipment, manufacturing and/or human resourc
They operate as a profit centre (responsible for planningmonitoring, controlling and reporting their profit/loss to their corpo
How product markets should be clustered into a business unit:
Technical Compatibility
Similarity in customer Needs
Similarity in personal characteristics
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Business unit objectives
Each business unit is usually assigned unique objectives
other SBUs) based on corporate objectives.
They are specific enough to have meaning, yet broad eno
innovation and specialized market knowledge.
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Allocating Resources within the Busin Resource allocation within a SBU can utilize the same
corporate level allocations; e.g. value-based and portfolio m
It is generally acknowledged that the value-based tools are
the SBU level as the information gathered is more specific
is usually a known size whereas industry attractiveness
subjective or non-specific
At SBU level managers must determine1. Attractiveness of individual markets
2. Competitive position of their product within those markets
3. Cash flows each product entry will likely generate rather
industry attractiveness and the overall competitive strength
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The Business Units Competitive Stra
Achieving a competitive advantage requires a business
two choices:
1. What is SBUs competitive domain or scope
2. How will the business unit distinguish itself from comp
target markets
Michael E Porter generated a model through which firm
choice about the type of competitive advantage:
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Porters Four Business Strategies
Low Cost Diffe
Broad Target Cost Leadership Diffe
Narrow Target Cost Focus Diffe
Source of Competitive Advantag
Competitive
Scope
R b t E Mil d Ch l C S id
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Robert E. Miles and Charles C Snow iden
another set of business strategies
Prospector
1. Undergoes periodic redefinition
2. Values being the first mover in new product and mark
3. Responds rapidly to early signals concerning areas of
4. Competes primarily by stimulating and meeting new mopportunities
Defender
1. Attempts to locate and maintain secure position in staservice areas
2. Offers relatively limited range of products or services ccompetitors
3. Offers lower prices, high quality and better service the
4. Not at the forefront of technological new product deve
Robert E Miles and Charles C Sno iden
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Robert E. Miles and Charles C Snow iden
another set of business strategies Analyzer
1. An intermediate type make fewer and slower products mar
than prospectors but is also not committed to stability and defenders
2. Maintain stable limited line of products or services carefullypromising new product developing in the market
3. Seldom a first mover
Reactor
1. Lack any well defined policy for competition2. Does not have as consistent a product market orientation a
3. Not as willing to assume the risk of new products
4. Not aggressive in marketing established products
5. Responds primarily when it is forced by environmental pres
Combined typology of business unit comp
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Combined typology of business unit comp
strategies
Units primarilyconcerned withattaining growth
throughaggressive pursuitof new product-
marketopportunities
Units with strongcore business;
actively seeking toexpand into
related product-markets with
differentiatedofferings
Units primarilyconcerned withmaintaining adifferentiated
position in maturemarkets
Units with strong
core business;
actively seeking to
expand into related
product-markets
with low-cost
Units primarily
concerned with
maintaining a low-
cost position in
mature markets
Prospector Analyzer Defender
Heavy Emphasis
No Emphasis
CostLeadership
Differentiation
CompetitiveStrategy
Emphasis on New product-Market Growth
B i St t i Diff i S Obj ti R D l
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Business Strategies Differ in Scope, Objectives, Resource Deploym
Dimensions Low Cost Defender Differentiated Defender Prospector A
Scope Mature/Stable/Welldefined domain;mature technologyand customersegments
Mature/Stable/Welldefined domain; maturetechnology and customersegments
Broad/Dynamic domains;technology and customersegment not well defined
Mp
Goals & Obj.Adaptability(New Pdt.success)
Very Little Little Extensive MP
Effectiveness(Incr. in MKTShare)
Little Little Large MP
Efficiency(ROI) High High Low MP
ResourceDeployment
Generate excesscash
Generate excess cash Need cash for productdevelopment
NdP
Synergy Need to seekoperating synergiesto achieve
Need to seek operatingsynergies to achieveefficiencies
Danger in sharingoperating facilities andprograms better to share
Dft
The fit between Business Strategies and t
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The fit between Business Strategies and t
environment
Different strategies pursue different objectives in differe
different competitive approaches, they do not all wo
under the same environmental circumstances
Changing Strategies at different stages in the industry li
External Prospector Analyzer Differentiated
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ExternalFactors
Prospector Analyzer DifferentiatedDefender
MarketCharacteristics
Introductory or early
growth stage of
industry life cycle
Many unidentified or
underdeveloped
customer segments
Late growth or early
maturity stage of industry
life cycle
Some segments well
established but potential
segments or application
remain underdeveloped
Maturity or decline
stage of industry life
cycle
Most segments well
developed; sales
primarily due to repeat
replacement purchase
Technology Newly emergingtechnology
Basic technology well
developed but product
improvements/
modification still possible
Basic technology fully
developed and stable
Competition Few establishedcompetitors
Industry structure still
emerging
Many CompetitorsIndustry structure still
emerging
Changes in relative
market shares likely
Several wellestablished competitor
Industry structure
stable but consolidatio
is possible
Businesss R&D Process engineering Process engineering
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Marketing Implications of Different Business
Business units typically incorporate a number of distinct prod
A marketing manager monitors and evaluates the products esituations and develop marketing program suited to it
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Marketing Implications of Different Business
MARKETING POLICIES AND PROGRAM COMPONENTSProspectorStrategy
DifferenDefendeStrategy
PRODUCT POLICIESProduct line breadth relative to competitorsTechnical sophistication of products relative to competitorsProduct quality relative to competitorsService quality relative to competitorsPRICE POLICIES Price levels relative to competitors
DISTRIBUTION POLICIESDegree of forward vertical integration relative to competitorsTrade promotion expenses as percentage of sales relative tocompetitorsPROMOTION POLICIESAdvertising expenses as percentage of sales relative tocompetitorsSales promotion expenses as percentage of sales relative tocompetitors
++??
+
_+
++?
++++
+
+_
??+
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Impact of service characteristic on ma
The business level competitive strategy pursued by bus
same implications for marketing policies and program e
those for goods
But services have certain characteristics that give rise to
marketing problems and therefore demand special kind
policies and actions
M k ti
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Marketing
Intangibility Perishability Customer Contact V
Designing facilities and
products serve assymbols of service
quality
The service firms
personnel can also be
important tangible
symbols of service
quality
Creating a tangiblerepresentation of the
service
Tying the marketing of
services to the
marketing of goods
Smoothing out
the variability indemand
Lowering fixed
costs by making
capacity more
flexible
There is a high degree of
uncertainty in the day-to-dayoperations of high-contact
systems because the customer
can disrupt the production
system in a variety of ways
Rarely does the demand for a
high-contact service equal
capacity at any one time
It is difficult to set up anefficient production schedule for
high-contact services because
customers cannot be
programmed
Appearance of employees
directly affect customer
U
teU
U
te
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Prof. Shailja Bhakar
Unit 3 Part C: Identification and Selectin
Segments
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Market Segmentation, targeting and p Market Segmentation: is the process by which a marke
distinct customer subsets of people with simila
characteristics that lead them to respond in similar wayproduct offering and strategic marketing program. Msegment descriptors into four major categories: physiperson or firm related descriptors, product reladescriptors and customer need descriptors
Market Targeting: Not all customers in a market can b
one product at a time therefore the firms have to targwhich can maximize the profits. Targeting is done on threvenue potential and growth rate.
Market Positioning: designing product offerings astrategic marketing programs which collectively creacompetitive advantage in the target market would
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Identification of Market Segments Physical Descriptors
1. Age
2. Gender3. Household Life Cycle/ Family Life Cycle
4. Income
5. Occupation
6. Education
7. Geography8. Event
9. Race and ethnic origin
Identification of Market Segments
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Identification of Market Segments General Behavior
1. Lifestyle: Activities, Interest and Opinions
2. Social Class
3. Hobbies
Industrial or firms behavioral descriptors
1. Purchase Structure: Centralized and Decentralized
2. Buying Situation: Straight Rebuy, Modified Rebuy, New buy
Product Related Behavior
1. Product Usage
2. Loyalty
3. Purchase Predisposition
4. Innovativeness: Innovators, early adopters, late adopters, lag
5. Present Customers
Customer Needs: benefit sought, choice criteria
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Identification of Market Segments Global Market Segmentation
1. Homogeneous
2. Heterogeneous Service Segmentation
1. Customers are part of production and delivery
2. Problems of consistency
These problems can be overcome by:
1. Use of hard technologies2. Use of soft technologies
3. Hybrid Technologies
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Selecting Market Segment Selection of meaningful descriptors (variables) in a given market
1. A Priori (Determined in advance)
2. Post Hoc (Research Based) Determination of whether and to what extent there are di
dependent (outcome) variables. Such as benefit sought segmdemographics, product usage and lifestyle
Evaluation of the results from step 2 to determine the eusefulness of the segment scheme
1. Different: Segment must be distinguishable from all other segm2. Identifiable: Possibility of accessibility
3. Adequate Size: To be cost effective
4. Measurability: use of measurable variables should be possible
5. Compatibility: Consistent with the companys resources
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Prof. Shailja Bhakar
Unit 3 Part E: Positioning
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Types of positioning
Positioning affects the way a customer perceives s
therefore occurs in the customers mind. Promotin
product or service from the customers mind when itsaim of positioning. There are several types of posit
make this happen. They are:
Physical positioning
Perceptual positioning
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Types of positioning
Physical Positioning: When a business intends for its pr
services features to be compared with its competitors fe
known as physical positioning This type of positioning is used in products in which cus
evaluate the product by comparing it with the competitiv
A limitation of this type of positioning is that it is technica
Also customers attitude toward a product are based on
comparisons of products aesthetics, appeal, status, ima
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Types of positioning Perceptual Positioning: When a business aims for
services benefits to be compared with its competitor
known as perceptual positioning. Unlike physical positioning, the technical details of the
the major concern in the consumers mind. Instead, tinfluenced more so by the products or services branappeal or aesthetics. On paper, buying an automobile oalone would quickly narrow the market down to just a fe
However, in the brand and image conscious minds of the look and image the vehicle portrays is more oftefeature. For example, theres no doubt that a Mercedezspecified automobile, yet the price tag, aesthetic appassociated with owning such a car is what sets it competitors not its top speed or handling characteristi
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Types of positioning
Physical Positioning Perceptual Analysis
Technical Orientation Consumer Orientation
Physical Characteristics Perceptual Attributes
Objective Measures Perceptual Measures
Data Readily Available Need Marketing Research
Physical Brand
Properties
Perceptual Brand Positions and p
IntensitiesLarge Number ofDimension
Limited Number of Dimension
Represents impact ofproduct specificationsand price
Represents Impact of Products Spand Communication
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Process of Positioning
Identify relevant set of competitiveproducts
Identify the set of determinant,attributes that defines the product
space in which positions of current
offerings are located
Collect information from a sample ofcustomers about perceptions of each
product on the determinant attributes
Analyze intensity of a products
current position in customers mindSelect positionin
str
Determine prlocation in th
(Product
Determine cu
preferred cdetermin
Examine thpreferences of and current po
(Market P
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The Positioning Process Identify a relevant set of competitive products: Positionin
take place at the
1. Company level: How entire company is positioned against 2. Product Category: customers perception regarding produc
used as a substitute for companies product is examined
3. Product or Brand Levels: how brand is perceived comparecompetitors brand
Identify determinant attributesFeatures Parentage Endorsements Pr
di
Benefits ManufacturingProcess
Comparison P
Usage: end use, demographic,psychographic or behavioral
Ingredients Pro-Environment
Coar
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The Positioning Process Determine consumers perception: two main technologie
analyze customers perceptions about the competitivealternative products or brands are: Multiple Dimension Sc
Discriminate Analysis1. Discriminate analysis: determines the consumers perce
on the basis of which attribute best discriminate among bra
2. MDS: Paired comparison becomes complex when usedattributes as well as adding or deleting new brands to the c
Analyze the intensity of a products current positioawareness by strongly associating it with several conc
purchase decision.1. Marketing opportunities to gain positioning intensity
2. Constraints imposed by an intense position
a) Problem in repositioning
b) Existing intense position could be diluted as a result of me
c) New products dilute the image of old one if it is not succes
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The Positioning Process Analyze the products current position: Products
can be identified by marketing research and analyzing
techniques (Positioning grid or Perceptual Map andActual position of all competitors and the companys bridea about where to reposition the existing brand and wfor a new product. These gaps may occur due toTechnical constraints or unattractive market.
Limitation of positioning analysis
1. It only tells where consumers are positioning companycomparative to competitors
2. It does not give idea about which is the most preferred
3. Customers preferences can give an idea to solve this
Th P i i i P
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The Positioning Process Determine consumers preferred combination of attributes: su
can be asked to think of the ideal product or brand within a prohypothetical brand possessing the perfect combination of attributesviewpoint). Respondents could then rate the ideal product and exisnumber of attributes. Also it can be asked to the respondents to ndegree of similarity between pairs of existing brands but to aldegree of preference for each.
Define Market positioning and market segmentation: market sbe defined to get an idea about the difference in the benefit so
customers. A market position can simultaneously identify distinct mas well as perceived positions of different brands. By examining thcustomers in different segments together with their perceptions oexisting brands, analysts can learn much about:
1. The competitive strength of different brands in different segments
2. The intensity of the rivalry between brands in a given segment
Th P iti i P
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The Positioning Process Select Positioning Strategies: The decision of where to po
and how to reposition a brand should be based on boanalysis and market position analysis.
1. Sales potential of market positions: Purchase intention sthe percentage of consumers who intend to buy a specactually searching for it.
2. Evaluation of the sales potential of alternative positioconsider the more pertinent market dynamics. These inclu
a) Growth of market segments
b) Evolution ofsegments ideal points
c) Changes in positioning intensity
d) Evolution of existing brands positions
e) Emerging attributes
f) Development of new segments
g) Introduction of new brands
Th P iti i P
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The Positioning Process
Market Positioning Strategies
1. Mono-segment Positioning
2. Multi-segment Positioning
3. Standby Positioning
4. Imitative Positioning
5. Anticipatory Positioning
6. Adaptive Positioning
7. Defensive Positioning
Positioning of services: is similar to products
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Prof. Shailja Bhakar
Unit 3 Part D: Differentiation Strat
C t I t d S
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Concept, Importance and Sources Consumers will choose one product over another fo
reasons; the specific marketing mix, the unique selling
personal selling skills of an individual all affect the decisA marketers role is to ensure that the most favorable c
place for the consumer to buy the particular product.
One way in which to achieve this is to stand out from tThis can be achieved through unique attractive packagadvertising, brand associations, effective positionin
different value proposition or a combination of all of thes The important point is that the product or service has
from the competitors in order to grow sales. This is differentiation strategy.
I t
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Importance
Increase the perceived value of firms products (or serv
to competitors products (or services)
Create a customer preference for firms products / serv
Increase in sales
Building Brand Image and Corporate Image
Increasing Market Share
Sources
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Sources
Product Attributes
Firm-Customer RelationshipFirm Linkages
Product Attribute
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INTANGIBLE DIFFUnobservable and subjectcharacteristics relating to exclusivity, identity
TANGIBLE DIFFERENTATIONObservable product characteristics: size, color, materials, etc. performance packaging complementary services
Product Features
Product Complexity e.g. multiple functions on mobileTiming of Introductionbeing the first to market, e.g. SWalkman
Location e.g. restaurant located next to a metro statio
Product Attribute
Firm-Customer Relationship
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Customization creating a unique product for a customer
e.g. custom-tailored suit, custom-made bike/ Cars (Rolls Royc
Consumer Marketing creating brand loyalty
e.g. strong advertising (Coke, Nike)
Reputation creating reputation for brand
e.g. sponsoring events (Red Bull Air Race)
Firm Linkages
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Linkages among functions in the company to exploit cert
e.g. skills, for example engineered by Lotus Protons
Linkages with other companies to exploit certain resource
e.g. reputation, for example Porsche Design products
Product Mix offering extended product mix to attract custom
e.g. a coffee shop selling food
A product differentiation strategy mmeet
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meet
VRIO
Is it Valuable
Is it Rare?
Is it costly to Imitate?
Is the firm Organized to exploit it?
if it is to create competitive advantage.
A product differentiation strategy mmeet
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meet Value: Does differentiation result in an increase in revenues?
customers willing to pay premium?
higher sales of product?
Rarity: By definition, we can assume rareness (if product/service is truthen it is, by definition, rare but do consumers value it?) Imitability: How easy/costly would it be for competitors to imitate the diff1. Logic of costs of imitation
a) if would-be imitators face a cost disadvantage of imitation, theychoose not to imitate
2. Substitutes
a) if a base of differentiation is valuable, others will attempt to imitaduplication and/or substitution
b) if no substitutes are obvious, then we would conclude that imitasubstitution will be costly at least for the present time
Exploiting Opportunities
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Exploiting Opportunities Fragmented Industry
Branding: commodity differentiated product
Example: Kelloggs Corn Flakes
Emerging Industry
First mover advantages: captures market share
Example: Motorola Mobile Phones
Mature Industry
Refining product or adding services
Example: IBMs emphasis on service
Declining Industry Exploiting niches: serving those with strong needs/preferenc
Example: production of analogue films
Exploiting other opportunities
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Exploiting other opportunities Trends or Fads
Social Causes
Government Policy Economic Conditions
Service Differentiation
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Service Differentiation
Ordering Ease
Delivery
Installation Customer Training
Customer Consulting
Maintenance and Repair
