mma6e chapter-02 final

Marketing Management:An Asian Perspective, 6th Edition

Instructor Supplements Created by Geoffrey da Silva

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Developing Marketing Strategies and Plans

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2.1 How does marketing affect customer value?

2.2 How is strategic planning carried out at different levels of the organization?

2.3 What does a marketing plan include?

Learning Issues for Chapter Two

4 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

Key Insights of the Chapter

• Key ingredients of the marketing management process are insightful, creative strategies and plans that can guide marketing activities.

• Developing the right marketing strategy over time requires a blend of discipline and flexibility.

• Firms must stick to a strategy but also constantly improve it.

• They must also develop strategies for a range of products and services within the organization.


Marketing and Customer Value

• The task of any business is to deliver customer value at a profit.

• In a hypercompetitive economy with increasingly informed buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value.


Traditional View of Marketing

• The traditional view of marketing is that the firm makes something and then sells it.

• Will not work in economies where people each with individual wants, perceptions, preferences and buying criteria.

• New belief: marketing begins with the planning process.


Value creation and delivery consists of three parts:

1. Choosing the value (segment the market, select target market, develop “offering”).

2. Providing the value (product features, prices, and distribution channels).

3. Communicating the value (sales force, internet, advertising, and communication tools).


The Value Chain (Porter)

• Michael Porter’s Value Chain identifies nine strategically relevant activities that create value and costs in a specific business (five primary and four support activities).

• The primary activities cover the sequence of bringing materials into the business (inbound logistics), converting them into final products (operations), shipping out final products ( outbound logistics), marketing them (marketing and sales), and servicing them (service).


The Value Chain (Porter)

• The support activities—procurement, technology development, human resource management, and firm infrastructure—are handled in certain specialized departments, as well as elsewhere.


Application of the Value Chain Model

• The firm’s task is to examine its costs and performance in each value-creating activity and look for ways to improve it.

• The firm should estimate its competitors’ costs and performances as benchmarks against which to compare its own costs and performance.

• It should go further and study the “best of class” practices of the world’s best companies.


Core Business Processes

1. The market sensing process (marketing intelligence)

2. The new offering realization process (research and development).

3. The customer acquisition process (defining target markets and consumers).

4. The customer relationship management process (deeper understanding of consumers).

5. The fulfillment management process (receiving, shipping, and collecting payments).


Finding capabilities inside and outside the organization

• Strong companies develop superior capabilities in these core business processes.

• Strong companies also reengineer the workflows and build cross-functional teams responsible for each process.

• Many companies have partnered with suppliers and distributors to create a superior value-delivered network.


Value Delivery Network

• To be successful, a firm also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors, and customers.

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In an attempt to be more streamlined, Sony restructured its supply chain by eliminating suppliers who are not efficient.

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Core Competencies

• The key is to own or nurture the resources and competencies that make up the essence of the business—outsource if competency is cheaper and available.

• A core competency has three characteristics

1. Makes a significant contribution to perceived customer benefits.

2. Has applications in a wide variety of markets.

3. It is difficult for competitors to imitate.


Competitive Advantage

• Competitive advantage also accrues to companies that possess distinctive capabilities or excellence in broader business processes.

• Competitive advantage ultimately derives from how well the company “fits” its core competencies and distinctive capabilities into tightly interlocking “activity systems.”


Competitive Advantage for SIA

Singapore Airlines has a competitive advantage because competitors find it challenging to imitate its core competency of service quality.


Maximizing Core Competencies

• Business realignment may be necessary to maximize core competencies. It has three steps:

1. (re) defining the business concept or “big idea”;

2. (re) shaping the business scope; and

3. (re) positioning the company’s brand identity.


Replicating the Core Competencies of MNCs in Asia

• Many multinationals find it difficult to replicate their core competencies in China.

• Williamson and Zeng found that multinationals have clear advantages over local companies in China in two areas—industry-specific technology and managerial competence.

• However, such core competencies are handicapped by several characteristics in the Chinese business landscape:


Challenges in China’s Business Landscape for MNCs to Exploit their Core Competencies

• Poor infrastructural support—China’s poor infrastructural support means scarce market research and compromised supply chains. Toshiba, for instance, spent more than five years establishing a local supplier for a component that it needed for laptop computer production.

• Inflexibility—The lack of flexibility means higher costs when integrating local operations.


Challenges in China’s Business Landscape for MNCs to Exploit their Core Competencies

• Fragmented market—A fragmented Chinese market suggests that multinationals cannot reap economies of scale. Otis Elevator, for example, discovered that it needed to maintain production facilities in several regions in China to respond to the buying preferences of local authorities.

• Less developed market—Many markets in China are still in an early stage of development. Over one billion of China’s consumers can only afford products that serve their basic needs.


In contrast, Chinese competitors have three competitive advantages over MNCs:

• Better understanding—Chinese companies have a better understanding of what will work in the local environment.

• Leaner and more flexible—Chinese companies tend to be leaner and more flexible with lower costs. Many successful Chinese companies are run by highly entrepreneurial people.

• Opportunity to catch up—The open global markets allow Chinese companies to buy much of the technology and expertise that they need to catch up. In the PC market, the latest tools and technologies developed in Silicon Valley arrive in China within months.


Asian Companies Adopt Three Main Strategies (McKinsey)

• Expand quickly to capture global market opportunities

• Become atomizers

• Become asset light by using intangibles


Strategies by Asian Companies

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McKinsey & Company found that many Asian companies such as Taiwan Semiconductor Manufacturing are successful by becoming singularly focused in a particular area. In TSMC’s case, it becomes an expert in the semiconductor foundry business.


A Holistic Marketing Orientation and Customer Value

• Holistic marketers succeed by managing a superior value chain that delivers a high level of product quality, service, and speed.

• Holistic marketers address three key management questions:a) Value exploration—identify new value opportunities.b) Value creation—efficiently creates more promising new value

offerings. c) Value delivery—deliver the new value offerings more efficiently.

• Developing strategy requires the understanding of the relationships and interactions among these three spaces.


A. Value Exploration

1. Customer’s cognitive space (reflects existing and latent needs and includes participation, stability, freedom, and change).

2. Company’s competence space (broad versus focused scope of business and depth physical versus knowledge-based capabilities).

3. The collaborator resource space (horizontal and vertical partnerships).


B. Value Creation

Marketer’s need to:a. Identify new customer benefits from the customer’s view.

b. Utilize core competencies.

c. Select and manage business partners from its collaborative networks.


C. Value Delivery—What Companies Must Become?

Often requires an investment in infrastructure and capabilities. A. Proficient at customer relationship management.

— Who the customers are, and respond to different customer opportunities.

A. Internal resource management. — Integrate major business processes within a single family of

software modules.

A. Business partnership management. — Allow the company to handle complex relationships with its

trading partners.


Core competency and Zara’s strategies

In Asia, Zara is perceived as offering better designs. Thus, Asians do not mind paying more for Zara clothings despite locally made clothes being inexpensive.


Core competency and Zara’s strategies

Zara — Zara’s core competency is its innovative business model of serving customers’ fashion needs in a fast and cheap way. In Asia, where locally made clothes are generally inexpensive and foreign brands are entering in a decisive way, Zara is well positioned to keep up with its growth compared to its competitors. Gap owns stores only in Japan with franchise agreements in other countries. Hennes & Mauritz (H&M) entered Asia only in 2007 and operates less than 30 stores. Marks & Spencer is more expensive and perceived to have fewer clothes for young people than Zara. Many Asians view Zara’s clothes as better designed and having higher quality, and thus, do not mind paying more.


The Central Role of Strategic Planning

• Successful marketing thus requires companies to have capabilities such as: understanding customer value, creating customer value, delivering customer value, capturing customer value, and sustaining customer value.

• This calls for action in three areas:I. Managing a company’s businesses as an investment portfolio.

II. Assessing each business’s strength by the market’s growth rate and the company’s position and fit in that market.

III. Establish strategy.


Levels of Planning in Marketing Organizations

• Most large companies consist of four organizational levels:

i. Corporate level.

ii. Division level.

iii. Business unit level.

iv. Product level.


The Marketing Plan

• The marketing plan is the central instrument for directing and coordinating the marketing effort.

• The marketing plan operates on two levels: strategic and tactical.

A. The strategic marketing plan lays out target markets and the value proposition.

B. The tactical marketing plan specifies the product, promotion, merchandising, pricing, sales channels, and service.


Figure 2.1: The Strategic Planning, Implementation, and Control Processes


Corporate and Division Strategic Planning

All corporate headquarters undertake four planning activities:

i. Defining the corporate mission.

ii. Establishing strategic business units (SBUs).

iii. Assign resources to each SBU.

iv. Assessing growth opportunities.


Defining the Corporate Mission

Key questions to ask in defining the corporate mission:

A. What is our business?

B. Who is the customer?

C. What is of value to the customer?

D. What will our business be?

E. What should our business be?


Purpose of Mission Statements:

• Organizations develop mission statements to share with managers, employees, and

• (in many cases) customers.

• A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity.

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Amazon’s mission is to be the world’s largest online store.


Characteristics of Good Mission Statements

1. They focus on a limited number of goals. The statement “We want to produce the highest-quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices” claims too much.

2. They stress the company’s major policies and values. They narrow the range of individual discretion so employees act consistently on important issues.


Characteristics of Good Mission Statements

3. They define the major competitive spheres within which the company will operate. Table 2.1 summarizes some key competitive dimensions for mission statements.

4. They take a long-term view. Management should change the mission only when it ceases to be relevant.

5. They are as short, memorable, and meaningful as possible.


Table 2.1: Defining Competitive Territory and Boundaries in Mission Statements (part one)


Table 2.1: Defining Competitive Territory and Boundaries in Mission Statements (part two)


Vague versus Clear Mission Statements


Establishing Strategic Business Units (SBUs)

• Companies often define themselves in terms of products: They are in the “auto business” or the “clothing business.”

• Market definitions of a business, however, describe the business as a customer-satisfying process.

• Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, automobile, railroad, airline, ship, and truck are products that meet that need.

• Viewing businesses in terms of customer needs can suggest additional growth opportunities.


Table 2.2: Product-oriented versus Market-oriented Definitions of a Business


Defining the Market

• A target market definition tends to focus on selling a product or service to a current market.

• Pepsi could define its target market as everyone who drinks carbonated soft drinks, and competitors would therefore be other carbonated soft drink companies.

• A strategic market definition, however, also focuses on the potential market.


Strategic Business Units

• A business can define itself in terms of three dimensions: customer groups, customer needs, and technology.

• An SBU has three characteristics:

i. It is a single business, or a collection of related businesses, that can be planned separately from the rest of the company.

ii. It has its own set of competitors.

iii. It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit.


Strategic Business Units

The purpose of identifying the company’s strategic business units is to develop separate strategies and assign appropriate funding.


Managing the Business Portfolio

Liz Claiborne has put more emphasis on some of its younger businesses such as Juicy Couture, Mexx, and Kate Spade while selling businesses such as Ellen Tracy that do not have the same buzz.


Assigning Resources to Each SBU

• Once it has defined SBUs, management must decide how to allocate corporate resources to each.

• The 1970s saw several portfolio-planning models introduced to provide an analytical means for making investment decisions.

• The GE/McKinsey Matrix classifies each SBU according to the extent of its competitive advantage and the attractiveness of its industry.


Assigning Resources to Each SBU

• Management would want to grow, “harvest” or draw cash from, or hold on to the business.

• Another model, from Boston Consulting Group, called the BCG’s Growth-Share Matrix, uses relative market share and annual rate of market growth as criteria to make investment decisions.


Shareholder Value Analysis

• Portfolio-planning models have fallen out of favor as oversimplified and subjective.

• More recent methods firms use to make internal investment decisions are based on shareholder value analysis, and whether the market value of a company is greater with an SBU or without it (whether it is sold or spun off).

• These value calculations assess the potential of a business based on potential growth opportunities from global expansion, repositioning or retargeting, and strategic outsourcing.


Assessing Growth Opportunities

• Assessing growth opportunities includes planning new businesses, downsizing, and terminating older businesses. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it.

• See Figure 2.2.


Figure 2.2: The Strategic Planning Gap


Strategic Options

• The first option is to identify opportunities for growth within current businesses (intensive opportunities).

• The second is to identify opportunities to build or acquire businesses related to current businesses (integrative opportunities).

• Third is to identify opportunities to add attractive unrelated businesses (diversification opportunities).


Intensive Growth

• Corporate management’s first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive-growth opportunities is a “product-market expansion grid”.

i. The company first considers whether it could gain more market

share with its current products in their current markets, using a market-penetration strategy.

ii. Next it considers whether it can find or develop new markets for its current products, in a market-development strategy.


Intensive Growth

iii. Then it considers whether it can develop new products of potential interest to its current markets with a product-development strategy.

iv. Later the firm will also review opportunities to develop new products for new markets in a diversification strategy.

• These intensive growth strategies offer several ways to grow. Still, that growth may not be enough and management must also look for integrative growth opportunities.


The Product Market Expansion Grid (Ansoff)


Intensive Growth Strategy—Case of Starbucks



Starbucks—Starbucks is a company that has achieved growth in many different ways. When Howard Schultz joined the company in 1982, he recognized an unfilled niche for cafes serving gourmet coffee directly to customers. This became Starbucks’ market-penetration strategy, and helped the company attain a loyal customer base in Seattle. The market-development strategy marked the next phase in Starbucks’ growth: it applied the same successful formula that had worked wonders in Seattle, first to other cities in the Pacific Northwest, then throughout North America, and finally, worldwide. Once the company established itself as a presence in thousands of cities internationally, Starbucks sought to increase the number of purchases by existing customers with a product-development strategy that led to new in-store merchandise, including compilation CDs.



Starbucks—Starbucks pursued diversification into grocery store aisles with Frappuccino® bottled drinks, Starbucks brand ice cream, and the purchase of tea retailer Tazo® Tea. Starbucks introduced instant coffee VIA in its stores. The encouraging sales gave Starbucks an easier time convincing the trade to carry the brand. Starbucks is drafting off its stores into ubiquitous channels of distribution and then integrating that into the same capability and discipline that it had with the social and digital media. Starbucks has also ventured into the beer business. To target at the health-conscious market, Starbucks offer Refreshers beverages made with real fruit juice and fruit pieces.


Integrative Growth

• A business can increase sales and profits through backward, forward, or horizontal integration within its industry.

• An example of horizontal integration is the purchase of Volvo from Ford by Geely, China’s largest private-run automobile maker.

• This acquisition will allow Geely to boost its technology and move into Western markets where its brand recognition has been low.


Geely’s Acquisition Strategy

Geely, China’s largest private-run automobile maker, acquired Volvo to enhance its technology and expand into the Western markets.


Diversification Growth

• Diversification growth makes sense when good opportunities exist outside the present businesses—the industry is highly attractive and the company has the right mix of business strengths to succeed.

• Several types of diversification are possible:–New products that have technological or marketing synergies with

existing product lines.

–New products unrelated to the current industry.

–New businesses unrelated.


Downsizing and Divesting Older Businesses

• Companies must not only develop new businesses, they must also carefully prune, harvest, or divest tired old businesses to release needed resources and reduce costs.

• Weak businesses require a disproportionate amount of managerial attention.

• Managers should focus on growth opportunities, not dissipate energy and resources trying to salvage loss-making businesses.


Organization and Organization Culture

• Strategic planning happens within the context of the organization.

• A company’s organization consists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment.

• Whereas structures and policies can be changed (with difficulty), the company’s culture is very hard to change.

• Yet changing a corporate culture is often the key to successfully implementing a new strategy.


What is Corporate Culture?

• Corporate culture defined is “the shared experiences, stories, beliefs, and norms that characterize an organization.”

• Sometimes corporate culture develops organically and is transmitted by the CEO’s.


Corporate culture in Asian companies

• Corporate culture varies markedly among Asian companies.

• Overseas Chinese businesses are characterized by fast, autocratic, experience-based, and action-oriented decision making. These businesses seem to invest and risk their capital without much analysis.


Corporate culture in Asian companies

• In reality, the overseas Chinese collect and analyze data tirelessly to make rapid decisions. Many leverage their core competencies in hoarding information and erecting barriers to outsiders’ acquisition of such information.

• However, their corporate culture may change as a new generation of Western-trained managers assumes leadership of their parents’ businesses.


Asian Corporate Cultures

Overseas Chinese companies are constantly collecting “soft” data to make fast decisions based on experience. They do not share information readily. This may change as state-owned enterprises become privatized and as more Asian managers are Western-trained.


Corporate Culture at Samsung

Samsung changed its corporate culture to one that encourages more communication and cooperation across hierarchy and divisions; and gives product managers more autonomy.


Clash of Corporate Cultures: Joint Ventures and Mergers

• What happens when companies with clashing cultures enter a joint venture or merger?

• In a study by Coopers & Lybrand of 100 companies with failed or troubled mergers, 85 percent of executives polled said that differences in management style and practices were the major problem.

• Conflict was certainly the case when Danone and Wahaha ended their partnership.


Clashing of Corporate Cultures

The joint venture between China’s Wahaha and Danone is a classic example of clashing cultures that resulted in animosity in the partnership. While Wahaha claimed that it was in China’s national interests to establish competing businesses outside the joint venture, Danone did not think so.


Corporate Cultures Vary between Asian countries

Asian companies display a myriad of corporate cultures. While Chinese companies are more entrepreneurial, Japanese companies are less so, placing more emphasis on consensual decision making. Thai companies are also quite consensual because of their Buddhist heritage, while Indian companies have to content with the legacy of central economic planning.


Marketing Innovation

• Innovation in marketing is critical. Imaginative ideas on strategy exist in many places within a company.

• Senior management should identify and encourage fresh ideas from three groups that tend to be underrepresented in strategy making: employees with youthful perspectives; employees who are far removed from company headquarters; and employees who are new to the industry.

• Each group is capable of challenging company orthodoxy and stimulating new ideas.


Scenario Analysis

• Firms develop strategy by identifying and selecting among different views of the future.

• The Royal Dutch/Shell Group pioneered scenario analysis. A scenario analysis consists of developing plausible representations of a firm’s possible future that make different assumptions about forces driving the market and include different uncertainties.


Scenario Analysis

• Managers think through each scenario with the question: “What will we do if it happens?”

• They adopt one scenario as the most probable and watch for signposts that might confirm or disconfirm that scenario.


Figure 2.3: Business Unit Strategic Planning


Business Mission and SWOT

The Business MissionEach business unit needs to define its specific mission within the broader company mission.

SWOT AnalysisA. The evaluation of a company’s strengths, weaknesses,

opportunities, and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment.

B. Use market opportunity analysis (MOA).

C. Environmental threat—unfavorable trend or development .


External Environment (Opportunity and Threat) Analysis

• A business unit must monitor key macro-environment forces and significant micro-environment factors that affect its ability to earn profits.

• It should set up a marketing intelligence system to track trends and important developments and any related opportunities and threats.

• Good marketing is the art of finding, developing, and profiting from these opportunities.


Marketing Opportunity Analysis

• A marketing opportunity is an area of buyer need and interest that a company has a high probability of profitably satisfying.

• There are three main sources of market opportunities.

• The first is to offer something that is in short supply. This requires little marketing talent, as the need is fairly obvious.


Marketing Opportunity Analysis

• The second is to supply an existing product or service in a new or superior way. How? — The problem detection method asks consumers for their suggestions, the ideal method has them imagine an ideal version of the product or service, and the consumption chain method asks them to chart their steps in acquiring, using, and disposing of a product.

• This last method often leads to a totally new product or service.


Opportunities—How to Spot Them

• A company may benefit from converging industry trends and introduce hybrid products or services that are new to the market. Example: Major mobile phone manufacturers have released phones with MP3 players and Global Positioning System.

• A company may make a buying process more convenient or efficient. Example: Consumers can now use the Internet to find more books than ever and search for the lowest price with a few clicks.

• A company can meet the need for more information and advice. Example: Zuji.com facilitates finding travel information by providing several flight and hotel alternatives.



• A company can customize a product or service that was formerly offered only in a standard form. Example: National Bicycle’s Panasonic Order System manufactures custom-made bicycles fitted to the preferences and anatomy of individual buyers.

• A company can introduce a new capability. Example: Consumers can create and edit digital “iMovies” with iMac and upload them to an Apple Web server to share with friends around the world.

• A company may be able to deliver a product or a service faster. Example: Taiwanese contract manufacturers excel in speedy design, manufacture, and delivery of a variety of computer-related products and components.



• A company may be able to offer a product at a much lower price. Example: Pharmaceutical firms like Ranbaxy sell generic versions of brand-name drugs.


Identifying and Converting Opportunities

• Opportunities can take many forms, and marketers have to be good at spotting them. Consider the following:

1. A company may benefit from converging industry trends and introduce hybrid products or services that are new to the market. Major mobile phone manufacturers have released phones with multimedia capabilities and apps.



2. A company may make a buying process more convenient or efficient. Consumers can now use the Internet to search for the lowest price for several products with a few clicks. In India, banks are expanding to the rural population by employing roving tellers. These roving tellers use a laptop, a wireless modem, and a fingerprint scanner to open accounts, take deposits, and process money transfers for farmers and migrant workers in small towns; thus, making the buying process more convenient and accessible.


Making a Service More Accessible

In a bid to reach 50 percent of the rural households without bank accounts, Indian banks have roving tellers who take fingerprints of first-time customers in villages. This makes the banking process more accessible.



3. A company can meet the need for more information and advice. Zuji.com facilitates finding travel information by providing several flight and hotel alternatives.

4. A company can customize a product or service that was formerly offered only in a standard form. National Bicycle’s Panasonic Order System manufactures custom-made bicycles fitted to the preferences and anatomy of individual buyers.

5. A company can introduce a new capability. Apple’s iPad allowed consumers to access emails, play games, and watch movies on a convenient-to-carry touch pad.



6. A company may be able to deliver a product or a service faster. Taiwanese contract manufacturers excel in the speedy design, manufacture, and delivery of a variety of computer-related products and components.

7. A company may be able to offer a product at a much lower price. Pharmaceutical firms like Ranbaxy sell generic versions of brand-name drugs.


Evaluating Opportunities—Using Market Opportunity Analysis (MOA)

Key questions to ask: a.Can the benefits involved in the opportunity be articulated convincingly to a defined target market(s)?

b.Can the target market(s) be located and reached with cost-effective media and trade channels?

c.Does the company possess or have access to the critical capabilities and resources needed to deliver customer benefits?

d.Can the company deliver the benefits better than any actual or potential competitors?

e.Will the financial rate of return meet or exceed the company’s required threshold for investment?


Figure 2.4: Opportunity Matrix


Environmental Threats

• An environmental threat is a challenge posed by an unfavorable trend or development

• that would lead, in the absence of defensive marketing action, to lower sales or profit.

• Threats should be classified according to seriousness and probability of occurrence.

• See the Threat Matrix in Figure 2.4.


Figure 2.4: Threat Matrix


Internal Environment (Strengths and Weaknesses) Analysis

• It is one thing to find attractive opportunities and another to be able to take advantage of them.

• Each firm must evaluate its internal strengths and weaknesses.

• See the Marketing Memo: Checklist for Performing Strengths and Weaknesses Analysis.


Checklist for Assessing Strengths and Weaknesses


Goal Formulation

• Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period. This stage of the process is called goal formulation.

• Managers use the term “goals” to describe objectives that are specific with respect to magnitude and time.


Goal Formulation

The firm sets objectives, and then manages by objectives (MBO). For MBOs to work they must meet four criteria:

1. They must be arranged hierarchically, from the most to least important.

2. Objectives should be stated quantitatively whenever possible.

3. Goals should be realistic.

4. Objectives must be consistent.


Strategy Formulation

• Goals indicate what a business unit wants to achieve; strategy is a game plan for getting there.

• Every business must design a strategy for achieving its goals, consisting of a marketing strategy and a compatible technology strategy and sourcing strategy.


Porter’s Generic Strategies

1. Overall cost leadership—The business work hard to achieve the lowest production and distribution costs so that it can price lower than its competitors and win a large market share. Firms pursuing this strategy must be good at engineering, purchasing, manufacturing, and physical distribution. They need less skill in marketing. The problem with this strategy is that other firms will usually compete with still lower costs and hurt the firm that rested its whole future on cost.


Porter’s Generic Strategies

2. Differentiation—The business concentrates on achieving superior performance in an important customer benefit area valued by a large part of the market. The firm cultivates those strengths that will contribute to the intended differentiation. Thus, the firm seeking quality leadership, for example, must make products with the best components, put them together expertly, inspect them carefully, and effectively communicate their quality.

3. Focus—The business focuses on one or more narrow market segments. The firm gets to know these segments intimately and pursues either cost leadership or differentiation within the target segment.


Application of Porter Generic Strategies

• According to Porter, firms pursuing the same strategy directed to the same target market constitute a strategic group.

• The firm that carries out that strategy best will make the most profits.

• Firms that do not pursue a clear strategy and try to be good on all strategic dimensions do the worst.


Strategy versus Operational Effectiveness

• Porter draws a distinction between operational effectiveness and strategy.

• Competitors can quickly copy the operationally effective company using benchmarking and other tools, thus diminishing the advantage of operational effectiveness.

• Porter defines strategy as “the creation of a unique and valuable position involving a different set of activities.”

• A company can claim that it has a strategy when it “performs different activities from rivals or performs similar activities in different ways.”


Strategic Alliances

• Companies are discovering that there is a need for strategic partners if they hope to be effective.

• Many strategic alliances take the form of marketing alliances. These fall into four major categories:

i. Product or service alliances.

ii. Promotional alliances.

iii. Logistics alliances.

iv. Pricing collaborations.103 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

Types of Marketing Alliances

1. Product or service alliances—One company licenses another to produce its product, or two companies jointly market their complementary products or a new product. For instance, in the disc format war, Warner Brothers has an alliance to release its movies in high-definition DVD in Sony’s Blu-ray format; while Paramount, Universal, and Dreamworks signed on exclusively with HD DVD by Toshiba.

2. Promotional alliances—One company agrees to carry a promotion for another company’s product or service. In India, Pepsi built strategic alliances with adidas and Microsoft to tap Indian cricket fans during the World Cup. adidas retails its Men-in-Blue cricket accessories, Microsoft features Pepsi in its XBox 360 games, while Yahoo! maintains its Web site.


http://www.bluebillion.co.in/

Types of Marketing Alliances

3. Logistics alliances—One company offers logistical services for another company’s product. For example, Hong Kong’s Li & Fung manages Avon’s supply chain.

4. Pricing collaborations—One or more companies join in a special pricing collaboration. Hotel and rental car companies often offer mutual price discounts.


Promotional Alliances—An example: The Cricket World Cup in India

Companies make strategic alliances to help them tap on opportunities. In India, the opportunity to reach to the large cricket fans during the World Cup saw Pepsi entering into a promotional alliance with adidas and Microsoft.


Partner Relationship Management

• To keep strategic alliances thriving, corporations have begun to develop organizational structures for support and have come to view the ability to form and manage partnerships as core skills (called Partner Relationship Management, PRM).

• Some of the key success factors for such partnerships include the following (see Marketing Insight—Same Bed, Different Dreams):• Strategic Fit

• A focus on the Long-Term

• Flexibility


Program Formulation and Implementation

• A great marketing strategy can be sabotaged by poor implementation.

• Marketing must estimate its costs.

• In implementing strategy, companies must not lose sight of the multiple stakeholders involved and their needs.


According to McKinsey & Company, strategy is only one of seven elements in successful business practice.

• The first three—strategy, structure, and systems are considered the “hardware” of success.

• The next four—style, skills, staff, and shared values are the “software.”a. “Style” means company employees share a common way of thinking

and behaving.

b. “Skills” means employees have the skills needed to carry out the company’s strategy.

c. “Staffing” means the company has hired able people, trained them well, and assigned them to the right jobs.

d. “Shared values,” means the employees share the same guiding value.


Feedback and Control

• As it implements its strategy, the firm needs to track the results and monitor new developments.

• A company’s strategic fit with the environment will inevitably erode because the market environment changes faster than the company’s 7 Ss.

• Organizations are subject to inertia and are set up as efficient machines and it is difficult to change one part without adjusting everything else.


Feedback and Control

Haier stands by its quality products. It was prepared to destroy its products if they do not meet quality standards as they come off the production line. Today, Haier is the second largest refrigerator manufacturer in the world.


Product Planning: The Nature and Contents of a Marketing Plan

• Working within the plans set by the levels above them, product managers come up with a marketing plan for individual products, lines, brands, channels, or customer groups.

• Each product level (product line, brand) must develop a marketing plan for achieving its goals.

• A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives.


Marketing Plans

• Marketing plans are becoming more customer and competitor orientated. The plan draws more input from all the business functions and is team developed.


Marketing Plan Criteria


Marketing Plan Contents

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Executive summary Table of contents Situation analysis Marketing strategy Financial projections Implementation controls


Marketing Plan Contents (1)

1. Executive summary and table of contents—The marketing plan should open with a brief summary of the main goals and recommendations.

2. Situation analysis—This section presents relevant background data on sales, costs, the market, competitors, and the various forces in the macro-environment. How is the market defined, how big is it, and how fast is it growing? What are the relevant trends and critical issues? All this information is used to carry out on a SWOT (strengths, weaknesses, opportunities, and threats) analysis.



3. Marketing strategy—Here the product manager defines the mission, and marketing and financial objectives.

The manager also defines those groups and needs which the market offerings are intended to satisfy as well as its competitive positioning. All this is done with inputs from other organizational areas, such as purchasing, manufacturing, sales, finance, and human resources.



4. Financial projections—Financial projections include a sales forecast, an expense forecast, and a break-even analysis.

– On the revenue side, the projections show the forecasted sales volume by month and product category.

– On the expense side, the projections show the expected costs of marketing, broken down into finer categories.

– The break-even analysis shows how many units must be sold monthly to offset the monthly fixed costs and average per-unit variable costs.



5. Implementation controls—The last section of the marketing plan outlines the controls for monitoring and adjusting the implementation of the plan.

– Typically, it spells out the goals and budget for each month or quarter, so management can review each period’s results and take corrective action as needed.

– Some organizations include contingency plans.


The Role of Research

• As the plan is put into effect, marketers use research to measure progress toward objectives and identify areas for improvement.

• Marketing research helps marketers learn more about their customers’ requirements, expectations, perceptions, satisfaction, and loyalty.


The Role of Research

• The marketing plan should outline what marketing research will be conducted and when, as well as how the findings will be applied.


The Role of Relationships

• Marketing plans also affects both internal and external relationships: A. First, it influences how marketing personnel work with each

other and with other departments to deliver value and satisfy customers.

B. Second, it affects how the company works with suppliers, distributors, and partners to achieve the plan’s objectives.

C. Third, it influences the company’s dealings with other stakeholders, including government regulators, the media, and the community at large. Marketers must consider all these relationships when developing a marketing plan.


From Marketing Plans to Marketing Action

• As each action program begins, marketing managers will monitor ongoing results, investigate any deviation from plans, and take corrective steps as needed.

• Some companies prepare contingency plans.

• Marketers must be ready to update and adapt marketing plans at any time.

• The marketing plan should define how progress toward objectives will be measured.

• Managers typically use budgets, schedules, and marketing metrics for monitoring and evaluating results.


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