Assesment 2

P2.1. Explain with supporting examples a range of marketing strategy options available,
Evaluate their benefits and limitations.

STRATEGIC MARKETING OPTIONS

A strategy is just a road map of the actions can take to achieve goals and objectives.
There are number of strategic marketing positions. But when all the glitter is stripped away,
three broad-based, generic strategies remain. They are

i. Cost leadership

ii. Differentiation

iii. Focus

Cost Leadership Strategy

Although most companies today claim that customer service and satisfaction are their first
priority, a recent survey indicates otherwise. Nearly 75 percent of the respondents said that
"the only way to survive is on price competition."

It was believed as a best strategic marketing option, a company is a prime candidate for a cost
leadership strategy.

There are many ways to build a low-cost marketing strategy. But to be a successful cost
leader, an organization must know where it has cost advantages over competitors, and use
these advantages as the foundation for its strategy.

Differentiation Strategy

If an organization decides to follow a differentiation strategy, it is wanting to build customer

loyalty. To accomplish this strategy, it must position its goods or service in a unique or
different way. In other words, company will strive to be better than your competitors at
something that customers value.
There're lots of ways to create a differentiation strategy, but the key marketing idea behind
differentiating is to be SPECIAL at something that is important to the customer.

Approaches to Differentiation

Different Taste- Dr.Pepper

Superior service-Federal Express

Spare Parts Availability- Caterpillar

More for your money-McDonald’s, Wal-Mart

Engineering design- & performance- Mercedes

Prestige- Rolex

Quality- Honda Automobile

Top-of-the-line image-Ralph Lauren

Technological Leadership-3M Corporation

Unconditional satisfaction-L.L.Bean

A few examples would be...

• Providing the best guarantee in the field.

• Added features that its competition doesn't offer.

• Offering a valuable, but unique service not found elsewhere.

• Always over-delivering to exceed customer expectations.

If the business can either improve the product's (or service's) performance, decrease the
customer's cost and risk of buying it, or both, you have the potential to differentiate.

Focus Strategy
Finally, there is a focus strategy. This option recognizes that not all markets are
homogeneous. As a matter of fact, within any given market, there are a lot of different
customer segments, each segment having different needs, wants, and characteristics.

The primary idea of a focus strategy, is to select one (or more) segment(s), identify
customers' special needs, wants, and interests, and approach them offers a good or service
designed to excel in meeting those needs, wants, and interests.

Focus strategies will build on the differences among market segments. Another name for a
focus strategy is niche marketing.

Examples: focus strategies

• Rolls Royce
o Luxury automobiles
• Apple Computer
o Desktop publishing
• Fort Howard Paper
o Paper products for industrial/commercial firms
• Commuter airlines
o Link major airports with small population centres
• Motel 6
o Caters to price-conscious travellers

One example that illustrates how to use a focus strategy would be in the area of Web Site
Design. Instead of focusing on general design, the Web site's FOCUS could be on FrontPage
design, with special emphasis on database management.

In other words, you are not marketing to the world. Your niche would be only that segment of
the market seeking what you have to offer.

POWER OF A FOCUS STRATEGY

• Competitive power is greatest when

 o Industry has fast-growing segments
 Big enough to be profitable BUT
 Small enough to be of secondary interest to large rivals
o No other rivals are concentrating on segment
o Buyers in segment require
 Specialized expertise OR
 Customized product attributes

Benefits of Low cost strategy

• Price competition among rivals is dominant competitive force

• Industry’s product is a commodity-type item readily available
• Few ways to achieve product differentiation that have value to buyers
• Most buyers have similar needs/requirements
• Buyers incur low switching costs changing sellers
• Buyers are large & have significant bargaining power
• charge a lower price yet make the same level of profit.
• win in the price war.
• low-cost as an entry barrier.
• protected from rivals.
• less affected by powerful buyers and suppliers.
• room to reduce its price to compete with substitute products.

Disadvantages of Low Cost strategy

• Technical breakthroughs open up cost reductions for rivals, negating a low-cost

provider’s efficiency advantages
• Rivals find it comparatively easy or expensive to imitate leader’s low-cost methods.
• Low-cost provider become so fixated on cost reduction it falls to respond to
o increased buyer desires for added quality or service features
o new development in related products
o declining buyer sensitivity to price
Benefits Differentiation Strategy

• Premium price.
• Protected from rivals. (i.e., brand loyalty, customer loyalty..)
• Brand loyalty as an entry barrier.
• Less affected by powerful buyers and suppliers.

Disadvantages of Differentiation Strategy

• Substitutes can be a possible threat.

• Difficult to maintain a product’s uniqueness in customers’ eyes for a long time.

Benefits Focus strategy

• Big enough to be profitable

• Good growth potential
• Not crucial to success of major competitors
• Focusing firm has resources to effectively serve segment
• Focuser can defend itself against challengers via customer goodwill & its superior
ability to serve buyers in segment

Disadvantage of Focus Strategy

• Broad-line competitors may find effective ways to match focused firm in

serving target market
• Niche buyers’ preferences may move towards product attributes desired
by market as a whole
• Segment may become so appealing it becomes crowded with aggressive
rivals, causing segment profits to be split many ways
Assessment 3

P3.3 Specify how you can keep all the stakeholders satisfied in changing environment

Stakeholder Satisfaction

The role of management is to formulate and implement strategies and to make decisions that
satisfy all or most of the stakeholders, or to ensure at least that no powerful and legitimate
stakeholders are left too unhappy. The interests of all stakeholders are closely related with the
general success and wealth of the organization. However, certain stakeholders interests are
particularly important at times when certain issues must be addressed,

Satisfying the stakeholders

• Owners and stockholders, investors

Offering higher return for their investment
• Banks and creditors
Repayment of loan and credits at the time bound. following good relationship with
them.

• Suppliers
The suppliers of a company are also an important aspect of the microenvironment
because even the slightest delay in receiving supplies can result in customer
dissatisfaction. Marketing managers must watch supply availability and other trends
dealing with suppliers to ensure that product will be delivered to customers in the time
frame required in order to maintain a strong customer relationship.
Continuous conduct, early settlement for their credit and supply
• Buyers, customers and prospects

Research and development have input as to the features a product can perform.Good
value for the price, quality product, after sales service, promotions, advertises not only
for sales but also retain in their mind the existence of the company.

• Management
 Promotions, salary incremental, non salary benefits,
• Employees, works councils and labour unions
Employees are important when circumstances or safety at work is discussed. Salary
incremental, motivation programs, non salary benefits, tools and equipments as per
their needs.
• Government (local, state, national, international) and regulators
Government is important when dealing with the environment or legislation.
Payment of Income tax, business turnover tax, VAT, Tariffs and other taxes in proper
time. Following the employment rules, other ethical issues
References

Kotler, Phillip and Gary Armstrong(2006), Principles of Marketing (Version 12/E). Pearson
Education Inc. New Jersey

Edward Freeman (1984), Strategic Management: a Stakeholder Approach

http://www.businesslink.gov.uk

http://www.csuchico.edu

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