Chapter Five

Marketing concepts

What is marketing?
"Marketing is an organizational function and a set of processes for creating, communicating, and
delivering value to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders."
Marketing Intelligence
Marketing intelligence is everyday information about developments in the marketing environment that
helps managers prepare and adjust marketing plans. The marketing intelligence system determines the
intelligence needed, collects it by searching the environment and delivers it to marketing managers
who need it. Marketing intelligence comes from many sources. Much intelligence is from the
company's personnel - executives, engineers and scientists, purchasing agents and the sales force. But
company people are often busy and fail to pass on important information. The company must 'sell' its
people on their importance as intelligence gatherers, train them to spot new developments and urge
them to report intelligence back to the company.
The company must also persuade suppliers, resellers and customers to pass along important
intelligence. Some information on competitor’s conies from what they say about themselves in annual
reports, speeches, press releases and advertisements. The company can also learn about competitors
from what others say about them in business publications and at trade shows. Or the company can
watch what competitors do - buying and analyzing competitors' products, monitoring their sales and
checking for new patents. Companies also buy intelligence information from outside suppliers. Dun
& Bradstreet is the world's largest research company with branches in 40 countries and a turnover of
SI.26 billion. Its largest subsidiary is Nielsen, which sells data on brand shares, retail prices and
percentages of stores stocking different brands.
Its InfoaAct Workstation offers companies the chance to analyze data from three sources on the PCs:
Retail Index, which monitors consumer sales and in-store conditions; Key Account Scantrack, a
weekly analysis of sales, price elasticity and promotional effectiveness; and Homesean, a new
consumer panel. Alliances between marketing research companies allow access to pan-European
research.

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Marketing intelligence can work not only for, but also against a company. Companies must sometimes
take steps to protect themselves from the snooping of competitors. For example, Kellogg's had treated
the public to tours of its plants since 1906, but recently dosed its newly upgraded plant to outsiders to
prevent competitors from getting intelligence on its high-tech equipment. In Japan corporate
intelligence is part of the industrial culture. Everyone from assembly-line workers to top executives
considers it their duty to filter intelligence about the competition back to management. Western
companies are less active, although most of America's Fortune 500 now have in-house corporate
intelligence units. Businesses are becoming increasingly aware of the need both to gather information
and to protect what they have. In its Bangkok offices one European organization has a huge poster
outside its lavatory saying: 'Wash and hush up! You never know who's listening! Keep our secrets
secret.'1" Some companies set up an office to collect and circulate marketing intelligence. The staff
scan relevant publications, summarize important news and send news bulletins to marketing managers.
They develop a file of intelligence information and help managers evaluate new information. These
services greatly improve the quality of information available to marketing managers. The methods
used to gather competitive information range from the ridiculous to the illegal. Managers routinely
shred documents because wastepaper baskets can be an information source. Other firms have
uncovered more sinister devices such as Spycatcher's TFR recording system that 'automatically
interrogates telephones and faxes. Also a range of tiny microphones.'

A marketing intelligence system is a set of procedures and data sources used by marketing managers
to sift information from the environment that they can use in their decision making. This scanning of
the economic and business environment can be undertaken in a variety of ways, including:

Unfocused The manager, by virtue of what he/she reads, hears and watches exposes him/herself to
scanning information that may prove useful. Whilst the behaviour is unfocused and the manager
has no specific purpose in mind, it is not unintentional

Semi-focused Again, the manager is not in search of particular pieces of information that he/she is
scanning actively searching but does narrow the range of media that is scanned. For instance, the
manager may focus more on economic and business publications, broadcasts etc. and
pay less attention to political, scientific or technological media.

Informal This describes the situation where a fairly limited and unstructured attempt is made to

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search obtain information for a specific purpose. For example, the marketing manager of a firm
considering entering the business of importing frozen fish from a neighboring country
may make informal inquiries as to prices and demand levels of frozen and fresh fish.
There would be little structure to this search with the manager making inquiries with
traders he/she happens to encounter as well as with other ad hoc contacts in ministries,
international aid agencies, with trade associations, importers/exporters etc.

Formal This is a purposeful search after information in some systematic way. The information
search will be required to address a specific issue. Whilst this sort of activity may seem to share
the characteristics of marketing research it is carried out by the manager him/herself
rather than a professional researcher. Moreover, the scope of the search is likely to be
narrow in scope and far less intensive than marketing research

Marketing intelligence is the province of entrepreneurs and senior managers within an agribusiness. It
involves them in scanning newspaper trade magazines, business journals and reports, economic
forecasts and other media. In addition it involves management in talking to producers, suppliers and
customers, as well as to competitors. Nonetheless, it is a largely informal process of observing and
conversing.

Some enterprises will approach marketing intelligence gathering in a more deliberate fashion and will
train its sales force, after-sales personnel and district/area managers to take cognizance of competitors'
actions, customer complaints and requests and distributor problems. Enterprises with vision will also
encourage intermediaries, such as collectors, retailers, traders and other middlemen to be proactive in
conveying market intelligence back to them.
Marketing Research
WHAT IS RESEARCH?
Marketing research is a Systematic Design, Collection, Analysis, and Reporting of Data Relevant to a
Specific Marketing Situation Facing an Organization.
Market research and marketing research are often confused. 'Market' research is simply research
into a specific market. It is a very narrow concept. 'Marketing' research is much broader. It not only
includes 'market' research, but also areas such as research into new products, or modes of distribution
such as via the Internet. Here are a couple of definitions:

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"Marketing research is the function that links the consumer, customer, and public to the marketer
through information - information used to identify and define marketing opportunities and problems;
generate, refine, and evaluate marketing actions; monitor marketing performance; and improve
understanding of marketing as a process. Marketing research specifies the information required to
address these issues, designs the methods for collecting information, manages and implements the
data collection process, analyzes, and communicates the findings and their implications."
American Marketing association - Official Definition of Marketing Research
Obviously, this is a very long and involved definition of marketing research.
"Marketing research is about researching the whole of a company's marketing process."Palmer
(2000).
This explanation is far more straightforward i.e. marketing research into the elements of the marketing
mix, competitors, markets, and everything to do with the customers
Marketing is a restless, changing, and dynamic business activity. The role of marketing itself has
changed dramatically due to various crises—material and energy shortages, inflation, economic
recessions, high unemployment, dying industries, dying companies, terrorism and war, and effects due
to rapid technological changes in certain industries. Such changes, including the Internet, have forced
today’s marketing executive to becoming more market driven in their strategic decision-making,
requiring a formalized means of acquiring accurate and timely information about customers, products
and the marketplace and the overall environment. The means to help them do this is marketing
research.
Marketing research assists in the overall management of the marketing function. A marketing manager
must prioritize the more important and pressing problems selected for solution, reach the best possible
solution based on the information available, implement the solution, modify the solution when
additional information so dictates, and establish policy to act as a ready-made solution for any
recurrence of the problem.

Market research can be defined as a formal organized effort to acquire specific information for a
specific purpose. According to Warren J. Reagan “Global Marketing Practise Hall 1995“.

Marketing research often focuses on understanding the “Customer” (purchasers, consumers,

influencers), the “Company” (product design, promotion, pricing, placement, service, sales), and can

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also be expanded toward the environment to include “Competitors” (and how their market offerings
interact in the market environment).
Within this “Company-Customer-Competition” environment, many types of marketing research can be
conducted, much of which is focused on using surveys for
• Monitoring customers and markets

• Measuring awareness, attitudes, and image

• Tracking product usage behavior

• Diagnosing immediate business problems

• Supporting strategy development
•Marketing Research, a critical part of Marketing Intelligence helps by providing accurate, relevant
and timely (ART) information.

What Information?

Situation Understand the environment and the market

Analysis Identify threats and opportunities
Assess the competitive position

Strategy Define the business scope and served market segments

Development Establish competitive advantages
Set performance objectives.

Marketing Product and channel decision

Program Communication decisions
Development Pricing
Personal selling decisions

Implementation Performance monitoring

Refining strategies and program

Objectives of Marketing Research

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Marketing research is used to identify and define marketing opportunities and problems:

 Generate, refine and evaluate marketing actions

 Monitor marketing performance.

 Improve understanding of marketing.

Marketing Research enables to answer such questions as:

a) What are our weak/strong products, divisions, attitudes etc?

b) Are there gaps/opportunities we can go for?

c) Are there dangers/threats we need protection from?

d) Are we strong in the right way to exploit the opportunity where one exists?

Market research helps the marketer to anticipate or respond to customer needs. It helps them to know
about their current and prospective customer and helps them to know about the success of their own
practices.
THE RESEARCH PROCESS
How is marketing research actually conducted? What are the general steps in completing a research
project? These questions are answered in the steps of the research process. While the steps are shown
as a linear process, some of the steps may be performed simultaneously, such as selecting data
collection techniques and sample design. There are other times when “later” decisions influence
decisions that are made early in the research planning process. For example, desired analysis
techniques often influence the selection of data collection techniques (e.g., measurement) and sample
design. Each step in this research process will now be introduced.

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STAGE 1: PROBLEM FORMULATION
In a very real sense, problem formulation is the heart of the research process. As such, it represents the
single most important step to be performed. From the researcher’s point of view, problem formulation
means translating the management problem into a research problem.
As previously discussed, in order to formulate an appropriate research problem, the researcher must
understand the origin and nature of management’s problem and then be able to rephrase it into
meaningful terms from an analytical point of view. This involves timely and clear communication
between manager and researcher.
The end result of problem formulation is a statement of the management problem that is analytically
meaningful and that often points the way to alternative solutions. An accurate problem formulation
specifies the types of information needed to help solve the management problem. In short, quality
thinking about a problem prior to data collection largely determines the quality of data collection,
analysis and problem solving.
Closely related to problem formulation is the development of a working hypothesis, or an assertion
about a state of nature. While hypotheses are crucial for basic research because they tell the researcher
what to do, the concept of a hypothesis can also be useful in decisional research to direct the
development of the research problem statement. In most cases, the marketing researcher will not

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explicitly state hypotheses for the research. Kerlinger and Lee (2000, Chapter 2) suggest that research
problems and hypotheses meet the following criteria:
1. The problem statement expresses a relationship between two or more variables.
2. The problem is stated clearly and unambiguously in question form.
3. The problem statement implies possibilities of empirical testing.
Where properties of good hypotheses include the following:
1. The hypothesis is a statement about the relationship between two or more variables in declarative
statement form.
2. The hypothesis carries clear implications for testing the stated relationship (i.e., variables must be
measurable or potentially measurable).
Problem Formulation Components
Problem formulation consists of specific components:
1. Specify the Research Objectives
Objectives guide the researcher in developing good, useful research, and they help the client evaluate
the completed project. Objectives range from the very general, such as profit maximization, to the
highly specific, such as measuring market interest in a new product. It is rare that the objectives are
explained fully to the researcher. The researcher will need to take the initiative in developing a clear
statement of objectives.
Each study should have a very limited and manageable set of objectives. Two or three well targeted
objectives is preferable to many that are ill-conceived. Fewer the objectives make it easier to keep
track of progress toward the objectives, to ensure that each is properly addressed, and to determine the
best methodology. If there are too many objectives separate studies may be appropriate.
2. The Environment or Context of the Problem
Consider the problem of deciding whether to introduce a new consumer product. The marketing
researcher must work closely with the client in transforming the client’s problem into a workable
research problem.
The researcher’s efforts should be oriented toward helping the manager decide whether any
investigation is justified based on the potential value of the research findings versus their cost. The
researcher must be aware of, and assist in, the identification of objectives, courses of action, and
environmental variables, insofar as they affect the design of the research investigation. If the research
is undertaken and if the resulting findings are to be utilized (i.e., have an influence on the user’s

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decision making), the manager and researcher must have a productive and trusting relationship that is
based on the researcher’s ability to perform and deliver the research as promised.
3. The Nature of the Problem
Every research problem may be evaluated on a scale that ranges from very simple to very complex.
The degree of complexity depends on the number of variables that influence the problem.
Understanding the nature of the problem helps a researcher ensure that the right problem is being
investigated and that a marketing plan can be developed to solve the problem. A thorough preliminary
investigation using focus groups of consumers, salespeople, managers, or others close to the problem
may produce much needed insight.
4. Alternative Courses of Action
A course of action specifies a behavioral sequence that occurs over time, such as the adoption of a new
package design, or the introduction of a new product. Such a program of action becomes a
commitment, made in the present, to follow some behavioral pattern in the future.
It is usually desirable to generate as many alternatives as possible during the problem formulation
stage and state them in the form of research hypotheses to be examined. A hypothesis often implies a
possible course of action with a prediction of the outcome if that course of action is followed.
Once the nature of the problem has been agreed upon, the course of action must be specified. This
involves:
1. Determining which variables affect the solution to the problem
2. Determining the degree to which each variable can be controlled
3. Determining the functional relationships between the variables and which variables are critical to
the solution of the problem.
5. The Consequences of Alternative Courses of Action
A set of consequences always relate to courses of action and even to the occurrence of events not
under the control of the manager. One of the manager’s primary jobs is to anticipate and communicate
the possible outcomes of various courses of action that may result from following the research.
6. Degrees of Uncertainty Most marketing problems are characterized by a situation of uncertainty as
to which course of action is best. Years of experience may allow the decision-making manager to
assign various “likelihoods of occurrence” to the various possible outcomes of specific courses of
action.

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A carefully formulated problem and statement of research purpose is necessary for competent
research. The statement of purpose involves a translation of the decision maker’s problem into a
research problem and the derivation of a study design from this problem formulation. The research
problem provides relevant information concerning recognized (or newly generated) alternative
solutions to aid in this choice.
STAGE 2: METHOD OF INQUIRY
Market researchers look to the scientific method as the source of their investigative methods. Even
though this method is not the only one used, it is the standard against which other investigative
methods are measured. The scientific method makes great use of existing knowledge both as a starting
point for investigation and as a check on the results of the investigations (i.e., a test of validity). Its
most distinctive characteristic is its total lack of subjectivity. The scientific method has evolved
objective and rigid procedures for verifying hypotheses or evaluating evidence. It is analytical in its
processes and is investigator-independent. Thus, the scientific method is for the most part logical and
objective, and frequently makes extensive use of mathematical reasoning and complicated experiments
(see Exhibit 2.6). The goal of a scientific methodologist, also called an objectivist, is to run a
hypothesis test using publicly stated procedures that are investigator-independent.
• Formulate a problem
• Develop a hypothesis
• Make predictions based on the hypothesis
• Devise a test of the hypothesis
• Conduct the test
• Analyze the results

Even though the terminology used is that associated with basic research, the process described is
analogous to that of decision making. Although the steps are the same, there are differences in the way
in which the steps are performed and in the underlying assumptions about behavior. For example, the
essential difference between the objectivist and the subjectivist is the latter’s allowance for use of
subjective judgments both when collecting data and when analyzing data (Diesing, 1966). The
distinction has very practical meaning, particularly when considering the use of outside research
suppliers. There are commercial research firms that tend to specialize in one or the other method of
inquiry. Objectivist-based

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research is often called quantitative research, whereas subjectivist-based research is often called
qualitative research.
STAGE 3: RESEARCH METHOD
Whether a particular method of inquiry is appropriate for a research problem depends in large part on
the nature of the problem itself and the extent or level of existing knowledge. In addition to selecting a
method of inquiry, the research planner must also select a research method.
Two broad methodologies can be used to answer any research question–experimental research and
non-experimental research. The major advantage of experimental research lies in the ability to control
extraneous variables and manipulate one or more variables by the intervention of the investigator. In
non-experimental research, there is no intervention beyond that needed for purposes of measurement.
STAGE 4: RESEARCH DESIGN
Research design is defined as the specific methods and procedures for acquiring the information
needed. It is a plan or organizational framework for doing the study and collecting the data. Research
designs are unique to a methodology.

STAGE 5: DATA COLLECTION TECHNIQUES

Research design begins to take on detailed focus as the researcher selects the particular techniques to
be used in solving the problem formulated and in carrying out the method selected. A number of
techniques available for collecting data can be used. Some techniques are unique to a method of
inquiry. For example, many of the qualitative research techniques, such as projective techniques, are
used only in subjectivist-type research. In general, data collection uses either communication or
observation. Communication
involves asking questions and receiving responses. This process can be done in person, by mail, by
telephone, by e-mail, and over the Internet. In most instances this constitutes the broad research
technique known as the survey. In contrast to this process, data may be obtained by observing present
or past behavior. Regarding past behavior, data collection techniques include looking at secondary
data such as company records, reviewing studies published by external sources, and examining
physical traces such as erosion and accretion.
In order to collect data from communication or observation there must be a means of recording
responses or behavior. Thus, the process of measurement and the development of measurement
instrument are closely connected to the decision of which data collection technique(s) should be used.

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The relationship is two-way. That is, the structure and content of the measurement instrument can
depend on the data collection technique, and measurement Considerations often influence technique
selection.
STAGE 6: SAMPLE DESIGN
Rarely will a marketing research project involve examining the entire population that is relevant to the
problem. For the most part, practical considerations (e.g., absolute resources available, cost vs. value,
etc.) dictate that one use a sample, or subset of the relevant population. In other instances the use of a
sample is derived from consideration of the relevant systematic and variable errors that might arise in
a project.
In designing the sample, the researcher must specify three things:
1. Where the sample is to be selected
2. The process of selection
3. The size of the sample
The sample design must be consistent with the relevant population, which is usually specified in the
problem-formulation stage of the research process. This allows the data obtained from the sample to
be used in making inferences about the larger population.
The process of sample selection may be done by probability or non probability methods. In probability
sampling every element in the population has a known nonzero probability (chance) of being selected
for inclusion in a study. In contrast, a non probability sample is one selected on the basis of the
judgment of the investigator, convenience, or by some other means not involving the use of
probabilities.
STAGE 7: DATA COLLECTION
Data collection begins after the previous six stages of the research process are complete. Data
collection, whether by communication or observation, requires the use of data collection personnel
which then raises questions regarding managing these people. Because data collection can be costly,
firms often utilize outside limited-service research suppliers, particularly when the extent of in-house
research activity does not warrant the cost of having permanent data collection personnel. Also,
project design may require specialized data collection, which might best be obtained from an outside
supplier.
The working relationship between the data collection agency (a so-called field service) and the
research supplier or client is a major factor affecting the quality of fieldwork and data collection.

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A study of marketing research firms found that the major barriers to the communication of information
from clients to research suppliers to field service firms were insufficient information supplied by the
client, the research supplier as an intermediary between client and field service firm, and lack of client
interest in data collection (Segal & Newberry, 1983).
The major suggestion for improving communication is for clients to provide more information to both
suppliers and field service firms. Another way to overcome communication barriers is for the field
service to be consulted on such major issues as scheduling, costs, and purpose of the study. Finally, it
was suggested that two-way communication with suppliers be established or strengthened. Although
this study was conducted more than 20 years ago, these are enduring problems that exist today.
Sources of Data - Primary and Secondary
There are two main sources of data - primary and secondary. Primary research is conducted from
scratch. It is original and collected to solve the problem in hand. Secondary research, also known as
desk research, already exists since it has been collected for other purposes.
We have given a general introduction to marketing research. Marketing research is a huge topic area
and has many processes, procedures, and terminologies that build upon the points above. (See also
lesson on market research, primary marketing research and secondary marketing research)

Primary - Marketing Research.

Primary marketing research is collected for the first time. It is original and collected for a specific
purpose, or to solve a specific problem. It is expensive, and time consuming, but is more focused
than secondary research. There are many ways to conduct primary research. We consider some of
them:

1. Interviews

2. Mystery shopping

3. Focus groups

4. Projective techniques

5. Product tests

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 6. Diaries

7. Omnibus Studies

STAGE 8: ANALYSIS AND INTERPRETATION

Data that are obtained and presented in the same form as originally collected are seldom useful to
anyone. Data must be analyzed. The data must be edited, coded, and tabulated before performing
formal analyses such as statistical tests. The types of analyses that can be properly performed depend
upon the sampling procedures, measurement instruments, and data collection techniques used.
Consequently, it is imperative that the techniques of analysis, associated descriptive or prescriptive
recommendation types, and presentation formats be selected prior to data collection.
STAGE 9: THE RESEARCH REPORT
The culmination of the research process is the research report. It includes a clear, accurate, and honest
description of everything that has been done and the results, conclusions, and— whenever possible—
recommendations for courses of action. Two critical attributes of the report are that it provides all the
information readers need using language they understand (completeness) and that it contains selective
information chosen by the researcher (conciseness). These attributes are often in conflict with each
other.
Two approaches can be taken to ensure that this conflict is not a problem. One approach involves
preparing two reports: (1) a technical report that emphasizes the methods used and underlying
assumptions, and presents the findings in a detailed manner; and (2) a popular report that minimizes
technical details and emphasizes simplicity. The second approach is concerned with how the report is
communicated. Because people vary a great deal in how they are affected by different forms of
communication, the ideal reporting process should try to encompass all major forms. Thus, a written
report, by itself, may be inadequate and only an invitation to inaction. There are simply a lot of people
who, for various reasons, don’t respond to the printed word. There are still more that, although they
may respond, will often misunderstand the meaning of what is written. For these reasons, it is vitally
necessary to get management to sit down with the research manager, or with the researcher and the
outside research firm, in a face-to-face reporting situation.
Good Marketing Research:
– Is scientific
– Is creative

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 – Uses multiple methods
– Realizes the interdependence of models & data
– Acknowledges the cost & value of information
– Maintains “healthy” skepticism
– Is ethical
Competitive analysis
To prepare an effective marketing strategy, a company must consider its competitors as well as its
actual and potential customers. It must continuously analyze its competitors and develop competitive
marketing strategies that effectively position it against competitors and give it the strongest possible
competitive advantage.
Competitor analysis first involves identifying the company's main competitors, using both an industry
and a market-based analysis. The company then gathers information on competitors' objectives,
strategies, strengths and weaknesses, and reaction patterns. With this information to hand, it can select
competitors to attack or avoid. Competitive intelligence must be collected, interpreted and distributed
continuously. Company marketing managers should be able to obtain full and reliable information
about any competitor affecting their decisions.

Marketing strategies
Which competitive marketing strategy makes the most sense depends on the company's industry
position and its objectives, opportunities and resources. The company's competitive marketing strategy
depends on whether it is a market leader, challenger, follower or nicher. A market leader faces three
challenges: expanding the total market, protecting market share and expanding market share. The
market leader wants to find ways to expand the total market because it will benefit most from any
increased sales.
To expand market size, the leader looks for new users of the product, new uses and more usage. To
protect its existing market share, the market leader has several defenses: position defense, flanking
defense, pre-emptive defense, counteroffensive defense, mobile defense and contraction defense. The
most sophisticated leaders cover themselves by doing everything right, leaving no openings for
competitive attack. Leaders can also try to increase their market shares. This makes sense if
profitability increases at higher market-share levels.

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 A market challenger is a firm that aggressively tries to expand its market share by attacking the
leader, other runner-up firms or smaller firms in the industry. The challenger can choose from a
variety of attack strategies, including a frontal attack, flanking attack, encirclement attack, bypass
attack and guerrilla attack.
A market follower is a runner-up firm that chooses not to rock the boat, usually out of fear that it
stands to lose more than it might gain. The follower is not without a strategy, however, and seeks to
use its particular skills to gain market growth. Some followers enjoy a higher rate of return than the
leaders in their industry.
A market nicher is a smaller firm that serves some part of the market that is not likely to attract the
larger firms. Market nichers often become specialists in some end use, vertical level, customer size,
specific customer, geographic area, product or product feature, or service.
FRONTAL ATTACK
In a full frontal attack, the challenger matches the competitor's product, advertising, price and
distribution efforts. It attacks the competitor's strengths rather than its weaknesses. The outcome
depends on who has the greater strength and endurance. Even great size and strength may not be
enough to challenge a firmly entrenched and resourceful competitor successfully, Unilever has twice
the world-wide sales of P & G and five times the sales of Colgate-Palmolive, hut its American
subsidiary trails P & G by a wide margin in the United States. Unilever launched a full frontal assault
against P & G in the detergent market while Unilever's Wisk was already the leading liquid detergent.
In quick succession, it added a barrage of new products - Sunlight dishwashing detergent, Snuggle
fabric softener, Surf laundry powder - and hacked them with aggressive promotion and distribution
efforts, P & G spent heavily to defend its brands and held on to most of its business. It counterattacked
with Liquid Tide, which came from nowhere in just 17 months to run neck-and-neek with Wisk.
Unilever did gain market share, but most of it came from smaller competitors. If the market challenger
has fewer resources than the competitor, a frontal attack makes little sense.
FLANKING ATTACK
Rather than attacking head on, the challenger can launch a flanking attack. The competitor often
concentrates its resources to protect its strongest positions, but it usually has some weaker flanks. By
attacking these weak spot, the challenger can concentrate its strength against the competitor's
weakness. Flank attacks make good sense when the company has fewer resources than the competitor.

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When Airbus Industries started making airliners it was up against Boeing, a company that dominates
the industry. Lockheed and McDonnell Douglas had once challenged Boeing as plane makers, but
Lockheed had withdrawn from the industry and McDonnell Douglas was reduced to making
derivatives of its old aircraft. Airbus's first move was to develop the A300 with range and payload
performance different from Boeing's established 727, 737 and 747 range.
Another flanking strategy is to find gaps that are not being filled by the industry's products, fill them
and develop them into strong segments. European and Japanese car makers do not try to compete with
American car makers by producing large, flashy, gas-guzzling contraptions. Instead they recognized
an unserved consumer segment that wanted small, fuel-efficient cars and moved to fill this hole. To
their satisfaction and Detroit's surprise, the segment grew to be a large part of die market.
ENCIRCLEMENT ATTACK
An encirclement attack involves attacking from all directions, so that the competitor must protect its
front, sides and rear at the same time. The encirclement strategy makes sense when the challenger has
superior resources and believes that it can break the competitor's hold on the market quickly. An
example is Seiko's attack on the watch market. For several years, Seiko has been gaining distribution
in every big watch outlet and overwhelming competitors with its variety of constantly changing
models. In most markets Seiko offers about 400 models, but its marketing strength is backed by the
2,300 models it makes and sells worldwide.

BYPASS ATTACK
A bypass attack is an indirect strategy. The challenger bypasses the competitor and targets easier
markets. The bypass can involve diversifying into unrelated products, moving into new geographic
markets or leapfrogging into new technologies to replace existing products. Technological
leapfrogging is a bypass strategy used often in high-technology industries. Instead of copying the
competitor's product and mounting a costly frontal attack, the challenger patiently develops the next
technology. When satisfied with its superiority, it launches an attack where it has an advantage. Thus
Minolta toppled Canon from die lead in the 35-min SLR camera market when it introduced its
technologically advanced auto-focusing Maxxum camera. Canon's market share dropped towards 20
percent, while Minolta's zoomed past 30 per cent. It took Canon three years to introduce a matching
technology."
G L'ERRILLA ATTAC K

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A guerrilla attack is another option available to market challengers, especially smaller or poorly
financed ones: When entrepreneur Freddie Laker frontally attacked the established airlines (then
BOAC and TWA) by offering cheap transatlantic flights, they fought back and bankrupted him. Now
TWA has all but disappeared and British Airways is facing Virgin Atlantic run by a much wilier
entrepreneur. Richard Branson. He makes guerrilla attacks on his much larger competitors. In these
attacks the agile challenger typically makes small, periodic attacks to harass and demoralize the
competitor, hoping eventually to establish permanent footholds. It might use selective price cuts, novel
products, executive raids, intense promotional outbursts or assorted legal actions. Virgin has been
successful so far and taken 22 per cent of the London to New York market. It is also expanding
quickly using franchising, an approach new to the airline industry.
Normally, guerrilla actions are by smaller firms against larger ones. The smaller firms need to be
aware, however, that continuous guerrilla campaigns can be expensive and must eventually be
followed by a stronger attack if the challenger wishes to 'beat' the competitor.
Market-Follower Strategics
Not all runner-up companies will challenge the market leader. The effort to draw away the leader's
customers is never taken lightly by the leader. If the challenger's Finally, the adapter builds on the
leader's products and marketing programes, often improving them. The adapter may choose to sell to
different markets to avoid direct confrontation with the leader. Many IBM PC look alikes did this -
Atnstrad was one of the earliest selling its ready and running machines through conventional electrical
goods retailers. Js'ow Dell and dan Technologies combine direct selling with excellent customer
support. Often the adapter grows into -A future challenger, as many Japanese firms have done after
adapting and improving products developed elsewhere.
Market-Nicher Strategies
Almost every industry includes firms that specialize in serving market niches. Instead of pursuing the
whole market or even large segments of the market, these firms target segments within segments or
niches. This is particularly true of smaller firms because of their limited resources. Smaller divisions
of larger firms also pursue niching strategies. EG & G is an example of a large company that
profitably employs; a niching strategy: EG & (i is a $1.4 billion industrial equipment and components
company consisting of over 175 distinct and independent business units, many with less than $10
million in sales in markets worth $25 million. Many EG & G business units have their own R & D,
manufacturing and sales force operations. The company is currently the market or technical leader in

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80 per cent of its niche markets. More astonishing, EG & G ranked second in earnings per share and
first in profitability in the Fortxine 1000. EG & G illustrates how niche marketing may pay larger
dividends than mass marketing. Tlie main point is that firms with low shares of the total market can be
highly profitable through clever niching.
Why is niching profitable? The main reason is that the market nicher ends up knowing the target
customer group so well that it meets their needs better than other firms which casually sell to this
niche. As a result, the nicher can charge a substantial mark-up over costs because of the added value.
Whereas the mass marketer achieves high volume, the nicher achieves high margins. Nichers try to
find one or more market niches that are safe and profitable. An ideal market niche is big enough to be
profitable and has growth potential. It is one that the firm can serve effectively. Perhaps most
importantly, the niche is of little interest to large competitors. The firm can build the skills and
customer goodwill to defend itself against an attacking big competitor as the niche grows ami becomes
more attractive.
The key idea in nichemanship is specialization. The firm has to specialize along market, customer,
product or marketing-mix lines. Here are several specialist roles open to a market nicher:
• End-use specialist. The firm specializes in serving one type of end-use customer. For example,
Reuters provides financial information and news to professionals and Moss Bros' strength is in clothes
hire. Vertical-level specialist The firm specializes at some level of the production-distribution cycle.
For example, the Dutch-based Anglo-Italian company, EVC, is Europe's leading manufacturer of
polyvhiylchloride (PVC), while Country Homes' niche is as an intermediary between owners of
country cottages and people who want to hire them for holidays.
Customer- specialist : The firm concentrates on selling to either small, medium or large customers.
Many nichers specialize in serving small customers neglected by the large companies, Fuji gained its
initial success in the photocopying market by specializing on small firms neglected by Xerox. Many
regional advertising agencies also specialize in serving medium-sized clients. Specific -customer
specialist The firm limits its selling to one or a few large customers. There are many firms like this in
the motor industry: for example, Unipart devotes most of its time to BM\V/Kover. Geographical
specialist. The firm sells only in a certain locality, region or area of the world. Most retail banks stay
within their national boundaries. Two odd exceptions to this rule are the European HSBC and
Standard & Charter, whose main interest is south-east Asia. Product or feature specialist. The firm
specializes in producing a certain product, product line or product feature - Rolls-Royce is the only

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supplier of tilt-thrust jet engines. Quality-price specialist. The firm operates at the low or high end of
the market. For example, Hewlett-Packard specializes in the high-quality, high price end of the hand-
calculator market, while Tring International sells very cheap CDs.
Service specialist The firm offers one or more services not available from other firms: for example,
NASA's ability to recover and repair satellites. Niching carries a very significant risk, in that the
market niche may dry up or he attacked. Porsche was hit by both of these threats when the demand for
luxury cars declined in the early 1990s and Honda, Toyota and Mazda attacked the sports car market.
On ;j different scale, innovation and intense competition between multinationals and social trends
eventually killed off Pollards Cornish Ice Cream./10 Its niche was selling high-fat dairy ice cream - an
estimated 100 calories per cone - to the declining number of tourists in the south-west of England.
The danger of the disappearing niche is why many companies use multiple moiling. By developing
two or more niches, the company increases its chances of survival. Most of the wealth of successful
healthcare companies comes from their each having products in a few niches that they dominate. For
instance, Sweden's Gambio concentrates on'renal care, cardiovascular surgery, intensive care and
anaesthesia, blood compound technology and preventive health services. The need for multiple
niching is shown by SmithKline Beecham's Tagamet sales dropping 76 per cent in the quarter that it
lost patent cover in the United States.

International marketing
International marketing is the multinational process of planning and executing the conception,
pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy
individual and organizational objectives. Only the word multinational has been added. That word
implies that marketing activities are undertaken in several countries and that such activities should
somehow be coordinated across nation.

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