Professional Documents
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3 Marketing Strategy
3 Marketing Strategy
3 Marketing Strategy
Lec 3
The major strategic question to be addressed at the SBU level: One key reason for 3M's continuing success is that all three levels of strategy within the company have been characterized by
good internal and external consistency of Strategic Fit.
Each strategy
fits with those at other levels as well as with the unique competitive strengths and competencies of the relevant business unit and the company as a whole.
Strategic Fit
When there is a good fit between a business's competitive strategy and the strategic marketing programs of its various products or serfvice offerings,
businesses achieve better results in terms of
sales growth, market share and profitability than when the two levels are inconsistent.
review and approve such decisions to ensure their ov erall consistency with the company's mission, objectives, and the allocation of resources across SBUs in its portfolio.
However SBU level managers, especially those in Mktg and Sales bear the
primary responsibility for collecting and analysing relevant info and formulating appropriate strategies for their businesses. products, customers and competitors and are responsible for successfully implementing the strategy. move strategic decision making closer to the customers.
The rationale for breaking larger firms into SBU stems from a market oriented desire to
The first step in developing BU level strategies is for the firm to decide how to divide itself into SBUs. The mgrs in each SBU must then make recommendations about
the units objectives the scope of its target customers and offerings which broad competitive strategy to pursue to build a competitive advantage in its product-markets how resources should be allocated across its productmarket entries and functional depts
Minimising diversity across an SBUs product-market entries enables the units managers to better formulate and implement a coherent and internally consistent business strategy.
This does not mean an SBU should not share resources such as a mfg plant or a sales force with other SBUs. 4. Responsibility for their own profitability.
But the SBU should determine how its share of the joint resource is used to effectively carry out its strategy.
Similarity in the customer needs or the pdt benefits sought by customers in the target markets Similarity in the personal characteristics or behaviour patterns of customers in the target markets.
technical / operational compatibility on the one hand and customer homogeneity on the other.
similar technologies, production facilities.
co-ord technically diff products aimed at the same customer need or mkt segtment Outweigh operational considerations.
Similarly overall SBU obj should be broken down into sub objectives for each product-mkt entry in the unit. Disc: Conflict between objectives of various pdt-mkts
Likewise these sub obj vary depending on the pdt mkt charcteristics.
relatively high volume and market share growth objectives but lower ROI objectives than an SBU with a large share in a mature industry.
attractiveness of individual target markets, the competitive position of their products within those markets and the customer equity and cash flows each product entry will likely generate rather than analysing industry attractiveness and overall competitive strengths of the firm.
allocating resources across functional activities and product markets to give the unit a substantial advantage over its competitors.
core competencies and resources alongwith the customer and competitive characteristics of its industry
determine the viability of the comp. strategy
one that best fits their market environments and competitive strengths across all or most of the product markets in which they compete
Competitive Strategies
Porters 3 competitive positions
Cost leadership: Differentiation:
Building customer perceptions of superior product quality, design or service
Focus
The business avoids direct confrontation with its major competitors by concentrating on narrowly defined niches
Porters prediction: Firms that lack strategy get stuck in the middle and perform poorly.
Defenders
Concentrate on maintaining their positions in well established pdt-mkts while paying less attention to new pdt development
Reactors
Businesses with no clearly defined business strategy
Prospectors:
Operate in broad and rapidly changing domains Neither the technology nor customer segments are well established. The scope undergoes periodic redefinition. Prospectors are organized around a core technology which might evolve over a period of time or
Around a basic customer need that can be met with different technologies
Analyzers:
Fall in between the two. Usually have a core business to defend Their domain is primarily focussed on that business. Often these are in industries that are still growing or experiencing technological changes. They must pay attention to the emergence of new customer segments or new product types. Managers must review and adjust the domain from time to time in such businesses.
Efficiency:
The outcomes of a businesss programs relative to the resources used in implementing them. Measures are: profitability as a % of sales and ROI.
Adaptability:
Businesss success in responding over time to changing conditions and opportunities in the environment. Measures: no of successful new pdts introduced relative to competitors
% of sales from new products introduced in the last 3-5 years.
Thus mgrs must choose 1 or 2 performance parameter to work on. The chosen strategy should promised discounted cash flows that exceed the cost of capital Only then the shareholder value is enhanced.
Defenders outperform on
ROI Differentiated defenders produce higher returns than low cost defenders. Because they avoid intense price competition due to differentiation.
Defenders
Allot resources to preserve their existing domains. These are generally highly profitable pdt-mkts Generate excess cash to support pdt-mkt development efforts. They are cash cows.
Prospectors
Sharing of operating facilities not appropriate Reduces the SBUs ability to change quickly to changing market demands and competitive threats.
Analyzers:
Intermediate.
Industries tend to be at an early stage in their life cycles Offer many opps for new pdt-mkt entries. Industry structure is often unstable because few competitors are present and their relative mkt share can shift rapidly as new products and new markets develop.
Prospectors
Devote substantial resources to
R&D, Pdt engg, and other areas that identify new technology and convert it into innovative pdts Mktg research, Mktg and Sales.
Even though firms might have strong pdt development and mktg skills, they might lack resources to maintain its early lead. New competitors enter and take away the market.
They also have to pay attention to new pdt dev and to avoid being leapfrogged by competitors with advanced technology.
This dual focus makes analyser strategy appropriate for well developed industries that are still experiencing growth and change as a consequence of evolving consumer needs. E.g., Automobile Industry.
Few competitors Well established Mature markets But technology continues to advance. Toyota, Honda invest millions in pdt development.
Differentiated defenders.
To defend its position by differentiation,
Business must be strong in the functional areas critical for maintaining its particular competitive advantage over time. If it is superior pdt quality,
Pdn, process engg, quality control and pdt engineering functions need to be strong.
Superior pdt quality has a positive effect on ROI Mktg is another important function for effective implementation of diff defender strategy.
At the same time, they need to invest in more plant capacity and state of art pdn faciities to minimize pdn costs This need for efficiency forces standardization of product offerings and marketing programs.
Both the above constraints impact the mktg programs for the individual mkts.
Product policies
Concerned with
the breadth or diversity of pdt lines Level of technical sophistication And the target level of pdt quality wrt the competition. Prospector businesses rely heavily on the devlpt of new products and penetration of new markets as their primary comp strategy. Various dimensions of quality
Reliability Technical features Upto the minute styling.
Pdt policies
Diff defenders compete by offering more or better choices to customers than their competitors
Should be focussed on the long term ROI
Low cost defenders cannot have broad and sophisticated prdt lines.
Calls for a lot of investments in pdt and processes
Pricing policies
Low prices can be a competitive weapon only for low cost defenders Disc: for Prospectors
For Diff Defenders
Diff provides customers
Distn policies
Prospectors:
More new products and new markets Need tighter control over the distn channel But also need flexibility of constructing new channels to move into new markets / pdts Rely on independent channel members
Defenders:
Controlling channels tightly is appropriate Esp defenders using service quality as a weapon. High degree of forward vertical integration
Promotion policies
Prospectors
Build primary demand Generate awareness Stimulate trial For new and unfamiliar products High advertising and sales promotion costs
Diff defenders
Maintaining the loyalty of customers
Need extensive and well trained salesforce especially in industrial pdts Higher sales force exp than competitors