Chapter 4

Strategic Marketing
Decisions, Choices and Mistakes
Strategic Choice
 The strategic question that drives business today is not
what companies can offer, but what more they can do
for their markets and customers.
 Strategic Choices involves understanding the bases and

directions that guide an organization’s future strategy,

generating various strategic options and alternatives
and choosing the most appropriate ones for the
organization.
 Fundamental to strategic thinking is the concept of

‘strategic fit’.
Strategic Fit

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 Where do we want to be?
Strategic Decisions

 Strategic decisions at corporate level

 Mission statement,
 Directional strategy (Growth, Stability, Retrenchment)
 Resource allocation

 Strategic decisions at SBU level

 Choosing Generic Strategy; cost leadership, differentiation &
focus

 Marketing-related strategic decisions

 Products to offer
 Market segments to target
 Positioning strategy
 Competitive stance to take
Defining the Business Purpose or Mission
 Business mission answers the question: Why a company
exists?
 The mission statement is the organization’s purpose,

what it wants to accomplish in the larger environment.

 Hence, a clear thoughtful mission statement provides a

shared sense of purpose, direction to the company and

its employees. Furthermore, it helps the company come
up with the right strategies to fulfill the mission.

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Our mission is to develop professionals in Bangladesh, who will
lead firms and organizations to their successes through sustainable
practices.

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 Components of Mission
Strategic Intent
Vision of what you want to be

Mission
Market Definition Company Values
Objectives and
Customer Targets Strategy Guiding Principles

Competitive Positioning Distinctive Competencies

Differential Advantage Core skills
 “Our mission is to be the world's premier consumer products
company focused on convenient foods and beverages. We seek
to produce financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our
business partners and the communities in which we operate. And
in everything we do, we strive for honesty, fairness and integrity.”
Our mission is to bring the best to everyone we touch
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“Our mission is to help you
“Our mission is to give people the
organize the world’s
power to share and make the
information and make it
world more open and connected”
universally accessible and
useful”

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 “To refresh the world…To inspire “Dedication to the highest quality of Customer
moments of optimism and happiness…To Service delivered with a sense of warmth,
create value and make a difference.” friendliness, individual pride, and Company
Spirit.”

“To provide authentic hospitality by making “To enrich people’s lives with programmes and
a difference in the lives of the people we services that inform, educate and entertain.”
touch every day”
Components of a Mission
 Strategic intent: signifies the vision of where the
organization wants to be in the foreseeable future.
 Company Values: signifies the company’s ethical and

moral principles in pursuing their business operations. It

is what creates an organizational culture.

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It is our vision to be a business school that
implements global standards in business and
economics education within our regional context,
to develop a productive workforce of next
generation thinkers and leaders of business
societies.
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NSU SBE Values are:

Accountability, Sustainability, Integrity, Excellence,

and Partnerships.

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Components of a Mission
 The distinctive competencies of an organization:
Signifies the strengths that a company possesses and
clearly articulates what differentiates the organization
from others of its kind.
 Competitive Positioning: signifies the superior value or

benefit the company wants to provide to the consumers.

Hence, the distinctive competencies are responsible to
generate the competitive positioning.

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  We identified 6 key areas each important to achieve our mission

1. Quality of Education
 We want to be the first to implement global standards of business and economics education in
Bangladesh

2. Student Experience
 We strongly believe that experiential learning will be the most important to develop true
professionals who are both skilled and responsible

Focus Areas 3. Stakeholder Relationships

 While NSU has a long-standing tradition of interacting with key industry players, we believe in
formalizing the relationship with each of our stakeholders.

4. Faculty Development
 The faculty profile at NSU Business School remains our greatest strength. A program that
promotes and sustains faculty development is essential

5. Configuration & Process-Orientation

 A school with 10,000+ students requires next-generation technology and corporate-grade
efficiency to provide student service, and support to faculty.

6. Governance
 We believe in faculty-driven initiatives for quality, and we want faculty in conversation
Focus Areas
QUALITY
interplay
FDP

Good STUDENT Configuration

Governance EXPERIENCE & Process

Stakeholder
Relationships

We first began with quality. And then we acknowledged the

role of each element, and the centrality of our mission. We
now recognize student experience as our primary focus, and
quality as a result of our efforts.
Directional (grand) strategies
Growth Strategies Stability Strategies Retrenchment strategies

Concentration Pause/Proceed with Turnaround

Caution Captive Company
Vertical Growth No Change Sell-Out/Divestment
Horizontal Growth Profit Bankruptcy/Liquidation
Diversification
Concentric
Conglomerate
Resource allocation: BCG matrix
BCG Model
Strategic choices and decisions at the SBU
level
Porter’s generic strategies

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Porter’s generic strategies

 Cost Leadership Strategy:

 Aims at the broad market
 Key is cost minimization
 firms work to achieve the lowest production and

distribution costs so that they can under price

competitors and win in the marketplace. For example:
Walmart, Ryanair
 However, there exists a risk of other firms pursuing the

same strategy and hurt the brand that rested its whole
future on cost.

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Porter’s generic strategies

 Differentiation Strategy: the business concentrates on

achieving superior performance by providing better/superior
customer benefit valued by a large part of the market.
 Differentiation in design, brand image, technology, dealer
network, customer service etc. Example: Singapore airlines.
 Focus Strategy: The business focuses on one or more narrow
market segments, gets to know them intimately, and pursues
either cost leadership or differentiation strategy within the
target segment.
 Example: Focus cost leadership- South west airline
Focus differentiation- chartered planes, Sensodyne,

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Porter’s generic strategies
Bowman's strategy clock
Miles and Snow’s strategies
Strategy Definition
Type
Reactor No clear strategy, reacts to
changes in the
environment, drifts with
events
Defender Protects current markets,
maintains stable growth,
serves current customers
Analyzer Maintains current markets
and current customer
satisfaction with moderate
emphasis on innovation
Prospector Innovative and growth
oriented, searches for new
markets and new growth
opportunities, encourages
risk taking
Examples
International Harvester in
the 1960s and 1970s, Joseph
Schlitz Brewing Co., W.T.
Grant
BIC
IBM
3M
Product lines: Adhesives,
Abrasives, Laminates,
Passive fire protection,
Electronic materials,
Shampoo, Car wax,
Medical products, Optical
films etc.
Ansoff’s product/market matrix
Present Products New Products
Penetration Strategy Product Development
Strategy
Existing
Market

•Increase share of customer

spending •Product modification via new
• Increase market share features
• Non-users to users (where • Different quality levels
both are in the same segment) • New Product(s)

Market Development Diversification

Strategy Strategy
Market
New

•New markets •Joint ventures

• New distribution channels • Mergers
• New geographical areas • Acquisitions/takeovers
Ansoff’s product/market matrix
Market Penetration: Generating more sales to current customers without changing its
products. This means increasing our revenue by, for example, promoting the product,
repositioning the brand, and so on.
◦ Add new stores in current market areas
◦ improve advertising, prices, service or store design.
◦ Example: McDonald’s Happy meal, extra value meal, delivery services etc.

ProductDevelopment: Develop additional or new product to serve existing market segment.

Example: New addition to the McDonald’s menu- Pizza McPuff, McArabia chicken,
McAloo tikki, Maharaja burger etc.

Market Development: develop new markets for the current products.

This means that the product remains the same, but it is marketed to new customers.
Exporting the product, or marketing it in a new region, are examples of market development
◦ Identify new demographic or geographic markets.
◦ Example: Introducing McDonald’s to Kazakhstan in 2015

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Ansoff’s product/market matrix
 Diversification: when new products are developed for new
markets. Diversification makes sense when good opportunities
exist outside the present business.
 Diversification is an inherently higher risk strategy because the
business is moving into markets in which it has little or no
experience.
 Apple has diversified from just selling computers to selling phones,
music players, and tablets.
◦ Important Note: Need is different.
◦ Example: Mccafe, Golden Arch Hotel in Switzerland
◦ Example : Virgin Air, Virgin mobile, Virgin drink etc.
◦ Example : Square selling cosmetics, pharmaceuticals, eatables, agro
products etc.

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Assessing Growth Opportunities: Integrative Growth

 A business can increase sales and profits through backward,

forward or horizontal integration within the industry.
 Forward integration involves owning the marketing
intermediaries and controlling distribution.
 Backward integration means owning the suppliers needed for
production.
 Forward and backward integration conceptualizes vertical
merger whereby 2 companies join together who are involved
in different stages of related business.
 E.g. 1: Airlines integrate backwards to in-flight kitchen and
forward to travel agencies.

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Assessing Growth Opportunities: Integrative Growth

 Horizontal integration signifies the purchase of competing

brands within the same industry which allows the
company to expand its product line and revenues.
 E.g: Marico wanted to purchase Jui in order to pursue a
horizontal integration.
 A horizontal integration can also be done through
horizontal mergers.
 E.g. 1: A cola drink company and a juice company can
merge together and provide a variety of different soft
drinks.

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Assessing Growth Opportunities: Integrative Growth

 Concentric Diversification  involves adding new products

or services that are related to your current offerings --
either because they appeal to the same market or because
they can be offered without much investment in new
resources (or both)
 Concentric diversity aims for synergy -- using your

experience and strengths in one area to gain a foothold in

another area.
 Dangers of concentric diversity include line overextension

-- diluting the value of your brand by trying to do too

much.
Assessing Growth Opportunities: Integrative Growth

 Conglomerate Diversification   refers to diversification

by entering entirely new and unrelated lines of
business. 
 Typically, companies achieve conglomerate diversity

through acquisitions 
 Tend to spread the market risk across more sectors
  However, there is no guarantee that the businesses

will be a good fit.

Competitive position tactics
Strategies for Market Leaders

Market Leader’s objectives:

 Expand the total market by
◦ Finding new users
◦ Creating new uses, and
◦ Encouraging more usage
 Protect its current market share by
◦ Adopting defense strategies (see following slides)
 Increase its market share
◦ Note the relationship between market share and
profitability
Which strategy to use?

Depends on your answer to the following:

 Is it worth fighting?
 Are you strong enough to fight?
 How strong is your defense?
 Do you have any choice but to fight?
Which strategy to use?
• “Move only if there is a real advantage to be gained …”
• “If our force is ten times the enemy’s, then surround him; five times his,
attack him, if double his, divide our force into two and use as ‘alternative
strategy’; if only equal his, we must concentrate our force to fight him…if
our force is so much weaker than the enemy’s, we should totally avoid
him.”
• “If I know my soldiers are capable of attacking the enemy but unaware
that he is invulnerable to attack, my chance of victory is but half…If I
know he can be attacked and my soldiers are capable of doing it but are
unaware that the terrain is unsuited for fighting, I should hold back for
my chance of victory is but half.”
• “Do not fight unless you are in danger”
• “One who has few must prepare for defense; one who has many shall
make the enemy prepare for defense.”
Defense Strategy
 A market leader should generally adopt a defense
strategy
 Six commonly used defense strategies

◦ Position Defense
◦ Mobile Defense
◦ Flanking Defense
◦ Contraction Defense
◦ Pre-emptive Defense
◦ Counter-Offensive Defense
Defense Strategy (cont’d)

Position Defense
 Occupying the most desirable position an
consumers’ mind and building fortifications around
that position
 Example – P & G ‘owns’ the key functional benefit
in many product categories
◦ Tide Detergent for cleaning
◦ Crest toothpaste for cavity prevention
◦ Pamper diapers for dryness
Defense Strategy (cont’d)

Flanking Defense:
 Secondary markets (flanks) are the weaker areas

and prone to being attacked

 Pay attention to the flanks
 Example - San Miguel introduced a flanking brand

in the Philippines, Gold Eagle, as a defense against

APB’s Beerhausen
Defense Strategy (cont’d)

Pre-emptive Defense
 Detect potential attacks and attack the enemies
first
 Perhaps with guerrilla action across the market-

hitting one competitor here another there and

keeping everyone off balance
 Product or brand proliferation is a form of pre-

emptive defense
 Example - Seiko has over 2,000 models
Defense Strategy (cont’d)
Counter-Offensive Defense
 Responding to competitors’ head-on attack by
identifying the attacker’s weakness and then launch
a counter attack
 Common forms include exercise of economic or

political clout ( Tech leaders like Intel, MS, Apple

defended their brands in court), Stabilize lower
price etc.
 Example - Toyota launched the Lexus to respond to

Mercedes attack
Defense Strategy (cont’d)
Mobile Defense
 By market broadening and diversification
 For market broadening, there is a need to

◦ Redefine the business (principle of objective), and

◦ Focus efforts on the competition (the principle of
mass)
 Example- When Philip Morris and Reynolds
acknowledged growing curbs on cigarette
smoking, they moved into industries like beer,
liquor, soft drinks and frozen foods
Defense Strategy (cont’d)

Contraction Defense
 Withdraw from the most vulnerable segments and
redirect resources to those that are more
defendable
 By ‘planned contraction’ or ‘strategic withdrawal’
 Example - India’s TATA Group sold its soaps and

detergents business units to Unilever in 1993

Market Challenger Strategies
The market challengers’ strategic objective is to gain
market share and to become the leader eventually
How?
 By attacking the market leader
 By attacking other firms of the same size
 By attacking smaller firms
Market Challenger Strategies
(cont’d)
Types of Attack Strategies
 Frontal attack
 Flank attack
 Encirclement attack
 Bypass attack
 Guerrilla attack
Frontal Attack
 Seldom work unless
◦ The challenger has sufficient fire-power (a 3:1
advantage) and staying power, and
◦ The challenger has clear distinctive advantage(s)
 Example Pepsi Vs Coke – Diet Pepsi – Diet coke
Flank attack
 Attack the enemy at its weak points or blind
spots i.e. its flanks
 Ideal for challenger who does not have

sufficient resources
 e.g. In the 1990s, Yaohan attacked Mitsukoshi

and Seibu’s flanks by opening numerous stores

in overseas markets
Encirclement attack
 Attack the enemy at many fronts at the same
time
 Ideal for challenger having superior resources
 Competitor attacks another on the basis of

strength as well as weaknesses

 Example - Seiko attacked on fashion, features,

user preferences and anything that might

interest the consumer
Bypass attack
 By diversifying into unrelated products or
markets neglected by the leader
 Could overtake the leader by using new

technologies
 Example - What did Ipod to to the Sony

walkman?
Guerrilla attack
 Best suited to smaller companies with limited
resources
 By launching small, intermittent hit-and-run

attacks to harass and destabilize the leader

 Usually use to precede a stronger attack
 e.g. airlines use short promotions to attack the

national carriers especially when passenger

loads in certain routes are low
Which Attack Strategy should a
Challenger Choose?

• Use a combination of several

strategies to improve market share
over time
• Strategies will change depending on
the competitor whom one targets
Market-Follower Strategies
 Theodore Levitt in his article, “Innovative Imitation”
argued that a product imitation strategy might be just
as profitable as a product innovation strategy
e.g. Product innovation--Sony
Product-imitation--Panasonic
Market-Follower Strategies (cont’d)
 Each follower tries to bring distinctive
advantages to its target market--location,
services, financing
 Four broad follower strategies:

◦ Counterfeiter (which is illegal)

◦ Cloner e.g. the IBM PC clones
◦ Imitator e.g. car manufacturers imitate the style of
one another
◦ Adapter e.g. many Japanese firms are excellent
adapters initially before developing into challengers
and eventually leaders
Market-Nicher Strategies

 Smaller firms can avoid larger firms by targeting

smaller markets or niches that are of little or no
interest to the larger firms
e.g. Logitech--mice
Microbrewers--special beers
Market-Nicher Strategies (cont’d)

 Nichers must create niches, expand the niches and

protect them
◦ e.g. Nike constantly created new niches--cycling, walking,
hiking, cheerleading, etc
 What is the major risk faced by nichers?
◦ Market niche may be attacked by larger firms once they
notice the niches are successful
Multiple Niching
“[A] firm should `stick to its niching’ but not necessarily
to its niche. That is why multiple niching is preferable
to single niching. By developing strength in two or
more niches the company increases its chances for
survival.”
Philip Kotler
Example of Nicher:
Challenger Superstore

 Challenger Superstore is a discount retailer of

computers and accessories
 It opened its first overseas store in Bangkok at a
cost of 90 million baht (S$3.7 million)
 In October 2000, it closed its Bangkok store “after
failing to pay rent amounting to about 6 million
baht”
Conclusion
• Strategic choice involves understanding the underlying bases guiding future
strategy, and generating strategic options for evaluation and selecting from
among them.
• Strategic decisions are usually taken at corporate level (e.g., directional
strategy, resource allocation), at SBU level (e.g., generic strategy), and at
functional level in relation to various functional areas (e.g., marketing, R&D,
finance, HR, production, etc.).
• Strategic marketing decisions include products to offer, market segments to
target, and positioning strategies.
• Organisational failure is arguably a product of repeated strategic mistakes
and unsuccessful interactions between the firm and its environment.