Chapter 2

CHAPTER 2
Strategic Marketing
Partners
Prepared by: Jeremiah D. Platino, MAED
Principles of Marketing
Strategic Planning for competitive advantage:
Creating and maintaining a fit between the organization’s
objectives and resources and the evolving market
opportunities.
Addresses two questions:

1. What is the organization’s main activity at a time?
2. How will it reach its goals?
The goal of strategic planning is long-run profitability and
growth. Strategic decisions require long-term commitments of
resources.
Strategic errors can threaten a firm’s survival, but a good plan

can help protect and grow the firm's resources.
Strategic Business Units:
A strategic business unit (SBU) is a subgroup of a single
business or a collection of related businesses within the larger
organization.
Characteristics:
• Distinct mission and specific target market
• Control over its resources
• A single business or a collection of related businesses
Example:
ABC Limited manufactures customer durables such as television sets,
mobile phones, laptops, and other electronic gadgets. These units are
formed as independent strategic business units to track revenues
separately, costs incurred, sales, and profits. The moment a unit is
bestowed with an SBU status, it becomes easy for the same to make
effective decisions, budgets, investments, etc. With independent SBUs,
it will become easy for ABC Limited to respond to the sudden shift or
changes taking place in the product market on or before time quickly.
Strategic Alternatives:
A method for developing alternatives is Ansoff’s strategic
opportunity matrix, which matches products with markets.
Market penetration: Increase market share among existing customers.

Market development: Attract new customers to existing products.
Product development: A strategy entailing the creation of new products for
present markets.
Diversification: A strategy of increasing sales by introducing new products
into new markets.
Ansoff’s Opportunity Matrix
Ansoff’s Opportunity Matrix is one of the most commonly used tools to

determine a company’s strategic direction. It matches products with
markets.
The Innovation Matrix:
Critics of Ansoff’s matrix mention that the matrix does not reflect
the reality of how businesses grow—that modern businesses
plan growth in a more fluid manner based on current capabilities
rather than the clear-cut sectors outlined by the opportunity
matrix.
Core Innovation: These decisions implement changes that use

existing assets to provide added convenience to existing
customers and potentially entice customers from other brands.
Adjacent Innovation: These decisions are designed to take company
strengths into new markets. This space uses existing abilities in new ways.
For example, Botox, the popular cosmetic drug, was originally developed to
treat intestinal problems and to treat crossed eyes. Leveraging the drug into
cosmetic medicine has dramatically increased the market for Botox.
Transformational Innovation: These decisions result in brand-new

markets, products, and often new businesses. The company must rely on
new, unfamiliar assets to develop the type of breakthrough decisions that fall
in this category.
The Boston Consulting Group Model:
The portfolio matrix classifies each SBU by its present or forecast
growth and market share. The measure of market share used in
the portfolio approach is relative market share, the ratio between
the company’s share and the share of the largest competitor.
The portfolio matrix breaks SBUs into four categories:

• Stars
• Cash Cows
• Question Mark
• Dogs
Stars
It is high growth and high share products or business concerns.
Stars always need a lump sum investment to fund their fast
growth. The growth of this type of SBU slows down eventually
and turns into cash cows. Star Business Units is regarded as a
profitable business, and it even has attractive long-term profit
earning opportunities. As this type of SBU has a higher growth
rate, these are regarded as highly competitive. It can turn into
cash cows only if it consolidates its competitive position.
Cash Cows
They generate relatively more cash in comparison to what they
consume. This type of SBU is low market growth and high share
products or businesses. Cash cows generate a lot of cash that
the organization ultimately utilized by the organization in settling
off its bills and support other strategic business units that need
the investment.
Question Marks
It is a low share business unit in a high growth market. Question
marks produce a significant amount of cash. Companies must
not inject further cash in this type of SBU since it lacks
opportunities for future expansion.
Dogs
It is low market growth and low market share products and
businesses. This type of SBU is unable to generate cash and
even has a very dim prospect. This is due to the low
competitiveness of this SBU.
Developing Strategies for Growth and Downsizing
Beyond evaluating current businesses, designing the business
portfolio involves finding businesses and products the company
should consider in the future. Companies need growth if they are to
compete more effectively, satisfy their stakeholders, and attract top
talent. "Growth is pure oxygen,” states one executive. “It creates a
vital, enthusiastic corporation where people see genuine
opportunity.” At the same time, a firm must be careful not to make
growth itself an objective. The company's objective must be
"profitable growth.”
Marketing has the main responsibility for achieving profitable

growth for the company. Marketing must identify, evaluate, and
select market opportunities and lay down strategies for capturing
them. One useful device for identifying growth opportunities is the
product/market expansion grid.
Starbucks management might consider whether the company can achieve
deeper market penetration-making more sales to current customers without
changing its products. It might add new stores in current market areas to make
it easier for more customers to visit. In fact, Starbucks is adding an average of
26 stores a week, 52 weeks a year. Improvements in advertising, prices,
service, menu selection, or store design might encourage customers to stop by
more often, stay longer, or to buy more during each visit. For example,
Starbucks recently added drive-through windows to many of its stores. And
Starbucks has introduced a company debit card, which lets customers prepay
for coffee and snacks or give the gift of Starbucks to family and friends.
Starbucks management might consider possibilities for market development
identifying and developing new markets for its current products. For instance,
managers could review new demographic markets. Perhaps new groups—
such as seniors or ethnic groups—could be encouraged to visit Starbucks
coffee shops for the first time or to buy more from them. Managers also could
review new geographical markets. Starbucks is now expanding swiftly into new
U.S. markets, especially in the Southeast and Southwest.
management could consider product development offering modified or new
products to current markets. For example, Starbucks has added hot breakfast
sandwiches to its menu to steal some early-morning business from McDonald's
and Burger King. And it recently added a line of iced shaken beverages to
attract more customers during the hot summer season.
Starbucks might consider diversification-starting up or buying businesses

outside of its current products and markets. For example, in 1999, Starbucks
purchased Hear Music and began making compilation music CDs to play and
sell in its stores. It is now installing Hear Music CD-burning kiosks, allowing
customers to create their own custom CDs.
In a more extreme diversification, Starbucks might consider leveraging its

strong brand name by making and marketing a line of branded casual clothing
consistent with the “Starbucks Experience.” However, this would probably be
unwise. Companies that diversify too broadly into unfamiliar products or
industries can lose their market focus, something that some critics are already
concerned about with Starbucks.
Companies must not only develop strategies for growing their business
portfolios but also strategies for downsizing them. There are many reasons that
a firm might want to abandon products or markets. The market environment
might change, making some of the company's products or markets less
profitable. The firm may have grown too fast or entered areas where it lacks
experience. This can occur when a firm enters too many foreign markets
without the proper research or when a company introduces new products that
do not offer superior customer value. Finally, some products or business units
simply age and die. One marketing expert summarizes the problem this way:
Companies spend vast amounts of money and time launching new brands,
leveraging existing ones, and acquiring rivals. They create line extensions and
brand extensions, not to mention channel extensions and subbrands, to cater
to the growing number of niche segments in every market. Surprisingly, most
businesses do not examine their brand portfolios from time to time to check if
they might be selling too many brands, identify weak ones, and kill unprofitable
ones. They tend to ignore lossmaking brands rather than merge them with
healthy brands, sell them off, or drop them.
Consequently, most portfolios have become [jammed) with loss-making and
marginally profitable brands. Moreover, the surprising truth is that most brands
don't make money for companies. Many corporations generate fewer than 80
to 90 percent of their profits from fewer than 20 percent of the brands they sell,
while they lose money or barely break even on many of the other brands in
their portfolios.
When a firm finds brands or businesses that are unprofitable or that no longer
fit its overall strategy, it must carefully prune, harvest, or divest them. Weak
businesses usually require a disproportionate amount of management
attention. Managers should focus on promising growth opportunities, not fritter
away energy trying to salvage fading ones.
Developing Strategies for Growth
Product/market expansion grid

A portfolio-planning tool for identifying company growth
opportunities through market penetration, market development,
product development, or diversification
Downsizing
Reducing the business portfolio by eliminating products or business
units that are not profitable or that no longer fit the company's
overall strategy.
Market Penetration
A strategy for company growth by increasing sales of current
products to current market segments without changing the product.
Market development A strategy for company growth by identifying
and developing new market segments for current company
products
Product Development
A strategy for company growth by offering modified or new
products to current market segments.
Diversification
A strategy for company growth through starting up or acquiring
businesses outside the company's current products and
markets,
Marketing Strategy and the Marketing Mix
The four Ps are the key considerations that must be thoughtfully
considered and wisely implemented in order to successfully
market a product or service. They are product, price, place,
and promotion.
The four Ps are often referred to as the marketing mix. They
encompass a range of factors that are considered when
marketing a product, including what consumers want, how the
product or service meets or fails to meet those wants, how the
product or service is perceived in the world, how it stands out
from the competition, and how the company that produces it
interacts with its customers.
Neil Borden, an advertising professor at Harvard, popularized

the idea of the marketing mix—and the concepts that would
later be known primarily as the four Ps—in the 1950s. His 1964
article, "The Concept of the Marketing Mix," demonstrated the
ways that companies could use advertising tactics to engage
their consumers.
Decades later, the concepts that Borden popularized are still

being used by companies to advertise their goods and services.
Borden's ideas were developed and refined over a number of

years by other key players in the industry. E. Jerome McCarthy,
a marketing professor at Michigan State University, refined the
concepts in Borden's book and named them the "four Ps" of
marketing. McCarthy co-wrote the book Basic Marketing: A
Managerial Approach, further popularizing the idea.
At the time the concept was introduced, it helped companies

breach the physical barriers that could hamper widespread
product adoption. Today, the Internet has helped businesses to
overcome some of these barriers.
People, process, and physical evidence are extensions of the

original Four Ps and are relevant to current trends in marketing.
People, process, and physical evidence are extensions of the

original Four Ps and are relevant to current trends in marketing.
The 4 Ps of Marketing
PRODUCT
Creating a marketing campaign starts with an understanding of
the product itself. Who needs it, and why? What does it do that
no competitor's product can do? Perhaps it's a new thing
altogether and is so compelling in its design or function that
consumers will have to have it when they see it.
PRODUCT
The job of the marketer is to define the product and its qualities
and introduce it to the consumer.
PRODUCT
Defining the product also is key to its distribution. Marketers
need to understand the life cycle of a product, and business
executives need to have a plan for dealing with products at
every stage of the life cycle.
PRODUCT
The type of product also dictates in part how much it will cost,
where it should be placed, and how it should be promoted.
PRODUCT
Many of the most successful products have been the first in
their category. For example, Apple was the first to create a
touchscreen smartphone that could play music, browse the
Internet, and make phone calls. Apple reported total sales of
the iPhone to be $71.6 billion in Q1 2022. In 2021, Apple hit
the milestone of 2 billion iPhones sold.
PRICE
Price is the amount that consumers will be willing to pay for a
product. Marketers must link the price to the product's real and
perceived value, while also considering supply costs, seasonal
discounts, competitors' prices, and retail markup.
PRICE
In some cases, business decision-makers may raise the price
of a product to give it the appearance of luxury or exclusivity.
Or, they may lower the price so more consumers will try it.
Marketers also need to determine when and if discounting is

appropriate. A discount can draw in more customers, but it can
also give the impression that the product is less desirable than
it was.
PRICE
UNIQLO, headquartered in Japan, is a global manufacturer of
casual wear. Like its competitors Gap and Zara, UNIQLO
creates low-priced, fashion-forward garments for younger
buyers.
PRICE
What makes UNIQLO unique is that its products are
innovative and high-quality. It accomplishes this by purchasing
fabric in large volumes, continually seeking the highest-quality
and lowest-cost materials in the world. The company also
directly negotiates with its manufacturers and has built
strategic partnerships with innovative Japanese
manufacturers.
PRICE
Finally, the company employs a team of skilled textile artisans
that it sends to its partner factories all over the world for
quality control. Production managers visit factories once a
week to resolve quality problems.
PLACE
Place is the consideration of where the product should be
available, in brick-and-mortar stores and online, and how it will
be displayed.
The decision is key: The makers of a luxury cosmetic product
would want to be displayed in Sephora and Neiman Marcus,
not in Walmart or Family Dollar. The goal of business
executives is always to get their products in front of the
consumers who are the most likely to buy them.
PLACE
That means placing a product only in certain stores and
getting it displayed to the best advantage.
The term placement also refers to advertising the product in

the right media to get the attention of consumers.
PLACE
For example, the 1995 movie GoldenEye was the 17th
installment in the James Bond movie franchise and the first
that did not feature an Aston Martin car. Instead, Bond actor
Pierce Brosnan got into a BMW Z3. Although the Z3 was not
released until months after the film had left theaters, BMW
received 9,000 orders for the car the month after the movie
opened.
PROMOTION
The goal of promotion is to communicate to consumers that
they need this product and that it is priced appropriately.
Promotion encompasses advertising, public relations, and the
overall media strategy for introducing a product.
PROMOTION
Marketers tend to tie promotion and placement elements
together to reach their core audiences. For example, In the
digital age, the "place" and "promotion" factors are as much
online as offline. Specifically, where a product appears on a
company's web page or social media, as well as which types
of search functions will trigger targeted ads for the product.
PROMOTION
The Swedish vodka brand Absolut sold only 10,000 cases of
its vodka in 1980. By 2000, the company had sold 4.5 million
cases, thanks in part to its iconic advertising campaign. The
images in the campaign featured the brand's signature bottle
styled as a range of surreal images: a bottle with a halo, a
bottle made of stone, or a bottle in the shape of the trees
standing on a ski slope. To date, the Absolut campaign is one
of the longest-running continuous campaigns of all time, from
1981 to 2005.
How to Use the 4 Ps of Marketing

in Your Marketing Strategy
The four Ps provide a framework on which to build your

marketing strategy. Think through each factor. And don't worry
when the factors overlap. That's inevitable.
First, analyze the product you will be marketing. What are the
characteristics that make it appealing? Consider other similar
products that are already on the market. Your product may be
tougher, easier to use, more attractive, or longer-lasting. Its
ingredients might be environmentally-friendly or naturally
sourced. Identify the qualities that will make it appealing to
your target consumers.
Think through the appropriate price for the product. It's not
simply the cost of production plus a profit margin. You may be
positioning it as a premium or luxury product or as a bare-
bones lower-priced alternative.
Placement involves identifying the type of store, online and

off, that stocks products like yours for consumers like yours.
Promotion can only be considered in the context of your target

consumer. The product might be appealing to a hip younger
crowd or to upscale professionals or to bargain hunters. Your
media strategy needs to reach the right audience with the right
message.
When Did the 4 Ps Become

the 7 Ps?
The focus on the four Ps—product, price, place, and

promotion—has been a core tenet of marketing since the
1950s. Three newer Ps expand the marketing mix for the 21st
century.
People places the focus on the personalities that represent

the product. In the current era, that means not only sales and
customer service employees but social media influencers and
viral media campaigns.
Process is logistics. Consumers increasingly demand fast and

efficient delivery of the things they want, when they want
them.
Physical evidence is perhaps the most thoroughly modern of

the seven Ps. If you're selling diamond jewelry on a website, it
must be immediately clear to the consumer that you are a
legitimate established business that will deliver as promised. A
professionally-designed website with excellent functionality, an
"About" section that lists the principals of the company and its
physical address, professional packaging, and efficient
delivery service, all are critical to convincing the consumer
that your product is not only good, it's real.
How Do You Use the 4 Ps of

Marketing?
The model of the 4Ps can be used when you are planning a
new product launch, evaluating an existing product, or trying
to optimize the sales of an existing product.
A careful analysis of these four factors—product, price, place,

and promotion—helps a marketing professional devise a
strategy that successfully introduces or reintroduces a product
to the public.
The bottom line:The four Ps of marketing—product, price,

place, promotion—are often referred to as the marketing mix.
These are the key elements involved in planning and
marketing a product or service, and they interact significantly
with each other. Considering all of these elements is one way
to approach a holistic marketing strategy.

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Addresses two questions:

Strategic errors can threaten a firm’s survival, but a good plan

Market penetration: Increase market share among existing customers.

Ansoff’s Opportunity Matrix is one of the most commonly used tools to

Core Innovation: These decisions implement changes that use

Transformational Innovation: These decisions result in brand-new

The portfolio matrix breaks SBUs into four categories:

Marketing has the main responsibility for achieving profitable

Starbucks might consider diversification-starting up or buying businesses

In a more extreme diversification, Starbucks might consider leveraging its

Product/market expansion grid

Neil Borden, an advertising professor at Harvard, popularized

Decades later, the concepts that Borden popularized are still

Borden's ideas were developed and refined over a number of

At the time the concept was introduced, it helped companies

People, process, and physical evidence are extensions of the

People, process, and physical evidence are extensions of the

Marketers also need to determine when and if discounting is

The term placement also refers to advertising the product in

How to Use the 4 Ps of Marketing

The four Ps provide a framework on which to build your

Placement involves identifying the type of store, online and

Promotion can only be considered in the context of your target

When Did the 4 Ps Become

The focus on the four Ps—product, price, place, and

People places the focus on the personalities that represent

Process is logistics. Consumers increasingly demand fast and

Physical evidence is perhaps the most thoroughly modern of

How Do You Use the 4 Ps of

A careful analysis of these four factors—product, price, place,

The bottom line:The four Ps of marketing—product, price,

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