Marketing Practice Notes 2015

Spectrium (Pty) Ltd Notes
Practice of
Marketing
0
Contents
Contents.................................................................................................................................1
1 The Nature of Strategic Marketing....................................................................................0
Importance of strategic marketing...................................................................................0
Strategic levels...................................................................................................................0
The corporate strategy.................................................................................................0
Business strategy.........................................................................................................0
Market strategy............................................................................................................0
Functional strategy.......................................................................................................1
The Functioning of SBUs.............................................................................................1
Strategic marketing and marketing management...................................................1
The difference between marketing management and strategic marketing.....................2
Importance...................................................................................................................2
Strategies......................................................................................................................2
Levels on execution......................................................................................................2
Regularity.....................................................................................................................2
Nature of the problem.................................................................................................2
Information required...................................................................................................2
Detail............................................................................................................................2
Ease of evaluation........................................................................................................3
Varying roles for different products and markets......................................................3
1
Relationship with finance............................................................................................3
QUESTIONS......................................................................................................................3
2 Analysing the Macroenvironment.....................................................................................0
Characteristics of the Macroenvironment........................................................................0
1. It is Boundless..........................................................................................................0
2. Weak Environmental Signals..................................................................................0
3. The Uncontrollable Nature of Environmental Factors..........................................0
4. The Diversity of Expertise Required.......................................................................0
Dimensions of Macro-environmental Analysis................................................................0
TECHNOLOGY ENVIRONMENT..............................................................................0
GOVERNMENT/LEGAL ENVIRONMENT................................................................1
ECONOMIC ENVIRONMENT....................................................................................1
SOCIAL/CULTURAL ENVIRONMENT......................................................................1
DEMOGRAPHIC ENVIRONMENT............................................................................2
INTERNATIONAL ENVIRONMENT.........................................................................2
Forecasting Environmental Trends and Events...............................................................2
Environmental Scanning.............................................................................................2
Key Environmental Issue Identification.....................................................................2
Impact Evaluation.......................................................................................................3
Formulation of Response Strategies...........................................................................3
QUESTIONS......................................................................................................................3
3 Analysing the market.........................................................................................................0
Competitive Structure of an Industry...............................................................................0
Competitive Industry Structure Porters Five Forces Model...............................0
2
Threat of New Entrants..................................................................................................0
Threat of Substitutes.......................................................................................................1
Bargaining Power of Suppliers.......................................................................................1
Bargaining Power of Buyers............................................................................................1
Rivalry between Direct Competitors..............................................................................1
Market Analysis.................................................................................................................2
Actual and Potential Size of Market/Industry............................................................2
Market Growth and Profitability.................................................................................2
Cost Structure and Behaviour of Industry..................................................................3
Distribution and Marketing Communication Practices in the Industry...................3
Trends and Developments in the Industry.................................................................3
Key Success Factors of the Industry............................................................................3
Portfolio Analysis..............................................................................................................3
Model 1 Market Growth-Market Share Matrix (BCG Matrix).............................4
Stars..............................................................................................................................4
Cash Cows....................................................................................................................4
Problem Children (Wild Cats).....................................................................................4
Dogs..............................................................................................................................4
Model 2- Market Attractiveness Enterprise Strength Model..................................5
Model 3 Porters Generic Strategy Model............................................................6
Competitive Advantage................................................................................................6
Competitive Strategies.................................................................................................6
Differentiation.............................................................................................................6
Cost Leadership............................................................................................................7
3
Differentiation Focus...................................................................................................7
Cost Focus....................................................................................................................7
QUESTIONS......................................................................................................................7
4 Customer Management.....................................................................................................0
Customer management (CM), Customer Relationship Management (CRM) and

Relationship Marketing (RM)...........................................................................................0
The relationship between RM, CRM and CM.........................................................0
Distinction between CM, CRM and RM..................................................................0
Customer Value...............................................................................................................0
Customer Value = Perceived Benefits Perceived Costs.....................................1
Performance ValueSpace.............................................................................................1
Price ValueSpace..........................................................................................................1
Performance ValueSpace.............................................................................................2
Needs and Benefits......................................................................................................2
Types of Benefits.............................................................................................................2
Functional Benefits......................................................................................................2
Emotional Benefits......................................................................................................2
Image Benefits.............................................................................................................2
Social Benefits..............................................................................................................3
Service Benefits............................................................................................................3
Experiential Benefits...................................................................................................3
Perceived Costs...............................................................................................................3
Monetary Costs............................................................................................................3
Time and Energy Component.....................................................................................3
Psychic Expenditure....................................................................................................3
4
Customer Knowledge Management..................................................................................3
The Role of Customer Needs.......................................................................................3
The Role of Marketing Research.................................................................................4
The Role of Listening Posts.........................................................................................4
The Role of Technology...............................................................................................4
Customer Portfolio Management.....................................................................................4
Selecting the customer base........................................................................................4
Developing a Value Proposition and Positioning Statement.....................................5
Determining the Decision Makers..............................................................................5
Customer Satisfaction Management.................................................................................5
Service Profit Chain..................................................................................................6
Customer Retention Management..............................................................................6
Reasons Why Customer Retention Increases Annual Profits....................................6
Strategies for Customer Retention..............................................................................6
Customer Relationship Management...............................................................................7
Customer Relationship Management Business Cycle.............................................7
Systems Procedures and Processes................................................................................7
QUESTIONS......................................................................................................................8
5 Competitor Analysis...........................................................................................................0
Analysing Competitors......................................................................................................0
A Framework for Competitor Analysis.............................................................................0
Identify Competitors......................................................................................................0
Analyse Strategic Groups.............................................................................................1
Characteristics for identifying strategic groups....................................................1
5
Analysis of Key Competitors.......................................................................................2
Issues to Consider........................................................................................................2
Competitors Objectives........................................................................................2
Competitors Strategies.........................................................................................2
Competitors Strengths and Weaknesses.............................................................2
A three stage process can be used to analyse KSFs;...................................................3
Identify likely response patterns of competitors...........................................................3
Competitive Positions.....................................................................................................3
Strategies that can be used by firms...........................................................................4
Collecting Competitive Information..............................................................................4
Published Data.............................................................................................................4
Field Data.....................................................................................................................4
Competitive Intelligence System (CIS).......................................................................4
QUESTIONS......................................................................................................................5
6 Internal Analysis................................................................................................................0
The framework of internal analysis..................................................................................0
1. Identify the strategic internal factors.....................................................................0
2. Analyse by comparing these internal strategic factors with.................................0
Identifying strategic internal factors..............................................................................1
Mission.........................................................................................................................1
Characteristics of Good Mission Statement................................................................2
The Resources of an Organisation.................................................................................2
Identify.........................................................................................................................2
Analyse.........................................................................................................................3
6
Financial Resources.....................................................................................................3
Human Resources........................................................................................................3
Manage.........................................................................................................................3
QUESTIONS......................................................................................................................3
7
1 The Nature of Strategic Marketing
Strategy requires that an organization manages its resources through the selection of
profitable markets in accordance with the changing environment. A strategic role for
marketing in strategy planning is a
Management of the markets to be served.

How competition is handled
The timing of market entry or exit.
Importance of strategic marketing
1. With the battle for market share intensifying strategic marketing can provide extra
leverage in share battles.
2. Deregulation in many industries is mandating a move to strategic marketing.
3. Competition in world markets has become stiff & fiercer. It is increasingly difficult to
cope with world wide competition; renewed emphasis on marketing strategy achieves
significance.
4. The fragmentation of the markets is causing market segments to become smaller in
terms of the unique needs and increased demand for the customization the
competitive realities of the fragmented markets require strategic marketing capability
to identify unserved segments.
5. There is diversity of the needs and requirements in South Africa, the concept of one
on one marketing demands no thinking in terms of strategy formulation
6. Shortening product lifecycles and ease of accessibility to technology will increase the
importance of getting to the market quickly.
7. The explosion on the internet (IT) and the implications for organizations have opened
up opportunities that have only the imagination as a ceiling.
Strategic levels
The corporate strategy
It describes the organizations sense of purpose. In essence it is mapping out the future
opportunities and the threats that match the organizations resources. It may be seen as
the linking process between the management of the organizations internal resources
and its external relationships with its customers, suppliers, competitors, the economic
and the social environment in which it exists. The role of marketing at corporate level is
to provide customer and competitive perspective for corporate strategic management.
Business strategy
This is concerned with the management of a specific division or business unit which
contributes to achieve corporate objectives. The role of marketing is to assist in the
development of the strategic perspectives of the business unit.
Market strategy
This refers to the marketing managements contribution to the formulation of the

business strategy, primarily it entails inputs at top management level with regard to the
internal and external marketing environment and joint decision making in the area of
competitive and investment decisions. The market strategy is a component of the
organisational strategy and represents the SBUs total attack on the market and is
therefore market orientated.
Functional strategy
This refers to marketing managements contribution to the formulation and

implementation of marketing programs. Once the broad strategies have been
formulated, the selection of the specific target markets must be made and the strategic
marketing value mix orchestrated.
The Functioning of SBUs
The philosophy underlying the SBU concept may be summed up as follows:
A diversified organization should be managed as a portfolio of business, each unit

serving a specific market segment and having a clearly defined strategy.
Each business unit in the portfolio should develop a strategy appropriate to its
distinctive opportunities, capabilities and competencies.
The total portfolio of business units should be managed in harmony, synchronization
and the interest of the corporate entity.
Strategic marketing and marketing management
Point of Strategic marketing MARKETING MANAGEMENT

difference
Time frame Long range, i.e. decisions has Day to day, i.e. Decision have
long term implications. relevance in a given year.
Orientation Inductive and intuitive Deduction and analytical
Decision Primarily bottom up Mainly top down

1
process
Relationship Environment considered Environment considered constant

with ever changing and dynamic with occasional disturbances.
environment
Opportunity On going to seek new Adhoc search for a new

sensitivity opportunities opportunity
Organizational Achieve synergy between Pursue interest on the

behavior different components on the decentralized unit.
organization both
horizontally and vertically.
Nature of job Requires high degree on Requires maturity, experience and

creativity and originality. control orientation.
Leadership style Requires proactive Requires reactive perceptive.

perspective.
Mission Deals with that which Deals with running delineated.

organization has to
emphasize.
The difference between marketing management and strategic marketing
Importance
Strategic marketing decisions are more important to the organization than marketing
management decisions. Marketing management focuses on efficiency (doing things
right) were as strategic marketing is more concerned with effectiveness in the market
(doing the right things).
Strategies
Marketing management formulates integrated marketing strategies (4Ps) whereas

market strategies are more important in strategic marketing. Marketing strategy is an
organizations total onslaught on the market.
Levels on execution
Because of their importance strategic marketing decisions are made at a higher level
than marketing management decisions.
2
Regularity
A market strategy is formulated at the top level on an on going but irregular basis.
Marketing management decisions are made on a periodic basis according to a fixed
schedule which is typically designed to coincide with the annual budgetary cycle.
Nature of the problem
Strategic marketing problems are characteristically unstructured and unique. Great

uncertainty and risk therefore accompany the marketing strategy formulation.
Marketing management decisions are more structured and repetitive in nature and the
risk associated with marketing decisions are therefore easy to determine.
Information required
Since strategic marketing represents an organizations reaction to its environment,

marketing strategy formulation requires considerable information outside. Marketing
management decisions are based largely on information available internally or existing
markets information.
Detail
Market strategies typically are vague indications of the direction in which to move were
as marketing plans are specific and supported by large amounts of detailed information.
Ease of evaluation
Strategic marketing decisions are more difficult to evaluate than marketing decisions.
Formal control is therefore a function more of marketing than strategic marketing.
Varying roles for different products and markets
Traditionally it has been believed that it is necessary to make an effort to maximize the
profitability of all products over the long term. Strategic marketing takes the view that
different SBUs have different roles to play in an organization. Some may be involved in
the market growth phase of the PLC, introduction, Growth, maturity or decline.
Relationship with finance
Strategic marketing decision making is closely related to financial management. The

importance of maintaining a close relationship between marketing and financing has
3
not been disregarded. Recent developments revealed that financial factors play a crucial
role in strategic marketing e.g. investment decision risk calculations.
QUESTIONS
1.1 Four (4) levels of strategy can be identified in large organisations
1.1.1 Identify these levels (strategies)

1.1.2 Briefly explain his strategy level
1.1.3 Indicate the role of marketing management at each level (15)
1.2 Identify and explain five (5) differences between strategic marketing and
marketing management. (You are welcome to present your answer in a table)
(10)
4
2 Analysing the Macro environment
Characteristics of the Macro environment
1. It is Boundless
Sources of environment change are practically infinite and must be comprehensively

and continuously monitored. The macro-environment conveys signals whose impact on
marketing strategies is difficult to interpret, it is for the most part uncontrollable and
that special expertise is required to understand it.
2. Weak Environmental Signals
Factors external to the organization rarely evolve dramatically over short time periods.
Signals arising from the environment are less discernable than those generated by
markets or competitors, shifts in the environment would have already occurred when
they are finally observed.
3. The Uncontrollable Nature of Environmental Factors
An organization never has full control over any environmental factors, but it can
respond in ways designed to take advantage of an opportunity or dampen the effects of a
threat.
4. The Diversity of Expertise Required
Analysis and understanding of macro-environmental variables require expertise in

many fields including science, law, economics and sociology. This makes an exhaustive
and systematic monitoring of all environmental factors by product/marketing manager
neither possible nor desirable.
Dimensions of Macro-environmental Analysis
TECHNOLOGY ENVIRONMENT
Technology is the application of science to convert an economys resources to output. To

what extent are existing technologies maturing? What technological developments or
trends are affecting or could affect the industry? Technological developments affect
marketing in two basic ways: new products and new processes (ways of doing things).
E.g., include these;
Rapid changes in the Internet and World Wide Web

Networked computer scanners at retail check-out counters

Worldwide satellites for data communication
Automated inventory control
Hybrid engines for vehicles
GOVERNMENT/LEGAL ENVIRONMENT
The political environment can have a dramatic affect on opportunities at a local or

international level. Some business managers have become very successful by studying
the political environment and developing strategies that take advantage of opportunities
related to changes.
Strong sentiments of nationalism (an emphasis on a countrys interests before

everything else. Nationalistic feelings can determine whether a firm can enter markets
because businesses often must get permission to operate.
Consumerism is a social movement that seeks to increase the rights and powers of
buyers.
Knowing all the relevant laws is sometimes difficult for a marketing manager, but it is
important because the legal environment sets the basic rules for how a business can
operate in society. It is important to keep in mind that laws often vary from one
geographic market area to another even within the same country, depending on the
jurisdiction.
More attention to laws governing international trade.

Changes in labeling requirements.
Increased concern about consumer privacy.
ECONOMIC ENVIRONMENT
Affects the way firms use resources and can require changes in a firms marketing
strategy. A weak economy undermines consumer confidence and when consumer
confidence is low, many purchases-especially big ticket purchases-are delayed. Many
companies arent strong enough to survive such bad times. The following are economic
variables:
Interest rates , can affect consumer purchases of homes, cars, furniture and other
items usually bought on credit.
Inflation, when costs are rising rapidly, a marketing manager may have no choice but
to increase prices. But the decisions of individual marketing managers to raise prices
adds to the macro-level inflation. That can lead to government policies that reduce
income, employment, and consumer spending.
1
Fluctuations in the exchange rate between trading countries currencies have an

important effect on international trade. A countrys whole economic system can
change as the balance of imports and exports shifts-affecting jobs, consumer income,
and national productivity.
SOCIAL/CULTURAL ENVIRONMENT
Affects how and why people live and behave as they do-which affects customer buying
behavior and eventually the economic, political, and legal environment. Culture includes
language, education, religious beliefs, food preferences, styles of clothing and housing,
and the roles of marriage and family. Many people dont stop to think about it, or how it
may be changing, or how it may differ for other people.
More women in the work force

Changing lifestyles amongst the previously marginalised communities, e.g., the Black
Diamond.
More single-person households
More health consciousness
More concern about the environment
What are the current or emerging trends in lifestyles, fashions and other components
of culture? Why?
What are their implications?
DEMOGRAPHIC ENVIRONMENT
Change in ethnic representation, age distribution, household composition, geographic

distribution and income may all affect the success of an organization. These changes are
as follows:
An explosion in the worlds population.

A slowdown in birth rates in many of the developed nations.
An ageing population as advances in medical care allow people to live longer
Changing family structure
Higher levels of education and increasing number of families in what has traditionally
been seen as the middle class.
Geographical shifts in population.
A growth in the number of commuters and people working at home.
INTERNATIONAL ENVIRONMENT
What international/global actions and trends will affect the industry?

How will they alter the competitive arena?
2
Forecasting Environmental Trends and Events
A monitoring system is required that calls a managers attention to relevant key

environmental issues and such an approach is referred to as strategic environmental
issue management and it consists of a four stage process.
Environmental Scanning
This activity systematically seeks information about the various elements of the
environment and detects new developments. It requires special expertise and extensive
information systems and is usually performed by central staff. There are three basic
approaches to environmental scanning;
The irregular approach this consists of ad hoc studies done only when specific
events arise that may affect the organization.
The regular approach involves periodically updated studies of particular events
of special interest and this enables the organization to be regularly informed on
selected issues so action can be taken before a crisis occurs.
The continuous approach involves regularly monitoring a variety of
environmental components and provides inputs to the standard planning process.
Key Environmental Issue Identification
This involves isolating new environmental developments detected by a scanning system

as they may have a significant impact on some activities of the organization. Key issues
that have marketing implications are drawn to the attention of marketing executives.
The system should determine;
The probability that an issue will materialize into an opportunity or a threat.

The degree of impact it will have on the organization.
Impact Evaluation
Four basic questions must be considered in order for the impact of a key environmental
issue to be determined;
Does the issue represent an opportunity or a threat to the organization?

How significant will its impact be on the operations and performance of the
organization?
What is the likely timing of its impact?
What are the specific marketing areas on which it will impact?
3
Formulation of Response Strategies
Given the foreseeable impact of a key environmental issue, managers must formulate an
appropriate response strategy. Feasible response strategies includes a status quo or
wait-and-see position if the impact is not sufficiently significant or too uncertain.
Responses can broadly be classified under reactive and proactive strategies. Reactive
strategy is undertaken in response to a major environmental event, often in a crisis
situation. A proactive strategy is formulated in response to a key environmental issue
and in anticipation of it becoming an event. Response strategies to environmental issues
based on reactive and proactive strategies;
Opposition strategy an organization may try to influence an environmental force

e.g., lobbying and corporate advertising
Adaptation strategy adaptations are often compulsory e.g., legislation on product
specifications, packaging and labeling(cigarettes)
Offensive strategy such a strategy uses the environmental issue to improve the
organisations competitive position.
Redeployment strategy redeploying resources faced with major environmental
issues
Contingency strategy alternative courses of action corresponding to the different
possible evolutions of the environment.
Passive strategy not responding to an environmental threat or opportunity.
QUESTIONS
1. Explain why it is important for marketers to analyse the environment in which

they operate. (5)
2. Detail the SIX dimensions of macro environmental analysis. Select a product of

your choice and explain how each dimension could impact the marketing strategy
of your chosen product. (20)
3. Detail the SIX dimensions of macro environmental analysis. Select a product of

your choice and explain how each dimension could impact the marketing strategy
of your chosen product. (20)
4. Identify five (5) changes (trends) in the macro-environment that impact on the
demand for cell phones. For each trend indicate what implications of each change
are for the marketing of cell phones. (15) Vodacom Case study.
5. A monitoring system is required that calls a managers attention to relevant key

environmental issues. Such an approach is called strategic environmental issue
4
management. Discuss the four stage process of forecasting environmental trends

and events in detail. (25)
6. The last phase in strategic environmental issue management is the formulation of

a response strategy. Discuss the phase in detail. (16)
5
3 Analysing the market
Competitive Structure of an Industry
Different industries have different competitive structures that result in quite different
rules of the game for competitive behaviour. An industry is a group of organizations that
markets products which are close substitutes for each other. The competitive structure
of an industry and the critical rules of the game set by this structure can be explained by
using the Porters Five Forces Model.
Competitive Industry Structure Porters Five Forces Model
Objective: to determine the opportunities and threats that exists for firms within a
competitive environment
Threat of New Entrants
The threat of entry into an industry by new organizations is likely to enhance

competition and thereby reduce the industrys attractiveness. The threat of new entrants
depends on the barriers to entry. Key entry barriers are;
Economies of scale such as high levels of production e.g. motor cars and electronic
equipment
Cost advantage e.g. organizations with favourable access to raw materials or
organizations with production experience
High switching cost e.g. cost to a buyer of changing suppliers
Limited access to distribution channels
Government policy
Product differentiation it is difficult to compete against products with unique

features
Strong brand identity
Present competitors can therefore minimize the fear of new entrants by raising the entry
barriers.
Threat of Substitutes
A substitute product is a product that serves essentially the same function as an

industrys product and this is another force of competition. The threat of substitute
products depends on;
Buyers willingness to substitute e.g. plastic for glass in packaging industry

The relative price and performance of substitutes
The advantages that substitutes offer over traditional products e.g. cell phones over
telephones
The costs of switching to substitutes
The image/identity of substitutes
Bargaining Power of Suppliers
The costs of raw materials and components can have major effects on an organisations
profitability and competitiveness in a particular industry. The higher the bargaining
power of suppliers of these raw materials and components, the higher are these costs.
The bargaining power of suppliers will be high under the following circumstances;
There are many buyers and a few dominant suppliers

There are differentiated, highly valued products
Suppliers consider integrating forward into the industry
Buyers do not threaten to integrate backward into the supply chain
The industry is not a key customer group to the suppliers
An organization can reduce the bargaining power of suppliers by seeking new sources of
supply, integrating backward and designing standardized components that can be
supplied by many suppliers.
Bargaining Power of Buyers
1
This refers to the ability of the industrys customers to force the industry to reduce
prices or increase features. Buyers gain power when substitute products of the same
product, offered by another supplier can meet their needs. Fewer buyers, the threat of
backward integration and low switching costs also increase buyer power.
Rivalry between Direct Competitors
The intensity of rivalry between direct competitors in an industry will depend on;
Structure of competition more intense rivalry will occur when there are a large
number of small competitors or a few equally balanced competitors; less rivalry when
a clear leader exists with a large cost advantage.
Structure of costs high fixed costs encourage price cutting to fill capacity.
Degree of differentiation commodity products encourage rivalry while highly
differentiated products that are hard to copy are associated with less intense rivalry.
Switching costs rivalry is reduced when switching costs are high because the
product is specialized, when the customer has invested a great deal of resources in
learning how to use the product, or when the customer has tailor-made investments
that are worthless with other products and suppliers.
Strategic objectives when competitors are pursuing build strategies, competition
is likely to be more intense than when playing hold or harvesting strategies
Exit barriers when barriers to leaving an industry are high due to such factors as
lack of opportunities elsewhere, high vertical integration, emotional factors or the
high cost of closing down a plant, rivalry will be more intense than when exit barriers
are low
Where all these forces are intense, below average industry performance can be expected
and if these forces are mild superior performance is possible. An important task for
marketing managers therefore is to analyse all these issues for the industry in which
they operate because it will give them confidence in knowing what is reasonable to
expect and what they can and cannot hope to control through their market strategy.
Market Analysis
The aim of a market analysis is to establish whether a market is an attractive proposition

to current and potential participants. The attractiveness of a market is generally
measured by the long term return on investment which has been achieved by its
participants. Another aim of a market analysis is to grasp a full understanding of the
dynamics of the market. The aim here is to identify trends, threats, opportunities,
changes, key success factors and any other aspects that can assist in the gathering and
analysis of information. A market analysis often includes the following dimensions;
2
Actual and potential market size, Market growth, Market profitability, Cost
structures, Distribution systems, Trends and developments and Key success factors.
Actual and Potential Size of Market/Industry
The industrys actual size must be established (the extent of consumption by current
customers buying from current competitors). It can be calculated by means of a detailed
analysis of customers of the industrys products or of competitor analysis, published
reports of government bodies, financial reports of competitors and market research
results. The difference between and industry actual size and its potential size depends to
a large extent on the life cycle stage of the industry or its segments
Market Growth and Profitability
Firms often wish to find high growth markets in which to pursue their objectives. Risks
should be carefully considered so that informed decisions are made. Risks often
associated with high growth markets include;
The number and commitment of competitors are greater than can be supported by the
market
A competitor could rather enter with a superior product or low cost advantage
Key success factors often change and the organization may not be able to adapt
The technology required to compete in the market could change
The market may not grow as expected
The organisations resources may not be adequate to maintain a high growth rate
There may not be adequate distribution channels available
Cost Structure and Behaviour of Industry
An important area of analysis for the industry as a whole, its strategic groups and its
product/market units is a particular units cost structure and behaviour. Some cost
structure phenomenon is applicable to the industry as a whole while others are
applicable only to certain segments. An important part of industry cost analysis is to
determine the cost components of each value added activity and state within the
industry. The value added activities with the highest cost contribution will exert the
strongest strategic leverage and will require definite steps from the organization to
ensure the lowering of its cost levels. The organization should also anticipate possible
changes in the industrys cost structure and these anticipated cost changes will have a
considerable bearing on the identified key success factors.
Distribution and Marketing Communication Practices in the Industry
3
Having access to an effective distribution channel is often crucial to the competitive

position of an individual organisation within the industry. A distribution systems
effectiveness will depend primarily on its cost structure, the extent to which it reaches
the target market and the geographical coverage it attains. Also, the scope and intensity
of marketing communications methods used are good indications of the marketing
approaches followed by different organizations. The marketing approaches of
competitors will also serve as indications of the competitive strategies(low cost,
differentiation or focus) adopted by those organizations.
Trends and Developments in the Industry
From the analysis of the areas discussed above, the organization will be able to
distinguish trends in the industry and also foresee the possible future developments, the
aim being to eventually pinpoint high growth and low growth areas within industry
boundaries.
Key Success Factors of the Industry
These can be defined as those characteristics and conditions in a particular industry that
have a significant impact on the performance of the organizations in that industry e.g.
image of company in the industry. For the individual organization these translate into a
few assets or skills to be possessed or a few activities to be performed particularly well in
order to do well in the industry e.g. advertising and sales promotion activities, research
and development activities, technical sophistication of equipment. The managerial
implications for identifying key success factors are that management should distinguish
between activities that are directly linked with the identified key success factors and
those that are not. The most important implication is that the organisations unique
competencies should be matched with the key success factors of the industry. The better
the fit the more successful the organization will be.
Portfolio Analysis
The product portfolio comprises a mix of products, product ranges or strategic business
units. Classification of these different products or units allows organizations to achieve a
better understanding of the internal business strengths and weaknesses and strategy
options. A balanced product portfolio allows optimal use of opportunities and allocation
of available resources. Several models are used to define units (products or SBUs), to
classify these according to the competitive situation and environmental threats and
opportunities and also serve as a framework for resource allocation.
Model 1 Market Growth-Market Share Matrix (BCG Matrix)
4
This model was developed by the Boston Consulting Group in 1960. In this matrix,
products of a multi product organization can be categorized into a matrix classification.
The matrix is defined by the market growth rate and the products relative market share
and is based on the cash flow position.
Stars
These are relatively new products in the market growth phase of their life cycles. Each
star has attained a relatively large market share and has growth potential. However they
need cash to maintain their positions because of many competitors entering the target
market under such lucrative circumstances. Traditionally the stars use more cash than
they generate. The growth rates will necessarily dwindle with time and stars will become
either cash cows or loose their positions within the market.
Cash Cows
These are successful stars of the preceding periods. They are well established with
respect to market share but few prospects exist for further market growth. They are
probably in the maturity phase and do not require much cash to keep them in this
profitable position. These products generate cash to be used for the development of new
products (stars).
Problem Children (Wild Cats)
These have relatively small market shares and require continued marketing efforts to
maintain their market shares. A problem child is often a new product which could
become a star if it is developed successfully. However, much cash is required to develop
the PC to its full potential.
5
Dogs
These have low market shares and market growth possibilities are limited or do not exist
at all because prospects are poor. Cash flow to these products is limited. Dogs can be
sold to other organizations or they can be withdrawn from the market.
In a well balanced product portfolio, there are several stars that show further growth
possibilities and contribute greatly to the rate of return. There are also some cash cows
in respect of which a harvest strategy can be followed. Cash generated by the cash cows
is used to stimulate further growth possibilities for stars and problem children. Dogs are
usually withdrawn from the market when they can no longer produce cash.
In a balanced product portfolio the success progression is from new product to problem
child or star and to cash cow where the product should stay for as long as possible until
it inevitably regresses to the dog status. Failure progression occurs when a promising
problem child (new product) moves directly to the dog position and thus never holds the
profitable star and cash cow positions.
This analysis shows that the phases in the PLC are closely related to the products in the
product portfolio.
The new product is in the development phase

The problem child is in the introductory phase
The star is in the growth phase
The cash cow is in the maturity phase
The dog is in the decline phase
Model 2- Market Attractiveness Enterprise Strength Model
6
This model was developed by Mckinsey, a marketing consultancy for General Electric. It
consists of a market grid and is based on the rate of return and is bounded by two
variables, market attractiveness on the horizontal axis and organizational strengths on
the vertical axis. Management evaluates different products or SBUs and places each in a
low, average or high position in the grid.
Market attractiveness constitutes a variety of variables and thus it is a compound

index indicating the relative importance of variables such as the following; Market
segment, Market growth, Profit margin, Competitors, Economic conditions,
Technological changes, Socio-cultural changes and Actions by authorities.
Enterprise strength shows how strong the organization is compared to its

competitors and the following variables are evaluated and combined into an index;
Market share, Profitability, Technology, Product quality, Resources and Knowledge of
the market.
Model 3 Porters Generic Strategy Model
Porter maintains that there are only two variables which should actually be considered
in categorizing products and these are
1. Competitive scope narrow or broad

2. Competitive advantage
Competitive Advantage
A competitive advantage is an advantage over competitors gained by offering consumers

greater value, either by means of lower prices or by providing greater benefits and
service that justifies higher prices.
7
Competitive Strategies
Following on from his work analysing the competitive forces in an industry, Michael
Porter suggested four "generic" business strategies that could be adopted in order to
gain competitive advantage. The four strategies relate to the extent to which the scope of
businesses' activities are narrow versus broad and the extent to which a business seeks
to differentiate its products. The four strategies are summarised in the figure below:
The differentiation and cost leadership strategies seek competitive advantage in a
broad range of market or industry segments. By contrast, the differentiation
focus and cost focus strategies are adopted in a narrow market or industry.
Differentiation
This strategy involves selecting one or more criteria used by buyers in a market - and
then positioning the business uniquely to meet those criteria. This strategy is usually
associated with charging a premium price for the product - often to reflect the higher
production costs and extra value-added features provided for the consumer.
Differentiation is about charging a premium price that more than covers the additional
production costs, and about giving customers clear reasons to prefer the product over
other, less differentiated products. Examples of Differentiation Strategy: Mercedes and
BMW cars.
Cost Leadership
With this strategy, the objective is to become the lowest-cost producer in the industry.
Many (perhaps all) market segments in the industry are supplied with the emphasis
placed minimising costs. If the achieved selling price can at least equal (or near)the
average for the market, then the lowest-cost producer will (in theory) enjoy the best
profits. This strategy is usually associated with large-scale businesses offering
"standard" products with relatively little differentiation that are perfectly acceptable to
the majority of customers. Occasionally, a low-cost leader will also discount its product
to maximise sales, particularly if it has a significant cost advantage over the competition
and, in doing so, it can further increase its market share. Examples of Cost
Leadership: Nissan; Dell Computers
Differentiation Focus
In the differentiation focus strategy, a business aims to differentiate within just one or a
small number of target market segments. The special customer needs of the segment
mean that there are opportunities to provide products that are clearly different from
competitors who may be targeting a broader group of customers. The important issue
8
for any business adopting this strategy is to ensure that customers really do have
different needs and wants - in other words that there is a valid basis for
differentiation - and that existing competitor products are not meeting those needs
and wants. Examples of Differentiation Focus: any successful niche retailers; (e.g. The
Perfume Shop); or specialist holiday operator (e.g. Carrier).
Cost Focus
Here a business seeks a lower-cost advantage in just on or a small number of market

segments. The product will be basic - perhaps a similar product to the higher-priced and
featured market leader, but acceptable to sufficient consumers. Such products are often
called "me-too's". Examples of Cost Focus: Many smaller retailers featuring own-label
or discounted label products.
QUESTIONS
1. Question 6 (October 2005) the management of Bell Equipment is diversifying into

agriculture market (e.g., tractors, trailers, equipment). Management has requested
you to perform a market analysis. Indicate the issues that you would include in such
an analysis. (20)
2. Question 5 (May 2005) Analyse the competitive structure of the retail book shop
industry using Porters model of five forces. (15)
3. QUESTION 2 [October 2007] Using Porters Five Forces Model, conduct an analysis
of the competitive structure of the South African fast food industry (25)
4. Question 1 (October 2004) Discuss the following portfolio matrix in detail:
Market growth-market share matrix AND Market attractiveness-enterprise strength
model (25)
9
4 Customer Analysis
The reasons why strategic analysis should include customer analysis is due to the need
for information:
- Current and potential customer
- Prevailing needs of current and potential customers
- Anticipated changes in customers and their needs
- The organisations ability to satisfy current and future needs of current and
potential customers
6W Model for Customer Analysis
WHO are the current and potential customers?
WHAT do the customers do with the product?
WHERE do customers purchase the product?
WHEN do they purchase the product?
WHY and how do the customers select the product?
WHY do potential customers not purchase the product?
Customer Value
The two main tasks of an organization are to create customers and to keep them.
An organization must offer customers something that they value. Value-driven

marketing assumes that customers who are willing and able to make exchanges will do
so when the benefits of exchanges exceed the costs of those exchanges and that the
products/services offer superior value compared to alternatives.
Organizations should develop a value proposition which is more than its positioning on
a single attribute: it is a statement about the resulting experience customers will have
from the delivered value offering and their relationship with the supplier.
Customer delivered value is the difference between customers perceptions of benefits

from buying and using products/services and customers perceptions of the costs they
incur to acquire and use them.
Customer Value = Perceived Benefits Perceived Costs
Benefits may be of a functional or emotional nature, while costs may consist of a

monetary value, a time and energy component or psychic expenditure. A marketer can
increase the value of the customer offering in the following ways:
1. increase benefits
2. reduce costs
3. raise benefits and reduce costs
The set of activities undertaken by the customer to satisfy his/her needs and wants can
be regarded as the customer value chain and the value creating factors can be speed,
costs, quality and flexibility.
Customer Needs and Benefits
The first step in delivering value to customers is to have a closer look at needs. Needs
describes basic, human requirements and they become wants when they are directed to
specific products/services that might satisfy those needs marketers can influence
wants but cannot create needs. Needs can be grouped into biogenic and psychogenic
needs
Biogenic needs are those needs that arise from physiological states of tensions such
as hunger, thirst or discomfort.
Psychogenic needs are those that arise from psychological states of tension such as
the need for recognition, esteem or belonging
Customer needs give rise to marketing opportunities and many opportunities are found
by identifying trends. Marketing opportunities must be converted into products/services
which maximize customer value in terms of perceived benefits.
Types of Benefits
Functional Benefits
These are the tangible benefits of using products and services. Reliability, durability and
performance describe the features and functional attributes of products. Trust,
1
flexibility and safety describe services. Task: Develop a set of functional benefits for a
new cellular phone to be marketed to young people.
Emotional Benefits
These are benefits that results when a customer buys a products/service and
experiences a warm feeling of pleasure when using the products or receiving services.
Image Benefits
These are benefits derived from value placed on the image of an organization. The
reputation of the organization provides assurance and the buyer feels confident to invest
his/her money in the service.
Social Benefits
These are benefits derived from the use of particular products/services in the form of
compliments from friends, family or associates
Service Benefits
Customers often value, compare and evaluate the benefits of accompanying services
such as delivery and training and maintenance in the case of industrial products.
Experiential Benefits
It is the sensory excitement that a customer experiences from using the product or
services.
Perceived Costs
Monetary Costs
These refer to the lowest total cost of acquisition, ownership and use of products
/service. Elements of total cost include price, transport, installation, credit and
maintenance of products and risks attached to poor performance or products failure.
Time and Energy Component

Time is money wasting time waiting in queues, complaining about bad services or
physically returning products to be altered or repaired does not add value to a
customers experience and positive perception of an organizations products, services or
image.
2
Psychic Expenditure
This is the mental energy and stress involved in making important purchases and
accepting the risks of products not performing according to expectations.
Segmentation Research
This research contains five steps:
1. Gather raw data from customers

2. Interpret the raw data in terms of customer needs.
3. Organise the needs into a hierarchy of primary and secondary needs.
4. Establish the relative importance of the needs.
5. Reflect on the results and the process.
Identifying Customer Segments
A customer segment is a group of customers who meet the following requirements:
Homogeneity/heterogeneity within a segment the customers response to a

marketing offering should be as homogeneous as possible but between the
segments the response should be a heterogeneous as possible.
Sufficient size segments should be large enough to justify a unique marketing

effort.
Measurable/identifiable the customers in a segment should be identified in

some way and be described in terms of unique characteristics and needs.
Accessible it is essential that the segment be accessible in terms of the

elements of the marketing mix, especially distribution and marketing
communications.
Based on the collected data, segments can be deduced. This can happen in the following
two ways:
Forward segmentation where customers are classified on the basis of

personal characteristics: demographic, geographic and psychographic
segmentation variables. Differences between the customer groups in terms of
product and brand choices and behaviour are then examined.
Backward segmentation is an approach based on behavioural differences

that implies that the process starts with identifying groups of customers who
3
demonstrate different behaviours in relation to the product or brand variables

(behavioural segmentation variables), for example have different applications for
the product or have different preferences in terms of product benefits. A search is
then made for common characteristics (demographic, geographic and
psychographic) that can be used to describe the groups. Behavioural difference
approaches to segmentation draw more heavily on buyer behaviour information
than does the forward segmentation approach. The widespread use of CRM
(customer relationship management) systems offers a greater opportunity for
timely and detailed analysis of behavioural or response differences between
customers. The most popular approaches to backward segmentation is:
Cluster analysis: a statistical tool that groups customers according to

similarity of their answers to questions such as brand preferences on product
attributes. Each cluster then represents a potential segment.
Perceptual maps: where customer data is used to construct perceptual maps of

customers perceptions of products and brands.
Criteria for evaluating attractiveness of segments
1. Segment size and growth possibilities
2. Attractiveness and potential profitability
3. The resources and skills of the organisation
4. Compatibility with organisations objectives
5. Cost of reaching the target market
Steps in evaluating potential market segments
Decide on criteria to measure attractiveness and

competitive position
Weigh attractiveness and competitive position to reflect

their relative importance
Assess the current position of each potential target

market on each of the factors
4
Project the anticipated future position of each market

based on expected changes
Evaluate implications of possible future changes for

business strategies and resource requirements
QUESTIONS
1. Question 1 (October 2006) Marketings goal should be to create value by

offering satisfying solutions to customer's needs. Discuss the concept of
customer value by explaining:
a. The Value Space of customers (12)
b. The equation: Customer value = benefits costs (13)
2. Answer the following questions
a. Discuss the FOUR processes of Customer portfolio management. (16)
b. Explain why customer retention is important for organisations. (1)
c. Select and discuss FOUR strategies for customer retention. (8)
d. Explain why customer retention is important for organisations. (1)
e. Select and discuss FOUR strategies for customer retention. (8)
5
6
5 Competitor Analysis
Analysing Competitors
Marketing strategy can be defined as the endeavor by a company to differentiate itself

positively from its competitors using its relative strengths to better satisfy customer
needs. It deals with the strategic three Cs which are; Customer, Competitor and
Company.
The aim in analyzing competitors is to assist marketing management to understand how

to gather and analyse information about competitors that is useful for developing
marketing strategies. A competitor analysis seeks to answer the following questions;
Who are our present and potential competitors?

What are the positions that they have established in the market?
What are their strategic objectives and thrusts?
What are their present and future practices?
What are their strengths and weaknesses
What are their response patterns?
A Framework for Competitor Analysis
Identify Competitors
Analyse Strategic Groups
Infer Key Competitors Objectives and Strategic Thrust (objectives and strategic thrusts,
strategies, Strengths and weaknesses)
Deduce Key Competitors Strengths and Weaknesses
Forecast on Key Competitors Response Patterns
Identify Competitors
Apart from defining competition that considers only those organizations which are
producing similar products, it is also vital to look at organizations producing substitute
products that perform a similar function or those that solve the problem or eliminate it
in a dissimilar way e.g. hotels are not only in competition with other hotels but also with
guest lodges, game lodges, holiday flats and individuals who offer rooms to rent. Two
complimentary approaches can be used in identifying existing competitors;
Asking customers whom and what they consider when making their purchases.
Identifying competitors as those organizations whose competitive strategies conflict
with the organizations strategies.
The marketer must therefore pay attention not only to todays immediate competitors
but also to those that are over the horizon. Competitors can be classified at four levels;
1. Competition consists only those organizations that offer a similar product or service to
the target market e.g. Vodacom, MTN and Cell C.
2. Competition consists of all organizations operating in the same product/service
category.
3. Competition consists of all organizations manufacturing or supplying
products/services that satisfy the same needs.
4. Competition consists of all organizations competing for the same spending power.
Sources of direct competition can also be identified and these include;
Competitors competing to satisfy the same customer needs e.g. liquid for the
body(drinks , mineral water etc)
Industry competition e.g. beer vs. soft drinks vs. mineral water vs. fruit juices
Product line competition e.g. regular cola vs. diet cola vs. non cola soft drinks
Organisational competition e.g. Coca Cola vs. Pepsi Cola
Brand competition e.g. Sprite vs. Fanta
Analyse Strategic Groups
The aim of this phase of competitors analysis is to identify clearly defined groupings of
competitors so that each group contains organizations with similar strategic
characteristics, following similar strategies or competing on similar bases. A strategic
group is a group of organizations that;
Pursue similar competitive strategies e.g. uses the same distribution channel
Have similar characteristics e.g. size, use of the same technology
Have similar assets or skills e.g. quality images or the use of mass production
Characteristics for identifying strategic groups
1
a) Size and relative market share

b) Extent of product/service diversity
c) Degree of geographic coverage
d) Research and development capability
e) Organizational culture
The conceptualization of strategic groups makes the process of competitor analysis more
manageable numerous industries contain many more competitors that can not be
analysed individually. Reducing competitors to strategic groups makes analysis
compact, feasible and more usable which helps marketing management to identify the
organisations principal or key competitors as those that compete in the same strategic
group.
Analysis of Key Competitors
The goal of key competitor analysis is to be able to predict the key competitor probable
future actions. This analysis requires information about the key competitors which is
both quantitative and factual(what the competitor is doing and can do), as well as
information which is qualitative and intentional(what the competitor is likely to do).
Issues to Consider
Competitors Objectives
Once an organization has identified its main competitors, it must determine what each
competitors objectives are i.e. what drives each competitors behaviour. This analysis is
important because it provides insights into whether the competitor is satisfied with its
current profits and market position. Objectives includes the following;
Financial goals(short and long term)

Competitive position(market share)
Qualitative objectives such as the following;
price leadership
technology leadership
service leadership
overall market leadership
Knowing how a competitor weighs each objective will help in anticipating the
competitors actions and also marketing strategies should give consideration to the
relative importance of each market(segment) to a competitor. By so doing, it is possible
2
to eliminate the level of effort that each competitor will then make in order to defend its
position
Competitors Strategies
In this part of the analysis, past and present strategies of each major competitor are
reviewed. Past strategies provide insights into failures and reveal how an organization
engineered changes. The analysis of a competitors strategies involves the assessment of
the competitors target market and differential advantage.
Competitors Strengths and Weaknesses
Whether competitors can carry out their strategies and reach their goals depends on
their resources and capabilities based on its strengths and weaknesses. An organization
could occupy one of the following six competitive positions in a target market;
Dominant the organization controls the behaviour of other competitors and has a
wide choice of strategic options
Strong the organization can take independent action and can maintain its long term
position regardless of competitor actions
Favourable the organization has an exploitable strength and a more than average
opportunity to improve its position
Tenable the organization is performing at a sufficiently satisfactory level to warrant
continuing in business but is threatened by dominant companies
Weak the organization has unsatisfactory performance and must change or die
Non-viable performance is unsatisfactory and no opportunity exists for
improvement
A precise understanding of a competitors strengths and weaknesses is an important

prerequisite for developing a strategy to compete against this competitor. One approach
that may be used to structure and focus this component of competitor analysis is that of
compiling the organization with its key competitors on the key success factors (KSFs or
KFSs).
A three stage process can be used to analyse KSFs;
Stage 1 Identify key factors for success in the industry -these should be restricted to
about 6 to 8 factors otherwise the analysis becomes too diffuse. These should be used to
compare with other competitors.
Stage 2 Rate the organization and competitors on each key success factor using a
rating scale - each organization is given a score on each success factor using a rating
3
device e.g. a scale ranging from 1(very poor) to 5(very good) and this results in a set of
company capability profiles.
Stage 3 Consider the implications for competitive strategy -the competitive profile
analysis is then used to identify possible competitive strategies.
Identify likely response patterns of competitors
A major objective of competitor analysis is to be able to predict competitors responses

to market and competitive changes. This issue has three components;
a) How is the competitor likely to respond to general changes taking place in the external
environment and particularly to changes in the market place
b) How is the competitor likely to respond to competitive moves that competitors might
make
c) How likely is it that the competitor will initiate an aggressive move and what form
might this take
A further insight into future response patterns of competitors may be gained by

classifying each according to its competitive position in a target market;
Competitive Positions
Market leader has the largest market share in the relevant market and usually
leads the other competitors in price changes, new product introductions, distribution
coverage and promotional intensity.
Market challenger these are normally the runner up organizations.
Market follower these are organizations which prefer to follow rather than
challenge the market leader or its main challengers.
Market nicher these are organizations which are leaders in a small or niche
market.
Strategies that can be used by firms
4
Collecting Competitive Information
Published Data
It refers to data that has already been researched, gathered and published and the major
sources of published data include; industry studies, trade publications, trade
associations, company documents annual reports, prospectuses, presentations,
brochures, government sources, universities and etc.
Field Data
This refers to data that is specifically collected for the use of a specific organization.
Field research involves in person or live interviews with individuals among a
competitors customers, suppliers, consultancy or even the competitors themselves
Competitive Intelligence System (CIS)
The need for an effective competitive intelligence system is paramount. Steps in setting
a Competitive Intelligence System.
1. Set up a system and decide what information is needed

2. Collect the data
3. Analyse and evaluate the data
4. Incorporate these conclusions into subsequent strategy
5
QUESTIONS
1. Question 4 (October 2006) You are requested to perform a market analysis of the
Southern African market for air conditioners. Discuss the dimensions that you will
include in such an analysis. (25)
2. Question 3 (October 2005) Give a step-by-step discussion of the process you
would follow to perform a competitor analysis. (25)
3. Question 5.1 (May 2005 and October 2006) The first step in the execution of a
competitor analysis is the identification of competitors. Perform this step by
answering the question: Who are Smirnoff Spins competitors? (NB It is not necessary
to perform other steps in the execution of a competitor analysis) (15)
4. Question 1 (May 2005) One of the stages in framework competitor analysis is the
analysis of strategic groups. Discuss this step in detail. Use example to support your
answer. (9)
6
CHAPTER 6
INTERNAL ANALYSIS
INTRODUCTION
To assist the management team in selecting the most appropriate strategies for the
future growth of the company, conducting a thorough internal analysis is critical. An
internal analysis identifies controllable areas that may impact the companys goal
achievement as well as that may impede the outcome of operational and marketing
strategies.
Developing an effective strategic marketing plan involves successfully allocating scarce

resources to support and drive the best possible opportunities for business grow
A Step-By-Step Process For Internal Analysis
Step 1 identify primary organization drivers
Step 2 conducting a thorough analysis of

strengths and weakness ,identifying the key
issues
Step 3 set organization objectives to address

the key issues
Step 4 examine organization resources and

capabilities
7
Step 5 conducting a gap analysis between the

objectives and the organizational resources
and capabilities
Identifying Primary Organization Drivers
Within any organization it should be possible to identify the driving forces that can be
regarded as the main contributions to its success, as well as the forces responsible for
the organizations unique culture and identify .Key organization drivers may include:
Suppliers relationship
Customer satisfaction
Training and skills development
Marketing and selling capabilities
Innovation and technology
Profitability
Commitment to quality
Sustainability
Sound corporate governance
Very often drivers emanate from the companys mission, vision or values and an
examination of these is a useful place to start an internal analysis
Mission
A mission statement is a short, carefully crafted statement of the fundamental business

purpose. It indicates the direction, intended activities and overriding corporate culture
the company is trying to achieve. The mission statements is formulated to inform the
stakeholders of what the company does and on companys goals and objectives
.Requirements for a well-defined mission statement include all ,or some of the following
:
Corporate ethical and moral issues

Growth and profitability goals
Corporate positioning or public image
The main strategic influences
A clear description of the target market ,products and services
Vision
8
A vision describes what the company wishes to become or dreams of becoming .All
employees should know the company vision and it should motivate and excite them as
well as give them a sense of belonging. A vision statement then converts this vision into
actions which, whilst remaining achievable, should really stretch the companys
resources to strive towards attaining an even better organization.
Values
Values reflect the essence of the organization and show what is really important to the
company. These are the characteristics and traits that underlie the companys
personality and usually relate to softer issues such as ethics, human rights, free trade
and the environment.
The SWOT Matrix
Strength Weakness
Opportunities Threats
Strength and weakness involve internal factors ,whilst opportunities and threats derive
from the environment external to the organization .The SWOT analysis are compared
with the organizations primary drivers ,priories and strategic goals and objectives
.Weaknesses are areas of vulnerability ,whereas strengths are areas to leverage and
protect
Examples of Strengths and Weaknesses
Strength Weaknesses
9
Positive company Low brand awareness

reputation High staff turnover
Excellent supplier Low customer satisfaction
relations index
Good distribution network Reaching and overcapacity
Stable profit margins situation
Lack of bandwidth
constraining communication
Lack of agents in certain
geographic regions
Establishing Organizational Objectives
The strategic planning process requires translating the primary goals of the mission and
vision into more specific ,quantifiable objectives ,the need to incorporate all information
gathered from the analysis with that of the analyses of the macro environment
,competition and industry .it is essential that the final quantifiable objectives relate to
the key issues identified through the fully analyses .Remember that keys issues are the
factors that emerge as vital to the ongoing success of the company and must be
addressed in the plan .At a strategic level ,key issues normally relate strong to certain
elements and priorities of the companys various stakeholders groups.
The objectives should also be quantifiable and have a timeline .Each objective must
address at least one key issues identified during the analysis and highlighted after the
SWOT analysis.
Analysis Internal Resources and Capabilities (Including Capacity)
Once the organizations primary drivers and key issues have been detailed and the
organizational objectives established, the resources and capacities of the organization
must be examined for gaps or mismatches that may hamper the companys progress.
Those elements considered finite and thus requiring careful allocation to those areas of
business where they will create greatest value and return on investment. Capabilties or
competencies are the skills with which an organization manages and uses its resources
most effectively and efficient .These skills develop over time and evolve into policies,
process and operational procedures that determine how the organization behaves and
decisions and the cultural or social norms it wishes to display or exhibit.
10
A distinctive competency generated when a company displays skills in utilizing a scarce

resources effectively and productively.
a. Financial Capacity e.g. money ,intangible resources ,shareholders value and

profitability
b. Human Resources management effectively employ ,develop and train human
resources to align skilled and capable employees with the organizations
objectives and future plans .The competences ,knowledge and experience that
become embodied in the minds of the employees over time marge to form
human capital ,which is the intangible part of human resources .
c. Technology as a Resource, Including Innovation Skills Technology is
often defined as that which converts goods and services from one thing into
another. Technology includes machinery, tools, information and IT systems
.Technology development is closely linked to the practice of innovation
.Innovation is the process by which a resource is transformed into something
with different or greater economic value .Innovation usually drives from creative
thought process.
d. Operations, Logistics And Procurement Capabilities-capabilities involve
the organizations ability to meet its objectives in turn these abilities or capacities
can become factors of success to business growth. Critical success factors (CSFs)
can be identified and targeted in both the organizations inbound and outbound
logistics .Healthy working relationships and sustainable service agreements with
suppliers or a strong network of strategic partners in the market can be a
distinctive competency and translate into competitive advantage .
e. Environmental Resources-these are the most physical and tangible of all
resources and include land, water ,earth ,air, plants ,trees ,rocks ,fish, birds and
animals .Recently ,alarm bells have begun to ring as scientists have calculated
that as a human race we are slowly but surely running out of often irreplaceable
resources .There is an urgent need to implement sustainable marketing and
business strategies to ensure that there are future marketers for our products
.Companies often confuse going green with true sustainability, one of the
reasons the King III Report has led to legislation requiring public companies to
report their sustainability performance in their annual reports .
Establishing Gaps Between Company Objectives And Capabilities
Once the internal analysis is compete, the organizations objectives clearly documented
and the resources and capabilities assessed, you are in position to assess the match
11
between what you have and what you wish to achieve .You may need to make harsh
decision and establish strict priorities in order to allocate scarce resources to the best
possible opportunities for growth
QUESTIONS
1. (October 2006) Provide a framework that can be used to perform an internal analysis.
(You can provide a sketch or you can briefly mention the components of the-analysis).
(13)
2. 4.3 (October 2005) what are the four characteristics of a good mission statement?
(6)
3. 4.2 (October 2005) what are the questions a good mission statement should
answer? (6)
Contents................................................................................................................................0
7 Strategic Marketing Planning.............................................................................................1
12
Corporate Mission and Objectives....................................................................................2
Strategic Analysis (Marketing Audit)...............................................................................2
SWOT Analysis..................................................................................................................2
The Asset- and Competency-based Marketing (ACM)...............................................4
Marketing Objectives........................................................................................................4
Market Strategy.................................................................................................................5
Marketing Strategy............................................................................................................5
Implementation and Control............................................................................................5
Developing the Marketing Plan........................................................................................5
The Structure of the Marketing Plan................................................................................6
Framework of a Typical Marketing Plan........................................................................6
Testing the marketing plan...............................................................................................7
Questions...........................................................................................................................7
Bibliography......................................................................................................................8
13
7 Strategic Marketing Planning

Marketing planning is a detailed analytical and applied set of activities, whereby an
organization determines the best way to implement marketing strategies. Marketing
planning is a process whereby an organization understands the marketing environment,
the needs and wants of customers and the strategies of competing organizations.
Marketing planning is part of strategic planning which not only involves marketing, but
also the fit between operations, finance and human resource strategies and the
environment. The aim of strategic planning is to shape and reshape an organization so
that its businesses and products continue to meet corporate objectives
The Strategic Marketing Planning Process
14
Corporate Mission and Objectives
A corporate mission statement provides direction and continuity for an organization by

objectively stating the broad parameters within which the organization operates and
seeks to develop and grow. A mission statement should be based on four core concepts:
The purpose of the organization, Strategy, Standards and behaviours and Organization
values
Having established the mission, the organization has to develop a set of corporate
objectives. These can be expressed in terms of sales growth, profitability, and market
15
share and risk diversification. These objectives are important because they provide
direction for marketing management and create a set of priorities it will use in
evaluating alternatives and making resource allocation decisions. Marketing objectives
and strategies have to be consistent with corporate objectives.
Strategic Analysis (Marketing Audit)
This is a systematic examination of an organisations marketing environment,

objectives, strategies and activities, with a view to identifying key strategic issues,
problem areas and opportunities. A strategic analysis has five major components:
A. External analysis
The wider macroenvironment
Markets in which the organization operates
The competitors
The customers
B. Internal analysis
The review of resources and skills which are available in the organization and the
systems and structures to deliver them
SWOT Analysis
It is a structured approach to evaluating the strategic position of an organization by

identifying its strengths, weaknesses, opportunities and threats. It provides a simple
method for synthesizing the results of the marketing audit.
The effective use of a SWOT analysis delivers benefits to managers, as outlined in the
table below
Major benefits of SWOT analysis
Simplicit Analysis need only comprehensive understanding of the organisation and

y the industry in which it operates.
Flexibilit An extensive marketing information system is not required to be used

y successfully
Integrati SWOT-analysis has the ability to integrate and synthesise diverse sources
on of information
Collabor SWOT-analysis foster collaboration and open information-exchange

ation between managers of different functional areas
16
The following are guidelines for an effective SWOT- Analysis, the following directives
help ensure that the SWOT analysis can be a strong catalyst for the planning process.
Directives for a productive SWOT analysis
Stay focused A single broad analysis can lead to meaningless generalisation.

Separate analyses for each product/market maybe more effective.
Define Dont overlook important product, generic and total budget

competition competitors.
broadly
Collaborate Cross pollination of ideas allows for creative and innovative

with other solutions to marketing programmes.
functional
areas
Examine issues The analysis should be performed through the eyes of the
from the customers. Customers beliefs about the firm, its products and
customers marketing activities and its competitors should be the focus points,
perspective not managements beliefs.
Separate The issues that can be considered in a SWOT analysis are numerous
internal issues and will vary depending on the organisation and industry analysed.
from external
issues
Potential Issues to Consider in a SWOT Analysis
POTENTIAL STRENGHTS POTENTIAL OPPORTUNITIES
Many product lines? Obsolete, narrow product lines?

Broad market coverage? Rising manufacturing costs?
Manufacturing competence? Decline in R&D innovations?
Good marketing skills? Poor marketing plan?
Good materials management systems? Poor material management systems?
R&D skills and leadership? Loss of customer good will?
Information system competencies? Loss of customer good will?
Human resource competencies? Inadequate information systems?
Brand name reputation? Loss of brand name capital?
Portfolio management skills? Growth without direction?
POTENTIAL WEAKNESSES POTENTIAL THREATS
Expand core business(es)? Attacks on core business(es)?

Exploit new market segments? Increases in domestic competition?
17
Widen product range? Increase in foreign competition?

Extend cost or differentiation Change in consumer tastes?
advantage? Diversify into new growth Fall in barriers to entry?
businesses? Rise in new or substitute products?
Expand into foreign markets? Increase in industry rivalry?
Apply R&D skills in new areas? New forms of industry competition?
Enter new related businesses? Potential for takeover?
Vertically integrate forward? Existence of corporate raiders?
Vertically integrate backward? Increase in regional competition?
Enlarge corporate portfolio?
To utilise the SWOT analysis as the for catalyst for strategic marketing planning,
management has to recognise the following issues;
An assessment of the organisations strengths and weaknesses involves looking

beyond its current products.
The key to the successful achievement of an organisations goals and objectives
depends on the ability of the organisation to transform key strengths into capabilities
by matching them with opportunities in the marketing environment.
Organisation can convert weaknesses into strengths, and even capabilities, by
investing strategically in key areas and linking key areas more effectively.
Key issues that are not converted into strength become limitations
To address these issues properly, marketing management should upraise each strength,
weakness, opportunity and threats to determine the total impact on the organisations
marketing efforts. See figure below.
Guidelines for strategic decisions
The Asset- and Competency-based Marketing (ACM)
Davidson has introduced an alternative way of diagnosing an organisations current

position and way forward. His ACM method reflects the idea that any business consists
18
only of assets (things an organisation owns) and competencies (skills created by staff
both as individual and groups. The challenge for the marketing planner is to recognise
the organisations real assets and then, through the competencies, how best to exploit
them. Davidson argues that for each asset there is a corresponding competency. Without
this it is unlikely that the asset will be exploited. The application of ACM revolves
around the following six step process;
Identifying the organisations exploitable assets and competencies.

Reviewing the extent to which these assets and competencies are being exploited
currently
Identify the future shape of the industry and market
Deciding how the organisations assets need to change over the next five years
Building and exploiting assets and competencies
Matching assets and competencies with future opportunities
Marketing Objectives
Marketing objectives should be consistent with the overall corporate objectives and the
vision set out in the mission statement. Marketing objectives must meet the following
criteria;
The objectives must be arranged hierarchically from the most important to the least
important
The objectives should be stated quantitatively whenever possible in order to avoid
ambiguity and to enable management to evaluate whether they are achieved e.g to
increase market share is not as satisfactory as to increase market share by 5% in the
next 18 months
Objectives should be realistic in the light of a detailed analysis of opportunities,
corporate resources, competitive strengths and competitive strategy
Objectives must be consistent
Objectives may be classified in different ways;
Can be stated in terms of; activities(manufacturing, selling), financial

indicators(target ROI) and desired positions(market share, quality leadership)
Can be split into; measurement objectives(sales, market share), growth/survival
objectives(penetrate, market growth, harvest, divest) and constraint objectives(avoid
certain markets or competitors)
Can be long-term(strategic) or short-term(operational)
Market Strategy
19
The market strategy reflects the overall game plan of how the objectives can be
accomplished and consists of the following key elements;
Competitive advantage
Competitive strategies
Strategies in the life cycle
Global strategies
Relationship Building Strategies
Marketing Strategy
The formulation of the marketing strategy involves the following;
Target market(s) selection.

Marketing value-mix decisions- those marketing management elements which an
organization is able to co-ordinate and control in adopting a position in selected target
markets.
Implementation and Control
No marketing plan will be successful unless it is implemented and controlled effectively
Developing the Marketing Plan
The strategic marketing planning process leads to a marketing plan. The marketing plan
is a report or document that addresses the information discovered and decisions made
in the planning process. It is an action document; it is the blueprint for implementation,
evaluation and control of the marketing strategy. A marketing plan fulfils the following
purposes in an organization;
It explains both the present and future situation in the organization

It specifies outcomes that are expected so that the organisations situation at the end
of the planning period may be anticipated
It describes the specific strategies and actions that are to take place
It identifies the resources that will be needed to carry out the strategies and actions
It permits the monitoring of each action and its results so that controls can be
implemented
The Structure of the Marketing Plan
A good marking plan is the result of a systematic process that is designed to uncover
marketing opportunities and threats that need to be addressed in order to achieve
20
performance objectives. The process requires, however, a delicate balance of creative

insight and systematic structure. Marketing plans should be well organised and
structured to ensure that all relevant information is considered and included and that a
logical process is followed that results in certain outputs, e.g. objectives, strategies and
action. A typical structure of the marketing plan is shown on the next page.
Framework of a Typical Marketing Plan

1. EXECUTIVE SUMMARY
Synopsis of overall plan
Major highlights of the marketing plan
2. SITUATION ANALYSIS
Short report on each of the following;
Macro-environment
Market and customer environment
Industry and competitive environment
Internal(organizational) environment
3. SWOT ANALYSIS
List the key strengths, weaknesses, opportunities and threats facing the
organization or business unit or product/brand
4. ISSUES THAT THE PLAN SHOULD ADDRESS

Specify the issues flowing from the SWOT analysis that are crucial and have to be
addressed in the plan
5. MARKETING GOALS AND OBJECTIVES

Mission statement(optional)
Marketing objectives
6. MARKET STRATEGY(OPTIONAL)
Competitive advantage
Core strategy(ies)
7. MARKETING STRATEGY
Target market(s)
Marketing value-mix for each segment
8. ACTION PLANS FOR EACH STRATEGY
What will be done?
Who will be responsible?
When will it be done?
How much will it cost?
Testing the marketing plan
Appropriateness- does the plan improve or strengthen the firms current position?
21
Feasibility - can the plan be successfully implemented?

Desirability - does the plan close any planning gaps, and are the risks acceptable?
Allocation or resources are the resources needed to execute the plan understood
and are they available?
Competitive advantage what are the bases for CA and are they sustainable?
Does the plan build upon the strength and exploit the capabilities?
Simplicity - does the strategy clear, concise and simple?
Questions
1. One of the steps in the strategic marketing planning process is the performance of a
SWOT analysis. Discuss this step by referring to:
a. Definition (2)
b. Benefits of SWOT analysis (4)
c. Directives for productive SWOT analysis (4)
d. The use of SWOT in strategic marketing planning (4)
e. Assets and competencies (7)
2. The outcome of a strategic marketing planning process is the marketing plan.

Provide the structure/framework for a typical marketing plan. (19)
3. Which criteria can be used to test the marketing plan? (6)
22
Contents
Contents................................................................................................................................0
8 Identification of a Sustainable Competitive Advantage...................................................0
The Need for a Market Strategy........................................................................................0
Components of a Market Strategy....................................................................................0
COMPETITIVE STRATEGY..............................................................................................1
Strategies over the organizations life cycle....................................................................1
Identifying possible sustainable competitive advantages (SCAs)...................................2
Definition of a sustainable competitive advantage....................................................2
NOTE:...........................................................................................................................2
The difference between a Sustainable Competitive Advantage (SCA), Core

competency and a Key Success Factor (KSF).............................................................2
Anatomy of Competitive Advantage: The SELECT Framework..................................2

SUBSTANCE...................................................................................................................3
Positional vs. Kinetic Advantages...............................................................................3
Homogenous vs. Heterogeneous Advantages.............................................................3
EXPRESSION.................................................................................................................3
Tangible vs. Intangible Advantages............................................................................3
Discrete vs. Compound Advantages............................................................................3
LOCALITY.......................................................................................................................3
Individual-bound advantages.....................................................................................3
Orgnisation-based advantages....................................................................................4
Virtual-bound advantages...........................................................................................4
EFFECT...........................................................................................................................4
Absolute vs. relative advantages.................................................................................4
Direct vs. indirect advantage.......................................................................................4
CAUSE.............................................................................................................................4
Spontaneous vs. strategic advantage..........................................................................4
Competitive advantage vs. Cooperative Advantage...................................................4
TIME SPAN.....................................................................................................................5
Potential vs. Actual Advantage....................................................................................5
Temporal vs. Sustained Competitive Advantage........................................................5
Bases for developing competitive advantage...........................................................5
THE 10 MOST MEANINGFUL COMPETITIVE ADVANTAGES FOR AN

ORGANISATION...............................................................................................................5
QUESTIONS......................................................................................................................6
9 Competitive Strategies.......................................................................................................0
Differentiation Strategy....................................................................................................0
1
The Differentiation Options.....................................................................................0
Differentiation by Means of Product/Service Quality...................................................0
Differentiation by Brand................................................................................................0
Differentiation by Unique Product Characteristics.......................................................1
Differentiation by Distribution.......................................................................................1
Differentiation based on Consumer Orientation...........................................................1
Sustainability of Differentiation........................................................................................1
Pitfalls of a Differentiation Strategy..................................................................................1
Low Cost Strategy/Cost Leadership Strategy...................................................................2
Cost Drivers.....................................................................................................................2
Pitfalls in Following a Low Cost Strategy.......................................................................2
Focus Strategy...................................................................................................................3
Ways of Achieving a Focus Strategy...............................................................................3
Advantages of a Focus Strategy......................................................................................3
Sustainability of a Focus Strategy..................................................................................4
The Preemptive Move.......................................................................................................4
Important Factors to Consider when Contemplating a Preemptive Move................4
Sources of Preemptive Opportunities.........................................................................4
Follower Strategy............................................................................................................4
Synergy...............................................................................................................................5
Forms of Synergy............................................................................................................5
Advantages of Synergy....................................................................................................5
QUESTIONS......................................................................................................................5
10 Strategies in the Life Cycle...............................................................................................6
2
The General PLC Pattern..........................................................................................6
Different Forms of the PLC............................................................................................6
Levels of Aggregation for the PLC..................................................................................6
Drivers of Product Evolution..........................................................................................7
TIME-BASED COMPETITION.........................................................................................8
Speeding up Innovation in an Organisation..................................................................8
Focus on Technology...................................................................................................8
Product Development..................................................................................................8
Market Development...................................................................................................8
Market Strategies for New Product Entries.....................................................................8
The Pre-emptive Move- timing of preemptive moves................................................8
Marketing Implications of a Pre-emptive Move.........................................................9
The Follower Strategy.......................................................................................................9
Potential Advantages of Being a Follower.....................................................................9
Maintaining the Position................................................................................................9
Strategic Marketing Programmes.................................................................................10
Mass-market Penetration..........................................................................................10
Niche Penetration......................................................................................................10
Skimming and Early Withdrawal..............................................................................10
Strategies in the Growth Phase.......................................................................................10
Growth in Existing Product Markets............................................................................10
Alternative Strategies for Generating Growth........................................................11
Growth through Product Development........................................................................11
Growth through Market Development.........................................................................11
3
Growth through Integration.........................................................................................12
Growth through Diversification.................................................................................12
Strategies in Mature or Declining Markets.....................................................................12
QUESTIONS....................................................................................................................13
4
8 Identification of a Sustainable
Competitive Advantage
Market strategies must be developed in reaction to the dynamic environment in which
an organization operates. A market strategy can be equated to the battle plan of a
organization and is formulated only after the sustainable competitive advantages (SCAs)
are determined.
The Need for a Market Strategy
To prosper in a fluid and destabilized environment, organizations constantly need adapt

to changes in the environment and to execute this, the following actions needs to be
undertaken.
Managing for competitive advantage the key to profitability is to achieve a

sustainable competitive advantage based on out performing the competition.
Viewing change as an opportunity the fluidity in the market must be perceived
as an opportunity and not a threat by the organization and its managers.
Managing through people corporate management must develop a vision for the
organization that will indicate the direction in which the organization must go, the
markets that it should compete in and how it will compete.
Developing a strategically managed organization corporate management
must work towards developing an innovative, self-regenerating organization based on
factors such as sound structures, effective systems, excellent staff and shared values.
The development of a market strategy is a continuous process that mainly takes place at
corporate level in large organizations. Marketing management influences the corporate
strategy formulation process.
Corporate strategy deals with the allocation of resources between the various
departments and units in the organization and with the profitable management of
these resources. Corporate strategy must be translated into strategies at lower
functional levels which include;
Organisation strategy deals with strategies of specific strategic business units
(SBUs).
Market strategy deals with an organisations activities aimed at its customers and
it is the marketing managements contribution to formulating the organization
strategy.
Functional Strategy deals with the development of the departmental strategies at
middle management level.
Components of a Market Strategy
It consists of the following components
STRATEGIC OPTIONS
Competitive Strategies of Strategies for Global strategies

strategy the building
organizations relationships Phases in
Differentiation life cycle with key development
Low cost Reason for going
stakeholders
Focus growth global
Pre-emptive diversification Issues in global
customers
move maintain channels market strategies
synergy harvest suppliers
divestment shareholders
other publics
FORMULATE THE MARKET STRATEGY
COMPETITIVE STRATEGY
Refers to the way in which the organization or SBU is going to compete in the market. It
includes:
a) Differentiation creating a different product or service through value addition.

b) Cost effectiveness refers to a cost leadership strategy.
c) Focus concentration on a special product or market e.g. a niche.
d) Pre-emptive move normally used by the business units that is really sustainable
can be called a synergism.
Competitive strategies are not mutually exclusive but can be used in combination to
realize greater advantage.
1
Strategies over the organizations life cycle
Also known as an investment strategy refers to the way in which an organization is

trying to survive and grew in the market. The alternative include:
Growth and diversification strategy growth occurs when turnover increases,

when value added to the product or service is boosted, when profit is raised and when
resources are multiplied.
Maintaining the existing position plough the investment to hold or maintain
the existing position of the organization in the market.
Harvesting used in a declining or mature market investment and operating
expenses are decreased to enhance the cash flow.
Divestment when the organization environment becomes negative, then the
organization is forced to divest.
NB Strategies for building relationships with key stakeholders and global strategies
shall be discussed later.
Identifying possible sustainable competitive advantages (SCAs)
Definition of a sustainable competitive advantage
A sustainable competitive advantage can be defined as the ability to deliver superior

value to the market for a protracted period of time.
To be competitive, survive and grow in the market, the organization must have
competitive advantages over its rivals. This advantage must be sustainable over a
certain period.
NOTE:
Superior value refers to the fact that the consumers of the product as service must be
convinced that they are receiving something of value (benefits) for their money.
(Customers evaluating of the benefits received in relation to the cost). Check table 7.1
page 190 (2ND Edition).
The sustainability of the competitive advantage refers to longevity (that the period
must be long enough to recover the investment in the product/market and to be
profitable).
Therefore a sustainable competitive advantage is an advantage that competitors cannot

copy or can only copy over a protracted period of time and with a vast amount of
investment.
2
The difference between a Sustainable Competitive Advantage (SCA), Core

competency and a Key Success Factor (KSF)
According to Kotler, a core competency has three distinctive characteristics, namely

that it is a source of competitive advantage, it has a wide variety of applications, and it
is difficult for competitors to imitate.
Therefore there is no key distinction between a core competency and a competitive
advantage.
Kotler distinguishes between a SCA and KSF. The difference between the two is that a
KSF consists of competitive skills or assets that are needed to compete successfully in
the market (e.g. large food retail needs the right location, enough store space, ample
parking etc). SCA are necessary in order to outperform the competition e.g.
economies of scale which provide the organizations with unbeatable cost advantage.
Anatomy of Competitive Advantage: The SELECT Framework
The different ways in which a competitive advantage can be structured is called the
anatomy of competitive advantage.
SUBSTANCE
Two basic schemes can be used to categorise the substance of the competitive advantage
to the organization.
Positional vs. Kinetic Advantages
Positional advantages came from the organizations unique attributes and assets that
it has available e.g. long established distribution channel, easier access to raw
materials.
Kinetic advantages are found within the organization and include special knowledge
and capability based in the hands of its staff. See Pick n Pay example on page 194.
Homogenous vs. Heterogeneous Advantages
Homogeneous advantage implies that the organizations and its competitors are
competing in the same manner using homogeneous products, services, strengths and
skills. The only way that the organization can obtain an advantage is by doing the
same things better than the competitors does e.g. offering quality service.
Heterogeneous advantages are created when the organization plays the game
differently from the way its competitors are playing it e.g. offering a variety of
products rather than one single product similar to competitors.
3
EXPRESSION
In what form is the competitive advantage visible? Two categories are identified,
namely:
Tangible vs. Intangible Advantages
Tangible advantages are visible e.g. location of hypermarkets near to highways with
ample parking.
Intangible advantages may be hidden from the naked eye e.g. brand name reputation.
Intangible advantages are often more difficult to duplicate.
Discrete vs. Compound Advantages
A discrete advantage is one that can stand alone hence guarantees the organizations
performance and sustainability e.g. Telkoms fixed line monopoly in South Africa.
A compound advantage consists of a multiple of individual advantages e.g. Coca colas
sophisticated distribution system, the best known brand name in the world, consumer
goodwill, etc.
LOCALITY
There are three localities where the competitive advantage may be situated:
Individual-bound advantages
Refer to the skills and networks of individuals within the organization and are easily
transportable.
Orgnisation-based advantages
Here there is synergy among all the people working for the organization contributing to
the competitive advantage e.g. corporate culture.
Virtual-bound advantages
Means that the organisation advantages reside outside the organisation. They include
access to a well established, distribution channel or a special relationship that exists
between the organization and influential outside the organization.
EFFECT
4
One needs to determine the effect of the competitive advantage.
Absolute vs. relative advantages
An absolute advantage refers to an overwhelming advantage over competitors, for

instance, where an organization can create high barriers of entry making it difficult for
a competitor to challenge its position.
Where an advantage is tentative and competitor action can easily destroy it, it is
relative.
Direct vs. indirect advantage
A direct advantage is directly traceable to an organization and is usually tangible.

An indirect advantage is not always directly traceable to the organization but can also
be very effective e.g. supporting activities in the value chain.
CAUSE
The focus is on the origins of the competitive advantage:
Spontaneous vs. strategic advantage
Some organization could be luck, or at the right place at the right time (spontaneous).
Changes in the environment may give rise to new competitive advantages for
organisation.
Competitive advantage vs. Cooperative Advantage
In hyper-competitive markets an organisation may struggle to gain a competitive

advantage and hence the organization may gain a competitive advantage and hence
the organization may gain the SCA by offering the product in external markets.
Co-operative advantages are reached when an organization co-operates with
competitors especially through strategic alliances.
TIME SPAN
This can be analysed in two perspectives:
Potential vs. Actual Advantage
A potential advantage is an underutilized or untapped advantage that can be exploited

in future.
5
An actual advantage is one that is currently being used by an organization.
Temporal vs. Sustained Competitive Advantage
Temporal advantages are those that are of short duration and do not contribute to
sustainability in the long term.
A sustainable advantage is one which withstands the test of being copied or diluted
over a period of time, e.g. Coca cola.
Bases for developing competitive advantage
Organisational Advantages Economies of scale , Flexibility, Financial

strengths, Size, Reputation, etc
Departmental and Functional (a) Marketing e.g. customer base, new product
Advantage skills, pricing, sales force.
(b) Research and development e.g. product
technology and patterns.
(c) Production e.g. technology, process efficiency,
economies of scale, product quality.
(d) Personnel e.g. good management-worker
relations and workforce flexibility.
Advantages based on Customer loyalty, government assistance, channel

relationships with external control, beneficial tariff and non-tariff barriers,
bodies intra-organisational relationships.
THE 10 MOST MEANINGFUL COMPETITIVE ADVANTAGES FOR AN

ORGANISATION
1. A Superior Product Benefit e.g. Mercedes Benz and National Panasonic, both
companies have developed superior products in their respective markets over the
years and are now perceived to be the benchmark against which competitive products
are measured.
2. A Perceived Advantage or Superiority e.g. the aggressively masculine image of
the Camel man that was created to sell Camel cigarettes at a premium in South Africa.
3. Low-Cost Operations as a result of a combination of low overheads, limited
product range, low cost distribution and high productivity e.g. Citi Golf range by
Volkswagen South Africa.
4. Legal Advantage in the form of patents, copyrights, exclusive distribution
channels or government protection such as tariff and trade restrictions
6
5. Global Experience, global skills and global coverage e.g. McDonalds

restaurants are found throughout the world and the company has learnt to adapt its
products to the local culture
6. Superior Contacts and Relationships in the form of knowing the right people
and moving in right circles
7. Superior Competencies obtained through conducting more market research,
having superior information systems and employing the best technical personnel
8. Scale Advantages such as long production runs, bring down the cost per unit of
the manufactured product .e.g. the manufacture of Toyota Tazz in South Africa
9. Offensive Attitudes such as the will to win and competitive toughness in cut
throat markets e.g. Pepsi is a conglomerate of organizations that compete in the soft
drink market as well as fast food organization with brand names such as Pizza Hut
and KFC and also manufactures snacks under the Frito-Lay brand name in South
Africa
10. Superior Assets e.g. the petroleum manufacturer Sasol has a superior asset
advantage because it has direct access to coal from its mines which is used in the
process of making petroleum
QUESTIONS
1. Distinguish between the concepts of Competitive Advantage, Core competence

and Key Success Factor. Use practical examples (10)
2. Discuss an three (3) dimensions of the SELECT framework (anatomy of

competitive advantage). Use examples to explain the dimensions. (15). NB.
Question can be asked in a case.
7
9 Competitive Strategies
Competitive strategies can be used to develop and maintain the competitive advantage
of an organization. A competitive strategy may be described as a strategy that develops
from a sustainable competitive advantage for an organization. The selection of the
correct competitive strategy depends on the industry, the competitor analysis and the
specific capabilities of an organization. The competitive strategies available for an
organization to obtain and maintain a sustainable competitive advantage are as follows;
the differentiation strategy or product or service differentiation

the low cost strategy or overall cost leadership
the focus strategy
the preemptive move or first mover advantage
synergy
Differentiation Strategy
Defined as the process whereby an organisations market offering is adapted physically

or psychologically from competing products in such a way that the customers regard it
as a totally different product or service.
The Differentiation Options
Differentiation by Means of Product/Service Quality
Product quality goes hand in hand with performance, durability and reliability but a
customer usually can not judge these characteristics in making a choice and thus
concentrates only on the finished product/service. For physical goods, the customers
will make their choices on the finished product. For services, the politeness, helpfulness
and friendliness of the staff of a service organization will all serve as a measure for
evaluating the quality of the services
Differentiation by Brand
A brand not only distinguishes competitive products from one another, but also gives
them specific symbolic value, creating an image or personality for the product.
Differentiation by Unique Product Characteristics
Unique product characteristics, which make a product better or different, create a

competitive advantage. The unique characteristics can be protected against imitators by
patent rights.
Differentiation by Distribution
New and unusual distribution channels not only create new market possibilities but may
also serve to differentiate products e.g. Tupperware.
Differentiation based on Consumer Orientation
An organization that intentionally strikes to meet consumer needs, demands and

preferences has already laid the basis for a strong and sustainable competitive
advantage.
Sustainability of Differentiation
Porter notes that an organisations ability to sustain differentiation depends on;
1. The continuance of the perceived value of the differentiation in the eyes of the
consumers who buy the product or service
2. The speed or lack of speed of imitation by competitors.
Conditions that make it easier for an organization to sustain its differentiation include;
When an organisations sources of uniqueness have barriers to competitors.

When an organization has a cost advantage in the differentiation of its
products/service.
When there are multiple sources of differentiation.
When an organization creates switching costs at the same time that it differentiates. A
switching cost is a fixed cost that the consumers must pay if they change supplier. A
consumer would be very reluctant to change suppliers because of the switching cost
and that would enhance the sustainability of the differentiation.
Pitfalls of a Differentiation Strategy
1
Having uniqueness that is valuable only to the organization. Uniqueness

must be perceived by the buyers and valued by them. A good way to evaluate whether
a product is valued is to test by increase in price.
Over elaborating -organisations need not be too different, if the product/quality
levels are higher than those consumers need, the organization may be vulnerable to
competitors that have the correct levels at a lower price e.g. Mercedes-Benz has been
accused of over engineering and lost to BMW and this led to the launch of the C-Class
to win back the market share.
Having too big a price difference -this may lead to consumers reevaluating the
value of the product in terms of differentiation on offer.
Ignoring the need to signal value to the consumer.
Not knowing the cost of differentiation -organisations must be aware of the cost
of the differentiation activities and this must be compared with the price difference
gained by the differentiation.
Low Cost Strategy/Cost Leadership Strategy
Organisations following this strategy concentrate on lowering their costs of

manufacturing the product/service, with the ultimate aim of lowering their prices. Cost
savings can be achieved in various areas, but it is important to establish a low cost
culture in the organization. This strategy is based on the interplay between costs, profit
margins and market share. There are two distinct alternatives that an organization can
select in order to be profitable which are;
Lower margins/higher share -low cost manufacturers usually earn lower profit
margins than differentiated marketers do, but because of this they gain higher shares
of the market. These firms may lower their prices and attain small margins but they
gain on volumes that they sell.
Lower costs/Higher margins -low cost manufacturers try to lower costs faster
than prices resulting in higher profit margins rather than a high share of the market.
Cost Drivers
These are factors that when combined, determine the cost of a given activity of an
organization and result in the determination of the cost position of the organisation in
its sector.
Economies of scale these arise from the ability of an organisation to perform

activities or purchase raw materials differently and more efficiently at larger volumes
than at smaller volumes
No frills products/services removal of all frills and extras from the product/services
2
Low cost distribution selection of a cheaper channel can create cost advantages
Location cost advantage locations differ in terms of costs such as labour, expertise,
customers and materials
Institutional factors government legislation, unionization, sales subsidies and tariffs
and levies are also important cost drivers
Pitfalls in Following a Low Cost Strategy
Concentrating only on manufacturing costs -other areas can include

development process, marketing and infrastructure maintenance.
Ignoring the purchasing or procurement function -many organizations focus
only on labour to reduce input costs, yet all inputs and the linkages between inputs
and costs need to be examined.
Overlooking smaller activities e g maintenance.
False perception of cost drivers -misdiagnosing the cost drivers could lead to
expenditures and management paying attention to areas that may be ineffective in
reducing costs or may even worsen the cost position
Failure to exploit linkages -none identification of all linkages affecting costs may
lead to errors in terms of setting cost reduction targets for all departments.
Contradictory cost reduction exercises -organisations must ensure that all its
cost reduction exercises work cumulatively to reduce overall costs.
Entry of lower-cost competitors -this results in price wars in which there are no
winners.
Reduced flexibility -in the quest to achieve lower manufacturing costs, an
organization may have to invest heavily to gain efficiency meaning that the
organization may tie itself to a single way of serving the market losing flexibility in its
reaction to market changes. Heavy investment in cost reductions could lock an
organization into a particular technology leaving it vulnerable to new technologies.
Focus Strategy
The aim of this strategy is to create a sustainable competitive advantage for an

organization by opting to occupy only one, specific niche in the market with a limited
product range. This sometimes happens if an organisations resources and abilities are
insufficient to tackle a full scale battle in the mass market. This strategy assumes that
competitors who are involved in mass marketing do not serve the target as well as
nichers do. There are two basic options through which an organization can obtain a
sustainable competitive advantage using the focus strategy
Low cost -an organization must find a buyer segment whose needs would be less
costly to meet than those of the rest of the market
3
A focus strategy based on differentiation -this option requires a specific buyer

segment in the market that wants unique product attributes e.g. luxury add-ons in
automobiles, specific applications in computers
Ways of Achieving a Focus Strategy
Focusing the product line -this involves for instance choosing a specific line of
software e.g. desktop publishing programs, like In Design and PageMaker.
Targeting a specific market segment.
Choosing a limited geographic area.
Targeting low share competitors -finding a specific portion of the market that is
extremely profitable or one that has been neglected by big competitors.
Advantages of a Focus Strategy
Avoiding distraction or the dilution of the strategy -by focusing all resources, skills
and efforts on one goal, the organization will match the market needs with its assets,
skills and functional strategies. With a broad product line or numerous segments an
organisations efforts and marketing activities tend to be diluted and unfocused.
Allowing an organization to make an impact with limited resources -new
organizations may have to choose a focus strategy until they generate enough earnings
to expand.
Providing the potential to bypass competitor assets and skills -an organization that
focuses can choose to compete on the basis of its choice.
Providing a positioning device -an organization can have the ability to identify itself
with a specific product line, segment or geographic area.
Reducing competitive pressures -choice of segments or products/markets to compete
in can reduce the competitive intensity.
Sustainability of a Focus Strategy
Sustainability against broadly targeted competitors -the more different the focusers
value chain is from the value chain of a broad based competitor, the more sustainable
the focus strategy will be.
Sustainability against imitators -the barriers to entry will depend on the industry and
need to be analysed in order to understand the likelihood of imitation and the size and
growth rate of this segment will also affect the likelihood of imitation. If the segment
is small and stable, entry could be difficult.
4
Sustainability against segment substitutions -there is a threat that the segment could
disappear altogether because of such factors as the development of technology or
changes in the environment.
The Preemptive Move
This involves being the first to market with a new product/service. Also this move
provides a sustainable competitive advantage to an organization that is first with a new
skill or asset and this is called a first mover advantage
Important Factors to Consider when Contemplating a Preemptive Move
By its very nature, being first requires some form of innovation by an organization.
The culture of an organization must be such that it is prepared to take risks.
A substantial commitment of resources is usually called for.
The preemptive move assumes that it will be difficult for competitors to copy or
counter a firm.
Sources of Preemptive Opportunities
Supply Systems -access to the sole, best or least expensive source of supply.
Product opportunities -the first product on the market can enjoy such an
advantage that competitors will be reluctant to compete against it.
Operations system- By pioneering a new operations system that is effective in
reducing cost and/or enhancing product quality, an organization may create a SCA.
Customer opportunities - may entice customer loyalty by creating high switching
costs.
Distribution and Service systems -a retail chain may preempt competitors by
taking up strategic retail sites.
Follower Strategy
An organization can be a follower because it is beaten by a preemptive move by its

competitor or because it chooses to let someone else take all the initial risks. The
advantages of this strategy include;
Positioning mistakes -the first mover may misjudge the preferences of the mass
market and could be vulnerable to a more precisely positioned product launched by a
follower.
Product mistakes -weaknesses in products may provide the openings followers need
to overcome the pioneers initial product advantage.
5
Marketing mistakes -these can include inadequate distribution, lack of introductory

advertising to gain customers awareness or lack of effective communication of the
products benefits which could allow a follower to quickly develop an effective
marketing program.
Technological flexibility -if the technology is rapidly changing then a follower may be
able to gain an advantage by introducing products based on superior technology.
Limited resources -if a pioneer does not invest adequately in manufacturing facilities
or marketing programmes, then a follower that is willing to outspent the competition
could overcome the inroads by the pioneer.
Synergy
The principle of synergy is that the whole becomes greater than the sum of parts.
Forms of Synergy
Shared know how Sharing knowledge or skills between the different business units.
Exposing one organization to another organisations way of doing things can also
create value.
Shared tangible resources SBUs can serve a great deal of money by sharing
physical assets or resources e.g. manufacturing capacity or research.
Pooled negotiating power Combining purchases provide greater leverage over
suppliers which results in lower costs.
Coordinated strategies Aligning the strategies of different SBUs to obtain a
coordinated strategy may help to reduce inter unit rivalries.
Vertical integration Coordinating the flow of products/services on the vertical level
can reduce inventory costs, speed up product development and improve market
access.
Combined business creation When different SBUs combine facilities and know
how in a new organization they can also attain synergy (joint venture or alliance).
Advantages of Synergy
Increased customer value and a resultant increase in sales if synergy is properly

applied in an organization
Decreasing operating costs through attaining economies of scale in an organization
Reduced investment and higher resource productivity for an organisation
QUESTIONS
6
Discuss differentiation strategy as a competitive strategy using the following

framework:
Explain the strategy (6)

Explain in detail the differentiation options (14)
Discuss FIVE common pitfalls of a differentiation strategy (5)
Discuss the low cost strategy as a competitive strategy. Refer your answer to:
The meaning of low cost

Cost drivers
Pitfalls of following a low cost (25)
10 Strategies in the Life Cycle

The Product Life Cycle is a concept the tracks trends in a products sales history from its
conception or launch into a market until its demise.
The General PLC Pattern
7
(Source: Basic Marketing, Perreault/Cannon/McCarthy)
The introductory phase this is when a new product is offered on the market for
the first time
The growth phase this is phase during which product sales gradually increase
The maturity phase this is when product sales reach their peak
The decline phase this is when a decrease in sales sets in
Different Forms of the PLC
The Classic PLC This shows a marked increase in sales, which reach a plateau at
which sales stagnate due to lack of new customers and sales outlets.
The Fashion-fad PLC This reflects a product which rapidly gains popularity but,
just as rapidly loses it e.g. clothing and shoe industries.
The Extended Fashion-fad PLC The difference from the fashion-fad PLC is that
after initial success, sales stabilize at a lower level.
The Seasonal or Fashion PLC Arises from a product having good sales over
successive sales periods e.g. sales of school uniforms, which fluctuate with intakes of
learners.
The Revival PLC Reflects a product that has been through the traditional life cycle
but has managed to regain sales through some marketing actions.
Levels of Aggregation for the PLC
A marketer should consider clearly delineating the level of a aggregation that is

applicable to the life cycle. This refers to the level at which sales are determined either
product levels or the level of sales of the whole organization;
8
1. International Product Life Cycle describes international trade patterns and explains
international trade fluctuations.
2. Corporate Life Cycle Theory the level of aggregation is the whole organization.
3. Brand Product Life Cycle the sales history of the brand.
4. Product Form or Type Life Cycle the life cycle of a product form is made up of the
joint sales histories of all the brands that make up that product form.
5. Product Class Life Cycle contains all the different forms that the class can
accommodate e.g., a filter cigarette is a product form, while all types of cigarettes
would reflect the product class.
Drivers of Product Evolution
A number of factors or drivers, may impact on the evolution of a product/market and

these include;
Demographic Trends -as consumers progress through their lives their needs for
products change e.g. changes in age, education, urbanization.
Changes in Segments Served -the segments that a new product targets as it
evolves from introduction through to maturity vary significantly.
Extent of Buyer Learning Required -if a product is a radically innovative product
of which consumers are not aware of, then there could be a sizeable educational effort
needed by the marketer in the market place e.g. many consumers resist the use of
computers and this has hampered the use and penetration of the Internet
Pressure to Adopt -once a product reaches critical mass in the market, it often
appears to catch on and surge in sales.
Social Trends -these help to drive product evolution through influence on product
usage and acceptance e.g. cigarettes are under threat due to the social trend for health
and legislative pressure curbing smoking.
Technological Trends -the accelerating pace of change has had significant impact
on the life cycle of products and product classes such as information storage and
retrieval, communication and medicine -this type of change can render the whole
product classes obsolete virtually overnight.
Cost Benefit Comparisons-the new product should, at an acceptable price perform
better than the previous products -if the price/benefit ratio is favourable, then there is
a greater likelihood of speeding up acceptance of the new product.
Complementary Products -the extent to which the new product is dependent on
other products also drives the speed of acceptance-those innovations that rely on
complementary products may face slower growth prospects until a reliable supply of
both is available
Economic Trends -evolution of products can be accelerated in times of economic
expansion and strength.
9
Standardization -many industries should work together to ensure that

standardization occurs in order to avoid mistakes and battles -compatibility with
other products is a requirement that must be met for wider acceptance of products.
TIME-BASED COMPETITION
Time-based competition evolved in response to pressures to include speed of response

as a strategic weapon in the arsenals of organizations. This emphasis on speeding up the
responses of organizations to the market has occurred as a result of a number of
environmental and competitive factors which include;
Shorter Product Life Cycles -life cycles now last only a few months, for some
products, long life cycles of products are a thing of the past.
Profits from New Products -for many industry categories, the profits of
organizations come from introduction of new products.
More Competition in Growth Markets -high growth markets are now extremely
attractive and organizations fight hard for market share in these, meaning there is
now the rampant price competition and rivalry that used to be found in markets which
were growing much more slowly
Rampant Copying -more and more organizations are copying each other, doing
away with extensive market testing e.g. the Japanese use reverse engineering in this
regard.
Speeding up Innovation in an Organisation
A number of methods have been identified that can speed up an organisations process
of innovating new products and commercializing them quickly and amongst these is the
new approach to product planning which has three stages;
Focus on Technology
This stage requires an organization to focus on scientific and engineering research so as

to develop new technologies. The goal is not to develop a useful product, but to establish
whatever technological platform is needed e.g. Sony did not set to discover CD players in
its research, instead it wanted to develop laser technology which in turn led to a useful
product (CD players).
Product Development
10
The technology is incorporated in developing new, marketable products, trying to get its
technology to the market quickly and focus on attracting customers as soon as possible.
Market Development
The speed strategy requires quick entry into the market. An organization targets the
market with products that use the new technology. Manufacturing facilities need to be
flexible to respond to market forces so that any minor modifications can be made. New
Approach to New Product Planning (See fig 9.4)
Market Strategies for New Product Entries
The Pre-emptive Move- timing of preemptive moves
When image and reputation of an organization are important to the buyer and the
organization can develop an enhanced reputation by being an early mover.
When early entry can kick start the learning process in an organization in which the
learning curve is important, experience is difficult to copy and will not be eroded by
successive technological improvements.
When customer loyalty will be great, so that these benefits will accrue to an
organization that sell first to customers.
When absolute cost advantages can be gained by early commitment to suppliers of
raw materials and distribution channels.
Marketing Implications of a Pre-emptive Move
Reputation an organization may establish itself as the innovator or leader and this
reputation may be difficult for competitors to overcome.
Positioning an organization may take ownership of an attractive product or
market positioning by making a preemptive move.
Switching costs if they are present, an organization that moves first can reel in its
customers and ensure later sales.
Channel Choice the first mover may get unique distribution channel access for
new products
Cost Advantages these may be present if there is a learning curve in value
activities that are affected by the early move.
Favourable access to facilities, inputs or other scarce resources.
Setting of Standards the first mover can define standards for technology of other
activities, forcing later movers to adopt them.
Barriers to imitations an organization that secures patents first may get
legislative barriers against competitors.
Early profits.
11
The Follower Strategy
This is a strategy adopted by an organization that is either beaten to a new

product/market by a competitor or one that chooses to let other organizations face the
risks of moving first.
Potential Advantages of Being a Follower
The ability to take advantage of a pioneers positioning mistakes

The ability to take advantage of a pioneers product mistakes
The ability to take advantage of a pioneers marketing mistakes
The ability to take advantage of a pioneers limited resources
The ability to take advantage of the latest technology
Maintaining the Position
The following are strategies used by pioneers in order to maintain their positions;
Large entry scale, used by firms with a huge financial base

Broad product line, implementing line extension and modifications that are
tailored to specific segments. Making it difficult for competitors to enter.
High product quality, offering high quality products from the start.
Heavy promotional expenditure, they start by heavy promotion of the category
and then focus on their brands.
Strategic Marketing Programmes
There are different types of marketing strategies geared towards achieving different
objectives in different market environments which have been identified and these
include;
Mass-market Penetration
The objective is to capture and keep a large share of the total market for a new product.
The important marketing task is to get as many new customers as possible to adopt the
product quickly as this should drive costs for the pioneer organization down and help it
to build up a sizeable group of loyal customers before competition reacts and enters the
market. The implementation of this strategy requires a number of different skills which
include engineering, marketing, financial and organizational skills.
Niche Penetration
12
Success is defined in a more limited way by focusing on a single segment rather than on
the entire market. This strategy is applicable when the new market is expected to grow
quickly and there are many different segments to appeal to in terms of benefits sought
or application.
Skimming and Early Withdrawal
The reason why an organization will choose to use skimming strategies or early
withdrawal is that competition usually follows and prices usually drop after competitors
enter the market. Profit margins will be under pressure. In using this strategy an
organization would price its product high and would use only limited advertising and
promotion in its product introduction. It is also appropriate when there are few barriers
to entry and when product diffusion is rapid and if an organization lacks the resources
or capacity to defend its position over the long term.
Strategies in the Growth Phase
Growth in Existing Product Markets
An organization tries to find growth by looking at opportunities in its current market

and with its current product portfolio. Options available to the marketer include;
Increasing market share a marketer tries to gain market share either at the
expense of the competition or by getting a greater proportion of the new consumers
-effective marketing communication programmes, new or increased distribution
outlets and price reduction can be used.
Increasing product usage this implies that the marketer understands the
underlying reasons for purchase and can convince consumers that more of the
product should be used e.g. coffee manufacturers can instruct users to use two heaped
teaspoonfuls of ground coffee per cup to get the real ground coffee flavor.
Increasing frequency used this can entail merely reminding customers to use
the product more or generating new opportunities for them to use the
product/service.
Alternative Strategies for Generating Growth
13
Ansoff
Matrix
Growth through Product Development
Development of successful products is another strategy for generating growth for an

organization and this implies that the organization is organized to develop and bring
innovative products to the market. Product development includes the following:
Development of new product features -occurs when new features are added to
current products.
Development of new generation products -the accelerating pace of
technological change means that market leaders must be aware of new technological
dev if they want to maintain their positions because new generation products can
make previous products obsolete.
Development of new products for existing markets -the marketer looks at
compatible products of complementary products that can be offered to the existing
customer base. An organization would be looking to obtain synergy advantages that
may take the form of distribution, marketing, brand name and image benefits.
Growth through Market Development
This means looking for new markets to which to market an existing product range
An organization can do this through expanding geographically local to regional to

national or global expansion.
Find new market segments by analyzing the current segmentation variables used.
14
Growth through Integration
This is the combination of various levels of a distribution system so that they work
together under the control and ownership of one organization. Vertical integration
occurs when an organization makes moves upstream or downstream in terms of the
product flow between an organization, its suppliers and its customers;
Forward vertical integration an organization moves downstream with respect

to product flow, such as when a manufacturer buys or creates its own retail outlets.
Backward vertical integration occurs when a manufacturer moves upstream
towards its suppliers or raw material sources.
Growth through Diversification
Diversification can be described as entering products/markets that are different from

those in which an organization is currently active;
Related Diversification occurs when an organization develops internally or

acquires another oragnisation that has products and customers common to its current
business. This can contribute to economies of scale and synergies through the sharing
of operating facilities, brand names, R & D skills and efforts or marketing and
distribution skills.
Unrelated Diversification refers to expansion into unrelated fields in which
there are no commonalities between the new business and the current business.
Advantages of diversification (Table 9.6)
Strategies in Mature or Declining Markets
Competitive strategies are applicable in the mature phase of a product/market life cycle.
Strategies to be considered in the decline phase include;
Divest or Liquidate -if conditions of demand, exit barriers and rivalry determinants
are attractive, an organization may choose to get out of the industry by selling off its
interests or liquidating them altogether.
Hold or Maintain -an organization decides to maintain the investment levels as per
the maturity phase so as to maintain product quality, production and customer
loyalty.
Harvest -the idea is to maximize the cash flow over the short term by reducing the
investment and costs-an organization tries to manage its products for profitability
while the volumes decline.
Niche-here an organization has identified one or more sub markets that are both
sizeable and which show volume stability.
15
Be a Profitable Survivor-if the market characteristics are still relatively attractive,

then an organization may choose an aggressive strategy of trying to attain or maintain
a leadership position-possible aggressive moves include the following;
A visible commitment to being the surviving leader.

Raising competition costs through price reductions and more promotions.
Introducing new products to cover all possible niches.
Creating a national dominant brand.
Reducing competitors exit barriers by assuming their spare parts and service in the
field or supplying them with products.
Purchasing the competitors market share and/or its production capacity.
QUESTIONS
a. Discuss the different strategies that can be followed in the decline phase of the
product life cycle. (16)
b. Discuss the factors that determine the attractiveness of declining markets. (9)
Contents
Contents................................................................................................................................0
11 Global Strategies...............................................................................................................0
Five Phases of Development in becoming a Global Marketing Organisation.................0
Domestic Marketing Organisation.................................................................................0
Export Marketing Organisation.....................................................................................0
International Marketing Organisation..........................................................................0
Multinational Marketing Organisation..........................................................................1
16
Global Marketing.............................................................................................................1
Putting Globalisation in Perspective.................................................................................1
Reasons for international marketing................................................................................1
Why SA must enter the international market...................................................................1
International Marketing Management Components:......................................................2
Scanning the international Environment......................................................................2
The Socio-cultural Environment.................................................................................2
The international and Legal Environment.................................................................2
The international Economic Environment.................................................................2
Size and growth of the target market..........................................................................3
International Competitors...........................................................................................3
Analysis of International Opportunities and Threats................................................3
Formulate an international Market Strategy..............................................................3
Competitive decision making................................................................................3
Investment decision..............................................................................................3
Formulation of the Marketing Strategy......................................................................4
Decision on the marketing instruments (the value mix)...........................................4
Managing the International Organisations......................................................................5
Questions...........................................................................................................................5
17
11 Global Strategies
Global trading is one of the most important growth strategies for an organisation. Ii has
several advantages that are going to be discussed in this chapter.
Five Phases of Development in becoming a Global Marketing Organisation
Phases of development in becoming a global marketing organisation
Domestic Marketing Organisation
The company is involved in marketing its products in one country usually is home
country (primary market). There is usually one target market with one business
environment.
Export Marketing Organisation
This takes place when the firm markets its products outside its domestic market and
product is physically transported from one country to another. Products are marketed
with no or few, if any, physical changes. The exports are considered a welcome and
profitable secondary market. More and more firms are involved in exporting of products
in South Africa.
International Marketing Organisation
The organisation now establishes its own sales division in the other countries and
develops a specific marketing strategy for the country. The strategy matches the unique
situation in each of the countries. There is a detailed analysis of the macro-

environmental variable.
Multinational Marketing Organisation
The firm shreds its local image and becomes a multinational corporation, characterised
by the acquisition and development of assets internationally and conducts business in
several foreign countries. They create several marketing strategies for each of the
different countries in which they operate in. Each country operates with its own distinct
strategy unique to each environment.
Global Marketing
Is viewed as the phase in which a single strategy is developed for the organisations
products (SBUs) in the global markets. Similarities among countries are considered in
order to formulate global strategies that work in all countries. The world is viewed as
one market (Global village) with national boundaries not viewed as the basis for
segmentation and target markets span numerous countries and regions. Global firms
view the world as one market, thus use one integrated strategy in the world market.
Putting Globalisation in Perspective
The aim of globalisation is to create a single world market with free trade between all
the countries in the world. According to Rugman major emphasis international trade is
being placed on regional blocks like EU, North America and Asia (known as the triad).
Reasons for international marketing
Obtaining economies of scale

Creating global brand name associations
Accessing low-cost labour or materials
Accessing government incentive schemes
Encouraging cross-subsidisation
Dodging trade barriers
Accessing strategically important markets.
Why SA must enter the international market
1
A small domestic market, for firms to be profitable they must therefore look for
overseas markets. Local firms are being encouraged to refine raw materials, thus
creating jobs and earning foreign currency.
The profit motive, there are more profitable ventures in international markets, thus
gives reason for local firms to go international.
Internal prosperity, the earning obtained in international markets can be reinvested in
the home country. This can help in achieving bigger profits in the long term
SAs tendency to import, because of the stage of economic development. South Africa
is still building on infrastructure, thus they tend to import more than they export
which puts pressure on the balance of payment.
International Marketing Management Components:
Refer to figure 11.4 in the text book for the detailed process
Scanning the international Environment
This topic was discussed in detail in Chapter 2. The following issues are important to be
discussed in international marketing.
The Socio-cultural Environment
Marketers must examine the ways consumers in different countries think about and
use products before planning a marketing program. People have certain cultures, that
is, people have different languages, values, religion, knowledge, laws and customs of
the society. This influences how consumers behave and thus affect their consumption
patterns.
Business norms vary from country to country, thus a study and understanding of
socio-cultural variables will help formulate the right strategies in international
markets
Companies that understand cultural nuances can use them to advantage when
positioning products internationally.
When Nike learned that this stylised Air logo resembled Allah in Arabic script, it
apologised and pulled the shoes from distribution.
The international and Legal Environment
Each country has its own set of different political and legal environment. Two schools of
thought need to be considered:
The free market economy, is represented by capitalism and socialism
2
The political dispensation propagated by communist countries, has fallen on the

wayside in the 1990s.
Political and legal systems may impede the international marketers ability to make
decisions and will increase the risks attached to international marketing. International
political environment focus on the evaluation of all political risks that can have an
impact on business operations. The issues that are of major concern are political
instability, expropriation, operations, and finance.
The international Economic Environment
A market consists of people who are able and willing to spend money on a product. The
international economic environment is responsible for changes especially in the
economic growth rate, employment levels, consumer income, the inflation rate and the
general state of the economy. Factors such as insufficient capital, declining productivity,
a shortage of resources of energy, an increasing inflation rate and unemployment have
all resulted in the decline of the Western economys growth rate. When scanning the
international economic environment, attention must be given to inflation, recession,
deficits, and the balance of payment.
Size and growth of the target market
The international firm must ascertain which of the potential markets are large enough
and have large enough growth potential. A two step process must be done;
A macro perspective of the country is done. This looks at geographic, demographic
and economic characteristics
A micro perspective which looks at the level of spending on its particular product or
service. In other words tries to establish market size.
International Competitors
The following two aspects are important to consider:

To determine who the current and potential customers are
The nature in which competition must be investigated.
Analysis of International Opportunities and Threats
It is necessary for organisation to have sufficient information, thus they have to use
international marketing intelligence. This intelligence has information about local
marketing research and has information that help to decide on which markets to enter,
3
entry strategy, how to market and the decisions how to enter international markets. See
table 11.3 on page 341. Obtaining this information is hampered by the following factors;
Diverse markets, in some instances more than 100 countries may need to be
investigated.
Poor secondary sources of information, there will be need to check why the
information was collected and who collected the information.
Problems with primary data gathering include language differences, different cultures,
negative perception of research which results in poor response rates and poor
infrastructure.
Formulate an international Market Strategy
The formulation of the market strategy follows the SWOT analysis. This strategy will be
effective if the sustainable competitive advantage has been identified. International
market strategy consists of two components, i.e., competitive decision and the survival
and growth.
Competitive decision making
This refers to the decision regarding the way in which the international firm will
compete in the international market. The firm can use the basic generic strategies;
differentiation, cost leadership and focus.
Investment decision
Also called survival and growth strategy. The organisation decides on how it wants to
grow, maintain its present position, harvest or divest in the international market. The
market attractiveness model discussed in chapter 3 can be used in international
marketing, see figure 11.6.
Formulation of the Marketing Strategy
The method of entry is of vital importance to the potential international entrepreneur.

In addition to Fig 11.7 in text book the following diagram show the modes of entry into
international market.
Entry options for international organisations
4
Thirteen different methods of entry are identified in the text and they are evaluated in
terms of risk and the control exercised by the international organisation.
Decision on the marketing instruments (the value mix)
Product decisions: Similarly to the domestic market, the international organisation

must take decision about the product range.
Straight Product Extension: Marketing a product in a foreign market without any

change.
Product Adaptation: Adapting a product to meet local conditions or wants in foreign
markets.
Product Invention: Creating new products or services for foreign markets.
Distribution decisions: It takes to forms, physical distribution and the type of

channel to be used. The marketer must give attention to these two. The following figure
illustrates what happens in distribution. Also see Fig 11.8 in the textbook
Whole channel concept for international marketing
Marketing communication decisions: language and cultural differencies make

communication in foreign markets difficult for the international marketer. Legislative
issues also have an impact. Can use a standardized theme globally, but may have to
make adjustments for language or cultural differences. Communication Adaptation:
Fully adapting an advertising message for local markets. Changes may have to be made
due to media availability.
5
Pricing decisions: The prices charged will have a direct impact on the income. The
international marketer must take cognisance of the transport charges, tariffs and all
taxes that are paid. Companies face many problems in setting their international prices.
Possible approaches include:
Charge a uniform price all around the world.

Charge what consumers in each country will pay.
Use a standard markup of costs everywhere.
International prices tend to be higher than domestic prices because of price escalation.
Companies may become guilty of dumping a foreign subsidiary charges less than its
costs or less than it charges in its home market.
Managing the International Organisations
The management process is the same as for a domestic firm the only challenge is to
consider aspects of the differing environmental variable. A basic prerequisite for the
implementation of an effective strategy is the existence of a good organisational
structure.
Questions
1. Explain the reasons why organisations get involved in international marketing.

2. Describe the international marketing management process and the various business
tasks and activities involve
6
CHAPTER 12
RELATIONSHIP BUILDING
STRATEGY
The term Relationship
A relationship is the way in which two or more people or things are connected
or how they behave towards each other
It consists of two parties who are in contact with each other
The term is used to describe how the organization is in contact with its
stakeholders e.g customers.
A relationship exists when:
i. Both parties must believe a relationship exists.
ii. There must be a special status that must be associated with this contact.
The term relationship marketing
It can be defined as interaction within a network of relationships with other

customers and other partners, at a profit so that objectives of the parties are met.
The definition emphasizes a number of key aspects in relationship building:
i. Various stages in relationships between organisations and various partners , that
is establishing , maintaining and enhancing phase
ii. The various stages imply that the relationship is not a short term one
iii. Relationships exist between the organization and various parties not just the
customers. These are known as chains of relationships or domains (markets) for
the organisation.
iv. Relationships need to be profitable. Each partner needs to be satisfied while the
organization makes profit.
v. Relationships enable the organization to meet objectives of the other party ,
which means the development of trust and commitment.
Does the organization need a relationship building strategy?
While it would appear every organization should select relationship building as a

strategy, as if it seems beneficial, not all organizations should use relationship
strategy.
Examples of organisations of which relationship building is not necessary:
i. Organizations selling large volumes of low-value products

ii. Organizations that have no direct relationship with the final consumer.
iii. .Organisations that have a low value associated with each customer over their
lifetime (i.e a low customer lifetime value)
iv. Organisations that have a low customer churn.
The benefits of building relationship for organisations
Getting to know customers better

Creating value
Customer retention
Improving customer loyalty
The characteristics of relationships
Longevity (or commitment)

Trust
Collaboration
The cost of relationships
Development of relationships takes time, money & resources. Time is needed

because relationship building is not an instantaneous process. Money is required
for the technology, people and communication methods that are needed to
develop a relationship. IT systems for example are required.
Relationship building as a strategy
Some organizations use the 80/20rule to decide which customers to build a

relationship with (80% of profits are generated from 20% of customers)
Before implementing a relationship strategy , an organization needs to consider
two main factors:
1
i. A problem solving ability refers to the extent to which a customer

requires an organization to develop unique solutions facing the
organization. If problem solving ability is low, then all suppliers can
provide the ability and vice-versa.
ii. Adaptation refers to whether the customer requires a standardized
iii. product that is specifically adapted to their needs.
Low
Operational Relationship
Problem Efficiency development
Solving
Ability
High
Offering Customer
excellence development
Low High
ADAPATION
Parties with whom the organisation builds relationships with
Christopher et.al, suggest what is known as a six markets framework as shown below:
Interna
l
Supplie
Market
d
s
alliance
Referra
Markets l
Customer
Market
s
Markets
Recruit
ment Influence
markets
Market
s 2
1. Customer Markets
Partners who acquire goods and services of the organization. These parties could
be individual consumers or business consumers
Identify the specific customers helps an organization to develop different
relationship strategies for different customers.
One of the key objectives of relationship marketing is customer retention.
The ladder of loyalty
--Partner--- Someone who has the relationship of a partner with your organisation.
--Advocate-- Someone who actively recommends your organization to others and

who does
your marketing for you.
-Supporter- Someone who likes your organization but only supports you
passively
-Client- someone who has done business on a repeat basis, but who may be
negative or
neutral about your organisation.
-Purchaser- Someone who has done business with your organisation just once.
-Prospect- Someone you believe may be persuaded to do business with you.
3
2. Internal markets
Those in the employment of the organization e.g employers
They are also refered to as internal suppliers
3. Supplier (Alliance) Markets

Critical in the process of creating value. Can be suppliers of raw materials,
skills or financial means.
4. Recruitment markets
Potential employees that will be in the employment of the organization in the
future
5. Referral Markets
Those who provide new business for the organisation, e.g. satisfied customers
(word of mouth).
6. Influence markets
Those who are able to influence positively or negatively the way in which the
organization carries out its marketing efforts. Include investors, media,
competitors, government and environmental markets.
Actions in relationship building
i. Customer service
ii. Communication
iii. Customer bonding
iv. Customization
4
CHAPTER 13
BRAND STRATEGIES
Too often brands are examined through their component parts: the brand name, the
logo, design or packaging, advertising or sponsorship, level of image and brand
awareness or in terms of financial valuation.
Four basic components of a brand strategy are:
i) Values of the brand
ii) Positioning of the brand
iii) Personality of the brand
iv) Brand architecture
Defining Brand values and establishing brand essence
Brand values
Core brand values are those abstract associations (attributes and benefits) that
characterize the five to ten most important aspects or dimensions of a brand.
They can serve as basis of brand positioning in terms of how they create points of
differentiation.
How do marketers identify core brand associations?
Firstly, to get all the salient brand associations and responses, the marketer needs to
determine the consumers top-of-the mind brand association.
Secondly, marketers must group brand association into related categories according
to how they are related, often with two or four associations per category with
descriptive labels.
Brand Essence
5
Also known as brand promise or brand mantra, is an articulation of the heart and
soul of the brand.
Brand essence consists of short, three to five word phrases that capture, the
irrefutable essence or spirit of the brands values.
It signals its meaning and importance to the organization, as well as the crucial role
of employees and marketing partners in its management.
It is argued that a brand essence statement is composed of three terms:
i) Brand function which describes the nature of the product or service and / or
the type of experiences or benefits provided by the brand.
ii) Descriptive modifier which further clarifies the brand function (sometimes
becomes the target market).
iii) Emotional modifier which is another qualifier how the brand delivers its
benefits (sometimes referred to as primary emotional value)
A powerful brand essence statement has the characteristics of being:

Simple
Concise
Enduring
Capable of providing a sense of direction
Optiomal competitive brand positioning
Positioning is a process for ensuring that a brand can fight through the noise in a
market and enables the brand to occupy a distinct, meaningful and valued place in
target consumers mind.
Positioning is concerned with registering the brands functional capabilities and
number of attributes that differentiate the brand.
Two key issues in arriving at the optiomal competitive brand positioning are firstly to
define the competitive frame of reference, and secondly to choose and establish
points of parity and points of difference.
Defining the competitive frame of reference.
6
Customers need to know what a product is and what function it serves before they
can decide whether it dominates the brands against which it competes.
A sound positioning strategy requires marketers to specify not only the category but
also how the brand dominates other members of its category. (Developing
compelling points of difference).
Choosing points of difference (POD)
Points of difference may involve performance attributes or benefits that customers

strongly associate with a brand, positively evaluate and believe that they could not
find to the same extent with a competitive brand.
Performance benefits are directly linked to the satisfaction that features convey.
This is similar to the concept USP and SCA.
Two most important considerations in choosing PODs are that consumers find the
POD desirable and that they believe the organization has capacity to deliver.
Desirability criteria
Must be determined from a customer perspective and consists of three desirability

criteria:
i) Reference Target customers find the POD personally relevant and important.
ii) Distinctiveness When marketers are entering a category in which there are
established brands, the challenge is to find a viable basis of differentiation.
iii) Believability a brand must offer a compelling and credible reason for choosing
it over other options.
Deliverable criteria
Must be based on a companys inherent capabilities, and necessitates focus on:
i) Feasibility product and marketing must be designed in such a way as to support
the desired association.
7
ii) Communicability current or future prospects of communicating information to

create or strengthen the desired associations.
iii) Sustainability is the positioning pre-emptive defensive and difficult to attack? Can
the favourability of a brand association be reinforced and strengthened over time.
Choosing points of parity associations (POSs)
POPs are not unique to brands, but may infact be shared with other brands. Two types
of
POPs are:
i) Category points of parity represent necessary but not necessarily sufficient

conditions of brand choice. They exist normally at the generic product level and are
most likely at the expected product level.
ii) Competitive points of parity are those association designed to negate competitors
point of difference. If a brand can break even in those areas where their competitors
are trying to find an advantage and can achieve advantage in some other areas, the
brand should be in a strong and perhaps unbeatable competitive position.
Establishing points of parity and points of difference
One challenge for marketers is that many of the attributes or benefits that make up
the POPs or PODs are negatively correlated e.g. it is difficult to position a brand as
inexpensive and at the same time assert that it is of the highest quality. Moreover
individual attributes and benefits have both positive and negative aspects.
POPs are often easier to achieve than PODs where the brand must demonstrate clear
superiority.
8
Defining the positioning statement
Defining a positioning statement for a brand is best considered an iterative process

whereby the brands team propose the positioning in context of the competitive
frame of reference, PODs and POPs.
In addition, marketers gauge consumers responses, building on the feedback in
order to refine their thinking.
A well constructed positioning statement is an invaluable means of bringing focus
and clarity to development of a marketing strategy and tactics.
Two elements (components) of a positioning statement are:
i) Benefit or point of difference
ii) Reason to believe (proof)
NB: Once a positioning statement is drafted, the brands team must consider if
it:
a) Communicates simply what the brand stands for.
b) Reflects the key motivations that might drive customers to buy it.
c) Clearly differentiates the brand from competitors.
d) Captures the imagination and understanding of staff.
e) Provides a direction for all to follow.
Most common mistakes in crafting a positioning statement

Not precisely defining the target.
Listing multiple differentiators / benefits (the benefit promise should be
singular).
Developing benefits that are not unique or sustainable
Not including the reason customers should believe the benefit promise.
Positioning Approaches
Attribute positioning
Benefit positioning
Use or application positioning
Competitor positioning
Product or service category positioning
Quality / price positioning
The pitfalls of brand positioning
9
Companies sometimes try to build brand awareness before establishing a clear brand
position.
Companies often promote attributes that consumers do not care about.
Companies invest heavily in PODs that can be easily copied.
Determining brand personality
Brand personality concentrates on what the brand says about the consumer and how
they feel being associated with it.
Brand personality provides an efficient summary of the brand values and acts as a
purchasing motivator since consumers want brands whose values they respect.
Brand personality also acts as a symbolic or self expressive function.
Updating brand positioning over time
i) Laddering progresses from attributes (descriptive features) benefits, which in

turn lead to values. A customer chooses a product that delivers an attribute that
provides benefits or has certain consequences that satisfy values.(ABV)
ii) Reacting competitive actions are often directed at eliminating points of

difference to make them POPs or establish new PODs. Three main options of the
target brand are:
Do nothing
Go on defensive
Go on the offensive
Supporting Marketing Programmes
i) Choosing brand elements
A six criteria in choosing brand elements include:

Memorability
10
Meaningfulness
Likeability
Transferability
Adaptability
Protectability
ii) The Marketing Mix elements

Branding is often viewed as the sub-component of the marketing mix, recognized for
its ability to build long term relationships.
The 7ps of the marketing value mix are product, price, promotion, place, physical
evidence, processes and people.
Brand Architecture
Brand architecture refers to the optiomal organization of the brands in an

organizations portifolio.
It seeks to create the best view of the organisations brands form the perspective of
the market place.
Brand architecture thus can be defined as the way in which organizations organize,
manage and go to market with their brands.
11
CHAPTER 14
BUILDING BRAND AND CUSTOMER
EQUITY
Brand equity
This is defined as the set of assets (and liabilities) inherent in a brand that add (or
subtract) value to a firm and its customers.
Customer equity
This is defined as the sum of the customer lifetime values to the organization.
Organizations operating in mass markets through distribution channels, such as Coca-
Cola should have higher brand equity. However organizations that can monitor and
develop individual relationships with its customers, e.g. MasterCard should seek greater
customer equity.
The concept of Brand Equity

The value of brands translates into brand equity, a market based intangible asset
that can be leveraged to improve the performance of the organization.
Brand equity has a positive effect on customers hence they develop positive
associations with the brand.
To organizations it can enhance effectiveness and efficiency of marketing
programmes, brand loyalty, prices/margins, brand extensions etc
12
Brand Equity models

1. Aakers model of brand equity
See fig 14.1
Aaker identifies four major asset categories that make up brand equity.
i. Brand awareness: strength of a brand s presence in the consumers mind
measured by recognition and recall
ii. Brand loyalty: willingness of customers to repurchase the same brand.
iii. Perceived quality: the reason to buy for many customers for which they are
prepared to pay a price premium
iv. Brand associations: attributes that consumers associate with a brand.
2. Kellers model of brand equity

See fig 14.2
Kellers model focuses on customer based brand equity where the power of the
brand lies in what resides in the minds of customers, as a result of their
experiences over time.
According to Keller , brand equity is created is created from brand knowledge
which exists in the consumer memory and which in turn can be characterized in
terms of two components:
a) Brand awareness- which consists of brand recognition and brand recall
performance
b) Brand image perceptions about the brand as reflected by the brand associations
held in the consumers memory
The associations are manifested in:
i. Brand attributes
ii. Brand benefits
iii. Brand attitudes
Aaker and Keller both acknowledge that brand equity represents the added value
endowed to a product due to past investments in marketing for the brand.
Brand equity is also a multi-dimensional construct, including brand awareness,
brand associations, brand image, brand loyalty, perceived quality and brand
meaning.
Measurement of Brand Equity

Marketers have long been grappling with the problem of measuring the results of their
marketing activities, and relating these to the performance of the organisation.
The chain is typically as follows:
Marketing programmes changes in customer mindsets changes in market
performance improved shareholder value
Thus the measurement of brand equity can be in two areas:
13
Measuring the sources o brand equity, by understanding the brand knowledge

structures of consumers, by striving to measure their feeling, perceptions,
images, beliefs and attitudes toward brands.
Measuring the outcomes of brand equity, such as greater loyalty, price premiums,
greater inelasticity e.t.c.
NB: an alternative perspective is to consider the measurement of brand equity generally
falling into three categories:
1. Consumer based measures: brand value is derived in the marketplace from
the mindset and actions of consumers. These measures rely on brand knowledge
structures in the minds of consumers, and this brand equity can be largely
captured by a hierarchy of aspects: from awareness, to association, to attitude, to
attachment (loyalty) to activity. Ambler proposes the following consumer metrics
of brand equity:
Familiarity measured by salience, or awareness levels
Penetration measured by customers as a percentage of the target market
What they think about the brand brand preference relative to other
brands
What they feel about the brand measured by customer satisfaction
Loyalty measured, for example, by repeat buying or retention
Availability measured by distribution intensity
2. Product market level outcomes: these include measures of price premiums
increased advertising elasticity and decreased sensitivity to competitors prices.
3. Financial market level outcomes: brand equity is measured based on the

financial market performance, such as the component of market value
unexplained by financial assets and results. Brand valuation is assigning a
monetary value or price to this tangible asset.
Brand valuation methods

Cost based approaches this is typically the accumulated costs associated
with creating the brand, or the replacement cost to replace the asset by launching
a new brand.
Market based approaches this is the valuation based on the amount for
which a brand can be sold on the open market; this can be derived either as a
comparable amount paid for similar brands, or as the brand equity component of
the market value of a firm.
Formulary approaches these methods popularized by organisation such
Interbrand, Brand Finance, utilise multiple brand market and risk criteria to
determine the value of a brand.
14
Special situation approaches this applies to strategic purchases at a

premium, liquidation sales at a discount, or special purpose such as tax.
Brand equity building strategies

To build brand equity, and hence grow shareholder value, requires investments in
marketing programmes that drive the components of brand equity.
Keller proposes the customer based brand equity pyramid to build a brand as a
sequence of steps, which are:
1. Brand identity (who are you?) This is achieved by creating deep, broad
brand awareness or brand salience in the target market.
2. Brand meaning (what are you?) this is achieved through brand
performance, customers positive experience of the intrinsic properties of the
brand to meet their functional needs and brand imagery, customers perceptions
of the extrinsic properties of the brand to meet their psychological or social
needs.
3. Brand response (what about you? What do I feel about you?) this is
determined through brand judgment, customers evaluations of the brand, e.g.
brand equity or credibility, and brand feeling i.e. emotional responses to the
brand.
4. Brand relationships (what about you and me?) this determined by
brand resonance, the nature, intensity and extent to which customers engage or
bond with the brand.
Kellers brand equity pyramid
Resonance
Judgements Feelings
Performance Imagery
15
Salience
Customer equity
This concept was originally proposed by Blattberg and Deighton, where they defined
customer equity (CE) as the sum of all the customer lifetime values (CLTVs) for each
customer.
This becomes a tool towards customer-centered marketing management, as opposed to
product-centered.
Customer lifetime value
The fundamental building block of customer equity is customer lifetime value (CLTV),
defined as the (net) present value of all current and future profits generated from a
customer over the life of his or her business with a firm.
In calculating CLTV, four steps need to be executed:
Step 1: measure each customers expected contribution to offsetting the companys fixed
costs (i.e. revenue less cost of sales)
Step 2: determine the acquisition and retention response rates
Step 3: determine acquisition and retention costs per customer
Step 4: use retention and acquisition rates to compute customer lifetime value, and
discount these values to reflect present values.
From a marketing strategy perspective, CLTV can be increased by:
Increasing lifetime, by raising retention rate or customer life

Increasing sales to a customer or a customers referrals
Cutting the costs of serving a customer
Customer equity models
Various models of customer equity have been developed to provide greater insights into
the derivation and building of customer equity. The various models can be grouped into
two main approaches or schools:
16
An internal school, or supply-side orientation, that focuses on analyzing internal

data, and then driving or optmising market investments based on these analyses,
to build customer equity and thus shareholder.
An external school, or demand-side orientation, that focuses on analyzing
external survey data on consumer behaviour, including the effects of competition,
and then modeling these to determine the drivers of customer equity. This model
is then used to guide marketing investment and to determine the effectiveness of
different marketing programmes in building customer equity and thus
shareholder value.
Customer equity building strategies
Acquisition strategies
- To grow the customer base (and hence customer equity), as well as to replace lost
customers, organisations should pursue a strategy of selective acquisition cost.
New customers should be targeted via suitable attraction programmes, by
offering superior value to the customer (benefits enjoyed greater than costs
incurred) through an appropriate value proposition.
Add-on selling strategies

- The objective of these strategies is to sell any additional products and services to
current customers.
While the type of product or industry could be a determinant of whether to pursue a

brand equity or customer equity focus, it is proposed that there are seven key
determinants of whether to focus on brand equity, customer, or both:
Interactivity with the customer

Cost structure to serve the customer
Role of technology
Strategic focus
Strategic choice
Time horizon
Transactional versus relationship marketing
17
CHAPTER 15: STRATEGY IMPLEMENTATION AND CONTROL

The terms strategy implementation and strategy execution are often used interchangeably in the
management literature. The latter is more often used in the business environment, whereas the former
is more often used in academic literature.
Noble defines strategy implementation as the communication, interpretation, adoption and
enactment of strategic plans.
David states that strategy implementation is often called the action stage of strategic management as it
requires mobilising managers and employees on all levels of the organisation to convert a formulated
strategy into action and results.
Critical managerial actions for the implementation of strategy
Effective implementation of a strategy involves:

Creating an organisational structure with the capabilities, competencies and resources required
to effectively implement strategy.
Developing budgets to ensure that resources are allocated for strategic success
Establishing strategy-supportive policies and procedures
Implementing best practises and continuous improvement to support the implementation
strategy
Creating and implementing organisational systems that enable employees to effectively execute
their strategic roles
Aligning rewards and incentives with the achievement of individual and organisational
objectives
Creating an organisational culture that is aligned with the strategy of the organisation
Practicing strategic leadership that is biased towards the effective implementation of strategy.
Barriers to effective strategy implementation
1. Poor understanding of the strategy by workforce

- One of the major barriers to effective implementation of strategies is a poor understanding of
the strategies by the workforce of the organisation.
- Research by the balanced scorecard collaborative highlighted that as little as 5% of the
workforce understands the strategies of their organisations. This is often the result of ineffective
communication of the strategies to the workforce.
- A poor understanding of the strategies of the organisation results in confused employees who
are unaware of their roles and importance in implementing these strategies.
18
2. The goals and incentives of the workforce are not aligned with the strategy
- A further barrier to effective implementation of strategy is that often individual and team goals
and incentives are not sufficiently defined and are not well aligned with the strategies of the
organisation.
- For a strategy to be effectively implemented it is essential that:
The goals of the workforce are aligned with the strategy of the organisation
The goals of the workforce are effectively communicated an contracted with them
The performance and behaviour of the workforce are regularly monitored
The workforce receive prompt and detailed feedback on their performance and behaviour
The rewards and incentives of the workforce are aligned with their individual performance and
behaviour as well as with the level of effectiveness of the implementation of the strategy on
team and organisational level.
There are negative or positive consequences for failure or success.
3. Allocation of resources is not aligned with the strategy

- In order to effectively implement chosen strategies, an organisations management must ensure
that all resources, including financial resources, are linked to the vision, mission, strategy and
strategic objectives.
- Inadequate or unavailable resources result in frustration and decreasing satisfaction among
employees. For a market or market strategy to be effectively implemented, the marketing
budget should be linked to the market or marketing strategy and objectives.
4. Lack of human capital

- It is not possible to effectively implement chosen strategies if the people in the organisation do
not have the necessary knowledge, skills and values.
- Proactive managers:
Anticipate the future human capital needs of the organisation
Understand the gap between the present and required skills profile of the workforce
Invest in training and development initiatives capable of developing the essential workforce
competencies.
- The development of human capital should be a strategic imperative and managers on all levels
should be committed to, and actively involved in, the development of human capital.
5. An inability to manage change effectively

- An inability to manage change including cultural change is an important arrier to the effective
implementation of strategies.
- A misalignment between the chosen strategies and culture of the organisation obstructs
effective implementation of a strategy.
- Marketing executives and managers should focus on creating a culture that is supportive of the
market or marketing strategy of the organisation.
19
6. Ineffective controls and feedback mechanisms

- Effective control systems should be put in place in order to ensure continuous monitoring
reviewing and updating of the strategy in order to ensure the efficacy of strategy
implementation efforts.
- It is interesting to note that when strategy implementation fails, it fails for variety of reasons. It is
further evident that no single approach, suggestion or offered guidelines can counteract the
deficiencies experienced in the implementation of strategy.
-
Drivers of strategy implementation
Structure
Resources
Strategic leadership
Culture
Rewards and incentives
NB: the drivers of strategy implementation will be discussed in detail in the following paragraph. Various
theoretical approaches to strategy implementation recognise the distinction between structural and
interpersonal or people drivers of strategy implementation.
The structural drivers of strategy implementation include:
Organisational structure
Resource allocation
The people drivers of strategy implementation include:
Organisational culture
Leadership (strategic leadership)
The performance management system
1) Structural drivers of strategy implementation

a) Organisational structure as a driver of strategy implementation
- Organisational structure defines the lines of authority and communication and specifies the
mechanism by which organisational tasks and programmes are accomplished.
- The organisational structure specifies the organisations formal reporting relationships,
procedures, controls and authority and decision-making process. Organisational structure
essentially details the tasks necessary for the implementation of strategies and specifies how,
and by whom, these tasks must be accomplished in order to achieve the strategic goals of the
organisation..
- An organisational structure can therefore be regarded as the framework within which strategy
implementation must take place in order to achieve the objectives of the organisation.
20
- An important decision in terms of the organisational structure is the extent to which authority
and responsibility are centralised. Many large organisations have a decentralised organisational
structure as a result of the many advantages associated with decentralisation.
- Some of these advantages include:
Managers of decentralised business units are close to the market and understand customer
needs
Managers are in touch with products and product technologies and can therefore make
important product decisions
Empowered managers can act quickly in making and implementing strategic decisions
Distinct business units can be held accountable for business results
Energy and vitality are fostered because managers are empowered and motivated to be
innovative and to gain competitive advantage through providing a superior value proposition to
customers.
However, the decentralised organisational structure also poses many challenges. These challenges
include:
Creating cross-business unit synergy as a result of duplication, inefficiencies and lost

opportunities.
It is difficult for decentralised business units to respond strategically at business unit level to
market dynamics. What is strategically optimal for a business unit may not be the best for the
organisation as a whole.
Aaker discusses three of the most popular contemporary organisational structures used to implement
strategy:
The matrix organisation

The virtual organisation
Alliance networks
b) Resource allocation as a driver of strategic implementation

- One of the major barriers to the effective implementation of a strategy is ineffective allocation of
resources o support a chosen strategy.
- All organisations have at least four types of resources that can be used to implement strategy:
financial, physical, human and technological resources.
- It is critically important for all managers in an organisation to allocate the organisations
resources in such a way that the allocation is aligned with the chosen corporate, business or
functional strategies and that it supports the effective implementation of these strategies.
2) Human drivers of strategy implementation
21
- Traditional thinking on the drivers of strategy implementation largely focuses on the importance
of structural drivers and tangible assets including physical and financial assets that are
required for the effective implementation of strategy.
- Mintzberg stated that strategies only take on value as committed people infuse them with
energy. The effective implementation of a strategy is largely based on the competencies of the
people of the organisation. These competencies create organisational capabilities that are
critical for effective implementation of a strategy.
- Therefore, it is important that for every chosen strategy, managers know how many people, with
what experience, depth and skills are needed for effective implementation of a strategy.
a) Strategic leadership as a driver of strategy implementation
- Kotler highlighted the differences between management and leadership. In essence,
management is about coping with complexity, while leadership, by contrast, is about coping
with change.
- The process of implementing strategy often requires strategic change in an organisation and
leaders are required to drive this change.
- Strategic leadership plays a critical role in the effective implementation of a strategy as strategic
leaders are ultimately responsible for effective strategy implementation. This contradicts the
popular view that strategic leaders or top managers are responsible for the formulation of
strategy, while managers on lower levels of the organisation specifically middle managers are
responsible for the implementation of strategy.
b) Organisational culture as a driver of strategy implementation

- Organisational culture refers to the shared assumptions, beliefs, values and behavioural norms
that the members of an organisation share.
- Culture refers to the way we do things around here and every organisation has its own unique
culture or personality.
- Kaplan and Norton viewed culture as the awareness and internalisation of the vision, mission,
and core values required to effectively implement the strategy.
- In addition, they asserted that most new strategies require dramatic changes in the existing
organisational culture.
- Top managers generally believe that:
Changes in strategy require basic changes in the way in which the organisation conducts its
business
Strategies must be implemented through individuals on all levels of the organisation
New cultures (attitudes and behaviours) will be required throughout the organisation as a means
of implementing the changes in the organisation.
Organisational culture consists of:
I. Shared values
22
- Shared values or beliefs underlie organisational culture by specifying what is regarded as

important in the organisation. In a strong organisational culture, these values and beliefs will be
widely accepted by managers and employees on all levels of the organisation.
II. Norms of behaviour

- To impact on the effectiveness of strategy implementation, the organisational culture must be
strong to develop norms of behaviour (informal rules that influence the behaviour of people on
all levels of an organisation).
- Strong norms of behaviour are much more effective than formal rules, policies and procedures in
controlling the behaviour of individuals and groups in the organisation.
- Norms encourage behaviour that is consistent with the shared values
III. Symbol and symbolic actions

- Organisational cultures can be developed and maintained through the use of symbols and
symbolic actions. The role that leaders play in this regard is very important.
- Organisational culture can either be an important contributor, or an obstacle, to the successful
implementation of a strategy because it influences the behaviour of people of the organisation.
- If the organisational culture is aligned with the strategies of the organisation and other drivers of
strategy implementation, it can lead to excellence in the execution of functional strategies, such
as market or marketing strategy.
c) Performance management as a driver of strategy implementation

- Rewards and incentives can be used to motivate and reward individuals and groups for achieving
strategic outcomes.
- Performance evaluations and the subsequent reward for performance can be powerful methods
used in order to effectively implement a strategy. How managers and employees are evaluated
and rewarded will largely affect whether they perform the required tasks to implement a
strategy effectively.
- An organisation may have a marketing objective of increasing sales to existing customers through
customer retention. However, if sales force is rewarded for acquiring new clients, as opposed to
keeping existing ones, the strategy is likely to fail. A change in strategy often requires a change in
the reward system in order to ensure continued alignment with the strategy.
- Reward systems is the umbrella term for the different factors considered in performance
evaluation and the allocation of monetary and non-monetary awards to these factors.
d) Internal marketing
- Internal marketing is imperative for the successful implementation of a market or marketing
strategy. In this context internal marketing involves managerial actions that help all members of
23
the organisation to understand, accept and fulfil their respective roles in implementing the
organisations market or marketing strategy.
- The development of internal marketing as a driver of strategy implementation is based upon the
recognition that if strategies are to be implemented more effectively, then there is a need to
overcome interfunctional conflict and to achieve better internal communication.
e) Obtaining strategic congruence for effective strategy implementation

- In order to effectively implement strategy it is critical importance that the drivers of strategy
implementation are aligned with the chosen strategy.
- In addition, there must be congruence between the drivers of strategy implementation. For
example:
Do the systems fit the structure?
Do the people fit the structure?
Does the structure fit the culture?
Strategy control and evaluation
Types of control
1. Strategic control
- Strategic control entails continuous monitoring, reviewing and updating of a strategy in order to
ensure the continuing efficacy of strategy implementation efforts.
- Strategy control or evaluation is often viewed as the final stage in the strategic marketing
process.
- Strategic control allows managers to provide feedback on the formulation and implementation
phases of the strategic marketing process.
- This feedback is used to:
Indicate whether the correct strategies have been formulated to align the organisational
business units and functional areas with the changes in its external environment.
Continuously monitor changes in the business environment of the organisation in order to verify
the validity of the assumption on which the formulation of the strategies was based.
Indicate the effectiveness of strategy implementation efforts as means of achieving the desired
outcomes detailed in the strategies.
2. Operational control
- Traditional or operational management control refers to the process of using control systems to
track actual performance against performance standards, and the used of deviations to inform
corrective actions to ensure that strategies are implemented as planned.
Operational marketing control and evaluation process
24
Set performance
Take corrective actions standards
4 1
Measure actual
performance
Evaluate deviations
3 2
Establishing balanced controls
Marketing executives and managers should use a balanced set of strategic and traditional financial
controls.
This can be done by using strategic controls to focus on the long term, while simultaneously using
operational management control to focus on the short term aspects of strategy implementation.
The Balanced scorecard
The balanced scorecard is a tool that can be used to establish a set of balanced controls to effectively
evaluate the implementation of a strategy.
It is not only a measurement system, but also a strategic management system that can enable marketing
and other managers to clarify their strategies (strategy formulation), translate them into action (strategy
implementation) and provide meaningful feedback (strategic control)
25
FINANCIAL
PERSPECTIVE
If we succeed, how will we

look to our shareholders?
CUSTOMER
LEARNING & VISION & PERSPECTIVE
GROWTH STRATEGY
PERSPECTIVE To achieve our vision,
how must we look to
To achieve our vision, how customers?
must our organisation
learn and improve?
INTENAL
PERSPECTIVE
To satisfy our customers,

which processes must we
excel at?
The objectives and measure of the balanced scorecard are derived from an organisations vision, mission,
strategy and strategic objectives.
The balanced scorecard requires managers to control and evaluate the implementation of strategy by
asking four basic questions.
The marketing audit
It is a periodic, comprehensive, systematic and independent investigation into an organisations

marketing environment and specific marketing activities, with the aim to identify opportunities and
challenges and to recommend action plans in order to increase the organisations overall marketing
efficiency.
It highlights what marketing activities the organisation does well; it helps to identify problems in the
execution of marketing activities and makes recommendations for improving the performance of these
activities.
26
Dimensions of a marketing audit
dimension Description
Marketing environment This comprises an audit of changes in the macro and market environment
audit of the organisation as well as possible effect of these changes on the
organisation in terms of opportunities and threats.
Marketing strategy Focuses on the capabilities o the internal organisational environment to
audit adapt to changes in the external environment and highlights the strengths
and weaknesses of the organisation.
The marketing It focuses on the effectiveness of the formal structure and flow of
organisation audit communication within the marketing function as well as between the
marketing function and other functional areas in the organisation.
Marketing system audit It deals with evaluating the effectiveness of various systems used in
marketing function such as the marketing information system, the
marketing planning system, the marketing control system and new
product development system.
Marketing productivity Analyses the profitability and includes cost-effectiveness analysis of
audit aspects such as different products, markets and distribution
Marketing function It deals with the analysis of the components of the marketing mix to
audit determine whether they are aligned with the external environment and
the strategic objectives of the organisation.
27

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Spectrium (Pty) Ltd Notes

Spectrium (Pty) Ltd Notes

1 The Nature of Strategic Marketing....................................................................................0

Importance of strategic marketing...................................................................................0

The corporate strategy.................................................................................................0

The Functioning of SBUs.............................................................................................1

Strategic marketing and marketing management...................................................1

The difference between marketing management and strategic marketing.....................2

Nature of the problem.................................................................................................2

Varying roles for different products and markets......................................................3

Relationship with finance............................................................................................3

2 Analysing the Macroenvironment.....................................................................................0

Characteristics of the Macroenvironment........................................................................0

2. Weak Environmental Signals..................................................................................0

3. The Uncontrollable Nature of Environmental Factors..........................................0

4. The Diversity of Expertise Required.......................................................................0

Dimensions of Macro-environmental Analysis................................................................0

Forecasting Environmental Trends and Events...............................................................2

Key Environmental Issue Identification.....................................................................2

Formulation of Response Strategies...........................................................................3

3 Analysing the market.........................................................................................................0

Competitive Structure of an Industry...............................................................................0

Competitive Industry Structure Porters Five Forces Model...............................0

Threat of New Entrants..................................................................................................0

Bargaining Power of Suppliers.......................................................................................1

Bargaining Power of Buyers............................................................................................1

Rivalry between Direct Competitors..............................................................................1

Actual and Potential Size of Market/Industry............................................................2

Market Growth and Profitability.................................................................................2

Cost Structure and Behaviour of Industry..................................................................3

Distribution and Marketing Communication Practices in the Industry...................3

Trends and Developments in the Industry.................................................................3

Key Success Factors of the Industry............................................................................3

Model 1 Market Growth-Market Share Matrix (BCG Matrix).............................4

Problem Children (Wild Cats).....................................................................................4

Model 2- Market Attractiveness Enterprise Strength Model..................................5

Model 3 Porters Generic Strategy Model............................................................6

Customer management (CM), Customer Relationship Management (CRM) and

The relationship between RM, CRM and CM.........................................................0

Distinction between CM, CRM and RM..................................................................0

Customer Value = Perceived Benefits Perceived Costs.....................................1

Needs and Benefits......................................................................................................2

Time and Energy Component.....................................................................................3

Customer Knowledge Management..................................................................................3

The Role of Customer Needs.......................................................................................3

The Role of Marketing Research.................................................................................4

The Role of Listening Posts.........................................................................................4

The Role of Technology...............................................................................................4

Customer Portfolio Management.....................................................................................4

Selecting the customer base........................................................................................4

Developing a Value Proposition and Positioning Statement.....................................5

Determining the Decision Makers..............................................................................5

Customer Satisfaction Management.................................................................................5

Service Profit Chain..................................................................................................6

Customer Retention Management..............................................................................6

Reasons Why Customer Retention Increases Annual Profits....................................6

Strategies for Customer Retention..............................................................................6

Customer Relationship Management...............................................................................7

Customer Relationship Management Business Cycle.............................................7

Systems Procedures and Processes................................................................................7

A Framework for Competitor Analysis.............................................................................0

Analyse Strategic Groups.............................................................................................1

Characteristics for identifying strategic groups....................................................1

Analysis of Key Competitors.......................................................................................2