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Strategic Planning

• The process of developing and maintaining a fit between a compan y’s goals and
capabilities and its changing marketing opportunities
• It involves:
– Defining company vision/mission
– Specifying objectives
– Designing portfolio of products/businesses
– Coordinating functional strategies

Three Levels of Strategy in an Organization


Corporate
Corporatestrategy
strategy
••Vision
Vision
••Corporate
Corporategoals
goals
••Philosophy
Philosophyand
andculture
culture

Business
Businessunit
unit strategy
strategy
••Mission
Mission
••Business
Businessgoals
goals
••Competencies
Competencies

Functional strategy

Information Research & Manufacturing


systems development

Human
Finance Marketing
resources

1
Components of Strategy

• Scope
• Breadth of strategic domain: number and types of industries, product lines, market
segments. Reflects company mission and strategic intent (vs. Strategic fit)
• MCI... Core business (long distance), Contiguous business (fastest growing sector -
communications related products: wireless paging, Internet, local service), Content
(invested $2 billion in News Corp): Vision of Bert Roberts, Chai rman
• MMM
• PCL
• EllisDon
• Mattamy

Components of Strategy
• Goals and Objectives
• Desired level of accomplishment on one or more performance dimen sions and the
growth vector
• Resource deployments
• Allocation of human, financial and other resources across businesses, markets, etc.
• Identification of a sustainable competitive advantage
• What are the distinctive competencies or strengths relative to competitors?
• MMM
• PCL
• EllisDon
• Mattamy
• Synergy
• Improving overall efficiency and effectiveness by exploiting syn ergies across
businesses and product markets

2
Market Oriented Vision / Missions

PRODUCT-ORIENTED MARKET-ORIENTED
VISION/MISSION VISION/MISSION
COMPANY STATEMENTS STATEMENTS

We sell lifestyle and self expression;


Revlon We make cosmetics. success and status;
memories, hopes and dreams.

Disney We run theme parks. We provide fantasies and


entertainment -- a place where
America still works the way it is
supposed to.

We offer products and services that


Wal-Mart We run discount stores.
deliver value to middle Americans.

Market Oriented Vision / Missions

PRODUCT-ORIENTED MARKET-ORIENTED
VISION/MISSION VISION/MISSION
COMPANY STATEMENTS STATEMENTS

MMM
PCL
EllisDon
Mattamy

3
The Strategic Marketing Process:

1. Situation and SWOT analysis

2. Market-product focus & goal setting

3. Marketing programs

1. Situation Analysis: The Three Cs


•Market
•MarketPotential
Potential(size,
(size,
growth
growthrate)
rate)
•Customer
•CustomerBehavior
Behavior
(wants
(wantsandandneeds,
needs,
segmentation,
segmentation,price
Customers sensitivity)
sensitivity)
price

•Industry
•IndustryStructure
Structure
Analysis
Analysis(entry/exit
(entry/exit
barriers,
barriers, buyers,sellers,
buyers, sellers,
substitutes)
substitutes)
•Competitor
•CompetitorResponse
Response
Profiles
Profiles(capabilities,
(capabilities, Company
current
current and futureactions)
and future actions)
•Economic
•EconomicAnalysis
Analysis
(costs,
(costs,break -even,
break -even,
profitability)
profitability)
•Company
•CompanyFit Fit
(strengths,
(strengths,weaknesses,
weaknesses,
resources, culture,
resources, culture,
goals)
goals)

Competitors

4
Company considerations

• History / Culture
• Resources
• Existing portfolio
• Existing customer base
– characteristics, esp. vis a vis future market
– loyalty
• Experience
– with markets
– with marketing

Business Objectives

• Maximize profits

• Maximize shareholder returns

• Maximize market share

• Survival

• Social responsibility

5
SWOT Analysis

Favorable Unfavorable
Strengths: Weaknesses:
Internal

Opportunities: Threats:
External

Strategic Issue Analysis

Opportunities Threats

Strengths Areas to Problems


Leverage

Weaknesses Chances lost Vulnerabilities

6
Strengths and Weaknesses Checklist…do
this for every competitor
Performance Importance

MAJOR MINOR NEUTRAL MINOR MAJOR HI MED LOW


STRENGTH STRENGTH WEAKNESS WEAKNESS
Marketing
1. Company reputation -------- -------- --------- -------- -------- ---- ----- ----
2. Market share -------- -------- --------- -------- -------- ---- ----- ----
3. Customer satisfaction -------- -------- --------- -------- -------- ---- ----- ----
4. Customer retention -------- -------- --------- -------- -------- ---- ----- ----
5. Product quality -------- -------- --------- -------- -------- ---- ----- ----
6. Service quality -------- -------- --------- -------- -------- ---- ----- -----
7. Pricing effectiveness -------- -------- --------- -------- -------- ---- ----- ----
8. Distribution effectiveness -------- -------- --------- -------- -------- ---- ----- ----
9. Promotion effectiveness -------- -------- --------- -------- -------- ---- ----- ----
10. Sales force effectiveness -------- -------- --------- -------- -------- ---- ----- ----
11. Innovation effectiveness -------- -------- --------- -------- -------- ---- ----- ----
12. Geographical coverage -------- -------- --------- -------- -------- ---- ----- ----
Finance
13. Cost/availability of capital -------- -------- --------- --------- -------- ---- ----- ----
14. Cash flow -------- -------- --------- --------- -------- ---- ----- ----
15. Financial stability -------- -------- --------- --------- -------- ---- ----- ----
Manufacturing
16. Facilities -------- --------- --------- ---------- -------- ---- ----- ----
17. Economies of scale -------- --------- --------- ---------- -------- ---- ----- ----
18. Capacity -------- --------- --------- --------- -------- ---- ----- ----
19. Able, dedicated workforce -------- --------- --------- --------- -------- ---- ----- ----
20. Ability to produce on time -------- --------- --------- --------- -------- ---- ----- ----
21. Technical manufacturing
skill -------- --------- --------- --------- -------- ---- ----- ----
Organization
22. Visionary,capable leadership-------- --------- --------- --------- -------- ---- ----- ----
23. Dedicated employees -------- --------- --------- --------- -------- ---- ----- ----
24. Entrepreneurial orientation -------- --------- --------- --------- -------- ---- ----- ----
25. Flexible or responsive -------- --------- --------- --------- -------- ---- ----- ----

Opportunities and Threats

Success Probability Probability of Occurrence


High Low High Low
Attractiveness

Seriousness

High 1 2 High 1 2

Low 3 4 Low 3 4

Opportunities Threats
1. ___________________ 1. ___________________
2. ___________________ 2. ___________________
3. ___________________ 3. ___________________
4. ___________________ 4. ___________________

7
Designing the Business Portfolio

• Fit company strengths and weaknesses to the opportunities in the


environment
– Analyze current SBU’s
– Which SBU’s should receive more, less, or no investment?
– Develop growth strategies

2. Identify SBUs

• Single business standing alone from rest of company

• Having own competitors to equal or surpass

• Has own manager who is responsible for strategic planning and profit

• Examples?

8
3. Evaluate your Current Portfolio

• The Boston Consulting Group (BCG) Matrix

• The General Electric (GE) Approach

Portfolio Analysis: The BCG Matrix

9
Strategies Associated with the BCG Matrix

• Business unit strategy:

Manage your portfolio

• Marketing/product strategy:

Build
Hold
Harvest
Divest

Limitations of the BCG

• Beyond growth rate:


– Barriers to entry
– Long term, stable consumer demand
– High ROI relative to other options
• Beyond market share:
– Technological leadership
– Related competencies
• Distribution strength
• Supplier relationships
• Management skills
• Leverage/extend brand equity

10
General Electric’s stoplight strategy chart

Green band = “Go” signal = Build Yellow band = “Caution” signal = Hold

ss
Market attractiveness

ne
High

ss

ve
ne

cti
ve

ra
cti

att
ra
att
all
er
ov
gh

all
Medium
Hi

er
ov

ess
Red band =

en
tiv
“Stop” signal = Divest

ac
ttr
B A
ll a
m

Low era
iu

ov
ed
M

w
Lo

Strong Medium Weak


Business position

Competitive Analysis

• Market structure
– Leader
– Follower
– Nicher
• Defining competition
– Industry Based Definition
– Market Based Definition
• Substitutes

11
Porter’s Five Forces

Barriers to
Potential
Entrants

Intensity of
Bargaining Competitive Bargaining
Power of Rivalry & Power of
Suppliers Barriers to Buyers
Exit

Substitutes
in Other
Industries

External environment

• Political trends-- “politically correct,” partisan


• Regulatory trends – what’s (il)legal
• Economic trends: macro, micro
• Social and Cultural trends
– Changing family, immigration
• Technological trends
• Other:
– Demographic trends
– Natural resources

12
Agenda for Competitor Analysis

• Introduction

• Competitive Analysis
– Strengths and Weaknesses
– Behaviors

• Competitive Strategy for dealing with competition


– Game Theory
– Porter’s 5 Forces Framework

Competitive Analysis and Strategy

• Competitive analysis answers …


– What is driving competition in this industry or industries the firm may consider
joining?
– What actions are competitors likely to take, and what are the best responses?
– How will the industry evolve?

• … in order to set strategy, which answers


– How should the firm be positioned to compete in the long-run?

13
Competitive Analysis

Current position and strategy Capabilities: Ability to…


– Market share and sales
– Target market and positioning – Design new products
– Marketing mix (4 P’s) – Manufacture
– Manufacturing and R&D – Market
– Financial strength – Finance
– Manage

Future Goals
– Product portfolio
– Share or profit
– Product Differentiation or Cost
Leadership

Step 2: Market-product focus & goal setting

1. Set market & product objectives

2. Select target markets

3. Find points of difference

4. Position the product

14
Step 3: Marketing Programs

Marketing
MarketingMix
Mix
Place
Product Channels
Product Variety Coverage
Quality Target
TargetMarket
Market Assortments
Design Locations
Features Inventory
Price
Brand Name Transport
List Price Promotion
Packaging
Discounts Sales Promotion
Sizes
Allowances Advertising
Services
Payment Sales Force
Warranties Period Public Relations
Returns Credit Terms Direct Marketing

The Marketing Plan


- Integrating the 3 C’s and the 4 P’s -
Current marketing Background data on sales, costs, profits, market,
situation (3 C’s) competitors, distribution, and environment.

Opportunity and Identifies the main opportunities/threats,


issue analysis (3 C’s) strengths/weaknesses.

Objectives Defines plan’s financial and marketing goals in terms of


sales volume, market share, and profit.

Marketing strategy Presents the broad marketing approach that will be used
(4 P’s) to achieve the plan’s objectives.

Action programs Presents the special marketing programs designed to


(4 P’s) achieve the business objectives.

Project profit-and- Forecasts the plan’s expected financial outcomes.


loss statement

Adapted From: Philip Kotler, Marketing Management, pg. 89.

15
Ansoff Product-Market Expansion Grid

Existing Products New Products


Existing
Market Penetration Product Development
Markets

New Market Development Diversification


Markets

Strategy: Porter’s Five Forces Model

Potential
Entrants
Threat of
new entrants

Industry
Bargaining power Competitors Bargaining power
of suppliers of customers
Suppliers Customers

Rivalry among
existing firms

Threat of
substitute offerings

Substitutes

Porter’s Five Forces Model - Each Force is a Threat

16
Existing Rivalry More Intense If:

• Numerous or equally balanced competitors


• Slow industry growth
• High fixed costs
• Low customer loyalties or switching costs
• Added capacity comes in large increments
• Diverse competitors
• High strategic stakes
• High exit barriers
– Specialized assets, emotional barriers, government and social restrictions (e.g.,
concerns for job losses, etc)

Threat of New Entry

• Barriers to entry
– Economies of scale
– Brand loyalties
– Capital requirements
– Switching costs independent of loyalties
– Access to distribution
– Cost disadvantages independent of scale

• Market Attractiveness

17
Expected Reactions of Firms

• Conditions that signal strong retaliation


– Firms with history of retaliation to entrants
– Firms with substantial resources
• Cash and unused debt and/or equity capacity
• Excess productive capacity
• High leverage with channels or customers
– Firms with commitment to industry and high levels of idiosyncratic
assets employed in it
– Slow industry growth

The Entry Deterring Price

• Structure of prices that just balances ...


– the potential rewards from entry that are forecast by the potential entrant with
– the expected costs of overcoming structural barriers to entry an d costs of
retaliation

• If prevailing prices exceed the entry deterring price, entry will occur

18
Bargaining Power of Customers

• Customers compete for lower prices

• Customers tend to be powerful when …


– They represent a large portion of the firm’s sales
– Offerings represent large portion of their expenditures
– Offerings are undifferentiated
– Switching costs are low
– They pose a credible threat of backward integration
– Quality of offerings is not important to them
– They have full information

• Big customers are attractive and dangerous (e.g., Walmart)

Bargaining Power of Suppliers

• Suppliers “compete” with the industry by trying to force costs higher

• Suppliers tend to be powerful when …


– They are concentrated
– There are few substitutes to their offerings
– The industry is not an important customer of theirs’
– Their offerings are important inputs to the firm’s
– Their offerings are differentiated or there are high switching costs
– They pose a credible threat of forward integration
– They have full information

19
Customer or Competitor Orientation?

• Focus on competitors: Aggressive and alert for changes

• Focus on customers: Align resources to customer needs

• Which is better?

• Which is more common?

Porter’s 4 Generic Business Strategies

Source of Competitive Advantage


Lower Cost Differentiation
Competitive Scope

Broad Cost Differentiation


Target Leadership

Narrow
Differentiation
Target Cost Focus
Focus

20
Market Life Cycle

High *Selected products /


selected markets
*Problem solving
emphasis
*Customer needs
*Product/Market knowledge
expansion
Price
*Competitive activity
*Knowledgeable
customers *Product/market
proliferation
*Market volatility
*Aggressive customer
Low

Low High
Cost-to-serve

Changing the players

• Bring in customers - Increase industry demand.


• Educate consumers about your product
• Pay customers (esp. early adopters)
• Subsidize some customers, other full paying customers will follow (Initial discount to lower
risk)
• Become your own customer
• Bring in suppliers
• Bring in complementors
• Do it yourself.
• Encourage complementors to come (Banking)
• Bring in competitors
• License technology to make money, avoid complacency
• Create a second source to encourage buyers to adopt technology

21
Changing the added value

• Limit your supply


• DeBeers and diamonds
• Raise amount consumers are willing to pay
• Policies that build loyalty (frequent flier miles) increase will ingness to pay - GM / Ford credit
cards; Intuit
• Lower competitors’ value

• Questions to ask :
• What is your added value?
• How can you increase value by changing supply, buyers, suppliers, complementors, or
substitutors in your value net?
• What is the value added by other players? Should you be increasi ng or decreasing their
added values?

Changing the rules

Questions to ask are:

• Which rules are helping you? Which ones are hurting you? Rules can be for pricing,
advertising, product variety, satisfaction, etc.
• What kinds of contracts are you willing to write with your buyer s and suppliers? Do
you want Match Competition Clauses? What does this do for you?
• Do you have the power to change the rules? Does someone else have the power to
overturn them?
• Can you signal your commitment credibly

22
Changing tactics

Questions to ask are:


• How do other players perceive the game? How do these perceptions affect the play of the game?
• Which perception do you want to keep, which to change?
• Do you want the game to be transparent or opaque? When do you want to send signals that benefit
you? When do you want to preserve the fog?
• To establish credibility (clear the fog)
– Accept a pay-for-performance contract
– Offer guarantees or advertise
– Ask others to demonstrate their credibility to you
• To preserve the fog
– Create complexity (long distance calling rates)
– Bluff: Ask yourself whether you will be believed and under what circumstances
– Ask what others stand to gain by preserving the fog, and what they could be bluffing about

Changing tactics

• Competitive stances that can be used to clear / add to the fog

Appear Appear
Tough Soft

Being Big Top Dog Fat Cat

Being Small Lean &


Puppy Dog
Hungry

23
The Strategy Game

• Fishbowl. This exercise brings everybody with an ax to grind on a given issue together in one room,
with advocates of certain points of view in the center of the

• Red team / blue team. assign managers to teams representing major competitors and have them plan
the strategies they would use to beat us.

• Future mapping. This is a fancy name for a way of looking at different scenarios for the future. We
look at several alternative futures, or "end states," for our bu siness, assign a probability to each
one, and identify the forces that will determine whether that scenario will happen.

Strategic objectives for share leaders

• Typically the pioneer or initial entrant


• Share maintenance objectives
• Retain current customers by:
– Maintaining and improving loyalty
– Encourage / simplify repeat purchase
– Reduce attractiveness of switching
• Stimulate selective demand among later adopters
– Head-to-head positioning against competition
– Differential positioning against competition

24
Strategic choices for share leaders

Flanker strategy: Proactive / Reactive

Fortress /
Confrontation Position Contraction /
Competitor Strategy defense Strategic
or potential
competitor withdrawal
Proactive /
Leader
Reactive

Market
Expansion

Fortress or position defense

Primary objective • Increase satisfaction, loyalty, repeat


purchase
• Build on strengths to keep current
customers; use same tactics to appeal to
late adopters
Market characteristics • Relatively homogeneous market
• Strong preference for leader’s product in
the largest segment
Competitors’ characteristics • Current / potential competitors have
limited resources and competencies

Firm’s characteristics • High awareness and preference for leader’s


product
• Marketing and R&D resources exceed
competition’s.

25
Flanker strategy

Primary objective • Protect against loss of specific segment


• Develop a second “filler” entry
• Attract customers in the segment
Market characteristics • Two or more major segments with distinct
needs and purchase criteria

Competitors’ characteristics • One or more current or potential


competitors
• Have resources to implement a
differentiation strategy
Firm’s characteristics • Current product weak on at least one
attribute for a major segment
• Firm has resources to develop and launch a
second offering for disaffected segment

Confrontation strategy

Primary objective • Protect loss of share among current


customers
• Meet/beatcompetitive offerings head-on
• Get new customers who may be
attracted to competitors
Market characteristics • Relatively homogeneous market
• Little preference for leader’s product in the
largest segment
Competitors’ characteristics • One or more potential competitors
• Sufficient resources and competencies to
implement head-to-head strategy
Firm’s characteristics • Current product suffers from low
awareness, preference, loyalty in a major
segment
• Firm has resources (R&D, marketing)
comparable or greater than competitor

26
Market expansion strategy

Primary objective • New products or line offerings


• Aimed at new applications / users
• Improve ability to retain customers as
market fragments
Market characteristics • Heterogeneous market
• Multiple product uses requiring different
product or service attributes
Competitors’ characteristics • Current / potential competitors have limited
resources / competencies in R&D and
marketing
Firm’s characteristics • No offerings in one or more application
segments
• Firm has relative competencies in R&D
and marketing

Contraction strategy

Primary objective • Increase ability to attract new customers


in selected high growth segments
• Withdraw from slower growing
segments to conserve resources
Market characteristics • Heterogeneous market
• Segments with different growth potential
• Multiple product uses requiring different
product / service attributes
Competitors’ characteristics • One or more current / potential competitors
with resources to mount a strong challenge
in growth segments
Firm’s characteristics • Current product suffers from low
awareness, preference, loyalty in one or
more major growth segment
• Firm’s resources limited vis-a-vis one or
more competitor

27
Strategic objectives for followers

• Capture repeat / replacement purchases from current customers of the leader or


other target competitor by:
• Head -to-head positioning against competitor’s offering in primary target
market (athletic footwear, PCs)
• Technological differentiation from target competitor’s offering in a primary
target market
• Stimulate selective demand among later adopters by:
• Head -to-head positioning against target competitor’s offering in established
market segments
• Differentiated positioning focused on untapped or underdeveloped
segments

Strategic choices for challengers

Leapfrog strategy

Flanking attack

Target
Guerrilla competitor Challenger
attacks
Frontal
Attack

Encirclement strategy

28
Who should a follower attack?

• Attack the share leader within its primary target market


• Most to lose, but also most likely to retaliate - in a few geographic markets?
• Attack another follower who has an established position within a major market
segment
• Attack one or more smaller competitors who have only limited resources
• Avoid direct attacks on any established competitor

Frontal attack

Primary objective • Capture substantial repeat / replacement


buyers from target competition
• Attract new customers from later
adopters via better price / features
Market characteristics • Homogeneous market
• Little preference or loyalty for existing
brands
Competitors’ characteristics • Vulnerable to direct attack
• Few R&D and marketing resources

Firm’s characteristics • Stronger R&D, marketing resources than


target competitor and / or
• Lower operating costs

29
Leapfrog

Primary objective • Induce current buyers to switch to a


superior product offering
• Attract new customers via superior
benefits
Market characteristics • Relatively homogeneous w.r.t. customer
needs and purchase criteria
• Some needs or criteria are currently
unfulfilled
Competitors’ characteristics • One or more current competitors has strong
marketing competencies but relatively
weaker R&D capabilities
Firm’s characteristics • Firm has proprietary technology
• Has necessary marketing and production
resources to stimulate and meet primary
demand for next generation products

Flank attack

Primary objective • Attract share of new customers in


market segments where needs are
different from those of early adopters
Market characteristics • Two or more segments with distinct needs
• Needs of at least one segment not currently
met
Competitors’ characteristics • Strong target competitor able to withstand
direct attack

Firm’s characteristics • Resources limited but sufficient to


penetrate and serve at least one major
market segment

30
Encirclement

Primary objective • Attract share of new customers in


several smaller, specialized segments
whose needs are different from those of
early adopters
Market characteristics • Heterogeneous
• Some segments not currently served

Competitors’ characteristics • Strong competitors capable of withstanding


direct attack

Firm’s characteristics • Decentralized and adaptable management


structure
• Resources to serve several small segments

Guerrilla attack

Primary objective • Capture modest share of repeat,


replacement purchases in several market
segments or territories
• Attract a share of new customers in a
number of existing segments
Market characteristics • Heterogeneous market, several segments
• Needs of most currently being satisfied by
competition
Competitors’ characteristics • Number of strong competitors capable of
direct attack

Firm’s characteristics • Limited resources


• Decentralized and adaptable management
structure

31
Rubbermaid’s growth strategy

Objectives for the 1990s

1. Corporate objective is to increase sales, earnings, and EPS 15% a year, while achieving a 20% return
on shareholders’ equity
2. Pay approx. 30% of current year earnings as dividends to shar eholders while using the remainder to
fund future growth
3. Each year, 30% of sales are projected to come from new products introduced over the past 5 years. It is
planned to enter an entirely new market every 12 to 18 months
4. The objective for customers and consumers is to offer the best value possible. Highest quality
products at a reasonable price, a continuous flow of new products, and exceptional service to
customers
5. Treat all constituents fairly and consider the interests of associates as individuals
6. Aim to be an environmentally responsible corporate citizen

Rubbermaid’s growth strategy

• Incremental growth
• Focus on growth within the company’s businesses that was responsive to customer needs and in turn,
provided value to these customers

• Leap growth
• High visibility and high vulnerability
• Win big or lose big

32
Rubbermaid’s incremental growth strategy

• To increase the value of Rubbermaid’s existing products. The key to this growth area was in
providing value to dealers, distributors, and consumers. The ke y to value is providing quality, low
cost and service
• To upscale existing products to meet today’s consumer and new design preferences. Upscaling
includes introducing new colors to existing lines
• To extend existing lines to capitalize on product successes, increase retail shelf space, and boost
sales volume
• To expand Rubbermaid’s international business as a significant growth opportunity during the
1990s

Rubbermaid’s leap growth strategy

• To develop new products. Goal is to have at least 30% of annual sales


coming from new products introduced during the past 5 years
• To hone product lines and optimize the number of stock units retained to
keep the lines manageable and provide proper customer service le vels
• To enter entirely new markets. This is consistent with the corporate
objective to enter a new market every 18-24 months
• To engage in joint ventures or acquisitions to enter new markets by
combining the capabilities of a strong outside partner with the many
strengths of Rubbermaid

33
Implications

Value axis
High 1

B
A

2
Price 3

C D

4
Low
Power axis
Low High
Cost-to-serve

Growth markets

• Share gains are easier. Due to


• Gaps or undeveloped segments in the market
• Lower risk of retaliation from share leader given growth
» Problem: Leader has higher expectations given growth
• Share gains are worth more
• Based on the expectation that earnings produced by each share point expands as market
expands. This depends critically upon
» Changes in technology and other success factors
» Competitive structure (large number of new entrants: PC)
» Market fragmentation
• Price competition less intense?
• Early entry necessary to maintain technical expertise

34
Marketing strategies for mature markets

Maintain current market share


• Maximize flow of profits over the remaining life which (could be several
decades)
• Need to maintain repeat purchases via customer satisfaction
• For large players
– Use fortress defense to
» improve customer satisfaction and loyalty
» encourage and simplify repeat purchasing
– Expand product line or launch flanker brands
• For small players
– Avoid prolonged direct confrontation with the “big guys”
– Niche strategy
Extend volume growth....(later)

Marketing strategies for mature markets

Extend volume growth


• Sales depend upon
(1) Number of persons buying product
(2) Number of units purchased per person
(3) How often the product is purchased
• So, one of the following strategies can be used
– Increased penetration strategy
– Increased frequency of use
– Wider variety of uses
• Market expansion strategy
– Underdeveloped domestic markets (BDI / CDI analysis)
– New customer or application segments
– Produce private labels
– Global expansion via sequential strategies

35
Marketing strategies for mature markets

• Assess the relative attractiveness of declining markets

• Conditions of demand
– speed of decline, certainty of decline, existence of pockets of enduring demand,
extent of product differentiation in market, price stability

• Exit barriers
– reinvestment requirements, amount of excess capacity, age of assets, resale
market for assets, extent of facilities shares with other SBUs, extent of vertical
integration, number of single product competitors

• Intensity of future competitive rivalry


– bargaining power of customers, customer switching costs, diseconomies of scale

Marketing strategies for mature markets....

• Divestment or liquidation
• Strategies for remaining competitors
• Harvesting
• Maintenance
• Profitable survivor
• Niche

36
Problem

• Not easy to tell when a market has reached maturity


• Variations in brands, marketing programs, and customer groups can mean that
different brands and segments reach maturity at different times
• Industry stability also affected by threats and opportunities
• Customer preferences can shift
• Product substitutes may appear
• Raw material costs may increase
• Changes in government regulation
• Entry of low-cost foreign producers
• Mergers and acquisitions
• Product improvements
• Process technology improvements
• Other environmental factors

Strategic issues

• Shakeout
• declining growth rate
• potential for overestimating future demand, hence over capacity
• competition intensifies as volume increases needed to cover fixed costs
• weaker businesses fail, withdraw or acquired
• Maturity
• volume stabilizes
• replacement sales dominate
• continued satisfaction and loyalty of existing customers key
• not all segments and all brands reach maturity simultaneously
• possibility of extending life via new uses, applications or creative marketing
• Decline
• divest, liquidate or hang-on?
• consolidation

37
Shakeout

• Excess capacity

• More intense competition

• Difficulty in maintaining differentiation

• Distribution problems

• Pressures on prices and profits

Strategic traps during shakeout

• Failure to recognize events signaling the beginning of a shakeout


...hence optimistic forecasts

• Stuck without a clear strategic advantage during shakeout

• Failure to recognize declining importance of product differentiation and increasing


importance of price and / or service

• Giving up market share in favor of short term profits


...hence priced out of the market

38
Strategies to beat the commodity magnet

• Pro-active strategies
• Value-added strategy
• Process innovation strategy

• Reactive strategies
• Market focus strategy
• Service innovation strategy

• Demand side: Value added & Market focus


• Supply side: Process innovation & Service innovation

International Marketing Strategy

• Strategic Alliances
• Global Companies
– International Firm
• Take our domestic practices overseas
– Multinational firm
• Customize strategies to each market
– Global firm
• Standardize strategy globally

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Global Market Entry Strategies

• Exporting
• Licensing
• Joint Venture
• Direct Investment

International Environment Trends

• Political: stability, sentiment


• Regulatory: trade regulations, tariffs, quotas
• Economic: exchange rates
• Social and Cultural: ethnocentrism

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The NewProd Scoring Model

• To help evaluate ideas generated

Very Good Good Average Poor Very Poor


(10) (8) (6) (4) (2)
Sub-factor Sub-factor EP EV EP EV EP EV EP EV EP EV TOTAL Sub-factor
Weight EV Evaluation
Product 1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4
Superiority
Unique 1 .1 1 .2 1.6 .4 2.4 .2 0.8 .1 0.2 6.0 6.0
features for
users
Reduce 3 .3 3 .4 3.2 .2 1.2 .1 0.4 - - 7.8 23.4
customer
costs
Higher 1 .1 1 .2 1.6 .5 3.0 .2 0.8 - - 6.4 6.4
quality than
competitors
Does unique 2 .5 5 .4 3.2 .1 0.6 - - - - 8.8 17.6
task for user
Priced lower 2 - - .2 1.6 .5 3.0 .3 1.2 - - 5.8 11.6
than
competition
10 TOTAL 71.4

Steps in the Design Process

Customer Measurement
Opportunity 1. Qualitative measurement to identify
Definition issues
2. Quantitative measurement for input
to models

Summary of Customer

Refinement
Perception Product Features

• Marketing
• R&D Preference Segments
• Engineering
• Production
Choice

“What-if” Forecasts
1. Aggregate Individuals
Evaluation 2. Awareness & Availability

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