Chapter 2
Marketing Strategy
Chapter 2 Learning Objectives
1. Understand the scope of strategic marketing
planning.
2. Identify the importance and sources of a competitive
differential advantage.
3. Recognize disruptive innovations as a source of new
competitors.
4. Describe the three alternative perspectives to assist
in developing organizational strategies.
5. Understand the essential components of marketing
strategy formulation.
Introduction
• Strategic planning: A process that describes
the direction an organization will pursue
within its chosen environment and guides the
allocation of resources and efforts
Learning Objective 1
• Four steps of strategic planning process
–
–
–
–
Define mission.
External assessment of threats and opportunities
Internal assessment of strengths and weaknesses
Establish set of priorities based on organizational
objectives.
• Then, determine which strategies to pursue.
Learning Objective 1
• Step 1: Defining organization mission
– Organization’s fundamental purpose for existing
– Who the organization is, its values, and the
customers it wishes to serve
– Blueprint for management in developing business
strategies
– Must recognize what the business is and what the
customer wants.
• Avoid marketing myopia.
Learning Objective 1
• Organization mission components
– Basic product or service, primary market, and
technology for delivering product or service
– Organizational goals
• Growth, profitability, stability, nor survival
– Organizational philosophy
– Organizational self-concept
– Public image
Learning Objective 1
Map
stakeholders
Determine
stakeholder
salience
Research
stakeholder
expectations
Avoiding
Myopia
Embed
stakeholder
orientation
Engage with
stakeholders
Learning Objective 1
• Step 2: Situational assessment
– SWOT analysis: Strengths, Weaknesses,
Opportunities, Threats
– Economic, competitive, regulatory, social, and
technological changes in marketplace
– Questions
• What are the changes and trends?
• How will these changes affect the organization?
• What opportunities to these changes present?
FIGURE 2-6 Four-Cell SWOT Matrix for Producing
Clinical Guidelines in the National Health Service
Learning Objective 1
• Step 2: Situational assessment (cont.)
– Barriers to entry: Conditions that a company must
overcome in order to pursue a business opportunity
– Barriers to exit: Costs of leaving a particular
business line
Learning Objective 2
• Differential advantage
– Product, market, cost
– Based on core competencies
– Criteria
• Importance, perceived, uniqueness, sustainable
– Sources
• Product, market, cost, trust (unique to health care)
TABLE 2-1 Sources of a Differential Advantage
Learning Objective 2
• Trust
• A unique source of a differential advantage in
health care
• Principal/agent relationship
“One individual (the principal, in this case the patient)
gives the agent (the clinician) the authority or power
to make the appropriate decisions on his or her behalf.”
Learning Objective 3
• Disruptive innovations
– Cheaper
– Simpler
– Easier to access
FIGURE 2-7 The Visible and Invisible Values
Learning Objective 4
• Organizational strategy
– Broad strategies are formulated.
– Can be either growth market or consolidation
strategies
• Growth market: Organization attempts to gain more
sales from an existing business line or by penetrating
new markets.
• Consolidation: Pairing either services or markets
Learning Objective 4
• Organizational strategy (cont.)
– Growth market strategies
• Market penetration
– Increase sales of present products/services in present
markets.
• Market development
– Increase sales in new markets.
• Product development
– Introduce new products/services to present markets.
• Diversification
– Introduce new products into new markets.
Learning Objective 4
• Organizational strategy (cont.)
– Product development strategy
• Vertical integration
– Backward integration: Become own supplier.
– Forward integration: Offer new services closer to
the customer.
Learning Objective 4
• Organizational strategy (cont.)
– Diversification strategy
• Strategic alliances
– Formal arrangements with other companies to
operate in a particular market
• Joint ventures
– New corporate entities created by strategic alliances
Learning Objective 2
• Organizational strategy (cont.)
– Consolidation strategies
• Divestment
– Selling off a business or product line
• Pruning
– Reducing the number of product or service offerings
• Retrenchment
– Withdrawing from certain markets
• Harvesting
– Gradually withdrawing support from a product until
market demand is reduced or eliminated
Learning Objective 3
• Alternative models
– Boston Consulting Group matrix
• Stars, cash cows, problem children, dogs
• Based on market growth rate and market share
• Can be used to focus on broad considerations
FIGURE 2-8 BCG Matrix for Selected Pfizer
Pharmaceutical Products
Viagra
Embrel
Cash
Cows
High
Student
Lyrica
Zyvox
Stars
Lipitor
Market share
Dogs
Low
Problem
Children
Low
High
Growth potential
Data from: “Extended Quantitative Analysis – Pfizer,” EternalYield (August 24, 2014),
http://eternalyield.com/2014/08/24/extended-qualitative-analysis-pfizer
Learning Objective 4
• Competitive market
– Must analyze
• Existing competition
• Potential competition
– Factors affecting competitive intensity
•
•
•
•
Threat of new entrants
Bargaining power of suppliers
Bargaining power or customers
Threat of substitute products or services
Learning Objective 4
• Competitive market (cont.)
– Existing competition
• When product is relatively standardized and the
competitors are relatively numerous and similar in size.
• When cost of switching providers is relatively low
• In industries characterized by overcapacity and among
firms still in the market because of a high fixed-asset
position
Learning Objective 4
• Competitive market (cont.)
–
–
–
–
New entrants
Threat of substitution
Bargaining power of suppliers
Bargaining power of customers
Learning Objective 4
• Blue ocean strategy
–
–
–
–
Achieve high performance in uncontested space.
Create demand in “unknown market.”
Most organizations follow red ocean.
Strategy focusing on competition
Learning Objective 5
• Marketing plan
– After establishing marketing objectives, then
formulate market strategies.
Learning Objective 5
• Market strategy formulation
– Determine target market (mass market, multisegment, market concentration).
– Specify market strategy (market challenger, market
follower, market niche).
– Develop tactical plans for marketing mix.
Learning Objective 5
• Determine target market.
– Whom the organization is trying to attract
– Assess organization’s strengths, competitive
intensity for target market, cost of capturing
market share, and potential financial gain in
attracting the targeted group.
– Mass marketing (undifferentiated) or segmenting
• Multi-segment marketing
• Market concentration strategy
Learning Objective 5
• Specify market strategy.
–
–
–
–
Market
Market
Market
Market
leader
challenger
follower
niche
Learning Objective 5
• Tactical action plan
– Identifies actions to be taken regarding each
aspect of the marketing mix
– Advertising strategy, pricing strategy,
distribution issues, nature of product
– Finally, evaluate plan (discussed further in
Chapter 14).
Summary
• Marketing plans—along with finance, production,
and human resource plans—form the core elements
of an organization’s strategic plan.
• An organization’s strategic plan is guided by the
mission that defines its purpose for existing. The
mission must recognize who the customer is and what
the customer wants to buy.
• In developing strategic plans, a SWOT analysis
provides a review of internal and external factors that
can affect strategic outcomes.
Summary (cont.)
• In developing strategic plans, an organization must be
able to recognize the barriers to entry and exit for any
new service venture.
• Invisible value is the value a producer builds into its
product or service; visible value is the value that a
customer sees. Typically an organization can only
charge for visible value.
• An organization can develop a differential advantage
that is either product-based, market-based, or pricebased.
Summary (cont.)
• There are four broad growth strategies that any
organization can pursue: market development, market
penetration, product development, and diversification.
• The BCG matrix and the Five Forces Model can aid
an organization in the review of its service portfolio
relative to the external market; both models
encompass market and competitive considerations.
Summary (cont.)
• In any industry, the level of competitive intensity is
affected by the threat of new entrants, the bargaining
power of both suppliers and customers, and the threat
of substitute products and services.
• In developing a marketing plan, organizations can
pursue a mass marketing or a market concentration
strategy.
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