Unit 1 Marketing Planning:Corporate and Division Strategic Planning: All corporate headquarters undertake four planning activities:Defining the corporate missionEstablishing strategic business unitsAssigning resources to each SBUAssessing growth opportunities

Defining the corporate Mission: To define its mission, a company should address Peter Drucker’s classic question: What is our business? Who is the customer? What is of value to the customer? What will our business be? What should our business be? These simple sounding questions are among the most difficult a company will ever have to answer.

Successful companies continuously raise these questions and answer them thoughtfully and thoroughly. A company must redefine its mission if that mission has lost credibility or no longer defines an optimal course for growth.

Good mission statements have three major characteristics. First, they focus on a limited number of goals. The statement “we want to produce the highest-quality products, offer the most service, achieve the widest distribution, and sell at the lowest prices” claims too much.

Second, mission statements stress the company’s major policies and values. They narrow the range of individual discretion (judgement) so that employees act consistently on important issues.

Third, they define the major competitive spheres (speciality) within which the company will operate.

Industry: some companies will operate in only one industry; some only in a set of related industries; some only in industrial goods, consumer goods, or services; and some in any industry. For example, DuPont

prefers to operate in the industrial market, whereas Dow is willing to operate in the industrial and consumer markets.

Products and application: Firms define the range of products and applications they will supply. Honda motorcycle aims to “not only manufacture 2-wheelers of global quality, but also meet and exceed the expectations of Indian customers with outstanding after-sales support.

Competence: The firm identifies the range of technological and other core competencies it will master and leverage. For example Sony products.

Market Segment: The type of market or customers a company will serve is the market segment.

Vertical: The vertical sphere is the number of channel levels, from raw material to final product and distribution, in which a company will participate. For example Ford car.Geographical: The range of regions, countries, or country groups in which a company will operate defines its geographical sphere. Some companies operate in a specific city or state. Others are multinational such as Unilever and Caterpillar, which operate in almost every country in the world.Definition of Business:Companies often define their business in terms of products: They are in the “auto business” or the “clothing business.” But Levitt argues that market definitions of a business are superior to product definitions. A business must be viewed as a customer-satisfying process, not a goods-producing process. Products are transient; basic needs and customer groups endure forever. Transportation is a need: the horse and carriage, the automobile, the railroad, the airline, and the truck are products that meet the need.Levitt encouraged companies to redefine their businesses in terms of needs, not products. A target market definition tends to focus on selling a product or service. Pepsi could define its target market as everyone who drinks a cola beverage and competitors would therefore be other cola companies. A strategic market

definition could be everyone who might drink something to quench (reduce) his or her thirst.

A business can be defined in terms of three dimensions: Customer groups, customer needs, and technology.For example, Incandescent lighting systems. Large companies normally manage quite different businesses, each requiring its own strategy. General Electric classified its businesses into 49 strategic business units (SBUs). An SBU has three characteristics:

1. It is a single business or collection of related businesses that can be planned separately from the rest of the company.2. It has its own set of competitors.3. It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit.

Company Product Definition Market Definition Missouri pacific we run a railroad we are a people and Rail road goods mover.

Xerox we make copying we help improve office

equipment productivity

Standard Oil we sell gasoline we supply energy Columbia pictures we make movies we market entertainment

Encyclopaedia we sell encyclopaedias we distribute information Britannica

Carrier we make air conditioners we provide climate and furnaces control in the home.

Assigning resources to each SBU: Management must decide how to allocate corporate resources to each. The GE / McKinsey Matrix classifies each SBU according to the extent of its competitive advantage and the attractiveness of its industry. Management would want to grow, “harvest” or draw cash from, or hold on to the business. Another model, the BCG’s Growth-share Matrix, uses relative market share and annual rate of market growth as criteria to make investment decisions.

a) G.E Model and Strategies Strong Medium Weak

High Protect Position

Invest To Build

BuildSelectively

Medium Build Selectively

Selectively/ Manage for Earnings

Limited Expansion for Harvest

Low Protect and Refocus

Manage for Earnings

Divest

Vertical side: Market Attractiveness Horizontal side: Business Strength

b) The Boston Consulting Group’s Growth-Share Matrix (B.C.G. Model) Vertical side: Market growth rate (%) Horizontal side: Relative market share

STARS QUESTION MARKS

CASH COWS DOGS

Assessing Growth Opportunities:Assessing growth opportunities involves planning new businesses, downsizing, or terminating older businesses. The company’s plans for existing businesses allow it to project total sales and profits. If there is a gap between future desire sales and projected sales, corporate management will have to develop or acquire new businesses to fill it.

Current Products New products

Current Markets

Ne Markets

1. Market-penetration Strategy P 3.Product development

Strategy

2.Market-development Strategy

4.(Diversification Strategy)

Intensive Growth: Corporate management’s first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive growth opportunities is called a “product-market expansion grid.” The company first considers whether it could gain more market share with its current products in their current markets, using a market-penetration strategy. Next it considers whether it can find or develop new markets for its current products, in a market-development strategy.

Then it considers whether it can develop new products of potential interest to its current markets with a product-development strategy. Later the firm will also review opportunities to develop new products for new markets in a diversification strategy. (Maruti Udyog Limited).

Market penetration strategy:1.Influence current customers to buy more by showing benefits of using more products.2.Attract competitors’ customers by showing its competitive advantage.3.Convince non users in the current market to start using them.For market-development:1.Attract institutional customers, if it is currently selling to only end-customer markets.2.Add new distribution channels.3.Enter untapped domestic markets.

Integrative Growth: A business can increase sales and profits through backward, forward, or horizontal integration within its industry. Diversification Growth: Diversification growth makes sense when good opportunities exist outside the present businesses-the industry is highly attractive and the company has the right mix of business strengths to be successful. Several types of diversification are possible. First, concentric strategy, Second, horizontal strategy, and finally, conglomerate strategy.Concentric strategy: The Company could seek new products that have technological or marketing synergies with existing product lines appealing to a new group of customers.Horizontal strategy: The Company can develop new products that are technologically unrelated to its current product line and could appeal to its current customers.Conglomerate strategy: The Company may seek new opportunities which have no relation with its current technology, products, or markets.

Downsizing and Divesting Older Business: Weak businesses require a disproportionate amount of managerial attention. Company must carefully prune, harvest, or divest tired old businesses in order to release needed resources to other uses and reduce costs.

Unit 2 Product Positioning and Competitive StrategiesProduct Positioning: Positioning is the act of fixing the locus of the product offer in the minds of the target consumers. The marketer decides how and around what parameters, the product offer will be placed before the target consumers. Some definitions of Positioning:According to Al Ries and Jack Trout, Positioning is m ore concerned with the consumer’s perception of the product, offer, than the offer as such.According Subroto Sengupta, The aim of product positioning is to create a perception for our brand in the prospect’s mind so that it stands apart from competing brands.According Michael Rothschild, Positioning refers to the place a brand occupies in the mind in relation to a given product class.

Important aspects in positioning:The need for positioning arises out of the fact that a product cannot be ‘everything to everyone’ and that it has to be something to some segment. Normally, some unique feature of the product, some special needs of the market, or some noticeable gap in competing offers, is picked up and the product offer is positioned around them in a manner appropriate for the target audience.Products are positioned in different ways, depending on what they have to offer and to whom they are offered. Some products may be positioned for the highly well-to-do segment of the market; some may be positioned for the executive class; some others for the fun-loving youth or for the health-conscious people. Products can be positioned on claims of luxury, distinctiveness, convenience, economy, uniqueness, novelty, or usage, they can also be positioned directly against competing brands.

Component tasks in Positioning:

1. Deciding the Locus in consumers’ mind where to lodge your product/ brand?Product Positioning is concerned with lodging the product offer in the consumers’ mind in a unique way. The questions to be answered are:Where exactly do we want our brand to be lodged in the consumer’s mind?As what should our brand be seen and considered by the consumer?How to ensure that the proposed offer delivers on those expectations of the consumers?To get the answers, we have to start with industry and competition analysis. Only through an in depth analysis of the structure of the industry, the nature of competition there in, predominance of players, the distinctiveness of their offers and the market responses to them, can one locate possible positioning opportunities.

2. Analyzing Competitors’ Positioning: Is there a Gap Somewhere?To get at an apt positioning, the marketer has to explore competitors’ positioning in detail. He has to size up his proposed offer against the competitors’ positions, and identify the best possible slot for his product.

3. Fixing the Position Plank or Theme:Some of the planks on which positioning can be based, are:Positioning viz-a-viz competition, its performance gapsPositioning on the consumer’s expectations and desiresPositioning on the plank of qualityPositioning on the plank of servicePositioning on the product’s conformity with societal requirementsIn fact, a product offer can be positioned on any factor, existing or emerging that is of important to the target buyers.

4. Ensuring the Infrastructure / Competitive Advantages for delivering the promise: Positioning is a promise and a bet. The firm bets its product is going to deliver the benefit. The firm has to put in place, the infrastructure and the competitive advantages required for honoring the bet. It has to build the required differentiators that will support the positioning. Any positioning is supported by the differentiators built into the offer.Success of differentiation and positioning hinges on the capabilities / infrastructure / competitive advantages you have built up.

5. Developing the value proposition:For product positioning to succeed, it must be based on an identifiable, meaningful and compelling value proposition. What is the value you propose to give the consumer through your product offer? What is it that the consumer gains by possessing your offer? A value proposition is the assertion/statement of the benefits and satisfaction the product offer is promising. The first rule in positioning is that it should state the value proposition through which the product will approach and appeal to the target consumers.Three distinct elements need to be attended to in value proposition

i) A distinctive claim on the particular value your product is offering

ii) An explanation on how the firm is capable of delivering itiii) For whom it is meant

6. Communicating the value proposition to target consumers:This is another important task in positioning. We know that through positioning the firm is trying to secure a place for its product in the consumer’s mind. So a major task is to communicate to the target audience, the distinction your product claims. Once the value proposition is decided, and the differentiators are built in, what remains in the positioning job is essentially marketing communications. In fixing the positioning, the firm is bridging the product offer with the target market. All the other Ps, namely Price, Place (channel) and Promotion, support the communication task.

Many product failures can be traced to inept(useless) communication – Positioning and the value propositions were not communicated properly to the target audience. It is the job of marketing communications to communicate effectively the positioning the firm seeks.The main burden of advertising is to take the positioning to

the target audience imaginatively and convincingly.

7. Monitoring how the positioning is faring in the market:One has to monitor the performance of their offer and see whether the positioning is working well in the market. The test takes place in the market and only the performance of the brand can prove whether it is positioned rightly or not. The firm may intend a particular positioning, but the market may perceive it differently. Sometimes, the underlying assumptions of the firm in the positioning might have gone wrong. Such drawbacks can only be brought to the fore by constant monitoring.

8. Repositioning the offer, if required:Even if the positioning is right at the launch and early growth

stage, it needs monitoring and correction through the growth

stages. Brands even successful ones may need repositioning. In fact, as the brand grows and absorbs newer benefits and value additions in tune with evolving buyer needs and expectations, brands do get repositioned.

Competitive Strategies:

The threats these forces pose are as follows:1.Threat of intense segment rivalry:2.Threat of new entrants:3.Threat of substitute products:4.Threat of buyers’ growing bargaining power:5.Threat of suppliers’ growing bargaining power:

Competitive Strategies for Market Leaders:Expanding the total market:New customers: A company can search for new users among three groups: those

who might use it but do not(market-penetration strategy); those who have never used it (new-market segment strategy); or those who live elsewhere (geographical-expansion strategy).

More usage: Usage can be increased by increasing the level or quantity of consumption or increasing the frequency of consumption.

i) identifying additional opportunities to use the brand in the same basic way or ii) identifying completely new and different ways to use the brand.

Defending the Market Share: The most constructive response is continuous innovation.

Premium performance: Cater PillarExtensive and efficient dealership system;Superior service;Full-line strategy;Good financing.

Six types of defense strategies:1. Position Defense:

Position defense involves building superior brand power, and making the brand almost secure. Nescafe, for example, has defended its position against several attacking brands using this strategy.

2. Flank Defense:

The market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. Britannia Vs. Sunfeast.

3. Pre-emptive Defense:A more aggressive maneuver (plan) to attack before the enemy starts its offense. A company can launch a pre-emptive defense in several ways. It can wage guerrilla action across the market. State Bank of India Vs. Other banks.Marketers can introduce a stream of new products, making sure to precede them with preannouncements - deliberate communications regarding future actions. Microsoft Vs. Other competitors.

4. Counteroffensive Defense:When attacked, most market leaders will respond with a counterattack. In a

counteroffensive, the leader can meet the attacker frontally or hit its flank or launch a pincer (a tool made of two pieces of metal with blunt inward-curving jaws, used for gripping and pulling things) movement. Hero Honda Launch of its 100cc Pleasure scooters.

5. Mobile Defense:In mobile defense, the leader stretches its domain over new territories that can serve

as future centers for defense and offense and offense through market broadening and market diversification.

Market broadening shifts focus from the current product to the underlying generic need. The company gets involved in R&D across the whole range of technology associated with that need. Thus Petroleum companies such as Bp sought to recast themselves as “energy” companies. Implicitly, this change demanded that they dip their research fingers in to the oil, coal, nuclear, hydroelectric, and chemical industries.

Market diversification involves shifting into unrelated industries. ITD Ltd., faced with growing concerns over the ill-effects of smoking and the ban on smoking cigarettes in many places, moved quickly into processed food, garments, and so on.

6. Contraction Defence:Large companies sometimes must recognize that they can no longer defend all their

territory. The best course of action then appears to be planned contraction (also called strategic withdrawal): giving up weaker territories and reassigning resources to stronger territories. P&G India decided to withdraw brands like the super soaker from the detergent market to improve its focus and profitability.

Expanding Market Share: The possibility of provoking antitrust action:Jealous competitors are likely to cry “monopoly” if a dominant firm makes further

inroads. This rise in risk would diminish the attractiveness of pushing market share gains too far. Microsoft and Intel are examples of companies that have faced great scrutiny for their market leadership and practices.

Economic cost:Profitability might fall with further market share gains after some level. The cost of

gaining further market share might exceed the value. Pushing for higher share is less justified when there are few scale or experience economies, unattractive market

segment exist, buyers want multiple sources of supply, and exit barriers are high. Some market leaders have even increased profitability by selectively decreasing market share in weaker areas.

Pursuing the wrong marketing activities:Companies successfully gaining share typically outperform competitors in three

areas: new-product activity, relative product quality, and marketing expenditures. On the other hand, companies that attempt to increase market share by cutting prices more deeply than competitors typically don’t achieve significant gains, because enough rivals meet the price cuts and others offer other values so buyers don’t switch. Competitive rivalry and price cutting have been shown to be most intense in industries with high fixed costs, high inventory costs, and stagnant primary demand, such as steel, auto, paper and chemicals.

The effect of increased market share on actual and perceived quality: Too many customers can put a strain on the firms’ resources, hurting product value

and service delivery.

Market Challenger Strategies:Firms that occupy second, third and lower ranks in an industry are often called

runner-up or trailing firms. These firms can adopt one of two postures. They can attack the leader and other competitors in an aggressive bid for further market share the way south Korean companies like LG, Hyundai, Samsung did in the last few years (market challengers), or they can opt for peaceful coexistence and not “rock the boat” (market followers). Market challengers like LG have gained ground and have even overtaken the leader in colour television and home air-conditioner markets.

Challengers like Airbus set high aspirations, leveraging their resources while the market leader often runs the business as usual.

Defining the strategic objective and opponents:A market challenger must first define its strategic objective. Most aim to increase

market share. The challenger must decide whom to attack. It can attack the market leader:This is a high-risk but potentially high-payoff strategy and makes good sense if the

leader is not serving the market well (Xerox Vs. Canon). It can attack firms of its own size that are not doing the job and are

underfinanced:These firms have aging products, are charging excessive prices, or are not

satisfying customers in other ways. It can attack small local and regional firms:

Several major banks grew to their present size by goggling (look with wide open) up smaller regional banks.

If the attacking companies goes after the market leader, its objective might be to gain a certain share.

Choosing a general attack strategy:We can distinguish among five attack strategies: frontal, flank, encirclement, bypass,

and guerrilla attacks.

Frontal Attack: The attacker matches its opponent’s product, advertising, price, and distribution. The principle of force says that the side with the greater manpower (resources) will win. A modified frontal attack, such as cutting price vis-a-vis the opponent’s can work if the market leader does not retaliate (react) and if the competitor convinces the market that its product is equal to the leader’s.

Flank Attack: An enemy’s weak spits are natural targets. A flank attack can be directed along two strategic dimensions – geographic and segmental. In a geographic attack, the challenger spots areas where the opponent is underperforming. For example, some of IBM’s former mainframe rivals, such as Honeywell, choose to set up strong sales branches in medium and smaller sized cities that were relatively neglected by IBM. The other flanking strategy is to serve uncovered market needs, as Japanese automakers did when they developed more fuel-efficient cars.

Encirclement Attack: The encirclement manoeuvre (move) is an attempt to capture a wide slice of the enemy’s territory through a “blitz”(attack). It involves launching a grand offensive on several fronts. Encirclement makes sense when the challenger commands superior resources and believes a swift encirclement will break the opponent’s will. In making a stand against arch rival Microsoft, sun Microsystems licensed its Java software to hundreds of companies and millions of software developers for all sorts of consumer devices. As consumer electronics products began to go digital, Java started appearing in a wider range of gadgets(a small mechanical device).

Bypass Attack: The most indirect assault strategy is the bypass. It means bypassing the enemy and attacking easier markets to broaden one’s resource base. This strategy offers three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies to supplant(replace) existing products. Pepsi used a bypass strategy against coke by purchasing: 1) orange juice giant Tropicana , which owned almost twice the market share of Coca-Cola’s Minute Maid.

2) The quaker oats company which boasts a huge market share lead over the coca-cola company’s powerade.

3) google vs yahoo

Guerrilla Warfare: Guerrilla warfare consists of waging small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds. The guerrilla challenger uses both conventional and unconventional means of attack. These include selective price cuts, intense promotional blitzes, and occasional legal action.

Normally, guerrilla warfare is practiced by a smaller firm against a larger one. The smaller firm launches a barrage of attacks in random corners of the larger opponent’s market in a manner calculated to weaken the opponent’s market power. Military dogma holds that a continual stream of minor attacks usually creates more cumulative impact, disorganization, and confusion in the enemy than a few major attacks. A guerrilla campaign can be expensive, although admittedly less expensive than a frontal, encirclement, or flank attack.

Choosing a specific attack strategy: The challenger must go beyond the five broad strategies and develop more specific strategies:

Price discount: Lower price goods:

Value-priced goods and services: Prestige goods: Product proliferation: large product variety Product innovation: Improved services: Distribution innovation: Manufacturing-cost reduction: Intensive advertising promotion:

MARKET-FOLLOWER STRATEGIES:“Product imitation might be as profitable as a strategy of product innovation”. The

follower can achieve high profits because it did not bear any of the innovation expense.Many companies prefer to follow rather than challenge the market leader. Patterns of

“conscious parallelism” are common in capital-intensive, homogeneous product industries, such as steel, fertilizers, and chemicals. The opportunities for product differentiation and image differentiation are low; service quality is often comparable; and price sensitivity runs high. The mood in these industries is against short-run grabs for market share because that strategy only provokes retaliation (vengeance). Most firms decide against stealing one another’s’ customers. Instead, they present similar offers to buyers, usually by copying the leader. Market shares show high stability.

Four broad strategies can be distinguished:1.Counterfeiter:The counterfeiter duplicates the leader’s product and package and sells it on the

black market or through disreputable dealers. Music record firms, Apple computer, and Rolex have been plagued with the counterfeiter problem.

2.Cloner:The cloner emulates the leader’s products, name, and packaging, with slight

variations.

3.Imitator:The imitator copies some things from the leader but maintains differentiation in

terms of packaging, advertising, pricing, or location. The leader does not mind the imitator as long as the imitator does not attack the leader aggressively.

4.Adaptor:The adaptor takes the leader’s products and adapts or improves them. The adapter

may choose to sell to different markets, but often the adapter grows into the future challenger, as many Japanese firms have done after adapting and improving products developed elsewhere.

Market-Nicher Strategies:

Firms with low shares of the total market can be highly profitable through smart niching. Even large, profitable firms use niching strategies for some of their business units or companies.

Niche specialists roles: Small firms normally avoid competing with larger firms by targeting small markets of

little or no interest to the interest to the larger firms. But even large, profitable firms may choose to use niching strategies for some of their business units or companies.

Firms with low shares of the total market can become highly profitable through smart niching. Such companies tend to offer high value, charge a premium price, achieve lower manufacturing costs, and shape a strong corporate culture and vision.

Nichers have three tasks: creating niches, expanding niches, and protecting niches.

The key idea in successful nichemanship is specialization, here are some possible niche roles:

End-user specialist:Vertical-level specialist:Customer-size specialist:Specific-customer specialist:Geographic specialist:Product or product-line specialist:Product-feature specialist:Job-shop specialist:Quality-price specialist:Service specialist:Channel specialist: