42260745 marketing strategy

FORMULATION OF MARKETING STRATEGIES TO IMPROVE MARKET SHARE OF LG MICROWAVE OVENS

November 10, 2010 Page 1

CHAPTER -1

INTRODUCTION



1.1 What is strategy?

"Strategy is the direction and scope of an organization over the long-term: which

achieves advantage for the organization through its configuration of resources

within a challenging environment, to meet the needs of markets and to fulfill

stakeholder expectations".

Strategy is about:

Where is the business trying to get to in the long-term (direction)

Which markets should a business compete in and what kinds of activities are

involved in such markets? (markets; scope)

How can the business perform better than the competition in those markets?

(Advantage)?

What resources (skills, assets, finance, relationships, technical competence,

facilities) are required in order to be able to compete? (Resources)?

What external, environmental factors affect the businesses' ability to

compete? (Environment)?

What are the values and expectations of those who have power in and

around the business? (stakeholders)



Strategy at Different Levels of a Business

Strategies exist at several levels in any organization - ranging from the overall

business (or group of businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is

heavily influenced by investors in the business and acts to guide strategic

decision-making throughout the business. Corporate strategy is often stated

explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about

choice of products, meeting needs of customers, gaining advantage over

competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction.

Operational strategy therefore focuses on issues of resources, processes,

people etc.

Strategy is the process of planning & executing various maneuvers or actions in

an attempt to reach a goal. Strategy is often associated with business,

politics,& military planning, but individuals can also strategized towards

achieving their career, health . Strategy is essentially akin to planning but

implies a maximization of resources with logical thinking, intelligence

(acquired knowledge) & leverage.



Strategy is differentiated from tactics in that tactics are micro strategies that

contribute to large goal. Opening a successful business would fall under

strategy achieving financing or an important client would be considered tactics

towards strategy.

7Ps 7Cs

Product Customer value

Promotion Communication

Price Cost

Place Convenience

People Capable

Process Convergent

Physical Evidence Conductive

Issues for marketing strategy

Product

What product do customers use now?

What benefits does consumer want from the product?



Promotions

What promotions appeals would influence consumer to purchase & use of our

product?

What advertising claims would be effective for our product?

Pricing

How important is price to the consumer in various target markets?

What effect will a price change have on purchase behavior?

Place

Where do consumers buy this product?

Would a different distribution system change consumer purchasing behavior?

People

What type of people is desired by the consumer to deliver the service? Would

differentiation by people help in gaining competitive advantage?

Process

Would different procedure, mechanism, routine, and helps in satisfying the

customer needs?

Physical Evidence

Can we have different physical evidence?



1.2 Marketing Strategy

Achieving objectives requires the marketer engage in marketing decision-

making which indicates where resources (e.g., marketing funds) will be directed.

However, before spending begins on individual marketing decisions (e.g., where to

advertise) the marketer needs to establish a general plan of action that summarizes

what will be done to reach the stated objectives.

Tactical Programs Marketing strategy sets the stage for specific actions that will

take place. Marketing tactics are the day-to-day actions that marketers undertake

and involve the major marketing decision areas. As would be expected, this is the

key area of the Marketing Plan since it explains exactly what will be done to reach

the organizations objectives.

Marketing Budget Carrying out marketing tactics almost always means that

money must be spent. The marketing budget lays out the spending requirements

needed to carry out marketing tactics. While the marketing department may request

a certain level of funding they feel is required, in the end it is upper-management

that will have final say on how much financial support will be offered.



Types of Marketing Strategy:

One of the most important concepts of the marketing planning process is the

need to develop a cohesive marketing strategy that guides tactical programs for the

marketing decision areas.

In marketing there are two levels to strategy formulation:

1. General Marketing Strategies

2. Decision Area Strategies.

General Marketing Strategies:

These set the direction for all marketing efforts by describing, in general terms,

how marketing will achieve its objectives.

There are many different General Marketing Strategies, though most can be

viewed as falling into one of the following categories:

Market Expansion :

This strategy looks to grow overall sales in one of two ways:

Grow Sales with Existing Products With this approach the marketer seeks to actively increase the overall sales of products the company currently

markets. This can be accomplished by: 1) getting existing customers to buy

more; 2) getting potential customers to buy (i.e., those who have yet to buy);

or 3) selling current products in new markets.

Grow Sales with New Products With this approach the marketer seeks to achieve objectives through the introduction of new products. This can be



accomplished by: 1) introducing updated versions or refinements to existing

products; 2) introducing products that are extensions of current products; or

3) introducing new products not previously marketed.

Market Share Growth This strategy looks to increase the marketers

overall percentage or share of market. In many cases this can only be

accomplished by taking sales away from competitors. Consequently, this

strategy often relies on aggressive marketing tactics.

Niche Market This strategy looks to obtain a commanding position within

a certain segment of the overall market. Usually the niche market is much

smaller in terms of total customers and sales volume than the overall market.

Ideally this strategy looks to have the product viewed as being different from

companies targeting the larger market.

Status Quo This strategy looks to maintain the marketers current position

in the market, such as maintaining the same level of market share.

Market Exit This strategy looks to remove the product from the

organizations product mix. This can be accomplished by: 1) selling the

product to another organization, or 2) eliminating the product.



Decision Area Strategies:

These are used to achieve the General Marketing Strategies by guiding the

decisions within important marketing areas (product, pricing, distribution,

promotion, target marketing).

For example, a General Marketing Strategy that centers on entering a new

market with new products may be supported by Decision Area Strategies

that include:

Target Market Strategy employ segmenting techniques

Product Strategy develop new product line

Pricing Strategy create price programs that offer lower pricing versus

competitors

Distribution Strategy use methods to gain access to important distribution

partners that service the target market

Promotion Strategy create a plan that can quickly build awareness of the

product

Achieving the Decision Area Strategies is accomplished through the

development of detailed Tactical Programs for each area.

For instance, to meet the Pricing Strategy that lowers cost versus competitors

products, the marketer may employ such tactics as: quantity discounts, trade-in

allowances or sales volume incentives to distributors.



1.3 Segmentation, Targeting, Positioning Differentiation

Segmentation: grouping consumers by some criteria

Targeting: choosing which group(s) to sell to

Positioning: select the marketing mix most appropriate for the target segment(s)

Segmentation:

Grouping consumers by some criteria, such that those within a group will

respond similarly to a marketing action and those in a different group will

respond differently.



Potential segmentation variables:

Sex

Age

race

Income

educational level

marital status

No of children

introvert / extrovert z

usage history



Which segment

Mass market,

Multiple segments,

Single segment

Mass market high volumes low margins goods-example confectionery, clothing

Multiple segment- appealing to wider range of groups example 4x4

vehicles, towns, country, gender, lifestyle, social class

Single segment often a specialized product, example machinery,

exclusive goods

MARKET SEGMENTATION STRATEGY:

The need for market segmentation

Marketers understand they cannot do all things to all people ,all the time .

Buyers & markets are too complex & diverse for one simple marketing formula

to adequately address the needs of all.

Target market identifying market segment that are bite size chunks that

organization can manage

Market segmentation - identifying markets with common traits

Market targeting - process of evaluation of selected segmentation & then

deciding which market segment to operate within.



Market Positioning process whereby market positions the product to

occupy a clear & distinctive position relative to other competing brands.

Market segmentation - markets are composed of buyers & they differ in

wants, resources, locations, & buying patterns.

Market segmentation is process that marketer use to divide the market in to

smaller segments' that can be efficiently addressed.

Six stages in market segmentation, targeting, positioning-

Identify for segmenting the market

Develop profiles of resulting segment

Develop measure of segment attractiveness

Select the target segment

Develop position for each target segment

Develop marketing mix for each target segment



Market Segmentation:

With a large country

Many different types of people

it is too difficult to create a product that will satisfy everybody, that is why we

focus on a segment of the total market

Market Segmentation-def

Grouping people according to their similarity related to a particular product

category

4 commonly used bases for Segmentation



Geographic location - based upon where people live (historically a popular

way of dividing markets)

Demographic - based upon age, gender and income level (very often used)

Psychographic / lifestyles - based on peoples opinions, interests, lifestyles

eg, people who like hard rock music probably prefer beer to wine

Benefits - based on the different expectation that customers have about what

a product/service can do for them

eg. People who want to but lite food cause ti will help them lose weight.



Positioning Strategy:

A Positioning Strategy results in the image you want to draw in the mind of

your customers, the picture you want him/her to visualize of you what you

offer, in relation to the market situation, and any competition you may

have".

While designing your positioning strategy you will be faced with three

main options:

Positioning your product against your competitors, " Our prices are half of

that you may find else where for similar products"

Emphasizing a distinctive unique benefit "the only book keeping system that

instantly calculates your taxes"

Affiliating your product with something the customer knows and values "the

same archiving system used by the library of university "

A positioning statement should have:

Your customer: The type of customer you target.

The benefits: What you can do for your customers.

The method: How you do it.

The USP: Why you do it better than the competitors. (As you may know,

USP stands for "unique selling proposition".)



You will need to write down the following

Our product offers the following benefits: ---------------

To the following customers (your target market_: ----------

Our product is better than the competitors in the following manner: -----------

-----

We can prove our product is the best because (evidence, differences,

testimonials..etc) --------------------

Your positioning statement reflects what you need to communicate about a

specific product, and to whom, so you will always hit the right button,

communicating the right message to the right customer at the right time.

Every marketing program should cover only one product, hence must not

reflect more than one clearly stated positioning strategy, So:

1 product = 1 marketing program = 1 positioning statement.

Generally, there are six basic strategies for product positioning:

By attribute or benefit- This is the most frequently used positioning strategy.

For toothpaste, it might be the mint taste or tartar control.

By use or application- The users of Apple computers can design and use

graphics more easily than with Windows or UNIX. Apple positions its

computers based on how the computer will be used.

By user- Face book is a social networking site used exclusively by college

students. Face book is too cool for MySpace and serves a smaller, more



sophisticated cohort. Only college students may participate with their

campus e-mail IDs.

By product or service class- Margarine competes as an alternative to butter.

Margarine is positioned as a lower cost and healthier alternative to butter,

while butter provides better taste and wholesome ingredients.

By competitor- BMW and Mercedes often compare themselves to each other

segmenting the market to just the crme de la crme of the automobile

market. Ford and Chevy need not apply.

By price or quality- Jewelers sell diamonds.

Positioning is what the customer believes and not what the provider wants

them to believe. Positioning can change due to the counter measures taken

at the competition.

Managing your product positioning requires that you know your customer

and that you understand your competition; generally, this is the job of market

research not just what the entrepreneur thinks is true.



1.4 MARKET SITUATION STRATEGY

What is market dominance?

Market dominance is a measure of the strength of a brand , product, service

or firm, relative to competitive offerings.

There is often a geographic element to the competitive landscape. In

defining market dominance, you must see to what extent a product , brand,

or firm controls a product category in a given geographic area.

Market Dominance Strategies:

These calculations of market dominance yield quantitative metrics, but

most business strategists categorize market dominance strategies in

qualitative terms.

Typically there are four types of market dominance strategies that a marketer

will consider:

There are -market leader, market challenger, market follower, and market

nicher.

MARKET DOMINANCE STRATEGIES :

Market Leader

Market Challenger

Market Follower

Market Nicher



Defense Strategy :

A market leader should generally adopt a defense strategy

Six commonly used defense strategies

Position Defense

Mobile Defense

Flanking Defense

Contraction Defense

Pre-emptive Defense

Counter-Offensive

Defense

Some of the options open to a market challenger are:

Price discounts or price cutting

Line extensions

Introduce new products

Reduce product quality

Increase product quality

Improve service

Change distribution

Cost reductions



Intensify promotional activity

Market Challenger Strategies :

The market challengers strategic objective is to gain market share and to

become the leader eventually

How?

By attacking the market leader

By attacking other firms of the same size

By attacking smaller firms

Types of Attack Strategies:

Frontal attack

Flank attack

Encirclement attack

Bypass attack

Guerrilla attack

PORTERS

FIVE FORCES MODEL

A framework for the industry analysis and business strategy

The Porter's 5 Forces tool is a simple but powerful tool for understanding

where power lies in a business situation. This is useful, because it helps you



understand both the strength of your current competitive position, and the

strength of a position you're looking to move into.

The five forces come from Porter's famous framework and are:

Power of Buyers

Power of Suppliers

Threat of substitutes

Barriers to entry

Competitors

It uses concepts developed in Industrial Organization Economics to derive

five forces which determine the competitive intensity and therefore

attractiveness of a market. Attractiveness in this context refers to the overall

industry profitability.



An "unattractive" industry is one where the combination of forces acts to

drive down overall profitability. A very unattractive industry would be one

approaching "pure competition".

Porter referred to these forces as the micro environment, to contrast it with

the more general term macro environment. They consist of those forces

close to a company that affect its ability to serve its customers and make a

profit. A change in any of the forces normally requires a company to re-

assess the marketplace. The overall industry attractiveness does not imply

that every firm in the industry will return the same profitability.

Firms are able to apply their core competence s, business model or network

to achieve a profit above the industry average. A clear example of this is the

airline industry. As an industry, profitability is low and yet individual

companies, by applying unique business models have been able to make a

return in excess of the industry average.

Porter's five forces include three forces from 'horizontal' competition: threat

of substitute products, the threat of established rivals, and the threat of new

entrants; and two forces from 'vertical' competition: the bargaining power of

suppliers, bargaining power of customers.

Firms that compete in a single industry should develop, at a minimum, one

five forces analysis for its industry.

Porter makes clear that for diversified companies, the first fundamental issue

in corporate strategy is the selection of industries (lines of business) in

which the company should compete; and each line of business should

develop its own, industry-specific, five forces analysis.



The idea is that change in your market is likely to come as the basis of one

of these five areas. For instance, buyers may distort the market by forcing

prices down, or by deciding to take build products in-house.

In considering how these "forces" act on your markets, you get a picture of

issues such as channel conflict, threats from vertical integration, the impact

of regulatory change or the advent of new technology. You can also take a

view as to how you are or can affect the competitive situation for your own

benefit, rather than statically accepting the status quo



1.5 Sustainable Competitive Advantage, Porters Generic Strategy

What is Competitive advantage?

When two or more firms compete within the same market, one firms possesses a

competitive advantage over its rivals when it earns a persistently higher rate of

profit (or has the potential to earn a persistently higher rate of profit)

Competitive Advantage Definition

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.

An advantage that a firm has over its competitors, allowing it to generate

greater sales or margins and/or retains more customers than its competition.

There can be many types of competitive advantages including the

firm's cost structure, product offerings, distribution network and customer

support.

Competitive advantage comes from performing better than competitors

Sustainable competitive advantage comes from performing better than

competitors for a long time



Competitive Advantage Examples

Focus on a narrow market niche

eBay Online auctions

McAfee Virus protection auctions

Develop expertise, resource strengths, and capabilities not easily imitated by

rivals

FedEx Next-day delivery of small packages

Walt Disney Theme park management and family entertainment

Toyota Sophisticated production system

Strive to be the industrys low-cost provider

Wal-Mart

Outcompete rivals on a key differentiating feature

Johnson & Johnson Reliability in baby products

Harley-Davidson King-of-the-road styling

Rolex Top-of-the-line prestige

Mercedes-Benz Engineering design and performance

Amazon.com Wide selection and convenience



There are two main types of competitive advantages:

Comparative advantage and

Differential advantage.

Sustainable Competitive Advantage:

However, we said the primary objective of business-level strategy was to

create sources of sustainable competitive advantage (SCA).

How do we know SCA when we see it? What is it? When is it considered

sustainable?

To produce SCA, the capability must:

1. Produce value

2. Be rare

3. Imperfectly imitable, i.e. not be easily imitated or substituted



4. Be exploitable by the organization

Competencies vs. Core Competencies vs. Distinctive Competencies

A competency is an internal capability that a company performs better

than other internal capabilities.

A core competency is a well-performed internal capability that is central,

not peripheral, to a companys strategy, competitiveness, and

profitability.

A distinctive competence is a competitively valuable capability that a

company performs better than its rivals.

Examples: Distinctive Competencies

Toyota, Honda, Nissan

Low-cost, high-quality manufacturing capability and short design-to-

market cycles

Intel

Ability to design and manufacture ever more powerful

microprocessors for PCs

Motorola

Defect-free manufacture (six-sigma quality) of cell phones

SCA is an element (or combination of elements) of the business strategy that

provides a meaningful advantage over both existing and future competitors.

An SCA needs to be meaningful, sustainable and substantial.



An SCA needs to be supported and enhanced over time.

The assets and competencies of an organization represent the most

sustainable element of a business strategy, because these are usually difficult

to copy or counter.

An SCA should be visible to customers and provide or enhance a value

proposition.

The key is to link an SCA with the positioning of a business.

A solid value proposition can fail if a key ingredient is missing (e.g.,

Pringles).

Sustainable Competitive Advantages vs. Key Success Factors

A KSF is an asset or competence needed to compete, whereas, an SCA is an

asset or competence that is the basis for a continuing advantage.

An SCA is analogous to a Point of Differentiation (POD), whereas a KSF

can be analogous to either a Point of Parity (POP) or a POD.

Frameworks for Sustainable Competitive Advantage

Knowledge-based strategy

Generic strategy

Hybrid strategy

Core competence/distinctive capability/resource based strategy



Knowledge-based Strategy

Porters Generic Strategy Framework:

Porters generic strategy is based on answering 2 questions:

Should strategy be differentiation or cost leadership?

Should the scope of strategy be broad or narrow?

Generic Strategy

According to Porter, competitive advantage, and thus higher profits will

result either from:

Differentiation of products and selling them at a premium price, OR

Producing products at a lower price than competitors



In association with choosing differentiation or cost leadership, the

organization must decide between:

Targeting the whole market with the chosen strategy, OR

Targeting a specific segment of the market

PORTERS GENERIC STRATEGIES



1.6 PORTFOLIO ANALYSIS

What is a portfolio?

A business portfolio is the collection of Strategic Business Units that

together form a corporation.

The optimal business portfolio is one that fits perfectly to the company's

strengths and helps to exploit the most attractive industries or markets.

What is Business Portfolio Analysis?

Business portfolio analysis is an enterprise strategy development tool based

primarily on the market share of your business and the growth of market in which

your business exists

Most Popular Business Portfolio Tools

Three most popular business portfolio tools are -

The BCG Growth -Share Matrix ,

The GE Multifactor Portfolio Matrix,.

The GE Multifactor Portfolio Matrix was deliberately designed by General

Electric Company (GE) and McKinsey and Company to be more complete

that the BCG Growth-Share Matrix.



Portfolio Analysis

Definition

Analyzing elements of a firms product mix to determine the optimum

allocation of its resources.

Two most common measures used in a portfolio analysis are market growth

rate and relative market share.

The BCG matrix

It is a chart that had been created by Bruce Henderson for the Boston Consulting

Group in 1970 to help corporations with analyzing their business units or product

lines .

This helps the company allocate resources and is used as an analytical tool in

Brand marketing,

Product management

Strategic management and

Portfolio analysis



1.7 New Product Strategy Innovation, Market Entry, Product Line Extension

Introduction

Product (or service) is the main element of the marketing mix

Therefore, need to determine the Product Strategies before deciding on the

remaining marketing mix

Product Hierarchy

Need

Product family

Product class

Product Line

Product type

Brand

Item

7-Levels of Product Hierarchy

Product needto satisfy a need e.g. feet protection

Product classa family of products having similar function e.g. all shoes

Product linea group of products with closely related functions e.g. sports

shoes



Product typeproducts within a line having similar form e.g. foot ball shoes

Branda name representing a product or line e.g. Nike

Item (Stock Keeping Unit)a unit item e.g. one pair of Nike football shoe

What is product?

A product can be defined as a collection of physical, service and symbolic

attributes which yield satisfaction or benefits to a user or buyer.

A product is a combination of physical attributes say, size and shape; and

subjective attributes say image or "quality".

Product-Mix Decisions

Decisions on the product mix (the number of product lines and items in each

line) that the company may offer:

A single product

Most firms started off as a single-product company

Multiple products

e.g. Creative Technology markets sound cards as well as MP3 players

A systems of products

e.g. Nikon sells camera, lenses, filters & other options

New Product Strategy:

New products are critical to survival

New-product development (NPD) is essential for companies seeking growth



It should be an on-going, well organized NPD process having top-

management support

What is a new product?

From a firm's perspective, a new product is a product that it is

unfamiliar in any way

Product Innovation:

Product innovation means different things to different people.

A modified version of an existing product range

A new model in the existing product range

A new product outside the existing range but in a similar field of technology

A totally new product in a new field of technology

Promotional

Strategy

Key Factors to Consider

Promotion strategy should be developed to

Reach your target market

Meet your goals and objectives



Tailor Promotion Strategy to:

Specific Objective:

To provide information about the product/service

To stimulate demand

To differentiate product/ service or build brand image

To counter competitors

To respond to news



1.8 BRAND STRATEGY

Definitions of Brand Strategy:

A plan for the systematic development of a brand to enable it to meet its

agreed objectives.

The strategy should be rooted in the brand's vision and driven by the

principles of differentiation and sustained consumer appeal.

The true brand is the sum total of the perceptions of all the constituencies

which contribute to revenues and profits.

BRAND VISION

A clean articulation of strategic, financial & brand goals that management

has created for the brand.

A first step to strategic success as to where the brand can & cannot go.

Provides a vision that forces management to articulate what they want the

brand to do for the organization over the next five years, relative to brand

value, revenue & profit contributions.



BRANDS POSITIONING IS

The place in the consumers mind that you want your brand to own the

benefit you want them to think of when they think of your brand.

A strong position means the brand has a unique, credible, sustainable, &

valued place in the customers mind.

Good positioning gives you the direction required to focus the organization

& focused your strategic moves.

A good positioning is a single idea to be communicated to your customers.

It revolves around a benefit that helps your product or service stand apart

from the competition.

Disney- family fun entertainment

Wall Mart low price & good value

McDonalds food & fun



1.9PRICING STRATEGY

Pricing is one of the 4 Ps of the marketing mix. The other three aspects are

product, promotion, and place. It is also a key variable in microeconomic price

allocation theory. Price is the only revenue generating element amongst the 4ps,

the rest being cost centers.

Definitions:

Pricing is the process of determining what a company will receive in

exchange for its products. Pricing factors are manufacturing cost, market

place, competition, market condition, Quality of product.

The effective price is the price the company receives after accounting for

discounts, promotions, and other incentives.

Promotional pricing refers to an instance where pricing is the key element

of the marketing mix.

Pricing Process:

1. Set Pricing Objectives

2. Analyze demand

3. Draw conclusions from competitive intelligence

4. Select pricing strategy appropriate to the political, social, legal and

economical environment

5. Determine specific prices.

42260745 marketing strategy

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