project sem iv

8/3/2019 Project SEM IV

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1.1 What is strategy?

"Strategy is thedirection andscope of an organization over

thelongterm: which achieves advantage for the organization through its

configuration ofresources within a challenging environment, to meet the

needs ofmarkets and to fulfillstakeholderexpectations".

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 BusinessStrategies 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 decisionsabout 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


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maneuvers or actions in an attempt to reach a goal.Strategy is often

associated with business, politics,& military planning, but individuals can

alsostrategized towards achievingtheir 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.

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 beeffective 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?

7Ps 7CsProduct Customer value

Promotion Communication

Price Cost

Place Convenience

People Capable

Process Convergent

Physical Evidence Conductive


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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 actionthat 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 marketingdepartment 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 :


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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:


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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 mostappropriate 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 willrespond differently.

FORMULATION OF MARKETING STRATEGIES TO IMPROVE

MARKET SHARE OF LG MICROWAVE OVENS

Potential segmentation variables:


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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.


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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 onesimplemarketing

formula to adequatelyaddress 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 selectedsegmentation& 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 processthat marketer use to dividethe 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


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Market Segmentation:

With a large country

Many different types of peopleit 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 particularproduct category

4 commonly used bases for Segmentation


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

may have".

While designingyour 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"


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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 bycollege 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.


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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 duetothe 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 abrand , 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,

butmost 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


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Six commonly used defense strategies

Position Defense

Mobile Defense

Flanking Defense

Contraction Defense

Pre-emptive Defense

Co u n t e r-O ffe n si v e

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


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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 implythat 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.


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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 firmhasover its competitors, allowing itto generate

greater sales or margins and/or retains more customers than itscompetition.

There can be many types of competitive advantages includingthe

firm'scost structure, product offerings,distribution network and customer

support.

Competitive advantage comes from performing better than competitors

Sustainable competitive advantage comes from performing better than


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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 ofsustainable 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


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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

Acompetency is an internal capability that a company performsbetter

than other internal capabilities.

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

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


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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

Superior Knowledge

(Compared to Competitors)

Core Competences

Competitive Advantage

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 choosingdifferentiation orcost leadership, the

organization must decide between:

Targeting the whole market with the chosen strategy, OR

Targeting a specificsegment of the market


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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 anenterprisestrategy 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 - TheBCGGrowth -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.


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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

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


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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 mixProduct 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


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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

technologyA 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


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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


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

product, promotion, andplace. It is also a key variable inmicroeconomic

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 pricingrefers 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 intelligence4.Select pricing strategy appropriate to the political, social, legal and

economical environment

5.Determine specific prices

project sem iv

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