Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Page 1 of 59

Chapter 1: Market-led strategic management
Doyle distinguishes between the following
Radical strategies
•

Companies achieve spectacular growth in sales and profits without building customer value
through superior products

Rational strategies
•

High short term performance through products cheaper than traditional competitors

Robust strategies
•

Companies achieve steady performance over long period by creating superior customer
value and building long-term customer relationships
...


Value-delivery processes
•

Processes that enable the delivery of value to customers
– Service delivery, customer relationship management, management of distribution
and logistics, communication processes (such as advertising and sales promotion)
and customer support services etc
...


•

Model of mutually beneficial exchanges

Mr
...

Components and context of market orientation are proposed:
•

Customer orientation: Understanding costumers to create superior value

•

Competitor orientation: Awareness of the short-long term competitor’s capabilities

•

Interfunctional co-ordination: Using all resources to create value for customers

•

Organizational culture: Linking employee and managerial behavior to customer satisfaction

•

Long-term profit

Mr
...


•

The key is to make customer want what we are good at
...


•

The retailers react by giving customers more choice, heavy promotions and deals to
stimulate purchases, and aggressive sales force targets
...

Resource based marketing

•

Companies base their marketing strategies on equal consideration of the requirements of
the market and their abilities to serve it
...


Mr
...
Islam Yusri
01228860960

Page 5 of 59

Marketing fundamentals
•

Set of basic and pragmatic marketing principles that guide marketing thought and action

•

Follow logic of value-based processes described by webster

•

Their applications can revolutionize how organizations respond to, interact with, their
customers

Principle 1: Focus on the customer
•

High degree of customer focus-But not blind focus!

•

Market-led approach
– What business are we in?
– What business could we be in?
– What business do we want to be in?
– What must we do to get into or consolidate in that business?

Principle 2: Only compete in markets where you can establish a competitive advantage
•

Choosing where to compete and where to commit its resources

•

How attractive the market appears

•

Do we have the competencies and skills to compete here?

Principle 3: Customers do not buy products
•

Customers do not buy products , they buy what the product can do for them – the problem
it solves

Principle 4: Marketing is too important to leave to the marketing department (even if there
still is one)
•

Marketing is everyone’s job in the organisation

Principle 5: Markets are heterogeneous
•

Different customers, sub-markets and segments; buy a car for cheap transport from a to b
or for comfortable or save travel; different benefits requirements

Principle 6: Markets and customers are constantly changing
•

Markets are dynamic and products have a limited life; need product and service
improvement; customer expectations change

•

Two main processes of improvement; innovation and changes in technology (which is a
continuous process)

Mr
...
Two main set of
factors; First, how attractive the alternative potential targets are
...
Islam Yusri
01228860960

Page 7 of 59

Defining the business purpose or mission
•

Requires asking fundamental questions: What business are we in? What businesses do we
want to be in? Who is our major competitor? What markets are we in?

Mission formulation and statement
•

The strategic intent or vision of where organization want to be in foreseeable future

•

The values of the organization should be spelled out to guide operations

•

Articulate distinctive competencies

•

Market definition, in terms of customer targets

•

Finally, it should spell out where organization intends to be positioned in marketplace

•

Components of mission:

The marketing strategy process
•

Three main levels:
– Establishment of a core strategy
•

Assessment of companies capabilities (strengths and weaknesses relative to
competition – opportunities and threats posed by the environment)

– The creation of the company’s competitive positioning
•

competitive edge in serving customers better than competition is defines

– The implementation of the strategy
•

Department putting strategy into action is created

Establishing the core strategy
Analysis of organizational resources
•

Creation of long list of resources and many weaknesses that an organization has at its
disposal

•

They may stem from;
– Skills of the workforce in assembling products
– Skills of management in planning
– R&D department in new product ideas
– Distinctive competencies may lie in image, market presence or its after sales
services (exploitable)

Mr
...
Islam Yusri
01228860960

Page 9 of 59

Analysis of the markets served
•

Opportunities and threats facing the company

•

Stem from two main areas;
– The customers (both current and potential) and competitors ( again both current and
potential)

•

Most markets consist of heterogeneous customers (varying needs and demands)

•

SWOT Analysis

Core strategy
•

Define the key factors of success

•

Company sets its marketing objectives

•

Objectives should be both long and short term

•

Core strategy varies at different stages of product life cycle

•

Expand the market (achieved in early growth stages of lifecycle) or to increase share of
existing market (pursued during late growth/maturity stages

•

Market expansion can be
service

•

Through geographic expansion of the company’s operations (both domestically and
internationally)

achieved through attraction of new users to the product or

Strategic focus
Increase share
•

Main routes to increasing share include;
– Winning competitors, customers
– Merging with (or acquiring) the competitors
– Entering into strategic alliances with competitors, suppliers and/or distributors

•

Increasing usage rate may be viable approach to expanding the market for some products
Improving profitability

•

Through improving margins

•

Increasing price, reducing cost or both

•

Removing poorly performing products and concentrating on more financially viable

Mr
...
Islam Yusri
01228860960

Page 11 of 59

•

Where elements of the mix do not pull in the same direction but contradict each other, the
positioning achieved will be confused and confusing to customers

Organization
•

How the marketing effort and the marketing department are organized will have effect on
how well the strategy can be can be carried through

•

Required manpower and financial resources to be made available

Control
•

Monitor and control the effort

•

Performance can be monitored in two ways;
– Market performance (sales, market share, customer attitude and loyalty and
changes in them over time)
– Financial performance ( monitoring of product contribution relative to the resources
employed to achieve it)

Amber reports the most important marketing metrics used by companies are Relative
perceived quality, Loyalty/retention, Total no of customers, Customer satisfaction, Relative price
(market share/volume), Perceived quality/esteem, Complaints (level of dissatisfaction), Awareness
and distribution/availability

Chapter3: The changing market environment
Introduction
•

How environment in which marketing takes place is changing
...
markets
•

Industries are collection of organizations with technology and products in common

•

Markets are customer linked by their similar needs

A framework for macro-environmental analysis
•

Nature of change in macro-environment

•

Importance of understanding macro-environment is tow fold
– Market impact of change
– Nature of change facing organizations is itself changing

•

PEST analysis (political, economic, social, cultural and technological)

Mr
...
g
...
g
...
Rivalry among existing companies The rivalry is likely to be most intense where;
Competition in the industry are roughly evenly balanced in terms of size and share/ During
periods of low market growth / Where exit barriers are high/ Where product differentiation is
low/ Where fixed costs are relatively high

Mr
...
The threat of market entry Potential for new entrants to emerge/ Conditions make market
entry more likely/ Entry barriers can be low where; Costs of entry are low/ Existing/new
distribution channels are open to use/ Little competitive retaliation is anticipated/
Differentiation is low/ There are gaps in the market
3
...
Bargaining power of suppliers Suppliers tend to have more bargaining power where
holds; Suppliers are more concentrated than buyers/ Costs of switching suppliers are
higher/ Supplier's offerings are highly differentiated
5
...

Customer and distribution have to be found
Growth stage Rapid increase in sales/ Product starts to attract different types of
customers/ Repeat purchases may start/ Microsoft Zunes as the ‘IPod killer’
Maturity stage Growth slows down significantly/ Lasts longer than the previous one, the
most challenging one/ Severe competition, market fragmentation and declining profits/
Weaker competitors will exit
Decline stage/ Rapid decline of the sales of the product/ Better solutions/ New technology
such as the flash pen replacing flopping and zip-disk/ A change in consumer taste or an
increase in competition, domestic or international

Strategic groups
Firms within industry following similar strategies for similar customer groups
...
Islam Yusri
01228860960

Page 14 of 59

Industry evolution
Stages

Issues

Strategies

Emergence

Technological uncertainty
Commercial uncertainty
Customer uncertainty
Channel uncertainty

Locate innovators, and early adopters
Establish standard
Reduce switching cost risk
Encourage trial

Transition
to maturity

Slow growth, failing products
Excess capacity, intense competition
Increased customer power
Extended product line

Marketing mix marketing
Customer retention and segmentation
Efficiency focus
Coordination

Decline

Substitution by newer technologies
Demographic change

Focus or divest

Environmental stability
•

Limitation of porter’s industry model

•

Technological and marketing uncertainty to emerging stage of the industry

•

Environmental turbulence is fundamental to understanding industries (Ansoff – 1984)

•

Marketing and innovation turbulence

•

Try to match its capability to appropriate environmental turbulence

Space analysis
•

SPACE (strategic position & action evaluation)

•

Relates industry strength to the competitive advantage and financial strength of company

•

Financial strength, high liquidity or access to resources; withstand environmental volatility

•

Industry strength, attractiveness in terms of growth potential, profitability and ability to use
its resources efficiently

•

Competitive posture; competitive advantage in an attractive industry

•

Aggressive quadrant; significant advantages, likely to face threats of new competition

•

Conservative posture; mature markets, lack of needs for investment, financial surplus

•

Defensive posture; vulnerable, little residual strength to combat competition

Mr
...
Islam Yusri
01228860960

Page 16 of 59

Information on current customers
•

Recognizing five roles can be useful in targeting marketing activity
– The initiator – initiates the research for solution to consumer’s problem
– The influencer – influence on purchase decision
– The decider – actually make the decision
– The purchaser – buys the product or service
– The user – consumes the product or service

•

Different approaches may be suitable

•

Understanding customers-the key questions
Information on future customers

•

Two main types of change essential to customer analysis First; change in existing
customers their wants, needs and expectations (Kaizen approach)
...
Islam Yusri
01228860960

Page 17 of 59

Company records
•

Company’s own records
– Data about who purchase and how much purchase may be obtained from invoice
records
– Purchase records may show customer loyalty pattern

•

Identify gaps in customer purchasing and highlight most valuable customers

•

Collect routine data on as detail a basis as possible for unforeseen data requirements
Off-the-peg research

•

Tapping into existing research services; data that are already in existence

•

Information such as market size, growth rates, economic trends

•

Crouch and Housden classify research as; Secondary or desk research, Syndicated
research, or Shared research
Secondary desk research

•

Data already been published by someone else

•

Advantages; Relatively cheap, quick to obtain, can be reliable and accurate i
...
govt
...
Islam Yusri
01228860960

Page 18 of 59

•

Qualitative research emphasize gaining understanding and depth in data that can not be
quantified

•

Quantitative research involves large samples and produces quantifiable outputs
Qualitative techniques

•

Unstructured or semi-structured interviewing methods

•

Group discussion take the form of relaxed, informal discussion among 7-9 respondents

•

The Depth interview takes place between one interviewer and one respondent

•

Uses of qualitative research Providing insights into problems/ Having customer descriptions
of things/ Getting reactions to new ideas/ Understanding the findings of large-scale
projects/ Helping structure later research/ Generating new ideas
Quantitative techniques

•

Include surveys, observation methods and experimentation

•

Surveys include three types; personal interviews, telephone interviews and postal surveys

•

Uses of surveys To determine customer behavior/ To provide quantitative data on markets
and customers/ To determine customer requirements and expectations/ To provide data for
segmentation of markets/ To determine customer opinions and perceptions
Surveys

Personal interviews
 Advantages are Greatest flexibility / Useful in attitudinal statements,
 Disadvantages are Most expensive to conduct
Telephone interviews
 Advantages are Data is acquired quickly / Low cost/ Closely controlled
 Disadvantages are Every one may not have telephone
Postal methods
 Advantages are Cheapest of all / Useful in locating geographically disperse samples
 Disadvantages are Low response rate / Little control over who responds / Requires clearly
laid out questionnaire, well pretested to insure clarity
Observation techniques
•

Observation techniques can be particularly useful where respondents are unlikely to be
able or willing to give the types of information required
– Observing what items a shopper has taken from supermarket shelf, considered for
purchase but not bought

Mr
...
Islam Yusri
01228860960

Page 20 of 59

•

Initially secondary sources and company records can be utilized

•

Qualitative research might then be used to explore

Quantitative research
•

Help in formulating hypothesis about how market is segmented and what factors influence
purchase

•

Followed by quantitative study
– Ask respondents to evaluate competing products

•

Experimentation might also be used in quantitative phase of segmentation

Analysis and interpretation
•

Turn the data generated into meaningful information
– Factor analysis
– Cluster analysis
– Perceptual mapping

•

Finally results will be presented to senior marketing decision-maker

Organizing customer information
•

Information is organized through MIS

•

Information system (MIS) has five basic components;
– Market research interface to collect data
– The raw data collected
– Statistical techniques used to analyze
– Market models to utilize raw data and statistical techniques
– Finally managerial interface as decision maker

Mr
...
e
...
Islam Yusri
01228860960

Page 22 of 59

Chapter 5: Competitor Analysis
Competitive Market Analysis
 Without knowledge of competitors’ strengths and their likely actions it is impossible to
formulate the central component of marketing strategy – finding a group of customers for
whom one has a competitive advantage over the competition
...

 Several studies demonstrate a positive link between a clear understanding of competitor
strategies and actions, and corporate performance
 the essential activities of gathering and disseminating and acting on competitor intelligence
are:
o benchmarking against rivals;
o dimensions of competitor analysis;
o the choice of ‘good’ competitors;
o the origin, sources and dissemination of competitive information
...
Benchmarking usually involves four main steps
...

o Central to such an analysis will be identifying the keys to their success in the market
...
New entrants or smaller, more focused firms may have particular
strengths from which the firm can learn
...

o Organizations also benchmark specific activities (such as procurement and
purchasing) against other organizations outside their immediate sector where
lessons can be transferred
...

o Scarce resources and time constraints generally dictate the selection of a few key
central processes for detailed benchmarking
...

o Initial focus will also typically be on processes that account for significant costs,
make a significant impact on customer satisfaction and show greatest room for
improvement
...


Mr
...

o Swain (1993) suggests three main sources of competitor information for
benchmarking: published sources; data sharing; and interviews
...

 Once the comparisons have been made and the areas for direct attention identified a
number of options may be apparent
...

o Second, the firm may conclude that its processes are inadequate or suboptimal and
need to be overhauled
...

o Alternatively, it may involve adopting best practice processes from other industries
that will enable the firm to leapfrog the competition and gain competitive advantage
from process innovation
...
In the longer term, however, there is a danger in the
analysis being so constrained
...

o Assessing the competitors’ current strategies:
 By understanding the strategies used by competitors in pursuit of their goals
and objectives the firm can identify opportunities and threats arising from
competitor actions
...
Those resources may not be fully deployed at present but can give
further clues into how the competitor will move in the future, or how the
competitor will react to threats
...
Islam Yusri
01228860960

Page 24 of 59

Assessing competitors’ current and future objectives
 Understanding the goals or objectives of competitors can give guidance to strategy
development on three levels
 Goals can indicate where the company is intending to develop and in which markets, either
by industry or internationally, major initiatives can be expected
...

 Goals may also give a guide to the intensity of competitor activity and rivalry
...

 The goals can have implications across the broad portfolio of a company’s activities
...

 Assumptions that a firm has about itself and the market affect the goals and objectives it
sets and can be a source of opportunity or threat
 Analyses of how major firms often react to technological threats show they are rarely able
to change their historic orientation
...
He suggests
o There is a tendency for firms to force the evidence to fit preconceptions; become
deaf to any evidence at odds with their beliefs; predict the most feared competitive
action as a defense in case there is any future post-mortem after such action occurs;
o Predict that competitive action will be that to which the manager’s favorite strategy is
an effective counter-strategy as a way of getting support for that strategy
...
It is an essentially complex activity to which the
components of marketing strategy
 Sets of issues need to be addressed with regard to understanding current competitor
strategies:
o First, Identification of the market or markets they have chosen to operate in
o Second, identification of the way in which they have chosen to operate in those
markets
o Third, the supporting marketing mix that is being adopted to enable the positioning
aimed for to be achieved
...
Islam Yusri
01228860960

Page 25 of 59

 valued uniqueness
 differentiated products and services that customers will be willing to pay for
o Competitors’ supporting marketing mix
o Competitors’ marketing organization
Value-chain analysis
 Porter (1985) identifies five primary activities that add value to the final output of a
company:
o Inbound logistics
o Operations
o Outbound logistics
o Marketing and sales activities
o Services that are needed to keep the product and service operate effectively

 There are several ways in which analysis of the value chain can provide an insight into
competitors
...

o Many conventionally oriented companies perceive operations as their primary
source of added value and therefore leave opportunities for competitors that take a
more extended view of the value they can add in the customer’s eyes
...

Assessing competitors’ capability profiles
 The assessment of a competitor’s resources involves looking at their strengths and
weaknesses
...
Islam Yusri
01228860960

Page 26 of 59

Predicting competitors’ future strategies
 How a competitor might behave when faced with various environmental and competitive
changes
...

o What likely moves or strategy shifts will the competitor make History can provide
some guide as to the way that companies behave
...

o A good competitor can support industry structure if it invests in developing its own
product and enhancing quality differentiation and market development rather than
confrontational price-cutting or promotional strategies
...

o A good competitor can provide both pressure to keep its competitors lean and an
umbrella under which the industry can develop steadily
...

o A good competitor will have reconcilable goals that make it comfortable within the
market it operates, less likely to make massive strategic shifts and tolerant of
moderate intrusion
...

Obtaining and disseminating competitive information
 At the most basic level a company can collect published statistical information on
competitors and markets
...

 A company’s own propaganda – in other words, its public relations activities can add
texture to background statistical information
...

 A company can gather information from intermediaries or by posing as an intermediary
...
It becomes valuable only when it
researches the right people within the organization and is subsequently acted on
...

o First, the destination must be clearly identified
...
Islam Yusri
01228860960

Page 27 of 59







o Second, the data must be presented in a manner that the recipient can understand
and assimilate
...

Although as important as market information, data on competitors are rarely gathered
systematically or comprehensively
...

There is therefore good reason for incorporating a competitive information system within
any marketing information system that exists, and having people responsible for ensuring
its maintenance
...

 Marketing resources play a great role in generating value for customers and protect
companies against competitor imitation
 Many marketing resources, as we shall see, are intangible in nature and hence more
difficult for competitors to understand and replicate
 Isolating mechanisms operate at three main levels:
o First, for a competitor to imitate a successful marketing strategy it must be able to
identify the resources that have been dedicated to creating and implementing that
strategy in the first place
...

o Third, most resources depreciate over time as competitors are eventually likely to
find ways of imitating successful strategies
...

 Treacy and Wiersema (1995) point to three different ‘value disciplines’, each of which
excels at meeting the distinctive needs of one customer type, and each of which requires
different resource capabilities:
o Operational excellence – providing middle-of-market products at the best price with
the least inconvenience
...
Islam Yusri
01228860960

Page 28 of 59

o Product leadership – offering products that push the boundaries of product and
service performance
o Customer intimacy – delivering what specific customers want in cultivated
relationships
...
We need to be flexible enough to change our ideas about corporate
capabilities as marketing strategy options emerge from our analysis (and vice versa), and if
necessary rethink the attractiveness of strategy options as a result
...
Indeed, the critical question may be
how capabilities can be managed successfully across alliances of companies
...
(1998) argued that two main themes came to dominate thinking about
marketing strategy during the 1990s:
o Market orientation
 the superior performance of companies with high-quality, organization-wide
generation and sharing of market intelligence leading to responsiveness to
market needs
o Resource-based view (RBV)
 RBV suggests that high-performance strategy is dependent primarily on
historically developed resource endowments
 Competitive positioning provides a definition of how the firm will compete by identifying
target markets and the competitive advantage that will be pursued in serving these target
markets
...

 Positioning perspective recognizes that for corporate resources to be leveraged for
economic benefit requires their application in the marketplace
...

 Indeed, the potential incompatibility with the principles of market orientation is illustrated by
Grant’s (1995) view that:
o The greater the rate of change in a company’s external environment, the more it
must seek to base long term strategy upon its internal resources and capabilities,
rather than upon an external market focus
...

 The RBV places central emphasis on the role of assets and capabilities in creating
competitive advantage
...
Islam Yusri
01228860960

Page 29 of 59

 The theory recognizes that resources are heterogeneous across firms and that there are
barriers to acquisition or imitation that can provide individual firms with ways of defending
the advantage created in the short to medium term
...

 A major criticism of the RBV, however, has been that it neglects the influence of market
dynamism
 The rapidly markets change, the more there is a need for firms to renew their resources
and develop new capabilities
Dynamic capabilities
 In response to the concerns above, recent research broadly in the RBV tradition has
focused on dynamic capabilities
 These have been defined as: The capacity of an organization to purposefully create,
extend, or modify its resource base
 This view recognizes that as markets change, become more globally integrated, new forms
of competition emerge and new technologies are employed, firms cannot rest on their
existing capabilities alone
 Firms need to actively seek to recreate themselves through extending and modifying their
operations
...

 From a marketing perspective dynamic capabilities help firms to identify market
opportunities and subsequently enter new businesses through the creation of new products
and improved services
 Teece et al
...

o The coordination and integration role enables firms to integrate external activities
...

 This also suggests that, besides their customer-linking abilities with customers, firms must
be able to enhance their knowledge creation process by being capable to develop networks
and strategic alliances throughout the value chain
 Learning enables new opportunities to be identified and can stimulate experimentation and
innovation
 It is a core element of dynamic capabilities since it is a ‘collective activity through which the
organization systematically generates and modifies its operating routines in pursuit of
improved effectiveness’

Mr
...
Other researchers seek commonalities across firms
...

 Helfat et al
...
In this sense, evolutionary fitness includes not only technical fitness but
also understanding of competition and market conditions
...

 Wang and Ahmed (2007) suggest that resources can usefully be considered at four levels
...

o Dynamic capabilities are the highest level of firm resource
...

 A wide variety of company properties can be converted into marketing assets
...

CUSTOMER-BASED MARKETING ASSETS:
“Customer-based marketing assets are those assets of the company, either tangible or intangible,
valued by the customer or potential customer
...
”
 Company name & reputation
o One of the most important customer-based assets a company can possess is its
reputation or image
 Brands
o The identity and exploitation of brands remain central to many views of marketing
...

o Brands can be particularly powerful marketing assets for a number of reasons:
 Brands are difficult to build
 Brands add value for customers
 Brands create defensible competitive positions
 Brands build customer retention

Mr
...

o Ex: French wine enjoys a strong international reputation
o The value of image of home country, company or brand should not be
underestimated
...

 Market domination
o In addition to image, the domination or apparent domination of the market can
constitute an asset
...

o Market leaders typically enjoy good coverage of the market, wide distribution and
good shelf positions
...

o Unique products or services, until they are imitated, can provide marketing assets,
so long as customers want them and are prepared to pay for them
...
They include the distribution network, its control and its uniqueness
and pockets of strength
...

 Distribution control
o Investments in dominating some or all of the channels for a product can be a
powerful asset
...

o Where a company is unable, through size or resource constraints, to serve a wide
market, concentrating effort, either geographically on specific regions of the market,
or through specific outlets, can enable a pocket of strength to be developed
...

 Delivery lead-time and security of supply
o Delivery lead-time is a function of at least three main factors – physical location,
order through production systems and company delivery policy
...
Islam Yusri
01228860960

Page 32 of 59

o In an increasing number of situations the ability to respond quickly, at no
compromise to quality, is becoming more important
...

INTERNAL MARKETING SUPPORT ASSETS
“A resource becomes an asset when it is actively used to improve the organisation’s performance
in the marketplace
...

 Information systems and market intelligence
o Information systems and systematic marketing research can be valuable assets in
that they keep the company informed about its customers and its competitors
...

 Existing customer base
o A major asset for many companies is their existing customer base
...

 Technological skills
o The type and level of technology employed by the organization can be a further
asset
...

 Production expertise
o Production know-how can be used to good effect as a marketing asset
...

o Patents grant persons the exclusive right to make, use and sell their inventions for a
limited period
...


Mr
...

o We should not neglect the importance of existing partnerships as marketing assets,
and also the management capability to manage marketing strategy in alliance-based
networked organizations
...

o The formation of culture and the capacity to learn are complex issues
...
”
 Market access – for example, alliances with local distributors are frequently the only way
open to the exporter to enter protected overseas markets
...

 Shared technology – alliances are often the basis for sharing and combining technologies
to create market offerings with higher customer value, which neither partner could achieve
alone
...

DEVELOPING MARKETING CAPABILITIES
“All the marketing assets in the world, however, are of little value if they are not actively exploited
in the marketplace
...
”
Product & service capability
 Managing existing products, including the ability to influence others in the organization,
where their activities impact on customer satisfaction, is basic to effective marketing
...

Advertising, promotion & selling capability
 Effective communications with customers, both current and prospective, take a variety of
forms including advertising, public relations, direct marketing, sponsorship and selling
 Companies are outsourcing many of these activities to enable them to buy in best practice
and expertise from outside
...


Mr
...

Pricing & tendering capability
 Pricing decisions are notoriously difficult
...

 Pricing decisions involve many considerations, including costs of production of physical
products or delivery of services, the prices charged by competitors, the demand elasticity
and the position in the market being targeted
...
”
Absorptive marketing capabilities
 Absorptive capabilities are the processes that enable firms to recognize the value of new
information from the market and to assimilate it
...

Market sensing capability
 The capacity for understanding what is happening in the external environment with respect
to demand, customers, competitors and wider macro-environmental change is essential to
crafting an effective strategy in a changing market
...

Adaptive marketing capability
 Adaptive capabilities center on the firm’s ability to identify and capitalize on emerging
market opportunities
...

Market targeting & positioning capability
 Market targeting and positioning capabilities encompass the ability to identify alternative
opportunities and then select appropriate market targets, where the firm’s resources and
capabilities are aligned for the best effect
...

 Strategic account management skills are becoming increasingly important in business-tobusiness markets, together with the increased focus in many markets on relationship
building through customer service
...
Islam Yusri
01228860960

Page 35 of 59

 Direct marketing also has a role to play here
...

 These can then be viewed as a portfolio that are available for deployment
 Hamel and Prahalad (1994) suggest that in future firms will define themselves more as
portfolios of competencies than as portfolios of products or SBUs
...

o Crown Jewels
...

o Black Holes
...

o Achilles’ Heels
...

o Sleepers
...

Developing & exploiting resources
 Organizations need to ensure they are developing and nurturing the resources that will be
required in the future
...

 There are four strategies for development
o The ‘fill the gaps’ strategy
 Involves looking for better ways of serving existing customers, using the
existing strengths of the organization
...

o Next generation Strategy
 The organization retains its focus on existing markets and customers but
recognizes that the resources it will need to serve them in the future will need
to change
 This requires the ‘next generation’ of resources to be built and nurtured
...

o Diversified opportunities
 Takes the organization simultaneously away from its existing markets and its
existing resources – a more risky strategy and one that should not be pursued
lightly
...


Mr
...

 In this sense positioning and segmentation are distinct parts of the strategy process and
provide us with some extremely powerful tools; but ultimately they are linked by the central
issue of focusing on satisfying the customer’s needs in ways that are superior to
competitors’
...
Islam Yusri
01228860960

Page 37 of 59

 This suggests that the sequence in planning can be of the following type:
o Market segmentation – identifying the most productive bases for dividing a market,
identifying the customers in different segments and developing segment
descriptions
...

Principles of Competitive Positioning
 Kotler, 1997
o Positioning is the act of designing the company’s offering and image so that they can
occupy a meaningful and distinct competitive position in the target customers’ minds
 Competitive differences that creates a competitive position show meet the following criteria:
o Importance
 a difference should create a highly valued benefit for significant numbers of
customers
o Distinctive & pre-emptive
 the difference cannot be imitated or performed better by others
o Superior
 the difference should provide a superior way for customers to obtain the
benefit in question
o Communicable
 the difference should be capable of being communicated to customers and
understood by them
o Affordable
 the target customers can afford to pay for the difference
o Profitable
 the difference will command a price adequate to make it profitable for the
company
Four Pillars of Company’s Distinctive Value Proposition
 Direct treating customers differently by dealing direct instead of through traditional
distributors, and staying in touch throughout the purchase and use of the product
 Hassle free clear communications with customers, and no sales pressure or price haggling
 Peace of mind all customers pay the same price, and many features traditionally sold as
extras are included in the deal
 Courtesy demonstrating respect for customer needs and preferences throughout the
process

Mr
...

o The operational use of segmentation usually requires that segment targets can be
identified by measurable characteristics to enable their potential value as a market
target to be estimated and for the segment to be identified
...

 Major issues in Market Segmentation, according to Piercy and Morgan (1993):
o Methodology of market segmentation
 First, there is the question of the choice of the variables or customer
characteristics with which to segment the market – the ‘bases’ of market
segmentation
...

o Testing the robustness of segments
 Frank et al
...

o Strategic Segmentation Decision
 If the market is susceptible to segmental analysis and modelling, and
attractive segments can be identified, then the decision faced is whether to
use this as the basis for developing marketing strategies and programs, and
whether to target the entire market or concentrate on part of it

Mr
...

Segmenting Consumer Markets
 The selection of the base for segmentation is crucial to gaining a clear picture of the nature
of the market – the use of different bases can result in very different outcomes
...

 In addition to choosing the relevant bases for segmentation, to make the segments more
accessible to marketing strategy, the segments are typically described further on common
characteristics
...
Background customer characteristics
2
...
Customer behavior
Background customer characteristics for segmenting markets
 Can be classified along two main dimensions
o The first dimension is the origin of the measures
o The second dimension to these characteristics is the way in which they are
measured
 The commonest variables are:
o Gender
o Age
 Downmarket/young
 Upmarket/young
 Downmarket/older
 Upmarket/older
o Geographic location
o Subculture
Socio-economic characteristics
 Factors such as income, occupation, terminal education age and social class have been
popular with researchers for similar reasons to demographics
 They are easy to measure and can be directly related back to media research for media
selection purposes
...
Islam Yusri
01228860960

Page 40 of 59

Customer Attitudinal Characteristics for Segmenting Markets
 Attitudinal characteristics attempt to draw a causal link between customer characteristics
and marketing behavior
...

 Benefit Segmentation
o Classic approaches examine the benefits customers are seeking in consuming the
product
...

o Benefit segmentation takes the basis of segmentation right back to the underlying
reasons why customers are attracted to various product offerings
...

o Much of the work in the multidimensional scaling area is primarily concerned with
identifying segments of respondents who view the products on offer in a similar way
and require from the market similar features or benefits
Customer Behavioral Characteristics for Segmenting Markets
 Purchase Behavior
o Study of purchasing behavior has centered on such issues as the time of purchase
(early or late in the product’s overall life cycle) and patterns of purchase (the
identification of brand-loyal customers)
o Innovators: because of their importance when new products are launched,
innovators (those who purchase a product when it is still new) have received much
attention from marketers
...
While innovators are concerned with initial purchase, loyalty patterns
are concerned with repeat purchase
...

o Examination of usage patterns and volumes consumed (as in the heavy user
approach) can pinpoint where to focus marketing activity
...

 Communication Behavior
o A further behavioral variable used in consumer segmentation studies has been the
degree of communication with others about the product of interest
...

 It is not an easy job
 Opinion only in their own interest areas

Mr
...

 Relationship-seeking characteristics
o A related characteristic for segmentation that is attracting some attention in the light
of the move towards relationship marketing is the relationship requirements of
customers
o The segmenting markets into such groups:
 relationship seekers
 relationship exploiters
 loyal buyers
 arm’s-length transaction customers
Segmenting Business Markets
Background company characteristics
 Industry type
 Company size
 Customer location
 Company technology
 Customer capabilities
 Purchasing organization
 Power structures
 Purchasing policies
 Product application
Attitudinal characteristics
 It is possible also to segment business markets on the basis of the benefits being sought by
the purchasers
...

 Its strength is that it is segmentation based on customer needs
...

 Business goods markets can be segmented by issues such as the following:
o Buyer–seller similarity
o Buyer motivation
o Buyer risk perceptions

Mr
...
In these cases primary research will be necessary
...

 This would be followed by quantitative research to estimate the size of the potential
segments and to describe them further in terms of other background characteristics
...

First-order and Second-order
 Hence use/benefit segmentation can be referred to as first-order segmentation
...

 Further segmentation within use/benefit segments can be termed second-order
segmentation
...

Benefits of Segmenting Markets






Useful approach for marketing of smaller groups
Identify gaps in the market
Identify specific segments there are still in growth
Enables marketer to marketer to match products to needs of target market
Competitive advantages
Implement Market Segmentation

 Scope & purpose of market segmentation
o There is growing recognition that conventional approaches may pay insufficient
attention to identifying the scope of market segmentation
o In selecting segmentation approaches it is necessary to distinguish between
segmentation that has the goal of gaining a general understanding of the market and
use for positioning studies, and segmentation concerned with marketing program
decisions in new product launches, pricing, advertising and distribution
...

o The nature of the different levels of segmentation can be described as follows:
 Strategic segmentation is related to management concerns for strategic
intent and corporate mission, based on product/service uses and customer
benefits
...


Mr
...

 Sources of implementation problems
o Wind (1978) noted that little was known about translating segment research into
marketing strategies
o Young et al
...

o Shapiro and Bonoma (1990) wrote: ‘Much has been written about the strategy of
segmentation, little about its implementation, management and control’, and this
would still seem a valid conclusion
...
Issues to assess include the following:
 Organization structure: Companies tend to organize into functional
departments and sub-units of one kind or another, depending on their task
allocation and how they deal with the outside world
...
If functions cannot collaborate or work together
because people are competing for power and withholding their knowledge
and expertise, the segmentation strategy is likely to fail
...

 Information and reporting: Novel segmentation schemes may not fit with
existing information systems and reporting systems
...

 Corporate capabilities: It is all too easy for marketing researchers and
analysts to develop attractive market targets, but a company may have little
basis for achieving a competitive advantage simply because it lacks the
capabilities for dealing with this type of customer
 Operational systems: Segmentation strategy may fail because it
underestimates the problems faced at the operational level in translating
segmentation strategy into effective reality

Mr
...
Islam Yusri
01228860960

Page 45 of 59

Chapter 11: Creating sustainable competitive advantage
Using organizational resources to create sustainable competitive advantage
 Organization will be able to create a long list of its resources, but some of these will be
more useful than others in creating competitive advantage
...

 There are three main characteristics of resources which, when they coincide, help create a
sustainable competitive advantage (SCA)
...

Porter (1980) has identified two main routes to creating a competitive advantage
...

Achieving cost leadership
 Porter (1985) has identified several major factors that affect organizational costs
...
4 and each is reviewed briefly
below
...

 Scale economies stem from doing things more efficiently or differently in volume
...

Experience & learning effects
 Further cost reductions may be achieved through learning and experience effects
...

 The Boston Consulting Group extended the recognised production learning curve beyond
manufacturing and looked at the increased efficiency that was possible in all aspects of the
business through experience
...


Mr
...

 There is a clear positive association between utilization and return on investment
...

Linkages
 A further set of cost drivers are linkages
...

 External linkages with suppliers of factor inputs or distributors of the firm’s final products
can also result in lower costs
...

Timing
 Timing, though not always controllable, can lead to cost advantages
...

Policy choices
 Policy choices, the prime areas for differentiating (discussed below), have implications for
costs
...
all affect costs
...

 Levitt (1986) has suggested that products and services can be seen on at least four main
levels: Core product , Expected product , Augmented product , Potential product
 Peters (1987) believes that, while in the past suppliers have concentrated on attempts to
differentiate their offerings on the basis of the generic and expected product, convergence
is occurring at this level in many markets
...
Islam Yusri
01228860960

Page 47 of 59

 In the future he predicts greater emphasis on the augmented and potential product as ways
of adding value, creating customer delight and hence creating competitive advantage
...

 Augmenting the product
o Differentiation of the augmented product can be achieved by offering more to
customers on existing features
o Analysis of product features must relate those features to the benefits they offer to
customers
...

o Packaging
 Packaging has five main functions, each of which can be used as a basis for
differentiation
...

o Branding
 A particularly effective way of differentiating at the tangible product level is to
create a unique brand with a favorable image and reputation
...

o Service
 Service can be a major differentiating factor in the purchase of many
products, especially durables (both consumer and industrial)
...

Deciding on bases for differentiation
 In deciding which of the possible elements to use in differentiating the product three
considerations are supreme:
o First, what do the customers expect in addition to the core, generic product
o The second consideration is what the customers would value over and above what
is expected
...


Mr
...

 He suggests that, as it becomes increasingly difficult to differentiate on the basis of core
product, greater emphasis will need to be put on how to ‘add service’ through the
augmented (and potential) product
...

 Recent developments in direct marketing are not only related to creating different ways of
promoting products
...

 The advent of the Internet has made significant changes to the distribution strategies of
many firms
...

 Without a cost advantage, starting a price war can be a disastrous course to follow
 Premium pricing is generally only possible where the product or service has actual or
perceived advantages to the customer and therefore it is often used in conjunction with,
and to reinforce, a differentiated product
...

 Public relations essentially consist of creating relationships with the media and using those
relationships to gain positive exposure
...

Brand differentiation
 Brand positioning places the customer at the center of building a maintainable hold on the
marketplace
...

Sustaining competitive advantage
 There are a variety of ways companies can attempt to create a competitive advantage for
themselves
...

 The most useful ways of creating defensible positions lie in exploiting the following:

Mr
...

 Unique products do not, however, stay unique forever
...

 This in turn requires a clear understanding of who they are and how to access them
...

Enhanced customer linkages
 Creating closer bonds with customers through enhanced service can help establish a more
defensible position in the market
 Creating switching costs, the costs associated with moving from one supplier to another, is
a further way in which customer linkages can be enhanced
Established brand and company credibility
 Brand and company reputation are among the most defensible assets the company has,
provided they are managed well and protected
...

Offensive and defensive strategies
Build strategies
 A build strategy seeks to improve on organizational performance through expansion of
activities
...

 Build strategies are most suited to growth markets
...

 Build strategies can also make sense in non-growth markets where there are exploitable
competitor weaknesses or where there are marketing assets that can be usefully deployed
...


Mr
...

 This will inevitably lead to some degree of confrontation between the protagonists for
customers
...
Frontal attack
 The frontal attack is characterized by an all-out attack on the opponent’s territory
...

 The outcome of the confrontation will depend on strength and endurance
2
...

3
...

o The first is to attempt to isolate the competitor from the supply of raw materials on
which they depend and/or the customers they seek to serve
...

4
...

 Bypass is often achieved through technological leapfrogging
...
Guerilla tactics
 Where conventional attacks fail or are not feasible guerrilla tactics are often employed
...

 They are often used by a weaker attacker on a stronger defender
...

 When the business dominates its market it may have cost advantages through economies
of scale or experience effects that can be used as a basis for defending through selective
price cutting
...


Mr
...

Position defense
 The brand or company occupies the most desirable space in the minds of the customer and
in no case intends to divert from that position thus making the brand impregnable
...

Flanking defense
 The flanking defense is a suitable rejoinder to a flanking attack
...

 It requires the prediction of competitor strategy and likely strike positions
...

 The pre-emptive defensive can involve an actual attack on the competition (as occurs in the
disruption of competitor test marketing activity) or merely signal an intention to fight on a
particular front and a willingness to commit the necessary resources to defend against
aggression
...

 Failure to move with these changes can result in opening the company to a flanking or
bypass attack
Contraction defense
 A contraction defense, or strategic withdrawal, requires giving up untenable ground to
reduce overstretching and allow concentration on the core business that can be defended
against attack
Market niche strategies
Market niche strategies, focusing on a limited sector of the total market, make particular sense for
small and medium-sized companies operating in markets that are dominated by larger operators
...
Islam Yusri
01228860960

Page 52 of 59

Choosing the niche
 An important characteristic of the successful nicher is an ability to segment the market
creatively to identify new and potential niches not yet exploited by major competitors
...

Focusing effort
 The essence of the niche strategy is to focus activity on the selected targets and not allow
the company blindly to pursue any potential customer
...

 Hammermesh et al
...

o Efficient use of R&D resources
...
Adopting a ‘small is beautiful’ approach to business increases the
emphasis on operating more efficiently rather than chasing growth at all costs
...

Divestment/deletion
 Divestment – the decision to get out of a particular market or business – is never taken
lightly by a company
...

Matching managerial skills to tasks
 The above alternative strategies require quite different managerial skills to bring them to
fruition
...

 Wissema et al
...

o Pioneers and conquerors for build strategies
o Administrators to hold position
o Focused creators to niche
o Economizers for divestment

Mr
...

 It is useful to distinguish two main sets, the rational and overt; and the emotional and covert
 For many products, however, emotional reasons may play as big a, or even a bigger role
...

 The balance between the two, however, will vary significantly across brands and it is an
important task for marketers to understand the balance for their particular market offering
...

 Parasuraman & Colby (2001) identified 5 types of technology customers:
o Explorers – highly optimistic & innovative
o Pioneers - the innovative but cautious
o Sceptics – who need to have the benefits of the technology proven to them
o Paranoids – those who are insecure about the technology
o Laggards – those who resist the technology

Mr
...

 Having such brand image allows companies to nimbly “cross the chasm” with new,
innovative product offerings, since mainstream customers are more likely to give a
company with known service and support offerings the benefit of doubt
...

 Building the brand preference
 Increasing the market share
o Breakaway positioning
 Associating the product with the radically different category (for packaged
goods mostly)
 Dedicated to the tangible goods mostly
...


Mr
...

 Mostly dedicated to the new technologies which product consumers perceive
as difficult to use
...
this entails attempting to identify the

Mr
...
Under this approach, you add together the direct material cost, direct labor
cost, and overhead costs for a product, and add to it a markup percentage (to create
a profit margin) in order to derive the price of the product
...

Going rate pricing is a common practice with homogeneous products with very little
variation from one producer to another, such as aluminum or steel
...

 Sealed bids
o A cost estimate, or a proposal to buy something, the value of which is kept secret
from competitors until all such bids have been made
Promotional pricing
 Loss-leader pricing: supermarkets and department stores often drop the price on wellknown brands to stimulate additional store traffic
 Special-event pricing: sellers well establish special pricing in certain seasons to draw in
more customers
 Cash rebates: companies offer cash rebates to encourage purchase of the manufacturers
products within a specified time period
 Low-interest financing: the company can offer customers low-interest financing
 Psychological pricing: setting the price just beneath the psychological barrier
The effects of the Internet on pricing decisions
 Easier to the customers to compare prices
 Help to spread the information about competitive prices
 Made the customers more price sensitive

Mr
...
Islam Yusri
01228860960

Page 58 of 59

The use of the internet for marketing communications





Banner advertising and pay-per-click
Viral Marketing
Pre-Launch Promotion
Advertising Audience measurement
Distribution Strategies

 Focuses on how products (goods/services) will be physically delivered to the customer
 The distribution network used/created depends on whether the final customers are
consumers or other businesses
Channels of Distribution
 Main choice facing Marketers is whether to sell through:
o Intermediaries (wholesalers-retailers)
o Direct to customers
Products sold through retailers
 Adv
...
g
...
: They have many competing brands on their shelves & little incentive to promote
one brand over another
 Suppliers attempt to counter this through either “push” or “pull” strategies
Effects of the Internet on Distribution Strategies
 Internet has facilitated the distribution of bit-based products (e
...
information, music &
video)
 Music companies are challenged by pirate sites providing music for free (e
...
Amr Diab)
 Managing multi-channel strategy is a challenge for many companies (e
...
Tesco
...
g
...
Islam Yusri
01228860960

Page 59 of 59

Processes
 System & processes involved in delivering the product will impact how the customers judge
the level of service received
 ICT tools such as CRM
 CRM covers all methods & technologies used by companies to manage their relationships
with customers & clients
 Effective CRM system helps org
...
g
...
Islam Yusri
01228860960



---