Lecture 2 Developing Marketing Strategies By : Dr Shahinaz Abdellatif

Chapter Questions How does marketing affect customer value? How is strategic planning carried out at different levels of the organization? What does a marketing plan include?

Three V’s Approach to Marketing Define the value segment Define the value proposition Define the value network

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-4 What is the Value Chain? The value chain is a tool for identifying how to create more customer value because every firm is a synthesis of primary and support activities performed to design, produce, market, deliver, and support its product.

Figure 1: The Generic Value Chain

Figure 2: Levi Strauss’s Value- Delivery Network

Figure 3: Determinants of Customer Delivered Value

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-8 Characteristics of Core Competencies A source of competitive advantage Applications in a wide variety of markets Difficult to imitate

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-9 Table 2.1 Becoming a Vigilant Organization Can we learn from the past? How should the present be evaluated? What do we envision for the future?

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-10 Core Business Processes Market-sensing process New-offering realization process Customer acquisition process Customer relationship management process Fulfillment management process

Vision Vision is the art of seeing things invisible Jonathan Swift The Best Way to Predict the Future is to Invent it Dennis Gabor

Vision Goals Objectives (sub-goals) Strategies Mission 1-Market segment scope 2-Industry scope 3-Technology scope 4-Vertical scope 5-Geographical scope How to achieve

Goal Formulation and MBO Unit’s objectives must be hierarchical Objectives should be quantitative Goals should be realistic Objectives must be consistent

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-14 Major Competitive Spheres Industry Products Competence Market segment Vertical channels Geographic

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-15 Corporate Headquarters’ Planning Activities Define the corporate mission Establish strategic business units (SBUs) Assign resources to each SBU Assess growth opportunities

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-16 Good Mission Statements Focus on a limited number of goals Stress major policies and values Define major competitive spheres Take a long-term view Short, memorable, meaningful

EXAMPLES OF COMPANY MISSION & VISION STATEMENTS  OTIS ELVATOR Our mission is to provide any customer a means of moving people and things up, down and sideways over short distances with reliability than any similar enterprise in the world.  THE SATURN DIVISION OF GENERAL MOTORS To market vehicles developed and manufactured in the United States that are world leaders in quality, cost, and customer satisfaction through the integration of people, technology, and business systems and to transfer knowledge, technology, and experience throughout General Motors.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-18 Rubbermaid Commercial Products, Inc. “ Our vision is to be the Global Market Share Leader in each of the markets we serve. We will earn this leadership position by providing to our distributor and end-user customers innovative, high-quality, cost- effective and environmentally responsible products. We will add value to these products by providing legendary customer service through our Uncompromising Commitment to Customer Satisfaction.”

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-19 Motorola “ The purpose of Motorola is to honorably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do this so as to earn an adequate profit which is required for the total enterprise to grow; and by doing so, provide the opportunity for our employees and shareholders to achieve their personal objectives.”

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-20 eBay “We help people trade anything on earth. We will continue to enhance the online trading experiences of all—collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.”

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-21 Dimensions that Define a Business Customer groups Customer needs Technology

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2-22 Characteristics of SBUs It is a single business or collection of related businesses It has its own set of competitors It has a leader responsible for strategic planning and profitability

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Ansoff’s Product-Market Expansion Grid Market penetration strategy Market development strategy Product development strategy Diversification strategy

Nine Ways to Build Demand Products ExistingModifiedNew Existing Sell more of our existing products to our existing types of customers. (Market penetration) Modify our current products and sell more of them to our existing customers. (Product modification) Design new products that will appeal to our existing customers. (New product development) Markets Modified Enter and sell our products in other geographical areas. (Geographical expansion) Offer and sell modified products to new geographical markets. Design new products for prospects in new geographic areas. New Sell our existing products to new types of customers. (Segment invasion) Offer and sell modified products to new types of customers. Design new products to sell to new types of customers. (Diversification)

2- Strategies for analyzing Product Portfolio

Strategies for analyzing Product Portfolio Build Strategy : question marks so they become stars. Hold: cash cows to continue to generate maximum cash flow. Harvest: dogs, weak cash cows and question marks with little opportunities. Divest or terminate: dogs or question marks.

Focus Differentiation Cost Leadership 3- Porter’s three generic strategies Middle of The road

Competitive Advantage The company’s competitive advantage lies in its core competence. A core competence is a distinctive capability.

Competitive Scope The breadth of the company’s or business unit’s target market, depends on various considerations: Range of product varieties Distribution channels Types of buyers it will serve Geographic areas in which it would sell Array of related industries it will compete with Broad TargetNarrow Target (niche)

3- Porter’s Generic Competitive Strategies Competitive Advantage Competitive Scope Lower CostDifferentiation Broad Target Cost LeadershipDifferentiation Narrow Target Cost FocusFocused Differentiation

Porter’s three generic strategies Possible problemsBenefitsWays to achieve the strategy Type of strategies Vulnerability to even lower cost operators Possible price wars The difficulty of sustaining it in the long term The ability to: outperform rivals erect barriers to entry resist the five forces Size and economies of scale Globalization Relocating to low-cost parts of the world Modification/simplification of designs Greater labour effectiveness Greater operating effectiveness Strategic alliances New source of supply Cost Leadership Limited opportunities for sector growth The possibility of outgrowing the market The decline of the sector A reputation for specialization which ultimately inhibits growth and development into other sectors A more detailed understanding of particular segments The creation of barriers to entry A reputation for specialization The ability to concentrate efforts Concentration upon on or a small number of a strong and specialist reputation Focus The difficulties of sustaining the bases for differentiation Possibly higher costs The difficulty of achieving true and meaningful differentiation A distancing from others in the market The creation of a major competitive advantage Flexibility The creation of strong brand identities The consistent pursuit of pursuit of those factors which customers perceive to be important High performance in one or more of a spectrum of activities Differentiation

4- Competitive Strategies & Tactics A tactic is a specific operating plan detailing how a strategy is to be implemented in terms of when and where it is to be put into action. Usually they are narrower in their scope and shorter in their time horizon than are strategies Strategies can either be: Timing Tactics (when) Market location strategies (where)

Timing Tactics First Mover Industry leader Cost leader position Temporarily high profits Set the standard Late Mover Imitate technological advances (Low R&D) Low risk Take advantage of the first mover’s natural inclination to ignore market segments

Market Location Tactics DefensiveOffensive -Used by a market leader. -Aim to lower the probability of attack, divert attacks to less threatening, or lessen the intensity of an attack. -Making competitive advantage more sustainable -Takes place in established markets. - Takes place in the firm’s own current market position as a defensive against possible attack by rival 1.Raise structural Barriers 2.Increase expected retaliation 3.Lower the inducement for attack 1.Frontal Assault 2.Flanking Maneuver 3.Guerrilla Warfare

PRINCIPLES OF DEFENSIVE MARKETING WARFARE 1.ONLY THE MARKET LEADER SHOULD CONSIDER PLAYING DEFENSE. 2.THE BEST DEFENSIVE STRATEGY IS THE COURAGE TO ATTACK. 3.STRONG COMPETITIVE MOVES SHOULD ALWAYS BE BLOCKED.

PRINCIPLES OF FRONTAL ASSAULT MARKETING WARFARE 1.THE MAIN CONSIDERATION IS THE STRENGTH OF THE LEADER’SPOSITION 2.FIND WEAKNESS IN THE LEADER’S STRENGTH AND ATTACK AT THAT POINT. 3.LAUNCH THE ATTACK ON AS NARROW A FRONT AS POSSIBLE.

PRINCIPLES OF FLANKING MARKETING WARFARE 1.A GOOD FLANKING MOVE MUST BE MADE INTO AN UNCONTESTED AREA. 2.TACTICAL SURPRISE OUGHT TO BE AN IMPORTANT ELEMNT OF THE PLAN. 3.THE PURSUIT IS AS CRITICAL AS THE ATTACK ITSELF.

PRINCIPLES OF GUERRILLA MARKETING WARFARE 1.FIND A SEGMENT OF THE MARKET SMALL ENOUGH TO DEFEND. 2.NO MATTER HOW SUCCESSFUL YOU BECOME, NEVER ACT LIKE THE LEADER. 3.BE PREPARED TO BUGOUT AT A MOMENT’S NOTICE.

5- VALUE DISCIPLINES OPERATIONAL EXCELLENCE PRODUCT LEADERSHIP CUSTOMER INTIMANCY Core Business Processes that …. Sharpen distribution systems and provide no hassle service Nurture ideas, translate them into products, and market them skillfully Provide solutions and help customers run their businesses Structure that ….Has strong, central authority and a finite level of empowerment Acts in an ad hoc, organic, Loosely knit, and ever-changing way Pushes empowerment close to customer contact Management System that …. Maintain standard operating procedures Reward individuals ’ innovative capacity and new product success Measure the cost of providing service and of maintaining customer loyalty Culture that … Acts predictably and believes “ one size fits all ” Experiments and thinks “ out-of- the-box ” Is flexible and thinks “ have it your way ”