1. Strategic Marketing Decisions, Choices and Mistakes
Chapter 4
Strategic Marketing
Decisions, Choices and Mistakes

2. Strategic Choice
The strategic question that drives business today is not what companies can offer, but what more they can do for their markets and customers.
Strategic Choices involves understanding the bases and directions that guide an organization’s future strategy, generating various strategic options and alternatives and choosing the most appropriate ones for the organization.
Fundamental to strategic thinking is the concept of ‘strategic fit’.

3. Strategic Fit

4. Where do we want to be? Strategic Decisions
Strategic decisions at corporate level
Mission statement,
Directional strategy (Growth, Stability, Retrenchment)
Resource allocation
Strategic decisions at SBU level
Choosing Generic Strategy; cost leadership, differentiation & focus
Marketing-related strategic decisions
Products to offer
Market segments to target
Positioning strategy
Competitive stance to take

5. Defining the Business Purpose or Mission
Business mission answers the question: Why a company exists?
The mission statement is the organization’s purpose, what it wants to accomplish in the larger environment.
Hence, a clear thoughtful mission statement provides a shared sense of purpose, direction to the company and its employees. Furthermore, it helps the company come up with the right strategies to fulfill the mission.

6. Our mission is to develop professionals in Bangladesh, who will lead firms and organizations to their successes through sustainable practices.

7. Competitive Positioning Distinctive Competencies
Components of Mission
Strategic Intent
Vision of what you want to be
Mission
Objectives and Strategy
Market Definition
Customer Targets
Company Values
Guiding Principles
Competitive Positioning
Differential Advantage
Distinctive Competencies
Core skills

8. “Our mission is to be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.”

9. Our mission is to bring the best to everyone we touch

10. “Our mission is to help you organize the world’s information and make it universally accessible and useful”
“Our mission is to give people the power to share and make the world more open and connected”

11. “Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”
“To refresh the world…To inspire moments of optimism and happiness…To create value and make a difference.”
“To provide authentic hospitality by making a difference in the lives of the people we touch every day”
“To enrich people’s lives with programmes and services that inform, educate and entertain.”

12. Components of a Mission
Strategic intent: signifies the vision of where the organization wants to be in the foreseeable future.
Company Values: signifies the company’s ethical and moral principles in pursuing their business operations. It is what creates an organizational culture.

13. It is our vision to be a business school that implements global standards in business and economics education within our regional context, to develop a productive workforce of next generation thinkers and leaders of business societies.

14. NSU SBE Values are:
Accountability, Sustainability, Integrity, Excellence, and Partnerships.

15. Components of a Mission
The distinctive competencies of an organization: Signifies the strengths that a company possesses and clearly articulates what differentiates the organization from others of its kind.
Competitive Positioning: signifies the superior value or benefit the company wants to provide to the consumers. Hence, the distinctive competencies are responsible to generate the competitive positioning.

16. We identified 6 key areas each important to achieve our mission
Quality of Education
We want to be the first to implement global standards of business and economics education in Bangladesh
Student Experience
We strongly believe that experiential learning will be the most important to develop true professionals who are both skilled and responsible
Stakeholder Relationships
While NSU has a long-standing tradition of interacting with key industry players, we believe in formalizing the relationship with each of our stakeholders.
Faculty Development
The faculty profile at NSU Business School remains our greatest strength. A program that promotes and sustains faculty development is essential
Configuration & Process-Orientation
A school with 10,000+ students requires next-generation technology and corporate-grade efficiency to provide student service, and support to faculty.
Governance
We believe in faculty-driven initiatives for quality, and we want faculty in conversation
Focus Areas

17. Focus Areas interplay STUDENT EXPERIENCE QUALITY FDP Good Governance
Configuration & Process
Stakeholder Relationships
We first began with quality. And then we acknowledged the role of each element, and the centrality of our mission. We now recognize student experience as our primary focus, and quality as a result of our efforts.

18. Directional (grand) strategies
Growth Strategies
Stability Strategies
Retrenchment strategies
Concentration
Vertical Growth
Horizontal Growth
Diversification
Concentric
Conglomerate
Pause/Proceed with Caution
No Change
Profit
Turnaround
Captive Company
Sell-Out/Divestment
Bankruptcy/Liquidation

19. Resource allocation: BCG matrix

20. BCG Model

21. Strategic choices and decisions at the SBU level

22. Porter’s generic strategies

23. Porter’s generic strategies
Cost Leadership Strategy:
Aims at the broad market
Key is cost minimization
firms work to achieve the lowest production and distribution costs so that they can under price competitors and win in the marketplace. For example: Walmart, Ryanair
However, there exists a risk of other firms pursuing the same strategy and hurt the brand that rested its whole future on cost.

24. Porter’s generic strategies
Differentiation Strategy: the business concentrates on achieving superior performance by providing better/superior customer benefit valued by a large part of the market.
Differentiation in design, brand image, technology, dealer network, customer service etc. Example: Singapore airlines.
Focus Strategy: The business focuses on one or more narrow market segments, gets to know them intimately, and pursues either cost leadership or differentiation strategy within the target segment.
Example: Focus cost leadership- South west airline
Focus differentiation- chartered planes, Sensodyne,

25. Porter’s generic strategies

26. Bowman's strategy clock

27. Miles and Snow’s strategies
Strategy Type
Definition
Examples
Reactor
No clear strategy, reacts to changes in the environment, drifts with events
International Harvester in the 1960s and 1970s, Joseph Schlitz Brewing Co., W.T. Grant
Defender
Protects current markets, maintains stable growth, serves current customers
BIC
Analyzer
Maintains current markets and current customer satisfaction with moderate emphasis on innovation
IBM
Prospector
Innovative and growth oriented, searches for new markets and new growth opportunities, encourages risk taking 3M
Product lines: Adhesives, Abrasives, Laminates, Passive fire protection, Electronic materials, Shampoo, Car wax, Medical products, Optical films etc.

28. Ansoff’s product/market matrix
Present Products
New Products
Penetration Strategy
Increase share of customer spending
Increase market share
Non-users to users (where both are in the same segment)
Product Development Strategy
Product modification via new features
Different quality levels
 New Product(s)
Existing
Market
Market Development Strategy
New markets
 New distribution channels
 New geographical areas
Diversification Strategy
Joint ventures
 Mergers
Acquisitions/takeovers
Market
New

29. Ansoff’s product/market matrix
Market Penetration: Generating more sales to current customers without changing its products. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on.
Add new stores in current market areas
improve advertising, prices, service or store design.
Example: McDonald’s Happy meal, extra value meal, delivery services etc.
Product Development: Develop additional or new product to serve existing market segment.
Example: New addition to the McDonald’s menu- Pizza McPuff, McArabia chicken, McAloo tikki, Maharaja burger etc.
Market Development: develop new markets for the current products.
This means that the product remains the same, but it is marketed to new customers. Exporting the product, or marketing it in a new region, are examples of market development
Identify new demographic or geographic markets.
Example: Introducing McDonald’s to Kazakhstan in 2015

30. Ansoff’s product/market matrix
Diversification: when new products are developed for new markets. Diversification makes sense when good opportunities exist outside the present business.
Diversification is an inherently higher risk strategy because the business is moving into markets in which it has little or no experience.
Apple has diversified from just selling computers to selling phones, music players, and tablets.
Important Note: Need is different.
Example: Mccafe, Golden Arch Hotel in Switzerland
Example : Virgin Air, Virgin mobile, Virgin drink etc.
Example : Square selling cosmetics, pharmaceuticals, eatables, agro products etc.

31. Assessing Growth Opportunities: Integrative Growth
A business can increase sales and profits through backward, forward or horizontal integration within the industry.
Forward integration involves owning the marketing intermediaries and controlling distribution.
Backward integration means owning the suppliers needed for production.
Forward and backward integration conceptualizes vertical merger whereby 2 companies join together who are involved in different stages of related business.
E.g. 1: Airlines integrate backwards to in-flight kitchen and forward to travel agencies.

32. Assessing Growth Opportunities: Integrative Growth
Horizontal integration signifies the purchase of competing brands within the same industry which allows the company to expand its product line and revenues.
E.g: Marico wanted to purchase Jui in order to pursue a horizontal integration.
A horizontal integration can also be done through horizontal mergers.
E.g. 1: A cola drink company and a juice company can merge together and provide a variety of different soft drinks.

33. Assessing Growth Opportunities: Integrative Growth
Concentric Diversification  involves adding new products or services that are related to your current offerings -- either because they appeal to the same market or because they can be offered without much investment in new resources (or both)
Concentric diversity aims for synergy -- using your experience and strengths in one area to gain a foothold in another area.
Dangers of concentric diversity include line overextension -- diluting the value of your brand by trying to do too much.

34. Assessing Growth Opportunities: Integrative Growth
Conglomerate Diversification   refers to diversification by entering entirely new and unrelated lines of business. 
Typically, companies achieve conglomerate diversity through acquisitions 
Tend to spread the market risk across more sectors
 However, there is no guarantee that the businesses will be a good fit.

35. Competitive position tactics

36. Strategies for Market Leaders
Market Leader’s objectives:
Expand the total market by
Finding new users
Creating new uses, and
Encouraging more usage
Protect its current market share by
Adopting defense strategies (see following slides)
Increase its market share
Note the relationship between market share and profitability

37. Which strategy to use? Depends on your answer to the following:
Is it worth fighting?
Are you strong enough to fight?
How strong is your defense?
Do you have any choice but to fight?

38. Which strategy to use?
“Move only if there is a real advantage to be gained …”
“If our force is ten times the enemy’s, then surround him; five times his, attack him, if double his, divide our force into two and use as ‘alternative strategy’; if only equal his, we must concentrate our force to fight him…if our force is so much weaker than the enemy’s, we should totally avoid him.”
“If I know my soldiers are capable of attacking the enemy but unaware that he is invulnerable to attack, my chance of victory is but half…If I know he can be attacked and my soldiers are capable of doing it but are unaware that the terrain is unsuited for fighting, I should hold back for my chance of victory is but half.”
“Do not fight unless you are in danger”
“One who has few must prepare for defense; one who has many shall make the enemy prepare for defense.”

39. Defense Strategy
A market leader should generally adopt a defense strategy
Six commonly used defense strategies
Position Defense
Mobile Defense
Flanking Defense
Contraction Defense
Pre-emptive Defense
Counter-Offensive Defense

40. Defense Strategy (cont’d)
Position Defense
Occupying the most desirable position an consumers’ mind and building fortifications around that position
Example – P & G ‘owns’ the key functional benefit in many product categories
Tide Detergent for cleaning
Crest toothpaste for cavity prevention
Pamper diapers for dryness

41. Defense Strategy (cont’d)
Flanking Defense:
Secondary markets (flanks) are the weaker areas and prone to being attacked
Pay attention to the flanks
Example - San Miguel introduced a flanking brand in the Philippines, Gold Eagle, as a defense against APB’s Beerhausen

42. Defense Strategy (cont’d)
Pre-emptive Defense
Detect potential attacks and attack the enemies first
Perhaps with guerrilla action across the market- hitting one competitor here another there and keeping everyone off balance
Product or brand proliferation is a form of pre- emptive defense
Example - Seiko has over 2,000 models

43. Defense Strategy (cont’d)
Counter-Offensive Defense
Responding to competitors’ head-on attack by identifying the attacker’s weakness and then launch a counter attack
Common forms include exercise of economic or political clout ( Tech leaders like Intel, MS, Apple defended their brands in court), Stabilize lower price etc.
Example - Toyota launched the Lexus to respond to Mercedes attack

44. Defense Strategy (cont’d)
Mobile Defense
By market broadening and diversification
For market broadening, there is a need to
Redefine the business (principle of objective), and
Focus efforts on the competition (the principle of mass)
Example- When Philip Morris and Reynolds acknowledged growing curbs on cigarette smoking, they moved into industries like beer, liquor, soft drinks and frozen foods

45. Defense Strategy (cont’d)
Contraction Defense
Withdraw from the most vulnerable segments and redirect resources to those that are more defendable
By ‘planned contraction’ or ‘strategic withdrawal’
Example - India’s TATA Group sold its soaps and detergents business units to Unilever in 1993

46. 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

47. Market Challenger Strategies (cont’d)
Types of Attack Strategies
Frontal attack
Flank attack
Encirclement attack
Bypass attack
Guerrilla attack

48. Frontal Attack Seldom work unless
The challenger has sufficient fire-power (a 3:1 advantage) and staying power, and
The challenger has clear distinctive advantage(s)
Example Pepsi Vs Coke – Diet Pepsi – Diet coke

49. Flank attack
Attack the enemy at its weak points or blind spots i.e. its flanks
Ideal for challenger who does not have sufficient resources
e.g. In the 1990s, Yaohan attacked Mitsukoshi and Seibu’s flanks by opening numerous stores in overseas markets

50. Encirclement attack Attack the enemy at many fronts at the same time
Ideal for challenger having superior resources
Competitor attacks another on the basis of strength as well as weaknesses
Example - Seiko attacked on fashion, features, user preferences and anything that might interest the consumer

51. Bypass attack
By diversifying into unrelated products or markets neglected by the leader
Could overtake the leader by using new technologies
Example - What did Ipod to to the Sony walkman?

52. Guerrilla attack
Best suited to smaller companies with limited resources
By launching small, intermittent hit-and-run attacks to harass and destabilize the leader
Usually use to precede a stronger attack
e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low

53. Which Attack Strategy should a Challenger Choose?
Use a combination of several strategies to improve market share over time
Strategies will change depending on the competitor whom one targets

54. Market-Follower Strategies
Theodore Levitt in his article, “Innovative Imitation” argued that a product imitation strategy might be just as profitable as a product innovation strategy
e.g. Product innovation--Sony
Product-imitation--Panasonic

55. Market-Follower Strategies (cont’d)
Each follower tries to bring distinctive advantages to its target market--location, services, financing
Four broad follower strategies:
Counterfeiter (which is illegal)
Cloner e.g. the IBM PC clones
Imitator e.g. car manufacturers imitate the style of one another
Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and eventually leaders

56. Market-Nicher Strategies
Smaller firms can avoid larger firms by targeting smaller markets or niches that are of little or no interest to the larger firms
e.g. Logitech--mice
Microbrewers--special beers

57. Market-Nicher Strategies (cont’d)
Nichers must create niches, expand the niches and protect them
e.g. Nike constantly created new niches--cycling, walking, hiking, cheerleading, etc
What is the major risk faced by nichers?
Market niche may be attacked by larger firms once they notice the niches are successful

58. Multiple Niching
“[A] firm should `stick to its niching’ but not necessarily to its niche. That is why multiple niching is preferable to single niching. By developing strength in two or more niches the company increases its chances for survival.”
Philip Kotler

59. Example of Nicher: Challenger Superstore
Challenger Superstore is a discount retailer of computers and accessories
It opened its first overseas store in Bangkok at a cost of 90 million baht (S$3.7 million)
In October 2000, it closed its Bangkok store “after failing to pay rent amounting to about 6 million baht”
6-months’ rent = 6 m baht
Source: “Challenger closes its Bangkok Store”, The Straits Times, October 7, 2000, pp.93

60. Conclusion
Strategic choice involves understanding the underlying bases guiding future strategy, and generating strategic options for evaluation and selecting from among them.
Strategic decisions are usually taken at corporate level (e.g., directional strategy, resource allocation), at SBU level (e.g., generic strategy), and at functional level in relation to various functional areas (e.g., marketing, R&D, finance, HR, production, etc.).
Strategic marketing decisions include products to offer, market segments to target, and positioning strategies.
Organisational failure is arguably a product of repeated strategic mistakes and unsuccessful interactions between the firm and its environment.