1. A2 Business Studies Miss Page
Marketing Strategies
A2 Business Studies
Miss Page

2. Lesson Objectives To describe a range of marketing strategies
Explain the meaning and significance of Ansoff’s matrix in assessing marketing strategies.
Evaluate the suitability of Ansoff’s competitive strategies in a given context.
Analyse the risks and benefits involved in entering international markets.

3. Marketing Strategies
So far we have looked at the marketing objectives of a business which come from the corporate goals and are influenced by internal and external factors. The necessity of analysing the market before attempting to devise a marketing strategy has already been discussed.
We are now moving on to look at the marketing strategy: the plan of how the marketing objectives are going to be achieved.

4. Low cost versus differentiation
Low Cost- In both niche and mass markets, there is the option to go for the cheaper end of the market. If this is the strategy adopted by the business, the aim is to offer products at a lower price than competitors in the market. To achieve this, the business must be able to reduce its own costs, for example through, economies of scale, by finding the lowest cost suppliers or by moving its own operations to a low-cost location.
Differentiation- This strategy applies in both niche and mass markets. The purpose is to make one product appear different and somehow superior to others on the market, and thereby encourage consumers to choose that particular make or model when making their purchasing decisions. A differentiation strategy involves all elements of the marketing mix and includes patenting a new invention, developing a USP or building a strong brand image. The pricing will reflect the exclusivity and superiority of the product and the distribution will be strictly controlled if possible to maintain this image.

5. Low Cost Examples
easyGroup companies, including easyjet, easycruise and easypizza, all operate as part of a brand which is known to represent value for money and is aimed at the many rather than the few. Tescos and Asda compete by offering customers the “lowest price”

6. Igor Ansoff
Igor Ansoff developed a model, known as Ansoff’s Matrix, which presents the products and market choices available to a business and divides them into four combinations, each shown by a different quadrant in the matrix. Choice is the basis for developing a clear marketing strategy, and the matrix allows managers to discuss the strategies for achieving corporate objectives through the marketing function. With every choice, there comes an element of risk, and the matrix suggests that the level of risk increases as the strategy moves further away from the present product, present market.

7. Ansoffs Matrix Products Markets Present New Market Penetration
Product Development
Market Development
Diversification
Markets

8. Market Penetration
Aims to increase sales of current products to existing customers and to entice consumers away from competing brands.
This strategy involves using the elements of the marketing mix more effectively:
Reducing prices to encourage customers to buy more or entice consumers from other brands in the market.
Increasing promotional spending to remind customers about the product range.
Launching a loyalty scheme
Increasing the activity of the sales force
Making small changes to the products on offer, for example a greater range of sizes or different levels of service.
Giving customers a greater range of buying options by increasing the places from which the product can be purchased.

9. Product Development
This is a higher risk strategy which involves selling new products to existing customers. Note that product development refers to a significantly new product line, not minor changes to an existing product. This strategy often looks favourable, because it might allow the company to utilise excess production capacity, respond to a new product launch from a competitor, maintain the company’s reputation as a product innovator, exploit new technology or protect overall market share.
This strategy might include:
Developing related products or services which market research has identified as being part of the buying decisions of customers.
Introducing new models of existing products with significant modifications, new functions or services.
Can you think of a company that use this strategy?

10. Market Development
A market development strategy involves attracting new customer groups to existing products. The aim is to increase the sales of the current product portfolio.
Strategies include
Targeting a different geographical area, including an overseas market
Developing new sales channels, such as e-commerce, to attract a new audience
Targeting a new consumer group with a different profile to existing customers.

11. Diversification
A diversification strategy is the most risky option because it involves the firm moving into new markets with new products, which may or not be related to existing products and markets. There is often little opportunity to use existing expertise or achieve significant economies of scale in the short term. Diversification may be:
Related, because it is some form of forward, backward or horizontal integration- the firm becomes involved in the activities of its customers, suppliers and competitors.
Unrelated- the highest risk strategy- because the business has no experience or detailed knowledge of the key success factors in the market, although there is evidence that it can lead to the fastest growth.
Strategies might include:
A new technology developed by R&D department of the business or bought from an inventor- if there is evidence of significant potential, the risk is reduced.
Buying an existing business in a completely different market- if the acquisition is successful, then the risk is reduced.
Taregting existing successful markets, if the business already has a very strong brand, the risk is reduced.

13. Entering international markets
There are increasing opportunities for UK companies to enter overseas markets. This option will particularly appeal to businesses where:
The UK market is saturated
The UK market is very competitive, driving down prices and therefore profits.
There are opportunities to achieve economies of scale
The firm has excess supply
The additional costs involved are relatively small.

14. The benefits and drawbacks of different methods of entering overseas markets.
Exporting from the UK
Accepting international orders increasingly on an e-commerce website
Making regular visits to the target country to identify customers, build relationships and complete sales negotiations.
Supported by telephone and sales
Relatively Cheap
Not very complicated to set up
Can be withdrawn easily if it does not work
Existing resources, e.g. The sales force and the website can be used
Full control over marketing is retained.
Distance may make it difficult to identify potential business opportunities.
Bureaucracy may be complicated.
Risk of non –payment or delayed payments of goods, due to export problems causing cash flow difficulties
Language barriers may lead to high recruitment and training costs.
Opening an overseas operation
Opening a new branch staffed by your own employees
Setting up as a registered subsidiary in the new market, using locally recruited employees, covered by local company, employment and tax rules
Forming an alliance with a local company establishing a new business which is jointly owned.
The chance to identify opportunities in the target market
Control operations and potential expansion
Developing relationships with clients
Providing good after-sales service
A joint venture means that the risk is shared
The local partner in the alliance provides important knowledge and experience.
This is a more expensive option, including the cost of the administration and management
Local company, employment and tax laws might be difficult to understand and local specialists may be needed.
The brand name of the product or company may not be appropriate in the target markets.