Strategic planning

Annual plan:
A short-term plan that describes the company's current situation, its
objectives, che strategy, and action programmer and budgets for the
year ahead and controls.
Long-range plan:
A plan that describes the principal factors and forces afecting the
organization during the next several years, including long-term
objectives, the chief marketing strategies used to attain them and the
resources reuired.
The Planning Process
!utting plans into action involves four stages" analysis, planning,
implementation and control. #igure $.% sho&s the relationship bet&een
these functions that are common to strategic planning, marketing
planning or the planning for any other function.
A'A()*+*.
!lanning begins &ith a complete analysis of the company's situation. ,he
company must analyses its environment to -nd attractive opportunities
and to avoid environmental threats. +t must analyze company strengths
and &eaknesses, as &ell as current and possible marketing actions, to
determine &hich opportunities it can best pursue. Analysis feeds
information and other inputs to each of the other stages.
!(A''+'..
,hrough strategic planning, the company decides &hat it &ants to do
&ith each business unit. /arketing planning involves deciding marketing
strategies that &ill help the company attain its overall strategic
objectives. /arketing, product or brand plans are at the centre of this.
1
+/!(0/0',A,+1'"
+mplementation turns strategic plans into actions that &ill achieve the
company's objectives. !eople in the organization that &ork &ith others
both inside and outside the company implement marketing plans.
21',31(.
2ontrol consists of measuring and evaluating the results of plans and
activities, and taking corrective action to make sure objectives are being
achieved. Analysis provides information and evaluations needed for all
the other activities.
Strategic plan:
A plan chat describes hoi4 a -rm &ill adapt to take advantage of
opportunities in its constantly changing environment, there by
maintaining a strategic -t bet&een the -rm's goals and capabilities and
its changing market
1pportunities.
Mission statement
A statement of the organizations purposes -&hat it -&ants to accomplish
in the environment.
/anagement must ask" 5hat business are &e in6 5hat do consumers
value6 5hat are &e in business for6 5hat sort of business are &e6 5hat
makes us special6 ,hese simple sounding uestions are among the most
di7cult that the company &ill ever have to ans&er. *uccessful
2
companies continuously raise these uestions and ans&er them. Asking
such basic uestions is a sign of strength, not uncertainty.
A mission should be:
Realistic. *ingapore +nternational Airlines is excellent, but it &ould be
deluding itself if its mission &ere to become the &orld's largest airline.
Specifc. +t should -t the company and no other. /any mission
statements exist for public-relations purposes, so lack speci-c, &orkable
guidelines.
,he statement '5e &ant to become the leading company in this industry
by producing the highest-uality products &ith the best service at the
lo&est prices' sounds good, but it is full of generalities and
contradictions. *uch motherhood statements &ill not help the company
make tough decisions.
Rased on distinctive competences. 8ang 9 1tufsen has the technology
to build microcomputers, but an entry into that market &ould not take
advantage of its core competences +n style, hi-- and exclusive
distribution.
: Motivating. +t should give people something to believe in.
SWOT analysis
;istillation of the -ndings of the internal and external audit &hich dra&s
attention to the critical organizational strengths and &eaknesses and the
opportunities and threats facing the company.
2ritical success factors the strengths and &eaknesses that most critically
afect an organization's success. ,hc.-' arc measured relative
competition.
3
The Business Portfolio
,he business portfolio is the collection of businesses and products that
make up the company. +t is a link bet&een the overall strategy of a
company and those of its parts. ,he best business portfolio is the one
that -ts the company's strengths and &eaknesses to opportunities in the
environment. ,he company must <=> analyze its current business portfolio
and decide &hich businesses should receive more, less or no investment,
and <?> develop gro&th strategies for adding +@5products or businesses
to the portfolio.
Portfolio analysis
A tool by &hich management identi-es and evaluates businesses that
makes up the company. ,he company &ill &ant to put strong resources
into its more pro-table businesses and phase do&n or drop its &eaker
ones.
Strategic business unit SB!":
A unit of the company chat has a, separate miss ton and objectives and
than can be planned independently from other company businesses. An
*8A can
8e a company division, a product line -&ithin a division, or sometimes a
*ingle product or brand.
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#ro$th-share matri%
A portfolio-planning method that evaluates company's strategic business
units <*8As> in terms of their market gro&th rate and relative market
share. */A9 are classi-ed as stars, cash cote uestion marks or dogs.
T&' BOSTO( )O(S!LT*(# #+O!P BO,-
Asing the 8oston 2onsulting .roup
<82.> approach, a company classi-es all its *8As according to the
gro&th-share matrix sho&n in #igure $.$. 1n the vertical axis. /arket
gro&th rate provides a measure of market attractiveness. 1n the
horizontal axis, relative market share serves as a measure of company
strength in the market. 8y dividing the gro&th share matrix as indicated,
four types of *8A can be distinguished"
Stars
Bigh-gro&th, high-share businesses or products that often reuire heavy
investment to -nance their rapid gro&th.
)ash co$s:
2ash co&s are lo&-gro&th, high-share businesses or products. ,hese
established and successful *8As need less investment to hold their
market share. ,hus they produce cash that the company uses to pay its
bills and to support other *8As that need investment.
.uestion mar/s
5
Are lo&-share businesses unite in high gro&th markets. ,hey reuire
cash to hold their share, let alone increase it. /anagement has to think
hard about uestion marks - &hich ones they should built into stars and
&hich ones they should phase out.
0ogs-
;ogs are lo&-gro&th, lo&-share businesses and products. ,hey may
generate enough cash to maintain themselves, but do not promise to be
(arge sources of cash.
Business planning grid
A portfolio planning method chat evaluates company's strategic business
units using indices of industry attractiveness and the company's strength
in the industry'
T&' #'('+AL 'L')T+*) #+*0.
.eneral 0lectric introduced a comprehensive portfolio planning tool
called a strategic business-planning grid. +t is similar to *hell's directional
policy matrix. (ike the 82. approach, it uses a matrix &ith t&o
dimensions - one representing industry attractiveness <the vertical axis>
and one representing company strength in the industry <the horizontal
axis>. ,he best businesses are those located in highly attractive
industries &here the company has high business strength.
,he .0 approach considers many factors besides market gro&th rate as
part of industry attractiveness, +t uses an industry attractiveness index
made up of market size, market gro&th rate, industry pro-t margin,
amount of competition, seasonally and cycle of demand, and industry
cost structure.
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The Mar/eting Process:
,he process of
<%> Analyzing marketing opportunities.
<?> *electing target markets.
<$> ;eveloping the marketing mix.
<C> /anaging the marketing efort.
0e1eloping the Mar/eting Mi%
,he marketing mix is one of the dominant ideas in modern marketing.
5e de-ne marketing mix as the set of controllable tactical marketing
tools that the -rm blends to produce the response it &ants in the target
market. ,he marketing mix consists of everything the -rm can do to
inDuence the demand for its product
,he four Ps: the mar/eting mi%
Product
7
Anything that can be ofered to a market for attention, acuisition, use or
consumption that
/ight satisfy a &ant or need. +t includes physical objects, .services,
persons, organizations and ideas.
Price
,he amount of money charged for a product or service, or the sum of the
values that consumers
0xchange for the bene-ts of having or using the product or service.
Place
All the company activities that make the product or service available to
target customers.
Promotion
Activities that communicate the product or service and its 'merits to
target customers and persuade them to buy.
1ne marketing expert suggests that companies should vie& the four !s
as the
2ustomer's four 2s"
#1A@ !s #1A3 2s
!roduct 2ustomer needs
and &ants
!rice 2ost to the
customer
!lace 2onvenience
!romotion 2ommunication
5inning companies are those that meet customer needs economically
and conveniently and &ith efective communication.
The Mar/eting Process:
,he strategic plan de-nes the company's overall mission and objectives.
5ithin each business unit, marketing playsE i role in helping to
accomplish the overall strategic objectives. /arketing's role and
activities in the organization are sho&n in #igure belo& &hich
summarizes die marketing process and the forces inDuencing marketing
strategy.
Mar/eting process:
,he process of
<%> Analyzing marketing opportunities.
<?> *electing target markets.
8
<$> ;eveloping the marketing mix.
<C> /anaging the marketing efort.
9
)ontents of a mar/eting plan:
*02,+1'
!A3!1*0
0xecutive summary !resents a uick overvie& of the plan for uick
management 3evie&.
2urrent marketing
situation
,he marketing audit that presents background data on
the market,
!roduct, competition and distribution.
*51, analysis +denti-es the company's main strengths and
weaknesses and the
/ain opportunities and threats facing the product.
1bjectives and issues ;e-nes the company's objectives in the areas of sales,
market
share and pro-ts, and the issues that &ill afect these
objectives
/arketing strategy !resents the broad marketing approach that &ill be
used to achieve
the plan's objectives.
Action programmes *peci-es what &ill be done, &ho &ill do it, 'when it &ill
be done
and what it &ill cost.
8udgets A projected pro-t and loss statement that forecasts
the expected
-nancial outcomes from the plan.
2ontrols +ndicates ho& the progress of the plan &ill be
monitored.
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Mar/eting Strategy:
/arketing strategy the marketing logic by &hich the business unit lops to
achieve its marketing objectives.
Mar/et Segmentation:
;ividing a market into groups of buyers &ith diferent needs,
characteristics or behavior, &ho might reuire separate products or
marketing mixes, is market segmentation.
/arket segments a group of consumers &ho respond in a similar '&ay to
a given set of marketing stimuli.
Mar/et targeting:
,he process of evaluating each market, segment's attractiveness and
selecting tine or more segments to enter.
Product position:
,he &ay the product is de-ned by consumers mind important attributes
-the place the product
1ccupies in 2onsumers' minds relative to competing products.
/arket positioning arranging for a product to occupy a clear, distinctive
and desirable place relative to competing products in the minds of target
consumers. #ormulating competitive positioning for a product and a
detailed marketing mix.
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Summary
*trategic planning involves developing a strategy for long-run survival
and gro&th. /arketing helps in strategic planning, and the overall
strategic plan de-nes marketing's role in the company. 'ot all companies
use formal planning or use it &ell, yet formal planning ofers several
bene-ts. 2ompanies develop three kinds of plan" annual plans, long-
range plans and strategic plans *trategic planning sets the stage for the
rest of company planning.
,he strategic planning process consists of developing the company's
mission, understanding a company's strengths and &eaknesses, its
environment, business portfolio, objectives and goals, and functional
plans. ;eveloping a sound mission statement Fs a challenging
undertaking. ,he mission statement should be market oriented, feasible,
motivating and speci-c, if it is to direct the -rm to its best opportunities.
2ompanies have plans at many levels" global, regional, national and so
forth. ,he higher-level plans contain objectives and strategies that
become part of subordinate plans. ,hese strategic imperatives are
objectives or de-ned practices. At each level a strategic audit revie&s
the company and its environment. A
*51, analysis summarizes the main elements of this audit into a
statement of the company's strengths and &eaknesses and the chief
threats and opportunities that exist.
#rom here, strategic planning calls for analyzing the company's business
portfolio and deciding &hich businesses should receive more or fe&er
resources. ,he company might use a formal portfolio-planning method
like the 82. gro&th-share matrix or the .eneral 0lectric grid. Bo&ever,
most companies are no& designing more customized portfolio-planning
approaches that better suit their uniue situations.
,his analysis and mission lead to strategic objectives and goals.
/anagement must decide ho& to achieve gro&th and pro-ts objectives.
,he productGmarket expansion grid sho&s four avenues for market
gro&th" market penetration, market development, product development
and diversi-cation.
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1nce strategic objectives and strategies are de-ned, management must
prepare a set of functional plans that co-ordinate the activities of the
marketing, -nance, manufacturing and other departments. 0ach of the
company's functional departments provides inputs for strategic planning.
0ach department has a diferent idea about &hich objectives and
activities are most important.
,he marketing department stresses the consumer's point of vie&.
/arketing managers
*ummary : %?$must understand the point of vie& of the company's
other functions and &ork
&ith other functional managers to develop a system of plans that &ill
best accomplish
the -rm's overall strategic objectives.
,o ful-ll their role in the organization, marketers engage in the market in
process. 2onsumers are at the centre of the marketing process. ,he
company divides the total market into smaller segments and selects the
segments it can best serve. +t then designs its marketing mix in order to
diferentiate its marketing ofer and to position this ofer in selected
target segments. ,o -nd the best mix and put it into action, the company
engages in marketing analysis, marketing planning, marketing
implementation and marketing control. 0ach business must prepare
marketing plans for its products, brands and markets. ,he main
components of a marketing plan are the executive summary, current
marketing situation, threats and opportunities, objectives and issues,
marketing strategies, action programmes, budgets and controls. ,o plan
good
*trategies are often easier than to carry them out. ,o be successful,
companies must implement the strategies efectively. +mplementation is
the process that turns marketing strategies into marketing actions. ,he
process consists of -ve key elements"
%. ,he action programmed identi-es crucial tasks and decisions needed
to implement the marketing plan, assigns them to speci-c people and
establishes a timetable.
?. ,he organization structure de-nes tasks and assignments and co-
ordinates the eforts of the company's people and units.
$. ,he company's decision-and-re-&ard systems guide activities such as
planning, information, budgeting, training, control and personnel
evaluation and re&ards. 5ell-designed action programmes, organization
structures and decision-and-re&ard systems can encourage good
implementation.
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C. *uccessful implementation also reuires careful human resources
planning. ,he company must recruit, allocate, develop and maintain
good people.
H. ,he -rm's company culture can also make or break implementation.
2ompany culture guides people in the companyE good implementation
relies on strong, clearly de-ned cultures that -t the chosen strategy.
/ost of the responsibility for implementation goes to the company's
marketing department. /odern marketing activities occur in a number of
&ays. ,he most common form is the functional marketing organization,
in &hich marketing functions are directed by separate managers &ho
report to the marketing director. ,he company might also use a
geographic organization, in &hich its sales force or other functions
specialize by geographic area. ,he company may also use the product
management organization, in &hich products are assigned
to product managers &ho &ork &ith functional specialists to develop and
achieve their plans. Another form is the market management
organization, in &hich main markets are assigned to market managers
&ho &ork &ith functional specialists. /arketing organizations carry out
marketing control. 1perating control involves monitoring results to
secure the achievement of annual sales and pro-t goals. +t also calls for
determining the pro-tability of the -rm's products, territories, market
segments and channels. *trategic control makes sure that the company's
marketing objectives, strategies and systems -t &ith the current and
forecast marketing environment. +t uses the marketing audit to
determine marketing opportunities and problems, and to recommend
short-run and long run actions to improve overall marketing
performance. ,he company uses these resources to &atch and adapt to
the marketing environment.
Mar/eting en1ironment:
14
,he actors and forces outside marketing that of eat marketing
management's ability to develop and maintain successful + transactions
&ith its target customers.
,he marketing environment consists of a microenvironment and a macro
environment. ,he microenvironment consists of the forces close to the
company that afect its ability to serve its customers - the company,
suppliers, marketing channel -rms, customer markets, competitors and
publics.
,he macroenvironment consists of the larger societal forces that afect
the &hole microenvironment - demographic, economic, natural,
technological, political and cultural forces. 5e look -rst at the company's
microenvironment.
The )ompany2s Macroen1ironment:
,he company and all the other actors operate in a larger macro
environment of forces that shape opportunities and pose threats to the
company. #igure C.H sho&s the six most inDuential forces in the
company's macroenvironment. ,he remaining sections of this chapter
examine these forces and sho& ho& they afect marketing plans.
;emographic, 0conomic, 'atural, ,echnological, !olitical, 9 2ultural
;evelopments
/acro environmental #orces
%. ;emographic 0nvironment
;emography is the study of human populations in terms of size, density,
location, age, gentler, race, occupation and other statistics. ,he
demographic environment is of considerable interest to marketers
because it involves people, and people make up markets. Bere, &e
discuss the most important demographic characteristics and trends in
the largest &orld markets.
Population Size and Growth Trendy.
Changing Age Structure of a Population
The, Changing Faily
!ising "u#er of $ducated People
%ncreasing &i'ersity
15
0emographic 'n1ironment
3-'conomic 'n1ironment
/arkets reuire buying po&er as &ell as people. ,he economic
environment consists of factors that afect consumer purchasing po&er
and spending patterns.
0conomic 0nvironment
Worldwide Population Growth
Worldwide Population Growth
Population Age Mix
Population Age Mix
Ethnic Markets
Ethnic Markets
Educational Groups
Educational Groups
Household Patterns
Household Patterns
Geographical Shifts in Population
Geographical Shifts in Population
Shift from Mass Market to Micro markets
Shift from Mass Market to Micro markets
Income Distribution
Income Distribution
Subsistence economies
Subsistence economies
Raw-material-exporting economies
Raw-material-exporting economies
Industrializing economies
Industrializing economies
Industrial economies
Industrial economies
Savings, Debt , &
Credit Availability
Savings, Debt , &
Credit Availability
16
/arketers should he a&are of the follo&ing predominant economic
trends.
+ncome ;istribution and 2hanges in !urchasing !o&er.
2hanging 2onsumer *pending !atterns.
'ngel2s la$s:
*tudied ho& people shifted their spending as their income rose. Be
found that as family income rises, the percentage spent on food declines,
the percentage spent on housing remains constant <except for such
utilities as gas. electricity and public services, &hich decrease>, and both
the percentage spent on other categories and that devoted to savings
increase. 0ngel's la&s have generally been supported by later studies.
$. (atural 'n1ironment"
,he natural environment involves the natural resources that are
needed as inputs by marketers or that are afected by marketing
activities. 0nvironmental concerns have gro&n steadily during the past
t&o decades.
/arketers should be a&are of four trends in the natural environment"
(. Shortages of !aw )aterials.
*. %ncreased Cost of $nergy
+. increased Pollution
Natural
Environment
Higher Pollution
Levels
Higher Pollution
Levels
Increased Costs
of Energy
Increased Costs
of Energy
Shortage of
Raw Materials
Shortage of
Raw Materials
Changing Role
Of overnment
Changing Role
Of overnment
17
,. Go'ernent %nter'ention in "atural !esource )anageent
C. Technological 'n1ironment:
#orces that create ne& technologies, creating the product and market
opportunities.
'e& technologies create ne& markets and opportunities. ,he marketer
should &atch the follo&ing trends in technology.
!cc
eler
atin
g
Pac
e
of
Cha
nge
!cc
eler
atin
g
Pac
e
of
Cha
nge
"nli
mite
d
O##
ortu
nitie
s
for
Inno
vati
on
"nli
mite
d
O##
ortu
nitie
s
for
Inno
vati
on
Incre
ased
Reg
ulati
on
Incre
ased
Reg
ulati
on
Issues in the $echnological
Environment
Issues in the $echnological
Environment
%aryi
ng
R &
'
(ud
gets
%aryi
ng
R &
'
(ud
gets
18
4- Political en1ironment
,he political environment consists of la&s, government agencies and
pressure groups that inDuence and limit various organizations and
individuals in a given society.
5- )ultural * 'n1ironment
,he cultural environment is made up of institutions and other forces
that afect society's basic values, perceptions, preferences and
behaviors. !eople gro& up in a particular society that shapes their basic
beliefs and values.
,he follo&ing cultural characteristics can afect marketing decision
making"
<%> Persistence of Cultural -alues
<?> Shifts in. Secondary Cultural -alues
,he principal cultural values of a society are expressed in people's vie&s
of themselves and others, as &ell as in their vie&s of organizations,
society, nature and the universe.
%. !01!(0'* I+05* 1# ,B0/*0(I0*
Political )
Legal
Environment
Political )
Legal
Environment
S#ecial )
Interest
rou#s
S#ecial )
Interest
rou#s
19
Increased
Legislatio
n
Increased
Legislatio
n
?. P'OPL'2S 6*'WS O7 1,B03*.
$. !01!(0'* 6*'WS .- O+#A(*8AT*O(S-
9- P'OPL'2S 6*'WS O: SO)*'T;-
4- P'OPL'2S 6*'WS O7 (AT!+'-
J. !01!(#G* I+05* 1# ,B0 A'+I03*0.
Social<)ultural 'n1ironmen t
Of Of
Oneself Oneself
Of Of
Others Others
Of Of
the the
"niverse "niverse
Of Of
Society Society
Of Of
Organi*ation Organi*ation
s
s
20
Of Of
Nature Nature
Summary
All companies operate &ithin a marketing environment. ,his
environment consists of all the actors and forces that afect the
company's ability to transact efectively %KC : 2hapter C ,he /arketing
0nvironment &ith its target market. ,he company's marketing
environment can be divided into the microenvironment. ,he
microenvironment consists of -ve components. ,he -rst is the company's
internal environment - its departmental and managerial structure, &hich
afects marketing management's decision making. ,he second
component is the marketing channel -rms that co-operate to create
value. ,hese include the -rm's suppliers and marketing intermediaries
<middlemen, physical distribution -rms, -nancial intermediaries,
marketing services.'agencies>. ,he third component refers to the -ve
types of market in &hich the company can sellE the consumer, producer,
reseller, government and international markets. ,he competitors facing
the company make up the fourth component. ,he -nal component is the
group of publics that have an actual or potential interest in or impact on
the organization's ability to achieve its objectives. ,hese constituencies
21
include -nancial, media, government, and citizen action, local, general
and internal publics. ,he company's macroenvironment consists of
primary forces that shape opportunities and pose threats to the
company. ,hese forces +nclude demographic, economic, natural,
technological, political and cultural forces. +n many developed &estern
and Asian countries, the demographic environment
!resents problems &ith the challenges of changing age and family
structures, a population that is becoming better educated and increasing
diversity. ,he economic environment sho&s changing patterns of real
income and shifts in consumer spending patterns. ,he natural
environment has pending shortages of certain ra& materials, gro&ing
energy costs, higher pollution levels, more government intervention in
natural resource management and higher levels of citizen concern and
activism about these issues. ,he technological environment reveals
rapid technological change, unlimited innovation opportunities, a need
for high 3 9 L budgets, concentration on minor improvements rather
than big discoveries, and gro&ing regulation of technological change.
,he political environment sho&s increasing business regulation, the
rising importance of public interest groups and increased emphasis on
ethics and socially responsible actions. ,he cultural environment
suggests long-term trends to&ards a '&e-society', less organizational
loyalty, increasing patriotism -nd conservatism, greater appreciation for
nature and a search for more meaningful and enduring values.


)ompetiti1e ad1antage:
Art advantage over competitors gained by ofering consumers
greater value, either through lo&er prices or by providing more bene-ts
that justify higher prices.
)ompetiti1e strategies:
22
*trategies that strongly position the company against competitors
and that give the company the strongest possible strategic advantage.
*nduce your competitors not to in1est in those products=
mar/ets and ser1ices $here you e%pect to in1est the most >
that is the fundamental rule of strategy-
Bruce Henderson, Founder of BCG
There is nothing more e%hilarating than to be shot at
$ithout result-
Winston Churchill
7i1e 7orces 0etermining Segment Structural Attracti1eness
)ompetitor analysis:
,he process of identifying key competitorsE assessing their
objectives, strategies, strengths and 5eaknesses, and reaction patternsE
and selecting &hich competitors to attack or avoid.
Potential
Entrants
+ $hreat of
Mo,ility -
Potential
Entrants
+ $hreat of
Mo,ility -
(uyers
+ (uyer
#ower -
Su,stitutes
+ $hreats of
su,stitutes -
Su##liers
+ Su##lier
#ower -
Su##liers
+ Su##lier
#ower -
Industry
Com#etitors
+ Segment
rivalry -
23
Steps in analy?ing competitors"
*dentifying the )ompany2s )ompetitors:
A company can de-ne its product category competition as other
companies ofering a similar !roduct and services to the same customers
at similar prices
1 !dentif"ing fro# the !ndustr" $oint of %ie&'
/any companies identify their competitors from the industry point
of vie&.
An industry" is a group of -rms that ofer a product or class of products
that are close substitutes for each other.
3- (he Mar)et $oint, of %ie&"
Bere it de-nes its task competition as companies that are trying to
satisfy the same customer need or serve the same customer group
,he key to identifying competitors is to link industry and market analysis
by mapping out productGmarket segments.
Assessing )ompetitors@ Strengths and Wea/nesses
/arketers need to identify accurately each competitor's strengths and
&eaknesses.
*dentify the
company
competitors
0etermining
)ompetitors2
ObAecti1es
*dentifying
)ompetitors2
Strategies
Assessing
)ompetitor
s@
Strengths
and
ea!nesses
'stimating
)ompetitors2
+eaction
Patterns
Selecting
)ompetitors to
Attac/ and
A1oid
24
#irst step, a company gathers key data on each competitor's business
over the last fe& years. +t &ants to kno& about competitors' goals,
strategies and performance.
Benchmar/ing=
2omparing the company's products and processes to those of
competitors or leading -rms in other industries to -nd &ays of improving
uality and performance. 8enchmarking has become a po&erful tool for
increasing a company's competitiveness.
0esigning the )ompetiti1e *ntelligence System:
,he company must. design its competitive intelligence system in a
cost-efective &ay. ,his information needs collecting, interpreting,
distributing and using. Although the cost in money and time of gathering
competitive intelligence is high, the cost of not gathering it is higher.
(he co#petitive intelligence s"ste# #ust'
7irst identi-es the vital types of competitive information and the best
sources of this information. ,hen the system continuously collects
information from the -eld <sales force, channels, suppliers, market
research -rms, trade associations> and from published data <government
publications, speeches, articles>.
(e%t the system checks the information for validity and reliability
interprets it and organizes it in an appropriate &ay. #inally, it sends key
information to relevant decision-makers and responds to enuiries from
managers about competitors.
5ith this system, company managers &ill receive timely information about
competitors in the form of phone calls, bulletins, ne&sletters and reports. +n addition,
managers can contact the system &hen they need an interpretation of a competitor's
sudden move, or &hen they reuire to kno& a competitor's &eaknesses and
strengths or ho& a competitor &ill respond to a planned company move.
)ompetiti1e Strategies:
Baving identi-ed and evaluated the main competitors, the company
must no& design competitive marketing strategies that best position its
ofer against competitors' oferings. 5hat broad marketing strategies can
the company use6 5hich ones are best for a particular company or for
the company's diferent divisions and products6
)ompetiti1e Positions:
,he -rms &ill occupy diferent competitive positions in the target market
Balancing )ustomer and )ompetitor Orientations:
2ompetitor-centered company
25
A company &hose moves arc mainly based on competitors' actions and
reactionsE it spends most of its time tracking competitors 'moves and
market shares and trying to -nd strategies
to counter them.
Summary
,o prepare an efective marketing strategy, a company must consider its
competitors as &ell as its actual and potential customers. +t must
continuously analyze its competitors and develop competitive marketing
strategies that efectively position it against competitors and give it the
strongest possible competitive advantage. 2ompetitor analysis -rst
involves identifying the company's main competitors, using both an
industry and a market-based analysis. ,he company then gathers
information on competitors' objectives, strategies, strengths and
&eaknesses, and reaction patterns. 5ith this information to hand, it can
select
competitors to attack or avoid. 2ompetitive intelligence must be
collected, interpreted and distributed continuously. 2ompany marketing
managers should be able to obtain full and reliable information about any
competitor afecting their decisions. 5hich competitive marketing
strategy makes the most sense depends on the company's industry
position and its objectives, opportunities and resources. ,he company's
competitive marketing strategy depends on &hether it is a market
leader, challenger, follo&er or nicher. A market leader faces three
challenges" expanding the total market, protecting market share and
expanding market share. ,he market leader &ants to -nd &ays to
expand the total market because it &ill bene-t most from any increased
sales. ,o expand market size, the leader looks for ne& users of the
product, ne& uses and more usage. ,o protect its existing market share,
the market leader has several defences" position defence, Danking
defence, pre-emptive defense, counter ofensive defence, mobile
defence and contraction defence. ,he most sophisticated leaders cover
themselves by doing everything right, leaving no openings for
HCL : 2hapter %? 2reating 2ompetitive Advantages competitive attack.
(eaders can also try to increase their market shares. ,his makes sense if
pro-tability increases at higher market-share levels. A market challenger
is a -rm that aggressively tries to expand its market
share by attacking the leader, other runner-up -rms or smaller -rms in
the industry. ,he challenger ean choose from a variety of attack
strategies, including a frontal attack, Danking attack, encirclement
attack, bypass attack and guerrilla attack. A market follo&er is a runner-
up -rm that chooses not to rock the boat, usually out of fear that it
26
stands to lose more than it might gain. ,he follo&er is not &ithout a
strategy, ho&ever, and seeks to use its particular skills to gain market
gro&th. *ome follo&ers enjoy a higher rate of return than the leaders in
their industry. A market nicker is a smaller -rm that serves some part of
the market that is not likely to attract the larger -rms. /arket nichers
often become specialists in some end use, vertical level, customer size,
speci-c customer, geographic area, product or product feature, or
service. A competitive orientation is important in today's markets, but
companies should not overdo their focus on competitors. 2ompanies are
more likely to be
hurt by emerging consumer needs and ne& competitors than by existing
competitors. 2ompanies that balance consumer and competitor
considerations are practicing a tme market orientation
ObAecti1es
+dentifying /arket *egments
2hoosing ,arget /arkets
Mar/et-Segmentation Procedure
*urvey
/otivations
Attitudes
8ehavior
Analysis
#actors
2lusters
!ro-ling
Bases for Segmenting )onsumer Mar/ets
27
B" #eographic Segmentation:
.eographic segmentation calls for dividing the market into diferent
geographical units, such as nations, states, regions, counties, cities or
neighborhoods. Acompany may decide to operate in one or a fe&
geographical areas, or to operate in all areas but pay attention to
geographical diferences in needs and &ants.
3" 0emographic Segmentation:
;emographic segmentation consists of dividing the market into
groups based on variables such as age, gender, family size, family life
cycle, income, occupation, education, religion, race and nationality.
;emographic factors are the most popular bases for segmenting
customer groups. One reason is that consumer needs, &ants and
usage rates often vary closely &ith demographic variables. Another is
that demographic variables are easier to measure than most other types
of variable. 0ven &hen market segments are -rst de-ned using other
bases - such as personality or behavior - their demographics need
kno&ing to assess the size of the target market and to reach it e7ciently.
C" Psychographic Segmentation:
!sychographic segmentation divides buyers into groups based on social
class, lifestyle or personality characteristics. !eople in the same
demographic group can have very diferent psychographic make-ups.
eogra#hic
Region. City or Metro
Si*e. 'ensity. Climate
'emogra#hic
!ge. ender. /amily si*e
and /ife cycle. Race.
Occu#ation. or
Income 000
Lifestyle or
Personality
Psychogra#hic
Occasions. (enefits.
"ses. or !ttitudes
(ehavioral
28
9" Beha1ioral Segmentation:
8ehavioral segmentation divides buyers into groups based on their
kno&ledge, attitudes, uses or responses to a product. /any marketers
believe that behavior variables are the best starting point for building
market segments.
122A*+1'*. 8uyers can be grouped according to occasions &hen they
get the idea to buy, make their purchase or use the purchased item.
1ccasion segmentation can help -rms build up product usage. #or
example, most people drink orange juice at breakfast, but orange
gro&ers have promoted drinking orange juice as a cool and refreshing
drink at other times of the day
Bases for Segmenting Business Mar/ets:
;emographic
1perating Iariables
!urchasing Approaches
*ituational #actors
!ersonal 2haracteristics
'Decti1e Segmentation:
29
Additional Segmentation )riteria
0thical 2hoice of /arket ,argets
*egment +nterrelationships 9 *uper segments
*egment-by-*egment +nvasion !lans
+nter segment 2ooperation
A target mar/et
2onsists of a set of buyers &ho share common needs or
characteristics that the company decides to serve
Measura,le
Measura,le
!ccessi,le
!ccessi,le
Su,stantial
Su,stantial
'ifferential
'ifferential
Segments must ,e large or
#rofita,le enough to serve 0
Segments can ,e
effectively reached and
served 0
!ctiona,le
!ctiona,le
Si*e. #urchasing #ower.
#rofiles of segments can
,e measured 0
Segments must res#ond
differently to different
mar1eting mi2 elements &
actions 0
Must ,e a,le to attract and
serve
the segments 0
30
7i1e Patterns of Target Mar/et Selection:
Segment-by-Segment
*n1asion Plan
+e1ie$
+dentifying /arket *egments
2hoosing ,arget /arkets
Summary
Single-segment Single-segment
Concentration Concentration
Selective Selective
Specialization Specialization
M3 M4
M5
P
3
P
4
P
5
"roduct "roduct
Specialization Specialization
M3 M4
M5
P
3
P
4
P
5
#ar!et #ar!et
Specialization Specialization
M3 M4
M5
P
3
P
4
P
5
M3 M4
M5
$ull mar!et $ull mar!et
coverage coverage
P
3
P
4
P
5
P 6 Product P 6 Product
M 6 Mar1et M 6 Mar1et
31
*ellers can take three approaches to a market. /ass marketing is the
decision to mass-produce and mass-distribute one product and attempt
to attract all kinds of buyers. ,arget marketing is the decision to identify
the diferent groups that make up a market and to develop products and
marketing mixes for selected target markets. *ellers today are moving
a&ay from mass marketing and product diferentiation to&ards target
marketing because this approach is more helpful in spotting market
opportunities and developing more efective products and marketing
mixes.
,he key steps in target marketing are market segmentation, market
targeting and market positioning. /arket segmentation is the act of
dividing a market into distinct groups of buyers &ho might merit
separate products or marketing mixes. ,he marketer tries diferent
variables to see &hich give the best segmentation C%M : 2hapter N
/arket *egmentation and ,argeting opportunities. #or consumer
marketing, the chief segmentation variables are geographic,
demographic, psychographic and behavioral. 8usiness markets segment
by business consumer demographics, operating characteristics, buying
approaches and personal characteristics. ,he efectiveness of
segmentation analysis depends on -nding segments that are
measurable, accessible, substantial and actionable. 'ext, the seller has
to target the best market segments. ,he company -rst evaluates each
segment's size and gro&th characteristics, structural attractiveness and
compatibility &ith company resources and objectivesE it then chooses
one of three market-coverage strategies. ,he seller can ignore segment
diferences <undiferentiated marketing>, develop diferent market ofers
for several segments <diferentiated marketing>, or go after one or a fe&
market segments <concentrated
/arketing>. /uch depends on company resources, product variability,
and product lifecycle *tage and competitive marketing strategies.
32
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