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Marketing Strategies
1. BCG Matrix has become integral part of business strategy for investment, Joint venture,
franchising and market entry in any part of the world.
Apply this concept in any one of the following Indian companies for making strategic decision
for survival and growth.
i) Videocon International
ii) Dabur Ltd.
iii) Tata Motors.
ANS: BCG’s Portfolio Analysis is based on the premise that majority of the companies carry out
multiple business activities in a number of different product-market segments.
Together these different businesses form the Business Portfolio, which can be characterized by two
parameters:
1) Company’s relative market share for the business, representing the firms competitive positions;
and
2) The overall growth rate of that business.
The BCG model proposes that for each business activity within the corporate portfolio, a
separate strategy must be developed depending on its location in a two-by two-portfolio matrix of
high and low segments on each of the above-mentioned axes. Relative Market Share is stressed on
the assumption that the relative competitive position of the company would determine the rate at
which the business generates cash. An organization with a higher relative share of the market
compared to its competitors will have higher profit margins and therefore higher cash flows.
Relative Market Share is defined as the market share of the relevant business divided by the
market share of its largest competitor. Thus, if Company X has 10 per cent, Company Y has 20 per
cent, and Company Z has 60 per cent share of the market, then X’s Relative Market Share is 1/6m,
Y’s Relative Market Share is 1/3, and Z’s Relative Market Share 60/20 = 3. Company Z has
Company Y as its leading competitor, whereas Companies X and Y have Company Z as their lead
competitor.
The selection of the Rate of Growth of the associated industry is based on the
Understanding that an industrial segment with high growth rate would facilitate expansion of the
operations of the participating company. It will also be relatively
Marketing Strategy
easier for the company to increase its market share, and have profitable investment opportunities.
High growth rate business provides opportunities to plough back earned cash into the business and
further enhance the return on investment. The fast growing business, however, demands more cash
to finance its growth.
If an industrial sector is not growing, it would be more difficult for the participating
Company to have profitable investments in that sector. In a slow growth business, increase in the
market share of a company would generally come from corresponding reduction in the competitors’
market share.
The BCG matrix classifies the business activities along the vertical axis according to the
‘Business Growth Rate” (meaning growth of the market for the product), and the ‘Relative Market
Share’ along the horizontal axis. The two axes are divided into Low and High sectors, so that the
BCG matrix is divided into four quadrants
Under such circumstances, the strategic solution is to either liquidate, or if possible Evaluation of
Strategy harvest or divest the DOG business.
Question Marks
Marketing Strategy
Like Dogs, Question Marks are businesses with low market share but the businesses have a
high growth rate. Because of their high growth, the cash requirement is high, but due to their low
market share, the cash generated is also low.
As the business growth rate is high, one strategic option is to invest more to gain
market share, pushing from low share to high. The Question Mark business then
moves to a STAR (discussed later) quadrant, and subsequently has the potential to become cash low,
when the business growth rate reduces to a lower level.
Another strategic option is when the company cannot improve its low competitive
position (represented by low market share). The management may then decide to divest the Question
Mark business.
These businesses are called Question Marks because they raise the question as to whether
more money should be invested in them to improve their relative market share and profitability, or
they should be divested and dropped from the portfolio.
Stars
Businesses, which have high growth rate and high market share, are called Stars. Such
businesses generate as well as use large amounts of cash. The Stars generate high profits and
represent the best investment opportunities for growth.
The best strategy regarding Stars is to make the necessary investments and consolidate the
company’s high relative competitive position.
Methodology for Building BCG Matrix
The Boston Consulting Group suggests the following step-by-step procedure to
develop the business portfolio matrix and identify the appropriate strategies for
different businesses.
- Classify various activities of the company into different business segments or Strategic
Business Units (SBUs).
- For each business segment determine the growth rate of the market. This is later plotted on a
linear scale.
- Compile the assets employed for each business segment and determine the relative size of the
business within the company.
- Estimate the relative market shares for the different business segments. This is generally
plotted on a logarithmic scale.
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- Plot the position of each business on a matrix of business growth rate and relative market
share.
Strategic Implications
Most companies will have different segments scattered across the four quadrants of BCG matrix,
corresponding to Cash Cow, Dog, Question Mark and Star businesses.
The general strategy of a company with diverse portfolio is to maintain its competitive position in
the Cash Cows, but avoid over-investing. The surplus cash generated by Cash Cows should be
invested first in Star businesses, if they are not self-sufficient, to maintain their relative competitive
position. Any surplus cash left with the company may be used for selected Question Mark businesses
to gain market share for them.
The BCG analysis, while considering different businesses does not take into consideration the
human aspects of running an organization. Cash generated within a business unit may come to be
symbolically associated with the power of the concerned manager. As such managing a Cash Cow
business may be reluctant to part with the surplus cash generated by his unit. Similarly, the workers
of a Dog business which has been decided to be divested may react strongly against changes in the
ownership. They may deem the divestiture as a threat to their livelihood or security. Thus, BCG
analysis could throw up strategic options which may or may not be easy to implement.
i) GENERIC STRATEGY:
Competitive Advantage
NICHE
Niche is an USP, which carves out a key result area imparting success to business
1. COST LEADERSHIP:
Economies of scale can be achieved when production cost decreases as volume of production
increases.
1. Appropriate technology
• Accuracy is great
• Precision is high
• Parity in price
• Proximity in value
EXAMPLES:
2. Nirma
3. Maruti
2. DIFFERENTIATOR:
A firm adopting differentiator strategy maintains its uniqueness in the features offered which the
buyers assumes to have specific and special value and do not mind to pay premium.
- Differentiation could be product specific, distribution, durability, after sale service, spare
parts or may be any other marketing parameter.
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- A differentiated product must have parity in areas other than differentiation and proximity in
value, benefits desired by customers.
- A firm can sustain differentiation and have competitive edge if premium price exceeds the
extra cost incurred in being unique.
EXAMPLES:
1. Park Avenue
2. Pepsodent Germicheck
3. Oxyrich
4. Savlon antiseptic
3. FOCUS
- Cost focus exploits the differentiation in the cost in some segment and differentiator focus
exploits the special needs of customer in same segment.
Cost focus
EXAMPLES:
1. Sterling properties
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2. Wada pao
3. Chamak
Differentiated focus
EXAMPLES:
1. Irani Chai
2. Toyota Lexus
3. Club Mahindra
A firm that engages in each of the generic strategy but fails to achieve any one of them is stuck in
the middle and in the long run will be a below average performer.
The business works hard to achieve the lowest production and distribution cost so that it can priced
lower than its competitors and win a large market share. Firms pursuing this strategy must be good at
purchasing, engineering, manufacturing and physical distribution. They need less skill in marketing.
The problem with this strategy is that other firms will usually compete with still lower costs and hurt
he firm that rested its whole future on cost.
EXAMPLE:
iii) SEGMENTATION
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a marketer can rarely satisfy everyone in a market. Therefore he divides the market into segments.
They identify and profile distinct group of buyers who might prefer or require varying products and
services mixes by examining demographic, psychographic and behavioral differences among buyers.
EXAMPLES
1. Arvind EYE care system, a group of institutions offering world class eye care to poor strata of
the society
2. DELL- t is divided into two direct sales divisions: one sell to consumers and small businesses;
another manages the company’s corporate accounts
iv) Differentiation
The business concentrates on achieving superior performance in an important customer benefit area
valued by a large part of the market. The firms cultivate those strengths that will contribute t their
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intended differentiation. This, the firm seeking quality leadership for example, must make products
with the best components pt them together expertly, inspect them carefully and effectively
communicate their quality.
EXAMPLES:
v) POSITIONING
Positioning is an act of designing the company’s offering and image to occupy a distinct place in the
mind of the target market to maximize the potential benefit to the firm.
EXAMPLES:
1. MOOV-it was launched as a balm for relieving joint pains in older people but subsequently it was
repositioned as “backache specialist”
Points-of-difference: these are the attributes or benefits consumers strongly associate with the
brand, positively evaluated, and believed that they could not find the same extent with a competitive
brand
EXAMPLES:
2. Nike- performance
3. Lexus- quality
Points-of-parity: these are the associations that are not necessarily unique to the brand but may in
fact be shared with others. These are viewed as essentials for a legitimate and credible product
offering.
EXAMPLES:
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Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted
(introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an
adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).
In theory, it is the same for a product. After a period of development it is introduced or launched
into the market; it gains more and more customers as it grows; eventually the market stabilizes and
the product becomes mature; then after a period of time the product is overtaken by development and
the introduction of superior competitors, it goes into decline and is eventually withdrawn.
- Product sales pass through distinct phases, each posing different challenges, opportunities
and problems to the seller
- Products require different marketing, financial, manufacturing, purchasing in each life cycle
stage.
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1. Introduction- a period of slow sales growth. profits are non-existent because of heave
expenses on product launch.
- cost high
- profitability
- public awareness
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3. Maturity- a slowdown in sales because the product have achieved acceptance by most of the
buyers. Profits stabilize or decline because of increase competition.
- Costs are very low as you are well established in market & no need for publicity.
However, most products fail in the introduction phase. Others have very cyclical maturity phases
where declines see the product promoted to regain customers.
Marketing Strategy
Introduction
The need for immediate profit is not a pressure. The product is promoted to create awareness.
If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of
product are available in few channels of distribution.
Growth
Competitors are attracted into the market with very similar offerings. Products become more
profitable and companies form alliances, joint ventures and take each other over. Advertising spend
is high and focuses upon building brand. Market share tends to stabilize.
Maturity
Those products that survive the earlier stages tend to spend longest in this phase. Sales grow
at a decreasing rate and then stabilize. Producers attempt to differentiate products and brands are key
to this. Price wars and intense competition occur. At this point the market reaches saturation.
Producers begin to leave the market due to poor margins. Promotion becomes more widespread and
uses a greater variety of media.
Decline
At this point there is a downturn in the market. For example more innovative products are
introduced or consumer tastes have changed. There is intense price-cutting and many more products
are withdrawn from the market. Profits can be improved by reducing marketing spend and cost
cutting.
In reality very few products follow such a prescriptive cycle. The length of each stage varies
enormously. The decisions of marketers can change the stage, for example from maturity to decline
by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is
not easy to tell which stage the product is in.
Marketing Strategy
A niche is a narrowly defined customer group seeking a distinctive mix of benefits. Marketers
usually identify niches by dividing segments into sub segments.
• They will pay a premium to a firm that best satisfies their needs.
• The niche gains certain economies through specialization and the niche has size, profit and
growth potential.
• Segments are fairly small and normally attract only one or two competitors.
EXAMPLES:
1. Crack, an ointment from Paras pharmaceuticals it is targeted to women for prevention and
treatment of cracked heels
2. Ezee, a liquid detergent from Godrej is a fabric washing product for woolen cloths
The follower can achieve high profits, as it did not bear any of the innovation expenses.
1. Counterfeiter- the counterfeiter duplicates the leader’s products and packaging and sells it on
the black market or through disreputable dealers.
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EXAMPLE:
b. Apple computer and Rolex have been plagued with counterfeiter problem
2. Imitator- the imitator something from the leader but maintains differentiation in terms of
packaging, advertising, pricing or location.
3. Cloner- the cloner emulates the leader’s products, name and packaging with slight variations.
4. Adapter- the adapter takes the leader’s products and improves them.
The leader should adopt the following strategies to maintain its share and sales.
The dominant firm must gain new users, new uses and usage of its products.
The leader leads by developing new products and customer services , distribution effectiveness
and cost cutting.
b.1) position defense: building superior brand power and making the brand almost impregnable.
b.4) counteroffensive defense: can meet the attacker frontally or hits his flank or launch a pincer
movement.
b.5) mobile defense: the leader stretches its domain over new territories that can serve as future
centers for defense and offense through market broadening.
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x) CHALLENGER STARTEGY
Strategies:
1. Frontal attack: attacker matches its opponent’s products, advertising, price and distribution.
3. Encirclement attack: attempt to capture a wide slice of the enemy’s territory through ‘blitz”
4. Bypass attack: bypassing the enemy and attacking easier markets to broaden one’s resources
base
5. Guerrilla warfare: waging small, intermittent attacks to harass and demoralize the opponent
and eventually secure permanent footholds.
It is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or subtracts
from) the value provided by a product or service to a firm and/or that firm’s customers.
The management of brand equity involves investment to create and enhance these assets.
Each brand equity asset creates value. In order to manage brand equity and brand building activities
effectively, it is important to be sensitive to the ways in which strong brands create value
a. Brand awareness
• The strongest brands are managed not for general awareness but strategic awareness.
b. Perceived quality
• Among all brand associations, only perceived quality has been shown to drive financial
performance.
c. Brand loyalty
• It is a key consideration when placing a value on a brand that is to be bought or sold, because
a highly loyal customer base can generate predictable sales.
• Also the impact of brand loyalty on marketing costs is substantial. It is simply to retain
customers than to attract new ones.
d. Brand Associations
It can be achieved by
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• Being different
• Slogans. Jingles
• Symbol exposure
• Event sponsorship
• Brand extension
• Repetition
3. The five-force model combined with value chain will help achieve better
performance in today’s competitive world. Discuss how performance can be
improved by adopting both concepts?
Ans: The Five Forces model of Porter is an Outside-in business unit strategy tool that is used to
make an analysis of the attractiveness (value) of an industry structure. The Competitive Forces
analysis is made by the identification of five fundamental competitive forces:
1. Entry of competitors. How easy or difficult is it for new entrants to start competing,
which barriers do exist.
3. Bargaining power of buyers. How strong is the position of buyers. Can they work
together in ordering large volumes.
5. Rivalry among the existing players. Does a strong competition between the existing
players exist? Is one player very dominant or are all equal in strength and size.
6. Government.
Porter's Competitive Forces model is probably one of the most often used business strategy tools. It
has proven its usefulness on numerous occasions. Porter's model is particularly strong in thinking
Outside in.
• Access to technology.
• Suppliers threaten to integrate forward into the industry (for example: brand
manufacturers threatening to set up their own retail outlets).
• The structure of industry costs. Industries with high fixed costs encourage
competitors to manufacture at full capacity by cutting prices if needed.
• Switching costs. Rivalry is reduced when buyers have high switching costs.
• Exit barriers. When barriers to leaving an industry are high, competitors tend to
exhibit greater rivalry.
• The model was designed for analyzing individual business strategies. It does not cope
with synergies and interdependencies within the portfolio of large corporations.
• From a more theoretical perspective, the model does not address the possibility that
an industry could be attractive because certain companies are in it.
• Some people claim that environments which are characterized by rapid, systemic and
radical change require more flexible, dynamic or emergent approaches to strategy
formulation. See: Disruptive Innovation
VALUE CHAIN
• Used for competitor analysis - to analyze competitive position within the industry
1. Support activities:
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The process of grouping a market (i.e. customers) into smaller subgroups. This is derived
from the recognition that the total market is often made up of submarkets (called 'segments'). These
segments are homogeneous within (i.e. people in the segment are similar to each other in their
buying behavior or parts thereof). Because of this intra-group similarity, they are likely to respond
somewhat similarly to a given marketing strategy.
Product differentiation (also known simply as "differentiation") is the process of
distinguishing the differences of a product or offering from others, to make it more attractive to a
particular target market. This involves differentiating it from competitors' products as well as one's
own product offerings.
Differentiation is a source of competitive advantage. Although research in a niche market
may result in changing your product in order to improve differentiation, the changes themselves are
not differentiation. Marketing or product differentiation is the process of describing the differences
between products or services, or the resulting list of differences. This is done in order to demonstrate
the unique aspects of your product and create a sense of value. Marketing textbooks are firm on the
point that any differentiation must be valued by buyers. The term unique selling proposition refers to
advertising to communicate a product's differentiation.
In economics, successful product differentiation leads to monopolistic competition and is
inconsistent with the conditions for perfect competition, which include the requirement that the
products of competing firms should be perfect substitutes.
The brand differences are usually minor; they can be merely a difference in packaging or an
advertising theme. The physical product need not change, but it could. Differentiation is due to
buyers perceiving a difference; hence, causes of differentiation may be functional aspects of the
product or service, how it is distributed and marketed, or who buys it. The major sources of product
differentiation are as follows.
Differences in quality which are usually accompanied by differences in price
Differences in functional features or design
Ignorance of buyers regarding the essential characteristics and qualities of goods they are
purchasing
Sales promotion activities of sellers and, in particular, advertising
Differences in availability (e.g. timing and location).
Marketing Strategy
The objective of differentiation is to develop a position that potential customers see as unique.
Differentiation primarily impacts performance through reducing directness of competition: As
the product becomes more different, categorization becomes more difficult and hence draws fewer
comparisons with its competition. A successful product differentiation strategy will move your
product from competing based primarily on price to competing on non-price factors (such as product
characteristics, distribution strategy, or promotional variables).
Most people would say that the implication of differentiation is the possibility of charging a price
premium; however, this is a gross simplification. If customers value the firm's offer, they will be less
sensitive to aspects of competing offers; price may not be one of these aspects. Differentiation makes
customers in a given segment have a lower sensitivity to other features (non-price) of the product.
Marketing Strategy
5. Explain the concept of “Value Chain” in different stages of PLC with example. How can
value chain be inter-linked with SCM and CRM?
ANS: Value Chain is a basic discrete building block of competitive advantage in a firm operating in
competitive scenarios. The value chain for the Industry could include:
Competitive advantage of firm cannot be looking at a firm in isolation; since it performs many
discrete activities like designing, producing, marketing and supporting its products. Each of these
activities can contribute to a firm’s relative cost and create basis for differentiation. A company may
have a cost advantage due to low cost distribution. Superior sales force utilization and Value
Engineered Superior Product Design.
1. Infancy:
The main idea in this stage is to develop the product such that it results in generation of higher
sales. A constant emphasis on to promote the product, sell and to simply exploit the ID
customers. Thus in the first part of the PLC, Marketing & Sales becomes more important than
anything else does. No errors and the company should do things right on the first time. This
implies that the task is to create the market for your product and also make the product available
to the customers. This means concentrate on the exclusive distribution of the products.
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The marketing & sales acts as a cost saver for the coming stage of PLC because the company is
spending today for tomorrow. This will further result in no additional spending in the next stages of
PLC.
Example: Binacas came up with an Angular Toothbrush, which was not offered, by any of the
competitors. However there was a confusion of the communication aspect and they over promised
and under delivered. At this time, Promise launched the angular toothbrush in all the three types i.e.
soft, medium & hard and worked well on the distribution, thus making all the three available to all
the customers.
2. Growth:
The customers who tried our product in the infancy stage have a high probability to repeat the
purchase in the growth stage. Moreover, there are many new trials as well. Thus, the sales increase
largely. In this stage, inbound logistics plays a vital role. If inbound logistics is done in an efficient
manner, it would act as a cost saver. It is in this stage of the PLC that one must develop strong
relationship with the suppliers.
3. Maturity:
In this stage of Maturity, it of paramount importance to make the product available for Sale to the
customers thus making operational efficiency & productivity very important
4. Decline:
While moving on from one stage to another, the company should not forget to take care of the
activities done in the previous stage. Thus, keep doing the activities and work on the strategies
rightly.
Entry point of Value Chain is Inbound Logistics, today very well known as, Supply Chain
Management, and SCM.
The concept has been extended beyond individual organizations. It can apply to whole supply
chains and distribution networks. The delivery of a mix of products and services to the end customer
will mobilize different economic factors, each managing its own value chain. The industry wide
synchronized interactions of those local value chains create an extended value chain, sometimes
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global in extent. Porter terms this larger interconnected system of value chains the "value system." A
value system includes the value chains of a firm's supplier (and their suppliers all the way back), the
firm itself, the firm distribution channels, and the firm's buyers (and presumably extended to the
buyers of their products, and so on).
Capturing the value generated along the chain is the new approach taken by many
management strategists. For example, a manufacturer might require its parts suppliers to be located
nearby its assembly plant to minimize the cost of transportation. By exploiting the upstream and
downstream information flowing along the value chain, the firms may try to bypass the
intermediaries creating new business models, or in other ways create improvements in its value
system.
Strategic
• Strategic network optimization, including the number, location, and size of warehouses,
distribution centres and facilities.
• Strategic partnership with suppliers, distributors, and customers, creating communication
channels for critical information and operational improvements such as cross docking, direct
shipping, and third-party logistics.
• Product design coordination, so that new and existing products can be optimally integrated
into the supply chain, load management
Marketing Strategy
Tactical
• Sourcing contracts and other purchasing decisions.
• Production decisions, including contracting, scheduling, and planning process definition.
• Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of best practices
throughout the enterprise.
• Milestone payments
• Focus on customer demand.
Operational
• Daily production and distribution planning, including all nodes in the supply chain.
• Production scheduling for each manufacturing facility in the supply chain (minute by
minute).
• Demand planning and forecasting, coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in collaboration with all
suppliers.
• Inbound operations, including transportation from suppliers and receiving inventory.
• Production operations, including the consumption of materials and flow of finished goods.
• Outbound operations, including all fulfilment activities and transportation to customers.
• Order promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers
and entered by employees in different departments, such as sales, marketing, customer service,
training, professional development, performance management, human resource development, and
compensation. Details on any customer contacts can also be stored in the system. The rationale
behind this approach is to improve services provided directly to customers and to use the
information in the system for targeted marketing and sales purposes.
While the term is generally used to refer to a software-based approach to handling customer
relationships, most CRM software vendors stress that a successful CRM strategy requires a holistic
approach. CRM initiatives often fail because implementation was limited to software installation
without providing the appropriate motivations for employees to learn, provide input, and take full
advantage of the information systems.
Analytical CRM analyzes customer data for a variety of purposes:
• Designing and executing targeted marketing campaigns
• Designing and executing campaigns, e.g. customer acquisition, cross-selling, up-selling
• Analysing customer behaviour in order to make decisions relating to products and services
(e.g. pricing, product development)
• Management information system (e.g. financial forecasting and customer profitability
analysis)
Analytical CRM generally makes heavy use of data mining.
6. “Pricing is a key issue in competitive markets”. Discuss this statement in the context of
factors affecting pricing decisions. What pricing objectives are open to “Kingfisher Airlines”?
Suggest pricing strategy.
Pricing Objectives:
1) Profit oriented objectives (ROI)
2) Volume oriented objectives (Market share)
3) Competition orientation
If the fixed cost is high then increased sales volumes are required. In that case charge high price
initially and once Break even is achieved, lower the price.
Marketing Strategy
EXAMPLE: Airlines have 65% cost fixed. Sale at high price until break-even is achieved, and then
reduce the price. If variable cost is high then, do marginal change (lower) the price it will add to
earnings (High turnover).
Economies of Scale:
We can afford to sell at lower price and gain higher market share.
Cost Structure vis-à-vis competitors:
If cost structure is lower-one can offer competitive price to gain market share.
Manage cost – structure at low level.
Monopoly – No issues
Oligopoly - Follow the leader’s style of leading firm adopts cost plus method.
Product differentiation is practiced.
Competitive industry – Takes into consideration
1) Capital intensiveness
2) Technology know-how
3) Break even and economies of scale
4) Marketing experience.
4. Demand:
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New low cost carriers (LCCs) like SpiceJet and GoAir entered the market after KINGFISHER
AIRLINES's launch and they started an all-out price war by slashing down on fares. For instance, in
December 2005, GoAir started offering 10,000 free air tickets on four new routes (Hyderabad,
Chennai, Jaipur, and Bangalore). Established players like Jet Airways (India) Ltd., (Jet Airways) too
looked to consolidate their market positions.
In January 2006, Jet Airways announced that it would acquire Air Sahara (Sahara) for US$
500 million. This acquisition would make Jet Airways India's largest airline with an almost 45%
market share. Jet Airways was also expected to gain control of Sahara's 22 parking bays spread
across many domestic airports. In February 2006, the Jet-Sahara combine brought down their
airfares to compete against KINGFISHER AIRLINES, and LCCs like Air Deccan and SpiceJet.
Marketing Strategy
Recently Kingfisher & Jet Airways made an alliance to mainly cut cost.
The Low Cost Carriers faced a bloodbath while seeking to convert the railway passenger into airline
passenger. Kingfisher Airline is positioned extremely differently. Kingfisher Airline targeted the
growing middle class segment that was net savvy, young and upwardly mobile, with a propensity to
spend.
Kingfisher falls into a good service and low cost airlines. Thus, the basic pricing strategy
followed by Kingfisher Airlines is Penetration Pricing by offering a good service to the middle class
segment at a reasonable cost.
As per the pricing policy of Kingfisher Airlines, it would not be positioned as a low cost
carrier as passengers would attribute the features of low cost carriers like low quality of service,
delayed flight timings, etc., to Kingfisher Airline as well.
Hence, the airline was called a budget airline and not a Low Cost Carrier. Fares were above
those of LCCs but lower than the economy class fares of Jet, Sahara, and Indigo Airline. Kingfisher
Airline also allowed multiple fare options and auctioning of tickets on all traffic routes...
Kingfisher Airline has a single class, which combines the experience of business class with
economy. Having a single class freed up more space and legroom for passengers when compared to
normal economy class seats. KINGFISHER AIRLINES was also the only airline in India to address
its passengers as 'guests'.
7. Using Porter’s Generic strategies model analyze options open to various players in two
wheelers industry.
As Porter's 5 Forces analysis deals with factors outside an industry that influence the nature of
competition within it, the forces inside the industry (microenvironment) that influence the way in
which firms compete, and so the industry’s likely profitability is conducted in Porter’s five forces
model. A business has to understand the dynamics of its industries and markets in order to compete
effectively in the marketplace.
The competitive forces model identified five forces, which would impact on an organization’s
behavior in a competitive market. These include the following:
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Understanding the nature of each of these forces gives organizations the necessary insights to enable
them to formulate the appropriate strategies to be successful in their market
The intensity of rivalry, which is the most obvious of the five forces in an industry; helps determine
the extent to which the value created by an industry will be dissipated through head-to-head
competition.
After facing its worst recession during the early 1990s, the two-wheeler industry bounced back with
a 25% increase in volume sales in February 1995. The scooters are considered as family vehicles.
There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are
Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd
(TVS).
The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic
Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd
(Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).
Both potential and existing competitors influence average industry profitability. The threat of new
entrants is usually based on the market entry barriers. The entry barriers are high in two-wheeler
Marketing Strategy
industry.
• Economies of scale: here in this two-wheeler industry economies of scale is required to cater to
vast target group and to be cost effective at the same time. So the new entrant needs to produce in
huge quantities which wont be possible at the initial stage for a small players, the entrant needs to
have ‘deep pockets’ to absorb the initial losses.
• Cost of entry: The initial investment in machinery, fixed equipment and working capital would be
tremendously high.
• Distribution channels: The entrant needs to have a good distribution network to reach the target
group but it happens many a times that the distribution channel members do not entertain new
players. It also happens that the players may find the distribution member is too expensive.
• The new entrant needs to have good contacts and relationships with the industry people before
entering.
The threat that substitute products pose to an industry's profitability depends on the relative price-to-
performance ratios of the different types of products or services to which customers can turn to
satisfy the same basic need. The threat of substitution is also affected by switching costs – that is, the
costs in areas such as retraining, retooling and redesigning that are incurred when a customer
switches to a different type of product or service. It also involves:
Two wheelers can have cost effective substitutes like bus, local trains etc.
Buyer power is one of the two horizontal forces that influence the appropriation of the value created
by an industry . The most important determinants of buyer power are the size and the concentration
of customers. Other factors are the extent to which the buyers are informed and the concentration or
differentiation of the competitors.
Marketing Strategy
Since the number of players and models available in the market is very high, therefore the
option available to the customer is also high, so the bargaining power of the customer is high.
So the entrant has to be careful while making the offering, because it should appeal to the
needs of the customers or else customer wont revert to the offering and it could be a big
failure, the options available to the customers are many.
Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier power
typically focuses first on the relative size and concentration of suppliers relative to industry
participants and second on the degree of differentiation in the inputs supplied. The ability to charge
customers different prices in line with differences in the value created for each of those buyers
usually indicates that the market is characterized by high supplier power and at the same time by low
buyer power. Bargaining power of suppliers exists in the following situations:
The switching costs are high. Switching from one supplier to another is easy hence; the
bargaining power of supplier is less.
High power of brands. If the entrant has already existing good brand image then the supplier
is not much.
8. Describe the process of developing an advertising strategy for a new brand of “Mobile
phone” and discuss the importance of creating the advertising message that has linkages with
marking goals and consumers readiness to accept the product with some examples.
Advertising is a way to get your message to your desired audience. But in order to do that,
you must first have a plan. This plan has many facets, including your marketing goal,
advertising strategies creative and media, implementation, evaluation, and budget.
Marketing Strategy
Marketing goal: - India’s subscriber base is around 200mn.we are aiming at around 35 mn in the 1st
year and 55 in the second year.
Determine your target market. In order to determine your target market segmentation and targeting is
done.
• Location – Our target group will be primarily from urban environment. All the metropolitan,
tier I and tier II cities will be targeted.
• Age – No specific age bar because our mobile phone would be for all age groups. But our
advertising would be made with the youths on the target.
• Income – consumer must make Rs.3 lacs p.a.
After narrowing target audience, begin the process of deciding what it is you want the consumer to
know or think about you. This is called the creative process or strategy. Basically at this stage
positioning is done.
• Comparatively reasonable.
Ads will target people of all age groups from 15 to 55, and persuade them that this cell phone is a
complete package providing all the features with style and elegance at affordable prices.
Since our target audience is located in urban areas, we should use advertising media that would
reach our target audience through
• Newspaper
• Handouts or Flyers
• Radio
• Magazines
• TV
• Outdoor, such as billboards
• Special promotions or packages
• Partnering with any service provider(like nokia and reliance)
• Internet Marketing
Television
Television is a powerful medium because it communicates with both sight and sound. We would
place your advertisement spots on the most viewed channels like Star TV, Zee TV, Colors and
MTV.ad spend on the television media will be around 10 crores. The duration of the ad will be
around 60 secs at the prime time from 8p.m. to 10p.m.
Radio
Marketing Strategy
For radio advertising, we would go for radio 93.5 fm. the slots for it will be of 45 secs and the
frequency will be around 4 in a week and the timing will be from 6p.m. to 8 p.m.the budget would
be approximately 4 crores.
Magazine
Newspaper: Newspapers are an important local medium with excellent reach potential. Because of
the daily publication of most papers, we place an ad in the DNA, Hindustan times on the day before
the launch. The budget would be approximately around 6 crores.
Outdoor
The most cost-effective advertising vehicle is outdoor . The visibility of this medium is good
reinforcement for products, and it is a flexible alternative. Outdoor media vehicle selected are
billboards, bus queue shelters and pole kiosks and in ambient media mall murals will be used. The
display duration will be around one month will a budget of 1.24 crores.
Pulsing schedule - Advertising of a product runs throughout the year, when demand and seasonal
factors are unimportant.
Who purchases the media, creates the ad, and produces the ad?
The responsibility for actually carrying out the advertising program can be handled in one of four
ways:
Full-service agency Research, selects and purchases media, develops ad copy and produces artwork.
Marketing Strategy
Your budget will determine when and where you can advertise. There are four basic ways to
determine what your budget should be. And don’t forget, your budget doesn’t just include media
costs, but production costs as well.
Task Objective Method - how much to spend to reach your objective. To reach aprrox 35 mn
subscribers an advertising budget of around 24 crores would be required.
9. “Strategic options open to a company is largely dependent on their competitive position and
stages at which they are”. Discuss this statement in relation to strategies of market leaders,
market challengers, followers and nichers in soap industry.
They can be applied to products or services in all industries, and to organizations of all sizes. They
were first set out by Michael Porter in 1985 in his book Competitive Advantage: Creating and
Sustaining Superior Performance. Porter called the generic strategies "Cost Leadership" (no frills),
Marketing Strategy
"Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a
specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost
Focus" and "Differentiation Focus". These are shown in Figure 1 below.
Porter's generic strategies are ways of gaining competitive advantage - in other words, developing
the "edge" that gets you the sale and takes it away from your competitors. There are two main ways
of achieving this within a Cost Leadership strategy:
• Access to the capital needed to invest in technology that will bring costs down.
• Very efficient logistics.
• A low cost base (labor, materials, facilities), and a way of sustainably cutting costs below
those of other competitors.
Marketing Strategy
The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are
not unique to you, and that other competitors copy your cost reduction strategies
Differentiation involves making your products or services different from and more attractive those of
your competitors. To make a success of a generic Differentiation strategy, organizations need:
Companies that use Focus strategies well concentrate on particular niche markets and, by
understanding the dynamics of that market and the unique needs of customers in it, develop uniquely
low cost or well-specified products for the market.
But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic
Focus strategy is to ensure that you are adding something extra as a result of serving only that
market niche. It's simply not enough to focus on only one market segment because your organization
is too small to serve a broader market
So, from here we can move on to the application of this strategy to the market leaders, market
challengers, followers and nichers in soap industry
Kotler classifies firms by the role they play in the target market: leader, challenger, follower, or
nicher.
Market Leader Strategies: The market leader generally leads the other firms in price changes,
new-product introductions, distribution coverage, and promotional intensity. The market leader
must maintain a constant vigilance as other firms keep challenging its strength or trying to take
Marketing Strategy
advantage of its weaknesses. To remain number one, dominant firms must find ways (1) to expand
total market demand, (2) to protect its current market share through good defensive and offense
actions, and/or (3) try to increase its market share further, even if market size remains constant
Example: LUX …
PLC Stage: Maturity
Market Challenger Strategies: Challengers can attack the leader and other competitors in an
aggressive bid for further market share. The strategic objective of most challengers is to increase
their market shares. An aggressor can choose to attack the market leader, to attack firms of its own
size that are not doing the job or are under-financed, or attack small local and regional firms that are
not doing the job or are under-financed. The attack strategies include frontal attack, flank attack,
encirclement attack, bypass attack, and guerilla attack.
Example: Nirma…
PLC Stage: Decline
Market Follower Strategies: Followers tend not to want to steal others’ customers, but instead
they present similar offers to buyers, usually by copying the leader. Follower market shares show a
high stability. Each follower tries to bring distinctive advantages to its target market. The follower
is a major target of attack by challengers. Therefore the follower must keep its manufacturing costs
low and its product quality and service high. Following does not mean the firm is passive or a
carbon copy of the leader. The specific strategies are: the cloner, which lives parasitically off the
leader; the imitator, which copies some things from the leader but maintains differentiation in terms
of packaging advertising, pricing, etc; and the adapter, which takes the leader’s products and adapts
and often improves them.
Example: Breeze, Lifebuoy Skinguard…
PLC Stage: Growth
well that it can meet their needs better than other firms casually selling to this niche could. The
nicher receives high margins in contrast to the high volume of the mass marketer. The key idea is
specialization. Nichers need to create niches, expand niches, and protect niches.
Example: Dove…
PLC Stage: Between Maturity and Decline.
10. “Quality of product is determined by the customers in the market and in the factory”.
Discuss this statement in relation to “product strategies with reference to product features and
quality”.
ANS:
Product Strategies:
Marketing Strategy
“Positioning tells what the product stands for, what it is and how customers should evaluate it.”
Therefore, the product should be placed
- In right segment
- To receive favorable reception
- The product should be designed to match the segment.
- Right communication should be planned.
Process of Positioning:
Example: 1) Beer: Light, strong, bitter, and mild.
Kingfisher v/s Haywards
2) Vicks Vapourub v/s Tiger Balm
3) Calcium Sandoz for women & children.
2) Product Re-positioning Strategy
Example:
1. Shampoo Sachets
3. Babool Toothpaste
Examples:
1) Cadbury Chocolates
4) Atlas Cycles.
Examples:
1) Coca Cola
• Tanda Matlab
• Safe drinks
3) Product-Overlap Strategy
Product overlap strategy refers to a situation where a company decides to compete against its
own brand. ‘This happens in India in the product range where clear segmentation of market is not
possible.’
Examples:
1. Detergent soaps and powders.
2. Bath soap
3. Luggage / Bag markets.
- Downward stretch
Marketing Strategy
Examples:
a. Contract Mfg. Emcure
b. Own brands Contract Mfg. Blue Cross
c. Godrej Soap – Contract Mfg. and Own brands
d. Peter England Shirts
4) Product-Scope Strategy
a) Single product
b) Multiple product
c) System product
1) Single Product:
One Brand Company selling to various segments.
Examples: Medical insurance, Pan Parag, Vitamin-C.
2) Multi-Brand Strategy:
Offering two or more products
Examples:
i. Proctor & Gamble
5) Product-Design Strategy
a. Standard products
b. Customized products
Standard Product:
1) Leads to similar experience to all customers.
Example:
Coca Cola
Lux
Lifeboy
Customized Product:
1) Products made to order.
Example:
Car – Power breaks, Air conditioning, Color, Tape, and CD
Player etc
6) Product-Elimination Strategy
3) Total Line Divestment e.g. Tata- Radio business, textile business, electricity, cosmetics.
2) Product Imitation
3) Product Innovation
Product Imitation:
- Me too products
Product Innovation:
New innovation, replacing the old way of need satisfaction.
Examples: Baggi – Car
Tape – VCR – VCD – DVD
Fountain pen – Ball pen etc.
US & German’s are the leading country in this business.
8) Value-Marketing Strategy
a. Quality Strategy
Quality Strategy:
Marketing Strategy
Quality is defined by customer and not by in-house quality control department / internal evaluations.
Ultimate objective of quality should be to delight the customers in every possible way i.e. Service,
Support beyond his / her experience.
Catching up – Filling the gap E.g. Washing Machines
Pulling ahead – Giving more than competitors.
E.g. TV Models, Microwaves.
Leapfrogging – Coming from behind and going ahead.
E.g. Videocon, Japanese cars.
11 “Basically all products are the same; it is marketing strategy that leads to differentiation
among the products”. Explain with suitable examples.
MARKETING STRATEGY
A marketing strategy is a process that allows an organization to concentrate its limited resources on
the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A
marketing strategy should be centered around the key concept that customer satisfaction is the main
goal.
PRODUCT DIFFERENTIATION
Marketing Strategy
The objective of a marketing strategy is to develop a position that potential customers will
see as unique. If your target market sees your product as different from the competitors', you will
have more flexibility in developing your marketing mix. Successful product differentiation creates a
competitive advantage for the seller, as customers view these products as unique or superior
A successful product differentiation strategy will move your product from competing based
primarily on price to competing on non-price factors (such as product characteristics, distribution
strategy, or promotional variables). In marketing, positioning is the technique by which marketers try
to create an image or identity in the minds of their target market for its product, brand, or
organization
An offering encompasses the benefits or satisfaction provided to your target markets, tangible and
intangible. To successfully market your product, you must understand its benefits from the buyer’s
perspective. This approach allows you to think beyond the tangible “product” entity and consider
what the consumer is actually buying and their reasoning behind that purchase.
Your offering includes a tangible product or service, plus any related services, such
as installation, warranties, guarantees, and packaging. It also includes intangible benefits, from peace
of mind, to validating an identity, to showing off to the neighbors.
Marketing Strategy
Focusing on the offering, rather than on the actual product or service itself, can be
valuable for analyzing consumers’ alternatives, to better identify unmet needs and wants of your
target markets, and to enhance development of new products or services.
In a larger sense, an organization’s offerings are a part of who they are as a business. Your
marketing strategy should address what types of customers you seek, what the buyers need, and how
your offerings meet their needs. It should also describe how your offering is communicated and what
value it holds for the consumer.
While a company can create many differences, each difference created has a cost as well as
consumer benefit. A difference is worth establishing when the benefit exceeds the cost. More
generally, a difference is worth establishing to the extent that it satisfies the following criteria.
Important: the difference delivers a highly valued benefit to a sufficient number of buyers.
Distinctive: the difference either isn't offered by others or is offered in a more distinctive way by the
company.
Superior: The difference is superior to the ways obtaining the same benefit.
Communicable: The difference is communicable and visible to the buyers.
Preemptive: The difference cannot be easily copied by competitors.
Affordable: The buyer can afford to pay the higher price
Profitable: The Company will make profit by introducing the difference.
POSITIONING
Positioning is the result of differentiation decisions. It is the act of designing the company's
offering and identity (that will create a planned image) so that they occupy a meaningful and distinct
competitive position in the target customer's minds.
The end result of positioning is the creation of a market-focused value proposition, a simple
clear statement of why the target market should buy the product.
Marketing Strategy
Example:
1) Volvo (station wagon)
Target customer-Safety conscious upscale families
Benefit - Durability and Safety,
Price - 20% premium,
Value proposition - The safest, most durable wagon in which your family can ride.
2) Dominos Pizza
3) McDonald’s
Zero Defect Quality, Standardization
12. Explain the relationship between industry attractiveness and competitive strength quoting
an Indian example.
GE / McKinsey Matrix
In consulting engagements with General Electric in the 1970's, McKinsey & Company
developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic
business units (SBU). This business screen became known as the GE/McKinsey Matrix and is shown
below:
GE / McKinsey Matrix
High
Medium
Low
The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic
business units on a grid of the industry and the SBU's position in the industry. The GE matrix
however, attempts to improve upon the BCG matrix in the following two ways:
• The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit
Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry
attractiveness and relative market share as a proxy for the strength of the business unit.
• The GE matrix has nine cells vs. four cells in the BCG matrix.
Industry attractiveness and business unit strength are calculated by first identifying criteria for
each, determining the value of each parameter in the criteria, and multiplying that value by a
weighting factor. The result is a quantitative measure of industry attractiveness and the business
unit's relative performance in that industry.
Whilst any assessment of market attractiveness is necessarily subjective, there are several
factors which can help determine attractiveness. These are listed below:
- Market Size
- Market growth
Marketing Strategy
- Market profitability
- Pricing trends
- Competitive intensity / rivalry
- Overall risk of returns in the industry
- Opportunity to differentiate products and services
- Segmentation
- Distribution structure (e.g. retail, direct, wholesale
The horizontal axis of the GE / McKinsey matrix is the strength of the business unit. Some factors
that can be used to determine business unit strength include:
• Market share
• Growth in market share
• Brand equity
• Distribution channel access
• Production capacity
• Profit margins relative to competitors
The business unit strength index can be calculated by multiplying the estimated value of each factor
by the factor's weighting, as done for industry attractiveness.
Marketing Strategy
Each business unit can be portrayed as a circle plotted on the matrix, with the information conveyed
as follows:
The shading of the above circle indicates a 38% market share for the strategic business unit. The
arrow in the upward left direction indicates that the business unit is projected to gain strength
relative to competitors, and that the business unit is in an industry that is projected to become more
attractive. The tip of the arrow indicates the future position of the center point of the circle.
Strategic Implications
Resource allocation recommendations can be made to grow, hold, or harvest a strategic business unit
based on its position on the matrix as follows:
• Grow strong business units in attractive industries, average business units in attractive
industries, and strong business units in average industries.
• Hold average businesses in average industries, strong businesses in weak industries, and
weak business in attractive industries.
• Harvest weak business units in unattractive industries, average business units in unattractive
industries, and weak business units in average industries.
Marketing Strategy
There are strategy variations within these three groups. For example, within the harvest group the
firm would be inclined to quickly divest itself of a weak business in an unattractive industry,
whereas it might perform a phased harvest of an average business unit in the same industry.
While the GE business screen represents an improvement over the more simple BCG growth-
share matrix, it still presents a somewhat limited view by not considering interactions among the
business units and by neglecting to address the core competencies leading to value creation. Rather
than serving as the primary tool for resource allocation, portfolio matrices are better suited to
displaying a quick synopsis of the strategic business units.
Porters fives forces model is an excellent model to use to make an analysis of the
attractiveness (value) of an industry structure. So for example, if we were entering the PC industry,
we would use Porters model to help us find out about:
1) Competitive Rivalry
2) Power of suppliers
3) Power of buyers
4) Threats of substitutes
5) Threat of new entrants.
The above five main factors are key factors that influence industry performance, hence it is common
sense and practical to find out about these factors before you enter the industry. These factors are
discussed below in detail:
Competitive Rivalry
• Degree of product differentiation: If there is little differentiation between the products sold
between customers, the rivalry will be high.
Power of suppliers
Suppliers are also essential for the success of an organization. Raw materials are needed to complete
the finish product of the organization. Suppliers do have power. Bargaining power of suppliers
comes from:
• If they are the only supplier or one of few suppliers who supply that particular raw material.
• If it costly for the organization to move from one supplier to another (known also as switching
cost)
•Suppliers threaten to integrate forward into the industry (for eg. Brand manufacturers threatening to
set up their own retail outlets)
Buyers or customers can exert influence and control over an industry in certain circumstances. This
happens when:
• There is little differentiation over the product and substitutes can be found easily.
• Customers are sensitive to price.
• Switching to another product is not costly.
•There are few dominant buyers and many sellers in the industry.
Threat of substitutes
Are there alternative products that customers can purchase over your product that offer the same
benefit for the same or less price? The threat of substitute is high when:
The threat of a new organization entering the industry is high when it is easy for an organization to
enter the industry i.e. entry barriers are low. Threat of new entrants depends on:
•Economies of scale
•Access to technology
•Brand loyalty
•Government regulations
An organization will look at how loyal customers are to existing products, how quickly they can
achieve economy of scales, would they have access to suppliers, would government legislation
prevent them or encourage them to enter the industry.
Marketing Strategy
Both these models help us to understand the relationship between industry attractiveness and
competitive strength
EXAMPLES
The adhesive tape industry consists of the major players Pidilite (acquired Bhor Industries), Morgan,
Sanghi, Paramount, Chetna Polypack, Fourpillar Corporation, Asia Chemicals and Tesa. The product
types are used for packaging, insulation, mounting, protection, medical, stationery or cellotapes).
All-India market size is Rs. 600 Crores and is growing at 10% p.a.
Insulation tapes have a market size of Rs. 40 Crores (approx.). These are made of PVC, Polyester,
Teflon, Kapton etc. The major brands in the PVC insulation tapes segment are Magic, Miracle,
Steelgrip, Anchor, Wonder and Deer.
Including the unorganized sector, there are around 200 players in the market (even though most are
regional). The industry is experiencing decreased margins on production and faces the threat of
cheap imports (especially from China). Price warring occurs in the segment among the organized
sector, though fluctuations are infrequent as most large players stick to their respective price bands
to maintain premium imagery. Advertising battles are not a current phenomenon, though are liable to
play a major part in the future. As of now, only Miracle and Steelgrip brands have launched
advertisements, both within the last to years.
THREAT OF NEW ENTRANTS
Entry and exit barriers do exist, but essentially curtail the larger players. Among the smaller players,
firms frequently enter and leave the market and thus returns are stable and low. A multi-brand
market exists, with distinct rungs differentiable by price and quality. On the whole, the market
exhibits the qualities of an oligopoly. There are a large number of buyers and sellers with distinct
Marketing Strategy
market leaders. Most retailers’ stock select multiple brands but tend to push specific preferred brands
(based usually on their margins on different brands).
Future entry barriers could be patents and licensing requirements. However, the lack of legal
implementation (given the large number of unorganised players) negates this. Mobility barriers exist
only in terms of distribution chain setup and building relationships with the retailers.
THREAT OF SUBSTITUTE PRODUCT
There is no distinct brand preference. The brand is rarely demanded at time of purchase, as the
consumer typically asks for ‘PVC tape’ or ‘electric tape’. The threat of substitutability exists in the
generic category from packaging and cellotapes for household use. However, as final household
consumption is minimal and most use is by electricians and auto-mechanics, this may be ignored.
Within the specific segment, industrial buying takes place on established quality parameters and
supplier relationships, thus substitutability by lower rung players is not a threat, the corporates being
brand and quality conscious. With non-industrial buyers, prices need to be monitored closely, as due
to largely undifferentiated brands and non-existence of brand loyalty, ‘quality’ tapes may be
substituted by local tapes. The threats are of advanced technology which may sway the market,
given that prices do not increase significantly, as the consumer is price-sensitive to an extent.
THREAT OF BUYER’S GROWING BARGAINING POWER
The main differentiator in the PVC electrical insulation tapes market is the buyers and their
consumption patterns. Thus, it is imperative that a comprehensive analysis be done of the consumer.
Buyers may be divided into the various segments based on their use. PVC insulation tape is
essentially used in the following -
o Sectors : Electrical, Telecom, Automobile, Defence services, State Electricity boards, State
Transports
o Electrical wiring :
Protecting electrical conductors from corrosion
Electrical wire insulation
o Edge protection, Handle wrapping, Pipe joining
Marketing Strategy
Industrial purchase follows the B2B model, is taken on a case-by-case basis, and is restricted to the
few organised players in the market. The product is used as a part of the manufacturing process of
industrial buyers. However, as it does not form a large portion of input cost, buying usually follows a
‘straight rebuy’ pattern and is based on salesperson-customer relationships, as it is a routine product
(standardised, with low value and cost and little risk). The end user is rarely the decider or even the
influencer in this case, and the purchase department acts as the key-point of contact which is wooed
by the salespeople.
o With respect to non-industrial buyers, which are the prime focus of competition, the product
may be sold to the retailers and then onward through seller-push or to the end consumer (the
electricians, auto mechanics etc.) in an attempt to generate demand-pull.
The raw materials require in the manufacturing process are PVC Films, Synthetic Rubber,
Antioxidants, Plastic Resins, Paper Core, Primers, Master Batches etc. Supplier’s bargaining power
does not form a significant threat as suppliers are not in a position to leverage their status and raise
prices or reduce quantity supplied. Supply of the inputs is essentially in the open market and specific
parameters for supply to this industry are negligible, thus reducing supplier differentiation and
negotiating power. Moreover, the suppliers are not of a colluding nature, and the cost of switching
suppliers is not significantly high.
The players in the industry retain the option of multiple supply sources and thus organisation and
concentration on the part of certain suppliers does not affect the market price. Long-term
relationships also ensure that frequent variations do not take place and affect the input costs.
Example 2
Structure of Industry
Background
The origin of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber Limited set up
the first tyre company in West Bengal. MRF followed suit in 1946. Since then, the Indian tyre
industry has grown rapidly.
Marketing Strategy
Transportation industry and tyre industry go hand in hand as the two are interdependent.
Transportation industry has experienced 10% growth rate year after year with an absolute level of
870 billion ton freight. With an extensive road network of 3.2 million km, road accounts for over
85% of all freight movement in India.
Market Characteristics
Demand
Demand for tyres can be classified in terms of:
13. Suggest the distribution strategy for marketing following products in urban and rural
markets of India.
Distribution Intensity
There are three broad options - intensive, selective and exclusive distribution:
Intensive distribution aims to provide saturation coverage of the market by using all available
outlets. For many products, total sales are directly linked to the number of outlets used (e.g.
cigarettes, beer). Intensive distribution is usually required where customers have a range of
acceptable brands to choose from. In other words, if one brand is not available, a customer will
simply choose another.
Selective distribution involves a producer using a limited number of outlets in a geographical area to
sell products. An advantage of this approach is that the producer can choose the most appropriate or
best-performing outlets and focus effort (e.g. training) on them. Selective distribution works best
when consumers are prepared to "shop around" - in other words - they have a preference for a
particular brand or price and will search out the outlets that supply.
Marketing Strategy
Exclusive distribution is an extreme form of selective distribution in which only one wholesaler,
retailer or distributor is used in a specific geographical area.
As the marketing channels of the company are already established I would try to increase the
penetration in the rural sector to the extreme remote areas which are not touched till now. I would try
to reduce the delivery time of the products by choosing and increasing the strategic locations of
warehouses. I would also track the distribution path of the wholesalers in small cities through
marketing team and would establish a platform or team at a zonal level for all the wholesalers and
would try to take their feedback on the market developments. These kinds of congregations could
also increase the brand loyalty in the wholesalers and they would be motivated to push HLL
products.
The strategy would be to develop the marketing channels as strong and penetrated as that of
HLL. The national coverage would be dealt with by increasing the company's warehouses and
creating C&F agents in the smaller cities.
Rural penetration on the lines of competitor would be better strategy. Emphasis would also
be on increasing wholesale dealer in small towns and tehsils who can cover the nearby villages. In
this context my strategy would be to provide the wholesalers a scheme for buy delivery vans by
funding 50% of the price of delivery vans and rest to be paid by wholesalers in installments. The
number of distribution van would again depend upon the distribution path covered by each
individual wholesaler, the number of villages nearby a small town and certain demographic factors.
Marketing Strategy
Rural: I would try to increase product penetration to rural population as by 2006-07 the rural
population who is rich and consuming class would be 209Mn which is not much lesser than urban
rich and consuming population of 253Mn people. I would try to increase the wholesalers to smaller
towns and would track the distribution path so that they are covering all the village areas around the
towns.
Urban: Toothpaste is a FMCG item and has almost 100% demands in the urban areas and hence the
distribution strategy to be adopted here would be the one of exclusive distribution as we want to
cover the maximum possible portion of India.
The type of distribution system would be largely related to the marketing strategy of the company.
Looking at the company as a general manufacturer of consumer goods the most likely system would
be one of "selective distribution." In selective distribution the company would target their products
to specific outlets where their products would best fit.
Other types of distribution would be "intensive distribution" where the company would try to sell
their products to as many different outlets as possible and "exclusive distribution" whereby the
company would look to a very limited number of outlets that would most likely specialize in a
specific niche. "Selective distribution" falls in between these two types.
Marketing Strategy
In the urban areas prominently we would use exclusive distribution strategy. The goods would be
made available to the entire India through use of all the channels as explained earlier.
The rural areas again we would be using our own agents to sell and also the handsets would be made
available in the haats and the melas in the rural areas as that is where the major buying of the
products by the customers takes place.
Exclusive: For the most premium ones that wouldn’t be afforded by all
14. “Product Mix” strategies are essential for a multi-product company”. If so, apply the
concept of product mix strategies to enhance the competitive advantage of P&G?
Product Mix
The product mix is the set of all products offered for sale by a company.
• A product mix has two dimensions:
• Breadth - the number of product lines carried.
• Depth - the variety of sizes, colours, and models offered within each product line.
Major product-mix strategies:
• Positioning, expansion, alteration, contraction, trading up and trading down
Marketing Strategy
Product-Mix Expansion
• Line Extension
• Mix Extension
15. Compare and contrast between “Competitive Advantage and Competitive Strategy”? How
one can achieve ‘Sustainable competitive advantage’? Taking a company of your choice in
automobile industry, illustrate how this company can develop competitive advantage?
COMPETITIVE ADVANTAGE
The competitive advantage model of Porter learns that competitive strategy is about taking
offensive or defensive action to create a defendable position in an industry, in order to cope
Marketing Strategy
successfully with competitive forces and generate superior return on investment. According to
Porter, the basis of above average performance within an industry is sustainable competitive
advantage. There are two types of CA
• Cost leadership
• Differentiation
Cost advantage occurs when a firm delivers the same services as its competitors but at a
lower cost. Differentiation advantage occurs when a firm delivers greater services for the same price
of its competitors. They are collectively known as positional advantages because they denote the
firm's position in its industry as a leader in either superior services or cost.
The primary factors of competitive advantage are innovation, reputation and relationships
COMPETITIVE STRATEGY
A firm's relative position within its industry determines whether a firm's profitability is above
or below the industry average. The fundamental basis of above average profitability in the long run
is sustainable competitive advantage. There are two basic types of competitive advantage a firm can
possess: low cost or differentiation. The two basic types of competitive advantage combined with the
scope of activities for which a firm seeks to achieve them, lead to three generic strategies for
achieving above average performance in an industry: cost leadership, differentiation, and focus. The
focus strategy has two variants, cost focus and differentiation focus.
Marketing Strategy
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The
sources of cost advantage are varied and depend on the structure of the industry. They may include
the pursuit of economies of scale, proprietary technology, preferential access to raw materials and
other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm can
achieve and sustain overall cost leadership, then it will be an above average performer in its industry,
provided it can command prices at or near the industry average.
2. Differentiation
In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions
that are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price.
3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its strategy
to serving them to the exclusion of others.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in
Both variants of the focus strategy rest on differences between a focuser's target segment and
other segments in the industry. The target segments must either have buyers with unusual needs or
else the production and delivery system that best serves the target segment must differ from that of
Marketing Strategy
other industry segments. Cost focus exploits differences in cost behaviour in some segments, while
differentiation focus exploits the special needs of buyers in certain segments.
A firm possesses a sustainable competitive advantage when its value-creating processes and
position have not been able to be duplicated or imitated by other firms. Sustainable competitive
advantage results, according to the Resource-based View theory, in the creation of above normal (or
supernormal) rents in the long run.
EXAMPLE:
In India, it has focused on providing economical transport solutions in consonance with its
values of safety, quality, and environmental care. Its competitive advantage is its high technology,
which makes the vehicle a very comfortable option to travel through. Tata's trucks have long been
reputed for their unmatched performance, build, and technological advancements that are the flag
bearers in their production activities in India. It is still operating in the niche market of high-end
buses
Tata Motors would become the cost leaders soon after the launch of Tata Nano. So much so
that it was already made its competitors struggle on deciding how to beat them with their one-lakh
wonder. The demand of Nano would be immense due to the wide spread middle-income population
in India. Tata Motors have also received huge demand from the international market as well.