Competitive Marketing Startegy

Question 1

Why is strategy important

Answer 1

Idea of strategic planning

Exercise carried out by senior management

Answers the following questions:
What business do we want to be in ?
Where are we now?
How do we get there?

Looking at the big picture and guiding long term thinking

Question 2

Business strategy and planning

Answer 2

The purpose of strategic and tactical planning is to identify and develop strategies that will help the organisation best compete in the market place

Strategic planning is done by senior management and examines long term overall business direction

Tactical planning is done by middle and operational management and focuses on functional goals

Question 3

Strategies can be

Answer 3

Competitive

Developmental

Resource based

Combination of any or all above

Question 4

Competitive strategy

Answer 4

Choosing the correct competitive strategy is fundamental to success

Firms need to understand how and where best they can compete in the marketplace and the overall industry

Tools such as porters five forces will help a firm understand the nature and intensity of competition in a given industry and potential risks and rewards of market attractiveness in the industry

A SWOT analysis exercise will highlight potential for the firm to organise its activities

Question 5

Choosing a competitive strategy

Answer 5

The correct choice of competitive strategy emerges from a thorough analysis of the value that the company provides and deciding on an appropriate competitive position to maintain in the market

Porters generic strategies provide an insight into the different types of choices available to firms

It is a theoretical model and strategic business tool that helps firms understand what type of competitive strategy they can adopt depending on the market they wish to compete in and the positioning they wish to create

Question 6

Types of generic strategies

Answer 6

Cost leadership strategy- the firm strives to be the lowest cost supplier and thus achieve superior profitability from an above average price cost margin

Product differentiation strategy- raise price above cost of differentiating and achieve superior profitability

Focus strategy- the firm concentrates on an particular segment of the market and applies either a cost leadership or a differentiation strategy

Question 7

Competitive advantage

Answer 7

The key to superior market performance is to gain and hold a competitive advantage

A competitive advantage is “the achievement of superior performance through differentiation to provide superior customer value, or by managing to achieve lowest delivered cost “(Jobber,2007:53)

Competitive advantages can be gained through
Differentiation
Managing for lowest delivered cost

The No.1/ no. 2 principle in any industry

Question 8

Sources of competitive advantage

Answer 8

Superior skills
Superior resources
Core competencies

Conducting a value chain analysis - assessing all the activities of a firm and categorising them in order to locate superior skills and resources

Question 9

How to create and maintain cost leadership

Answer 9

Firms have to identify and understand key cost drivers (the separate factors that cost the firm)

Examples would be economies of scale, manufacturing location, capacity utilisation, labour costs, guv regs

Firms will have to manage these cost drivers for effecting maintaining of cost leadership

Question 10

How to create and maintain a differential advantage

Answer 10

Created when a customer perceives that the firm is providing more value than the competition

Can be created by using any element in the marketing mix and be maintained by strengthening any of these mix elements that cannot be easily copied by competition with

Question 11

Development strategies

Answer 11

Alternative directions for growth

Market penetration, product/ service development, market development, or pure diversification

Alternative methods of development 
Internal Dec through organic growth 
Acquisitions and mergers 
Joint ventures 
Hybrid arrangements and expansions- franchising, licensing, merchandising, tie ups

Question 12

Resource based strategies

Answer 12

Strategies that draw from a companies internal resources and capabilities where:

Resources are tradable and non specific to a firm
Capabilities are specific to a firm

Helps a firm decide between strategy as “fit” v strategy as “stretch”

Fit: traditional way- strategy is a compromise between organisational capabilities and environmental opportunities

Stretch: innovative way - examining resources and resourcefulness, and ways of making innovative use of resources (also called leverage)

Question 13

Internationalisation

Answer 13

• To exploit new market opportunities
• To counter saturated home markets and stagnant growth
• to exploit natural fit among culturally compatible countries
• to transfer technology,innovation, and managerial best practice
• to take advantage of location benefits
• To take advantage of tax regs
• to reduce costs and achieve economies of scale
• to seek potential partners

Question 14

Build objective

Answer 14

For price sensitive markets

Lower price than competitors if they raise their prices we would be slow to match

I’n less price sensitive markets the overall positioning strategy thought appropriate for the product

Question 15

Hold objective

Answer 15

Where the objective is to hold market share or sales the pricing strategies is to match competitors

Question 16

Harvest objective

Answer 16

Maintenance or raising of profit margins even tho sales or market share are falling

Set premium prices

for products that are being harvested there would much greater reluctance to price match cuts than for products that were being built or held

Price increases will be matched

Question 17

Reposition

Answer 17

Changing market circumstances and product fortunes may necesítate the the repositioning of an existing product

May involve a price change, direction and magnitude will be dependant on the new positioning strategy for the product

Question 18

Channel management

Answer 18

Pricing strategy is dependant on understanding not only the ultimate customer but also the needs of the distributors and retailers who form the link between them and the manufacturer

Question 19

International marketing strategy

Answer 19

Price escalation-number of factors pressure a firm to increase prices e.g. Shipping costs, tariffs etc

Whilst international prices are often higher they can also be lower if circumstances dictate that lower prices are needed to gain sales, as in countries where disposable income is low
In these circumstances firms must guard against parallel importing

Parallel importing - products destined for an international market are re imported into the original country and sold in unauthorised channels at levels lower than the company wishes to charge.

Firms try to standardise all marketing mix but internationally it is hard for price to be standardised for reasons outlined above