Exam 1 (Chapters 1-2) Flashcards
3 stage process of strategic marketing management
The strategic marketing process has three components
Analysis
Formulation
Implementation
These three components for the planning cycle and are interactive in nature
To successfully achieve these aims, organizations must develop and deploy processes, procedures, and techniques that ensure market strategy is:
Relevant to the current and future business environment
Sustainable
Generating optimal benefits to all stakeholders of the organization
Correctly implemented
This is the strategic marketing management process
Concept of marketing (simple)
business success through a process of understanding and meeting customer needs
Goal of strategy
The process of strategy aims to specify corporate objectives, and establish ways of achieving such objectives with the intent of attaining competitive advantage. The purpose of strategy is to simplify managerial decision making when it comes to marketing decisions
Strategy seeks to develop long term sustainable competitive advantage
Concept of Marketing
Marketing defines how the organization interacts with its marketplace
Marketing can be more than a functional activity. It can be adopted as a business philosophy – marketing orientation
A company’s orientation defines its fundamental business philosophy, highlighting what is perceived as the primary route to success
Strategic management
We are currently in the age of strategic management. Strategic management concerns both the formulation of strategy and how such strategy is put into practice. While still undertaking analysis and forecasting, far greater prominence is placed on implementation. The concern is with managing change and transforming the organisation within an increasingly turbulent business environment.
Strategic management is not usually an orderly logical sequence of events/activities
Many activities are interlinked and overlapping, and strategic analysis is always occurring to reevaluate plans
Creativity, vision, leadership, and flexibility and required to develop sound but adaptable strategies
Drivers of change
Consistently, current products and methods of operating rapidly being displaced by a combination of competitors’ actions and shifting customer needs. This discontinuity is being driven by the following factors: Political, Economic, Social (e.g. demographics) and Technological.
Impact of change
Quite simply, change means we need to re-define our markets. While fast growth is still possible within certain ‘sun-rise’ industries, many industries have to accept the days of incremental annual growth are over. Variation in consumer habits and demographic patterns mean traditional markets are becoming more challenging.
(Voltility
globalization
intense competition
redefine)
Result of change
There are two main outcomes. Firstly, change creates opportunity. Organisations that are flexible and in touch with customer needs are likely not just to survive, but prosper. Secondly, past actions, strategies and methods offer no guarantee of future success. There is a need to guard against complacency and ensure that the strategic thrust of the organisation does not drift from the true needs of the market place (beware strategic drift).
(Opportunity
Strategic drift)
Balanced scorecard
Business success should not just be measured by financial measures
The balanced scorecard approach involves taking both financial and non-financial measures to examine the benefits delivered to all the organization’s stakeholders
Financial measures
Customer measures
Internal activity measures
Innovation and learning measures
Different orientations
Production orientation- efficient production
product orientation- product innovation and design (sell themselves)
sales orientation- volume of sales as key determinant of success
market orientation- starts with the customer and uses customer demand to focus resources (provide what the market wants)
Purpose of Marketing strategy
In a strategic role marketing aims to transform corporate objectives and business strategy into a competitive market position
Essentially, the concern is to differentiate our services and products by meeting customer needs more effectively than competitors
Marketing strategy involves achieving a superior competitive position within a defined market in a long-term sustainable way.
three key constituents of marketing strategy
customers, competitors and internal corporate factors
Macro-environmental analysis
The macro-environment audit examines the broad range of environmental issues that may affect the organisation. This will include the political/legal issues, economic factors, social/cultural issues and technological developments. This is normally referred to as a PEST
Political: • Taxation policy, Monopoly controls, Environmental protection measures, Employment law
Economic: • Interest rates • Inflation rates • Money supply
Social: Age profiles, Social mobility, Changes in lifestyles • Family structures
Technological: • Focus of government research
• Rate of technology transfer
• Materials
Industry Analysis (5 Forces)
An organization must understand the nature of the relationships within its industry in order to develop strategies that will take advantage of the current relationships
The analysis should be conducted at the individual strategic business unit than at the level of the organization as a whole
- Suppliers
- Buyers
- Potential entrants
- Substitutes
- Competitive rivalry
(Porter’s 5 forces)
Identifying Competitors
Strategic groups are made up organizations within the same industry that are direct competitors in terms of products and the consumers they target
For each competitor we want to learn about their:
Objectives
Strategies
Capabilities
Reactions
Problems with identifying competitors: Overlooking small competitors by placing too much emphasis on larger, more visible competitors
Focusing on established competitors and ignoring potential new entrants
Concentrating on current domestic competitors and disregarding international competitors who could potentially enter the market
Market analysis
Actual and potential market size: Estimating the total sales in the market allows the organisation to evaluate the realism of particular market share objectives.
Trends: Analysing general trends in the market identifies the changes
that have actually taken place.
Customers: The analysis needs to identify who the customer is and what criteria they use to judge a product offering.
Customer segments: Identifying current market segments and establishing the benefits each group requires allows an organisation to detect if
it has the capability to serve particular consumer’s needs.
Distribution channels: Identifying the changes of importance between channels of distribution, based on growth, cost or effectiveness, permits a company to evaluate its current arrangements.
Market analysis helps build a picture of potentially profitable segments
Relationship between strategy and change
Change is the only certainty
Change can be cyclical (predictable) or evolutionary (unpredictable)
Change is an integral part of strategy
Any strategy is significantly influenced by environmental change and its success
should not just be measured in financial terms
Marketing Myopia
is a short-sighted and inward-looking approach to marketing that focuses on fulfilment of immediate needs of the company rather than focusing on marketing from consumers’ point of view (Theodore Levitt)
What is Strategy?
Strategic positioning attempts to achieve
sustainable competitive advantage by
preserving what is distinctive about a company. It means performing different activities from rivals, or performing similar activities in different ways.
5 Competitive Forces that Shape Strategy
You know that to sustain long-term profitability you must respond strategically to
competition. And you naturally keep tabs
on your established rivals.
• Savvy customers can force down prices
by playing you and your rivals against
one another.
• Powerful suppliers may constrain your
profits if they charge higher prices.
• Aspiring entrants, armed with new capacity and hungry for market share, can
ratchet up the investment required for
you to stay in the game.
• Substitute offerings can lure customers
away
Two ways to reshape an industry’s structure
An industry’s structure can be reshaped in
two ways: by redividing profitability in favor of
incumbents or by expanding the overall profit
pool. Redividing the industry pie aims to increase the share of profits to industry competitors instead of to suppliers, buyers, substitutes,
and keeping out potential entrants. Expanding
the profit pool involves increasing the overall
pool of economic value generated by the industry in which rivals, buyers, and suppliers
can all share.
Scanning
Scanning is the monitoring activity undertaken by the organization to obtain
information about its environment
− Undirected viewing (Observation with no goal or subject in mind)
− Conditional viewing (Observation with goal or subject in mind)
− Informal search (Information search with goal in mind)
− Formal search (Information search with subject in mind)
