Module 3 - Business Strategies and their Marketing Implications

Question 1

1 Conditions are most likely to be favourable for an analyser business strategy when:
A.the basic technology is mature.
B.the technology is emerging.
C. the industry’s technology is relatively stable.
D.there are a substantial number of competitors.
E.the basic technology is well developed, but still evolving.

Answer 1

E

Question 2

2 Conditions favour an analyser strategy when there is/are:
A.few established competitors and an evolving industry structure.
B.few established competitors and a stable industry structure.
C.a large number of competitors and a stable industry structure.
D.a large number of competitors and an evolving industry structure.
E.newly emerging technology.

Answer 2

D

Question 3

3 Which type of strategy is particularly well suited to an environment in which the industry is in the late growth or early maturity stage of the life cycle?
A.Mass market.
B.Differentiated defender.
C.Low-cost defender.
D.Analyser.
E.Prospector.

Answer 3

D

Question 4

4 Generally, as a product moves along its life cycle firms must change their strategic orientation to remain competitive. This statement is:
A.true, and the changes are easy to implement.
B.false, but the changes would be easy to implement.
C.true, but the changes are not easy to implement.
D.false, and the changes would not be easy to implement.
E.true, but being external to the firm, the changes could not be implemented.

Answer 4

C

Question 5

5 To successfully implement a low-cost defender strategy, a firm:
A.may most effectively enter at the maturity stage of the product life cycle.
B.must develop a basis for cost efficiency in the introductory stage that allows the firm to be more efficient than its competitors.
C.must be first into the particular target market.
D.is likely to leave the industry as it enters the shake-out phase.
E.is only likely to become more efficient than competitors when the market begins to decline.

Answer 5

B

Question 6

6 A policy of high service quality is particularly appropriate for the:
A.differentiated defender.
B.reactor.
C.low-cost defender.
D.low-cost analyser.
E.focus strategy.

Answer 6

A

Question 7

7 Low price is the primary competitive weapon of which type of strategy?
A.Low-cost defender.
B.Analyser.
C.Focus.
D.Prospector.
E.Reactor.

Answer 7

A

Question 8

8 Firms following a(n) ____ strategic orientation should devote more time than firms following other strategic orientations to uncovering and exploiting opportunities for forward integration:
A.low-cost analyser.
B.prospector.
C.differentiated defender.
D.focus.
E.There is no categorical advantage to any one strategic orientation given these circumstances.

Answer 8

C

Question 9

9 A(n) \_\_\_\_ offering can rarely be experienced in advance of a sale while a(n) \_\_\_\_ offering can be tested before purchase:
A.intangible; tangible.
B.intangible; service.
C.intangible; installation.
D.tangible; intangible.
E.tangible; tangible.

Answer 9

A

Question 10

10 More extensive salesforces are likely to be maintained by prospectors and ____, while less spending on advertising is likely to be associated with ____.
A.differentiated defenders; prospectors.
B.differentiated defenders; low-cost defenders.
C.low-cost defenders; differentiated defenders.
D.analysers; low-cost defenders.
E.reactors; prospectors.

Answer 10

B

Question 11

1 At the SBU level, the essential strategic question is:
A. what industries should we be in?
B. what mix of firms will provide the best flow of investment funds?
C. what are the life-cycle stages of the SBU subunits?
D. how are we going to compete in this industry?
E. how does this portfolio of businesses compare to the optimal portfolio?

Answer 11

D

Question 12

2 The decision by an automotive division of General Motors to offer a variety of products that appeal to young people interested in performance cars is an example of:
A. corporate strategy.
B. SBU strategy.
C. functional strategy.
D. grand strategy.
E. strategic orientation.

Answer 12

B

Question 13

3 Porter distinguishes three strategies that businesses pursue to gain and maintain competitive advantage in product markets:
A. prospector, analyser, defender.
B. harvester, share maintenance and share growth.
C. low price, price competitive and high price.
D. cost leader, differentiation and focus.
E. first-in, second-in and maintenance strategies.

Answer 13

D

Question 14

4 In which type of generic business-level strategy does a company attempt to avoid direct, head-on competition with its major competitors and concentrate, instead, on a narrowly defined market niche?
A. Reactor strategy.
B. Analyser strategy
C. Focus strategy.
D. Cost-leader strategy.
E. Differentiation strategy.

Answer 14

C

Question 15

5 According to the text, businesses that compete in the global market almost always follow a(n) ____ strategic orientation.
A. prospector.
B. analyser.
C. focus.
D. differentiated defender.
E. low-cost defender.

Answer 15

B

Question 16

6 The greatest emphasis on operating and marketing efficiencies is likely to occur among:
A. differentiated defenders.
B. analysers.
C. prospectors.
D. reactors.
E. low-cost defenders.

Answer 16

E

Question 17

7 Among the following, the best measure of adaptability is said to be:
A. the number of successful new products introduced relative to competitors.
B. profitability as a percentage of sales.
C. return on investment.
D. sales growth relative to competitors.
E. change in market share.

Answer 17

A

Question 18

8 Conditions are most likely to be favourable for a prospector business strategy during:
A. the late growth stage of the product life cycle.
B. the shake-out stage of the product life cycle.
C. the maturity stage of the product life cycle.
D. the introductory or early growth stage of the product life cycle.
E. the decline stage of the product life cycle.

Answer 18

D

Question 19

9 For which strategic orientation are the performance implications of sharing resources generally negative?A. Prospector.
B. Analyser.
C. Focus.
D. Differentiated defender.
E. Low-cost defender.

Answer 19

A

Question 20

10 Which type of strategy is particularly well suited to environments which are unstable and rapidly changing due to new technology and/or shifting customer needs?
A. Prospector strategy.
B. Analyser strategy.
C. Differentiated defender strategy.
D. Low-cost defender strategy.
E. Reactor strategy.

Answer 20

A

Question 21

What are the basic/generic competitive strategies? Describe each briefly.

Answer 21

Overall cost leadership
Differentiation – customer perceptions of superior quality or deign
Focus – focusing on a niche market

Michael Porter distinguishes three strategies – or competitive positions – that businesses pursue to gain and maintain competitive advantages in their various product-markets: (1) overall cost leadership; (2) differentiation – building customer percep- tions of superior product quality, design, or service; and (3) focus, in which the business avoids direct confrontation with its major competitors by concentrating on narrowly defined market niches. Porter describes firms that lack a distinctive strategy as being ‘stuck in the middle’ and predicts that they will perform poorly.

Question 22

What are the characteristics of Miles and Snow’s four business strategies?

Answer 22

Question 23

How do low-cost defender, differentiated defender, prospector and analyser differ with respect to their scope, cash needs and synergy?

Answer 23

Question 24

What are the appropriate external environment conditions for a prospector strategy? A defender strategy?

Answer 24

Question 25

What are the marketing implications for each of the different business strategies with respect to:
A. product policies?
B. pricing policies?
C. distribution plicies?
D. promotion policies?

Answer 25

A. One set of marketing policies defines the nature of the products the business will concentrate on offering to its target markets. These policies concern the breadth or diversity of product lines, their level of technical sophistication and the target level of product quality relative to competitors.

B. Success in offering low prices relative to those of competitors should be positively related to the performance of low-cost defender businesses – for low price is the primary competitive weapon of such a strategy. However, such a policy is incon- sistent with both differentiated defender and prospector strategies. The higher costs involved in differentiating a business’s products on either a quality or service basis require higher prices to maintain profitability. Differentiation also provides custom- ers with additional value for which higher prices can be charged. Similarly, the costs and benefits of new product and market development by prospector businesses require and justify relatively high prices. Thus, differentiated defenders and prospec- tors seldom adhere to a policy of low competitive prices.

C. Some observers argue that prospector businesses should show a greater degree of forward vertical integration than defender businesses.23 The rationale for this view is that the prospector’s focus on new product and market development requires superior market intelligence and frequent re-education and motivation of distribution channel members. This can best be accomplished through tight control of compa- ny-owned channels. However, these arguments seem inconsistent with the prospector’s need for flexibility in constructing new channels to distribute new products and reach new markets. Attempting to maintain tight control over the behaviour of channel members is a more appropriate policy for defenders who are trying to maintain strong positions in established markets. This is particularly true for defenders who rely on good customer service to differentiate themselves from competitors. Thus, it seems more likely that a relatively high degree of forward vertical integration is found among defender businesses, particularly differentiated defenders, while prospectors rely more heavily on independent channel members – such as manufacturer’s represent- atives or wholesale distributors – to distribute their products.24 Because prospectors focus on new products where success is uncertain and sales volumes are small in the short run, they are likely to devote a larger percentage of sales to trade promotions than are defender businesses. Prospectors rely on trade promotion tools such as quantity discounts, liberal credit terms and other incentives to induce cooperation and support from their independent channel members

D. Extensive marketing communications also play an important role in the successful implementation of both prospector and differentiated defender strategies. The form of that communication, however, may differ under the two strategies. Because prospectors must constantly work to generate awareness, stimulate trial and build primary demand for new and unfamiliar products, high advertising and sales promotion expenditures are likely to bear a positive relationship to the new product and share-growth success of such businesses. The drug delivery SBU at 3M, for instance, devotes substantial resources to advertising in professional journals and distributing samples of new products, as well as to maintaining an extensive salesforce. Differentiated defenders, on the other hand, are primarily concerned with main- taining the loyalty of established customers by adapting to their needs and providing good service. These tasks can best be accomplished – particularly in industrial goods and services industries – by an extensive, well-trained, well-supported salesforce.25 Therefore, differentiated defenders are likely to have higher salesforce expenditures than are competitors. Finally, low-cost defenders appeal to their customers primarily on price. Thus, high expenditures on advertising, sales promotion, or the salesforce would detract from their basic strategy and may have a negative impact on their ROI. Consequent- ly, such businesses are likely to make relatively low expenditures as a percentage of sales on those promotional activities.

Question 26

Ideally, what characteristics should strategic business units have?

Answer 26

• A service is any activity or benefit that one party can offer to another that is essentially intangible and that does not results in the ownership of anything. Its production may or may not be tied to a physical product
• The same competitive strategies that apply to product companies also apply to service companies
• Cable and Wireless could be described as a differentiated analyzer as they differentiate themselves by service rather than price in a cut throat telecoms market
• They focused on small to mid sized businesses and acted as telecom specialists to those firms – advising them on the best strategies and solutions
• They also pitched specialized services at new customers in their target segment – like developing functions specifically for lawyers

Question 27

What are the objectives of a business unit?

Answer 27

• Strategic Business Unit (SBU) sales and marketing managers bear the primary responsibility for collecting and analyzing relevant information and generating appropriate strategies for the business
• Larger firms break into semi-autonomous SBUs so that strategic decision making is moved closer to the customer
• First decision is to decide how to divide itself into SBUs
  
  • Then the managers in each SBU must make decisions about
  • the units objectives
  • the scope of its target customers and offerings
  • which broad competitive strategy should be used to build competitive advantage
  • how resources should be allocated across its product-market entries and functional departments

Question 28

3.9 Which criterion did General Foods Corporation emphasise when it decided to put Cool Whip and Jell-O into the same SBU?
A. Similarity in personal characteristics of customers.
B. Similarity in distribution patterns.
C. Similarity in customer needs.
D. Technical compatibility.
E. Similar engineering skills.

Answer 28

C

Question 29

3.10 Ideally, SBUs have all of the following EXCEPT: A. profit responsibility. B. related markets to serve.
C. related technologies to use.
D. publicly traded common stock.
E. control over performance factors.

Answer 29

D

Question 30

3.11 When all three levels of strategy (corporate, SBU, product-market) have good internal and external consistency, we say that the strategies have a good:
A. strategic fit.
B. return on investment.
C. return on sales.
D. gap strategy.
E. mission.

Answer 30

A

Question 31

3.12 A strategy of competing with low prices is most likely to work if:
A. the SBU’s R&D is better than that of its competitors.
B. the SBU’s manufacturing operations are at least as efficient as those of competitors.
C. the product-market is relatively mature.
D. the SBU is part of a larger organisation that can subsidise low margins by the low-price unit.
E. there is a small field of competitors

Answer 31

B

Question 32

3.13 The generic business-level strategy which attempts to build customer perceptions of a superior-quality product which is supported by superior service is called:
A. a cost leader strategy.
B. a focus strategy.
C. a prospector strategy.
D. a differentiation strategy.
E. a quality strategy.

Answer 32

D

Question 33

3.14 Miles and Snow identify the following four types of business strategy:
A. cost leader, differentiator, focus and stuck-in-the-middle.
B. liquidation, harvest, share maintenance and share growth.
C. leader, follower, guerrilla and flanker.
D. high price, price competitive, low price and service oriented.
E. prospector, analyser, defender and reactor.

Answer 33

E

Question 34

3.15 With its limited selection of pizzas and its focus on the delivered market, Domino’s Pizza is likely to be classified today as a (an):
A. prospector.
B. defender.
C. analyser.
D. reactor.
E. differentiator

Answer 34

B

Question 35

3.16 In terms of the Miles and Snow typology, the prospector strategic type: A. is likely to be first into new product-markets.
B. attempts to locate and maintain a secure niche in relatively stable product areas.
C. attempts to maintain a stable, limited line of products.
D. lacks a well-defined strategy.
E. responds primarily when it is forced to do so by environmental pressures.

Answer 35

A

Question 36

3.17 Strategic business units which have no clear strategy are termed by Miles and Snow as:
A. analysers.
B. reactors.
C. defenders.
D. prospectors.
E. cost leaders.

Answer 36

B

Question 37

3.18 In terms of the Miles and Snow typology, the defender strategic type:
A. is likely to be first into new product-markets.
B. responds rapidly to early signals concerning areas of opportunity.
C. carefully follows a selected set of new developments in its industry.
D. responds primarily when it is forced to do so by environmental pressures.
E. attempts to maintain a stable, limited line of products

Answer 37

E

Question 38

3.19 In terms of the Miles and Snow typology, the analyser strategic type:
A. operates within a product-market that is regularly redefined.
B. responds early to signals concerning areas of opportunity.
C. is usually at the forefront of new-product development in its industry.
D. responds primarily when forced to do so by environmental pressures.
E. carefully follows a selected set of new developments in its industry.

Answer 38

E

Question 39

3.20 In terms of the Miles and Snow typology, the reactor strategic type:
A. responds primarily when forced to do so by environmental pressures.
B. has a well-defined competitive strategy.
C. is as willing to assume the risks of new-product development as its competitors.
D. is aggressive in marketing established products.
E. anticipates environmental change.

Answer 39

A

Question 40

3.21 The strategic orientations offered by Miles and Snow are applicable at which strategic decision-making level?
A. Corporate.
B. Division.
C. Product-market.
D. All of the above.
E. Only B and C above.

Answer 40

B

Question 41

3.22 After combining the generic strategies of Miles and Snow and Porter, the ‘prospector’ strategic type is left unchanged. Why might the text authors have ignored the ‘low-cost prospector’ and ‘differentiated prospector’ classifications?
A. There are so few prospector types that making the distinction was unnecessary.
B. Since a prospector strategy is really the same as Porter’s focus strategy making the distinction was not necessary.
C. The distinction is not meaningful as prospectors aren’t concerned with competition.
D. The distinction would make the model too complicated, so, like Porter’s focus strategy, it too was omitted. E. While these are viable classifications, operationally the differences are too small to bother with.

Answer 41

C

Question 42

3.23 When companies like 3M and McDonald’s allow business units (SBUs) to follow different strategies when competing inside the USA and outside the USA it suggests that:
A. generic strategies are too generic to capture corporate reality.
B. they are not being viewed as SBUs, but as product-markets and this lower level allows for the needed flexibility.
C. these exceptions are allowed when strategic fit is poor.
D. the overseas markets are being treated like independent SBUs and over time they will either conform to the US SBUs or be split off.
E. none of the above.

Answer 42

D

Question 43

3.24 The breadth of the strategic domain of an organisation is known as that organisation’s:
A. depth.
B. market penetration.
C. scope.
D. direction.
E. cost leadership.

Answer 43

C

Question 44

3.25 The success of an SBU’s products and programmes relative to those of its competitors in the marketplace is known as that SBU’s:
A. adaptability.
B. efficiency.
C. effectiveness.
D. return on sales.
E. return on investment.

Answer 44

C

Question 45

3.26 Given that increased share of market is a primary objective of both company A and B, if company A increases its market share by 10 per cent during a given period, while company B increases its market share by 2 per cent, company A is said to be more:
A. efficient.
B. differentiated.
C. effective.
D. of a cost leader.
E. adaptable.

Answer 45

C

Question 46

3.27 Profitability as a percentage of sales and return on investment are said to be measures of:
A. effectiveness.
B. differentiation.
C. adaptability.
D. efficiency.
E. cost leadership.

Answer 46

D

Question 47

3.28 The category of businesses likely to devote the largest proportion of resources to development of new product-markets is termed:
A. defender.
B. prospector.
C. analyser.
D. reactor.
E. differentiator

Answer 47

B

Question 48

3.29 The category of businesses most likely to generate excess cash to support product and market development efforts in other business units within the firm is the:
A. reactor.
B. defender.
C. analyser.
D. prospector.
E. differentiator

Answer 48

B

Question 49

3.30 A business unit’s strategic orientation usually influences:
A. the use of print rather than broadcast media.
B. the couponing redemption method followed.
C. the amount of resources committed to marketing.
D. the decision of which industry to compete in.
E. the decision of whether to diversify by growth or acquisition

Answer 49

C

Question 50

3.31 If a company, like Volvo, takes one of its car lines and adds all-wheel-drive technology to it to exploit a growing market which demands maximum traction, we can infer that it follows which strategic type:
A. prospector.
B. low-cost analyser.
C. differentiated analyser.
D. low-cost defender.
E. differentiated defender.

Answer 50

C

Question 51

3.32 Which strategic orientation is well suited to unstable, rapidly changing environments?
A. prospector.
B. analyser.
C. focus.
D. differentiated defender.
E. low-cost defender.

Answer 51

A

Question 52

3.33 Conditions are most likely to be favourable for a differentiated defender business strategy during:
A. the introductory stage of the product life cycle.
B. the shakeout stage of the product life cycle.
C. the early growth stage of the product life cycle.
D. the decline stage of the product life cycle.
E. the late growth stage of the product life cycle.

Answer 52

D

Question 53

3.34 The business strategy most likely to have been successful when cordless telephones were first introduced and began to grow as a market was that of the:
A. differentiated defender.
B. low-cost defender.
C. prospector.
D. analyser.
E. reactor.

Answer 53

C

Question 54

3.35 Which type of strategy is particularly well suited to an environment in which the industry is in the maturity or decline stage of the life cycle?
A. prospector.
B. analyser.
C. low-cost defender.
D. differentiated defender.
E. either C or D above.

Answer 54

E

Question 55

3.36 Which type of strategy is particularly well suited to an environment in which the industry is in the introductory or early growth stage of the life cycle?
A. prospector.
B. mass market.
C. analyser.
D. differentiated defender.
E. low-cost defender.

Answer 55

A

Question 56

3.37 All of the following are examples of the product policies of a marketing programme EXCEPT:
A. product quality.
B. service quality.
C. publicity.
D. the technical sophistication of the product.
E. the product line breadth.

Answer 56

C

Question 57

3.38 Businesses following a prospector strategy should seek synergy through the sharing of:
A. technology.
B. operating facilities and programmes.
C. engineering skills.
D. market knowledge.
E. A, C and D only.

Answer 57

E

Question 58

3.39 All of the following are examples of the promotion policies of a marketing programme EXCEPT:
A. advertising expenses as a percentage of sales.
B. sales promotion expenses as a percentage of sales.
C. salesforce expenses as a percentage of sales.
D. public relations expenses.
E. service quality.

Answer 58

E

Question 59

3.40 ‘Any activity or benefit that one party can offer to another that is intangible’ is a working definition of:
A. a utility.
B. a service.
C. a benefit.
D. a motive.
E. a tangible benefit

Answer 59

B

Question 60

3.41 All of the following are examples of a service EXCEPT:
A. product maintenance.
B. on-the-job training of personnel.
C. installation.
D. product repair.
E. product packaging.

Answer 60

E

Question 61

Compare and contrast the prospector and low-cost defender business strategies discussed in this module on each of the following strategic dimensions:

a. Scope.
b. Objectives.
c. Deployment of resources.
d. Sources of synergy.

Answer 61

Question 62

The 3M Company’s Industrial Tape SBU pursues a differentiated defender strategy in an industry where both the basic technologies and the customer segments are relatively mature and stable. Is the objective imposed by top management of obtaining 30 per cent of sales from products introduced within the last four years an appropriate objective for such an SBU? What do you think top management hopes to accomplish by imposing such an objective on the Industrial Tape SBU? What are the potential disadvantages or dangers involved in imposing such an objective?

Answer 62

Obtaining 30 per cent of sales from products introduced within the last four years is a particularly challenging goal for a business in a mature and stable industry, but it can be appropriate. By imposing such a goal, top management may seek to compel the business’s managers to develop product modifications in anticipation of competitor moves. While such innovations are unlikely to be radical in a ma- ture/stable industry, they may be substantive from the standpoint of users (indeed, they may be suggested by users). While pressing the management of a business in a mature industry to develop new products presents a challenge, it is the challenge used by companies like Gillette, which is also in a stable/mature industry. Yet Gillette utilises revenues from existing products in the mature shaving-products industry to fund new-product develop- ment and marketing. Thus, products like Trac II funded development of Atra. The disadvantages or dangers in this technique are that: (1) innovations will be developed that were unnecessary, due to lack of competition; (2) innovations may prove to be unsuccessful; and (3) innovations may cannibalise existing products.

Question 63

If you were the general manager of the 3M Industrial Tape SBU discussed in Question 3.43, which objectives would you argue are most appropriate for your business unit in view of its strategy and its external environment? Why?

Answer 63

One realistic (and potentially profitable) argument would be to augment the new product goal with a new-uses goal, given the maturity of the industry. This is comparable to the situation that confronted the marketing management of Arm & Hammer baking soda, which faced a stable industry (which it dominated) with a mature product-market. Rather than develop new products, management developed new uses (such as use in refrigerators to absorb odours) for the existing product. The strategy was highly successful and did not require substantial new-product development costs.

Question 64

Historically, each division in General Motors (i.e. Chevrolet, Pontiac, Olds-mobile) competed strategically by: (a) maintaining its current position within the car market by aggressive marketing and annual improvements to its existing line of cars; and (b)simultaneously working to develop new models that would incorporate advanced technologies and designs. What strategy was each division to follow? What are the strengths and limitations of such a strategy?

Answer 64

This is an analyser strategy. The strengths of this strategy are that: (1) by operating from a core product-market base, the organisation is able to realise production efficiencies; and (2) by monitoring the success of new products in the external environment, the organisation is able to adapt to market change. A fundamental weakness of this strategy is evident when a dramatic change occurs that affects the core business. Thus, GM’s large-car core market was dramatically affected by a radical increase in petrol prices. Because of the time required to retool a car manu- facturing plant, GM was not able to shift the core business from large to small cars. Several Japanese firms, which had already been producing quality small cars in an environment with high petrol prices were ready to capitalise on the market oppor- tunity.

Question 65

Several years ago, General Motors created the Saturn division and charged it with developing an entirely new line of cars incorporating the latest advancements in product and production technology. What kind of business strategy is the Saturn division expected to pursue? How might the creation of this new division help overcome some of the limitations of GM’s traditional business-unit strategy that you identified in your answer in Question 3.45?

Answer 65

Saturn was expected to pursue a prospector business strategy. This strategy should have helped Saturn avoid preconceptions about the market (i.e. that a large-car approach is needed). The strategic emphasis and sometimes the creation of a new division is necessary because strategic preconceptions can become institutionalised. In the other divisions, the commitment to large cars was reinforced by the execu- tives in power who had made initial decisions in that direction, who had committed resources to those decisions and who held power based on the production of large- car divisions. This problem is not unique to one company, and a change in strategy (and the creation of a new division) is sometimes a useful approach to the problem.

Question 66

Suppose you have been the marketing manager for 3M Company’s Industrial Tape SBU as described in Question 3.43. You have just been informed that you are being trans- ferred to a similar position within the company’s Health Care SBU, a business unit that pursues a prospector strategy aimed at the rapid development of new products for newly emerging markets. Would you see the transfer as a positive step in the develop- ment of your career? How are your responsibilities and your decision-making influence likely to change as a result?

Answer 66

For a marketing manager, this move will probably be seen as positive. The differentiated defender will emphasise production efficiencies; the prospector will emphasise marketing skills. Thus, you are likely to be involved in making more (and more important) decisions about advertising, sales and other marketing-related issues in the new prospector job.

Question 67

You are the marketing vice president for a small firm whose success depends on pioneering the development of new personal-care products such as soap and tooth- paste. What role as marketing vice president would you play in determining the firm’s success?

Answer 67

Compared to the other business strategy types, prospector firms such as this one are likely to spend more on trade promotion and advertising in general. This trade promotion can occur as advertising and sales (‘to the trade’), and may also include trade discounts or outright ‘renting’ of shelf space, a practice that is increasing.

Question 68

You are the marketing manager for a generic products division of a major pharmaceutical manufacturer. Your division uses the corporation’s excess manufacturing capacity to produce generic prescription drugs – drugs whose patents have expired and which can thus be manufactured by any company that wishes to produce them. Your division is a low-cost defender that maintains its position in the generic drug market by holding down its costs and selling generic products to distributors and pharmacies at very low prices. What are the implications of this business strategy for each of the 4 Ps in the strategic marketing programme you would develop for your division?

Answer 68

As a low-cost defender, this firm will seek to minimise the cost of each of the marketing functions, including product development, distribution, and promotion. There will probably be a more limited product line, and little if any product R&D to augment that line. Promotion will be minimised, both to the trade and to the public. The marketing manager’s primary emphasis, aside from cost cutting, will probably be a strong orientation toward watching – and matching – competitive price moves.