STRATEGIC MARKETING

Lesson 4
Aim

Understand the tools used to develop

a strategic marketing strategy
LO 2.1

assess the value of models used in strategic marketing

planning
General areas
Models: organisation, industry and market environment
situation analysis; Porters Five Forces model; structure,
conduct and performance; !"# $strengths, %eaknesses,
opportunities, threats& analysis, #''PL' $social,
ethnological, economical, environmental, political, legal,
ethical& analysis, P'# $political, economic, social,
technological& analysis, marketing audit; portfolio analysais
techni(ues eg )*G matri+, Product Life *ycle model, ,nsoff
matri+
Political/L
egal
Political/L
egal
Economic Economic
Technological Technological
Global Global
Demographic Demographic
Sociocultural Sociocultural
Competitive
Environment
Industry
Environment
Industry
Environment
Components of the General
Environment
Components of the General
Environment
SWOT Analysis

trengths

!eaknesses

"pportunities

#hreats
The purpose of SWOT Analysis

-t is an easy.to.use tool for developing an

overvie% of a companys strategic
situation

-t forms a /asis for matching your companys

strategy to its situation
SWOT is the starting point

-t provides an overvie% of the strategic

situation0

-t provides the 1ra% material2 to do more

e+tensive internal and e+ternal analysis0
Opportunities

,n "PP"3#U4-#5 is a chance for firm

gro%th or progress due to a favora/le
6uncture of circumstances in the /usiness
environment0

Possi/le "pportunities:

'merging customer needs

7uality -mprovements

'+panding glo/al markets

8ertical -ntegration
Threats

, #93',# is a factor in your companys

e+ternal environment that poses a danger
to its %ell./eing0

Possi/le #hreats:

4e% entry /y competitors

*hanging demographics:shifting demand

'mergence of cheaper technologies

3egulatory re(uirements
Opportunities and Threats form
a basis for EXTERAL analysis

)y e+amining opportunities, you can

discover untapped markets, and ne%
products or technologies, or identify
potential avenues for diversification0

)y e+amining threats, you can identify

unfavora/le market shifts or changes in
technology, and create a defensive posture
aimed at preserving your competitive
position0
The purpose of
!i"e#!or$es Analysis

#he five forces are environmental forces

that impact on a companys a/ility to
compete in a given market0

#he purpose of five.forces analysis is to

diagnose the principal competitive
pressures in a market and assess ho%
strong and important each one is0
#hreat of
4e%
'ntrants
#hreat of
4e%
'ntrants
Threat of e!
Entrants
Threat of e!
Entrants
Porter"s #ive #orces
$odel of Competition
Porter"s #ive #orces
$odel of Competition
Threat of e! Entrants Threat of e! Entrants
%arriers to
Entry
%arriers to
Entry
Expected Retaliation
Government Policy
Economies of Scale
Product Differentiation
Capital &e'uirements
S!itching Costs
(ccess to Distribution Channels
Cost Disadvantages Independent of
Scale
%argaining
Po!er of
Suppliers
%argaining
Po!er of
Suppliers
#hreat of
4e%
'ntrants
Threat of e!
Entrants
Threat of e!
Entrants
Porter"s #ive #orces
$odel of Competition
Porter"s #ive #orces
$odel of Competition
%argaining Po!er of Suppliers %argaining Po!er of Suppliers
Suppliers e)ert
po!er in the
industry by*
Suppliers e)ert
po!er in the
industry by*
+ Threatening to raise + Threatening to raise
prices or to reduce
quality
prices or to reduce
quality
Po!erful suppliers
can s'uee,e
industry
profitability if firms
are unable to
recover cost
increases
Po!erful suppliers
can s'uee,e
industry
profitability if firms
are unable to
recover cost
increases
Suppliers are li-ely to be po!erful if*
upplier industry is dominated /y a fe% firms
uppliers products have fe% su/stitutes
)uyer is not an important customer to supplier
uppliers product is an important input to
/uyers product
uppliers products are differentiated
uppliers products have high s%itching
costs
upplier poses credi/le threat of for%ard
integration
%argaining
Po!er of
%uyers
%argaining
Po!er of
%uyers
#hreat of
4e%
'ntrants
Threat of e!
Entrants
Threat of e!
Entrants
%argaining
Po!er of
Suppliers
%argaining
Po!er of
Suppliers
Porter"s #ive #orces
$odel of Competition
Porter"s #ive #orces
$odel of Competition
%argaining Po!er of %uyers %argaining Po!er of %uyers
%uyers compete !ith
the supplying industry
by*
%uyers compete !ith
the supplying industry
by*
+ Bargaining down prices + Bargaining down prices
* Forcing higher quality * Forcing higher quality
* Playing firms off
of
* Playing firms off
of each
other
each
other
%uyer groups are li-ely to be po!erful if*
)uyers are concentrated or purchases are large
relative to sellers sales
Purchase accounts for a significant fraction of
suppliers sales
Products are undifferentiated
)uyers face fe% s%itching costs
)uyers industry earns lo% profits
)uyer presents a credi/le threat of /ack%ard
integration
Product unimportant to (uality
)uyer has full information
Threat of
Substitute
Products
Threat of
Substitute
Products
#hreat of
4e%
'ntrants
Threat of e!
Entrants
Threat of e!
Entrants
%argaining
Po!er of
%uyers
%argaining
Po!er of
%uyers
%argaining
Po!er of
Suppliers
%argaining
Po!er of
Suppliers
Porter"s #ive #orces
$odel of Competition
Porter"s #ive #orces
$odel of Competition
Threat of Substitute Products Threat of Substitute Products
Products !ith
similar function
limit the prices
firms can
charge
Products !ith
similar function
limit the prices
firms can
charge
.eys to evaluate substitute products*
Products !ith improving
price/performance tradeoffs relative to
present industry products
Example:
Electronic security systems in place of
security guards
#a) machines in place of overnight mail
delivery
Threat of
Substitute
Products
Threat of
Substitute
Products
#hreat of
4e%
'ntrants
Threat of e!
Entrants
Threat of e!
Entrants
&ivalry (mong
Competing #irms in
Industry
&ivalry (mong
Competing #irms in
Industry
%argaining
Po!er of
%uyers
%argaining
Po!er of
%uyers
%argaining
Po!er of
Suppliers
%argaining
Po!er of
Suppliers
Porter"s #ive #orces
$odel of Competition
Porter"s #ive #orces
$odel of Competition
&ivalry (mong E)isting Competitors &ivalry (mong E)isting Competitors
Intense rivalry often plays out in the follo!ing
!ays*
;ockeying for strategic position
Using price competition
taging advertising /attles
<aking ne% product introductions
-ncreasing consumer %arranties or service
/ccurs !hen a firm is pressured or sees an
opportunity
Price competition often leaves the entire industry %orse off
,dvertising /attles may increase total industry demand, /ut may /e
costly to smaller competitors
Cutthroat competition is more li-ely to occur
!hen*
&ivalry (mong E)isting Competitors &ivalry (mong E)isting Competitors
4umerous or e(ually /alanced competitors
lo% gro%th industry
9igh fi+ed costs
Lack of differentiation or s%itching costs
9igh storage costs
*apacity added in large increments
9igh strategic stakes
9igh e+it /arriers
=iverse competitors
The !i"e !or$es are %ni&ue to 'our
(ndustry

Five.Forces ,nalysis is a frame%ork for

analy>ing a particular industry0

5et, the five forces affect all the other

/usinesses in that industry0
Competitor (nalysis Competitor (nalysis
The follo!0up to Industry (nalysis is
effective analysis of a firm"s
Competitors
Competitive
Environment
Industry
Environment
Industry
Environment
Competitor (nalysis Competitor (nalysis
(ssumptions
!hat assumptions do our competitors
hold a/out the future of industry and
themselves?
Current Strategy
=oes our current strategy support
changes in the competitive environment?
#uture /b1ectives
9o% do our goals compare to our
competitors goals?
Capabilities
9o% do our capa/ilities compare to our
competitors?
&esponse &esponse
!hat %ill our competitors do
in the future?
!hat %ill our competitors do
in the future?
!here do %e have a
competitive advantage?
!here do %e have a
competitive advantage?
9o% %ill this change our
relationship %ith our
competition?
9o% %ill this change our
relationship %ith our
competition?
#uture
/b1ectives
#uture
/b1ectives 2o! do our goals
compare to our
competitors" goals3
2o! do our goals
compare to our
competitors" goals3 4here !ill emphasis be
placed in the future3
4here !ill emphasis be
placed in the future3
4hat is the attitude
to!ard ris-3
4hat is the attitude
to!ard ris-3
4hat Drives the competitor3
Competitor (nalysis Competitor (nalysis
4hat is the competitor doing3
4hat can the competitor do3
#uture
/b1ectives
#uture
/b1ectives 2o! do our goals
compare to our
competitors" goals3
2o! do our goals
compare to our
competitors" goals3 4here !ill emphasis be
placed in the future3
4here !ill emphasis be
placed in the future3
4hat is the attitude
to!ard ris-3
4hat is the attitude
to!ard ris-3
Current
Strategy
Current
Strategy 2o! are !e currently
competing3
2o! are !e currently
competing3
Does this strategy
support changes in
the competitive
structure3
Does this strategy
support changes in
the competitive
structure3
Competitor (nalysis Competitor (nalysis
4hat does the competitor believe about
itself and the industry3
#uture
/b1ectives
#uture
/b1ectives 2o! do our goals
compare to our
competitors" goals3
2o! do our goals
compare to our
competitors" goals3 4here !ill emphasis be
placed in the future3
4here !ill emphasis be
placed in the future3
4hat is the attitude
to!ard ris-3
4hat is the attitude
to!ard ris-3
Current
Strategy
Current
Strategy 2o! are !e currently
competing3
2o! are !e currently
competing3
Does this strategy
support changes in
the competition
structure3
Does this strategy
support changes in
the competition
structure3
Do !e assume the
future !ill be volatile3
Do !e assume the
future !ill be volatile3
(re !e assuming
stable competitive
conditions3
(re !e assuming
stable competitive
conditions3
4hat assumptions do
our competitors hold
about the industry and
themselves3
4hat assumptions do
our competitors hold
about the industry and
themselves3
(ssumptions (ssumptions
Competitor (nalysis Competitor (nalysis
4hat are the competitor"s
capabilities3
#uture
/b1ectives
#uture
/b1ectives 2o! do our goals
compare to our
competitors" goals3
2o! do our goals
compare to our
competitors" goals3 4here !ill emphasis be
placed in the future3
4here !ill emphasis be
placed in the future3
4hat is the attitude
to!ard ris-3
4hat is the attitude
to!ard ris-3
Current
Strategy
Current
Strategy 2o! are !e currently
competing3
2o! are !e currently
competing3
Does this strategy
support changes in
the competition
structure3
Does this strategy
support changes in
the competition
structure3
Do !e assume the
future !ill be volatile3
Do !e assume the
future !ill be volatile3
(re !e operating
under a status 'uo3
(re !e operating
under a status 'uo3
4hat assumptions do
our competitors hold
about the industry and
themselves3
4hat assumptions do
our competitors hold
about the industry and
themselves3
(ssumptions (ssumptions
4hat are my
competitors" strengths
and !ea-nesses3
4hat are my
competitors" strengths
and !ea-nesses3
2o! do our
capabilities compare to
our competitors3
2o! do our
capabilities compare to
our competitors3
Capabilitie
s
Competitor (nalysis Competitor (nalysis
#uture
/b1ectives
#uture
/b1ectives 2o! do our goals
compare to our
competitors" goals3
2o! do our goals
compare to our
competitors" goals3 4here !ill emphasis be
placed in the future3
4here !ill emphasis be
placed in the future3
4hat is the attitude
to!ard ris-3
4hat is the attitude
to!ard ris-3
Current
Strategy
Current
Strategy 2o! are !e currently
competing3
2o! are !e currently
competing3
Does this strategy
support changes in
the competition
structure3
Does this strategy
support changes in
the competition
structure3
Do !e assume the
future !ill be volatile3
Do !e assume the
future !ill be volatile3
(re !e operating
under a status 'uo3
(re !e operating
under a status 'uo3
4hat assumptions do
our competitors hold
about the industry and
themselves3
4hat assumptions do
our competitors hold
about the industry and
themselves3
(ssumptions (ssumptions
&esponse &esponse
4hat !ill our
competitors do in the
future3
4hat !ill our
competitors do in the
future3
4here do !e have a
competitive
advantage3
4here do !e have a
competitive
advantage3
2o! !ill this change
our relationship !ith
our competition3
2o! !ill this change
our relationship !ith
our competition3
Capabilitie
s
Capabilitie
s
4hat are my
competitors" strengths
and !ea-nesses3
4hat are my
competitors" strengths
and !ea-nesses3
2o! do our
capabilities compare to
our competitors3
2o! do our
capabilities compare to
our competitors3
Competitor (nalysis Competitor (nalysis

#he tructure @ conduct. performance

Paradigm
AB
Basic Conditions: factors %hich shape the market of the industry, e0g0
demand, supply, political factors
tructure: attri/utes %hich give definition to the supply.side of the market, e0g0
economies of scale, /arriers to entry, industry concentration, product
differentiation, vertical integration0
Conduct: the /ehavior of firms in the market, e0g0 pricing /ehavior advertising,
innovation0
Performance: a 6udgment a/out the results of market /ehaviour, e0g0 efficiency,
profita/ility, fairness:income distri/ution, economic gro%th0
9o% can the government improve the performance in an industry?
LIFE-CYCLE STRATEGIES
Learning )oals
C0 Dno% the stages of the product life
cycle
B0 3eali>e ho% marketing strategies
change during the products life cycle
*rodu$t Life#+y$le
Strategies

#he Product Life *ycle $PL*& has Five

tages

Product =evelopment, -ntroduction, Gro%th,

<aturity, =ecline

4ot all products follo% this cycle:

E
Fads
E
tyles
E
Fashions
Goal C: Dno% the stages of the product life cycle process
*rodu$t Life#+y$le
Strategies

#he product life cycle concept can /e

applied to a:

Product class $soft drinks&

Product form $diet colas&

)rand $=iet =r0 Pepper&

E
Using the PL* to forecast /rand performance
or to develop marketing strategies is
pro/lematic
Goal C: Dno% the stages of the product life cycle process
*rodu$t Life#+y$le
Strategies

Product development

Introduction

Growth

Maturity

Decline

)egins %hen the

company develops a
ne%.product idea

ales are >ero

-nvestment costs are

high

Profits are negative

PLC Stages
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
*rodu$t Life#+y$le
Strategies

Product development

Introduction

Growth

Maturity

Decline

Lo% sales

9igh cost per customer

ac(uired

4egative profits

-nnovators are targeted

Little competition
PLC Stages
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
,ar-eting Strategies.
(ntrodu$tion Stage

Product @ "ffer a /asic product

Price @ Use cost.plus /asis to set

=istri/ution @ )uild selective distri/ution

,dvertising @ )uild a%areness among early

adopters and dealers:resellers

ales Promotion @ 9eavy e+penditures to

create trial
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
*rodu$t Life#+y$le
Strategies

Product development

Introduction

Growth

Maturity

Decline

3apidly rising sales

,verage cost per

customer

3ising profits

'arly adopters are

targeted

Gro%ing competition
PLC Stages
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
,ar-eting Strategies.
)ro/th Stage

Product @ "ffer product e+tensions,

service, %arranty

Price @ Penetration pricing

=istri/ution @ )uild intensive distri/ution

,dvertising @ )uild a%areness and interest

in the mass market

ales Promotion @ 3educe e+penditures to

take advantage of consumer demand
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
*rodu$t Life#+y$le
Strategies

Product development

Introduction

Growth

Maturity

Decline

ales peak

Lo% cost per customer

9igh profits

<iddle ma6ority are

targeted

*ompetition /egins to
decline
PLC Stages
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
,ar-eting Strategies.
,aturity Stage

Product @ =iversify /rand and models

Price @ et to match or /eat competition

=istri/ution @ )uild more intensive

distri/ution

,dvertising @ tress /rand differences and

/enefits

ales Promotion @ -ncrease to encourage

/rand s%itching
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
*rodu$t Life#+y$le
Strategies

Product development

Introduction

Growth

Maturity

Decline

=eclining sales

Lo% cost per customer

=eclining profits

Laggards are targeted

=eclining competition
PLC Stages
Goal B: 3eali>e ho% marketing strategies change during the product life cycle
,ar-eting Strategies. 0e$line
Stage

Product @ Phase out %eak items

Price @ *ut price

=istri/ution @ Use selective distri/ution:

phase out unprofita/le outlets

,dvertising @ 3educe to level needed to

retain hard.core loyalists

ales Promotion @ 3educe to minimal level

Goal B: 3eali>e ho% marketing strategies change during the product life cycle
!imensions E)isting Products e! Products
E)isting
$ar-ets
5656 Do nothing
76 4ithdra!
86 Consolidate
96 Penetrate
Product Development
:ris-y ; e)pensive<
e!
$ar-ets
$ar-et Development
:!hen product is very
competitive<
Diversification
:assuming ne! activities<
(nsoff0$atri) or
Product0$ar-et E)pansion Grid
Anso1#,atri2
-mproving the performance of e+isting /usinesses

1Do Nothing2 if the environment is static $short.run only&

1Withdraw2 %hen there is an irreversi/le decline in demand

or opportunity costs of staying in a market are too high

1Consolidation2 means concentration of resources and

focusing on e+isting competitive advantages

1Penetration2 means gaining market share

SWOT Analysis
S4/T is a universal analytical tool developed by the
military*
$atching corporate s-ills and resources !ith
forecasted mar-et opportunities
56 Strengths* Internal Positives $availa/le skills F
competencies&
76 4ea-nesses* Internal egatives $poor use or lack
of skills&
86 /pportunities* E)ternal Positives $evaluating areas
%here advantages may /e gained, e+: add a ne%
product, target ne% segments&
96 Threats* E)ternal egatives $evaluating forces that
may prevent the company from accomplishing its
o/6ectives, e+: competition, regulation, customer
preferences&