Bachelor of Commerce

Bcom Marketing (Honours)

Strategic Marketing Management

Module BMKT405
Author: Tawanda Dzama
MBA (MSU)
Bcom (honours) Marketing Management (MSU)
HND in Marketing Management (HEXCO)
ND in Marketing Management (HEXCO)
NC in Marketing (Salesmaship) (HEXCO)

Content Reviewer: Enock Mupamawonde

MBA (UZ)
BBS (Honours) Marketing (UZ)
HND in Marketing Management (HEXCO)
ND in Marketing Management (HEXCO)
NC in Marketing (Salesmaship) (HEXCO)

Editor: Cuthbert Muza

Master of Commerce in Accounting Degree (MSU)
Bachelor of Business Administration in Accounting Degree
(Solusi University)
Certified Public Accountant (CPA(Z)) (ICPAZ)
Certified Professional Forensic Accountant (CPFAcct) (ICFA-
Canada)
Public Accountants and Auditors Board (PAAB) Registration
Certificate
Intermediate Certificate (ICSAZ)
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 The Six Hour Tutorial Session At
The Zimbabwe Open University
A s you embark on your studies with the Zimbabwe
Open University (ZOU) by open and distance
learning, we need to advise you so that you can make
This is where the six hour tutorial comes in. For it
to work, you need to know that:
· There is insufficient time for the tutor to
the best use of the learning materials, your time and
the tutors who are based at your regional office. lecture you
· Any ideas that you discuss in the tutorial,
The most important point that you need to note is originate from your experience as you
that in distance education and open learning, there work on the materials. All the issues
are no lectures like those found in conventional raised above are a good source of topics
universities. Instead, you have learning packages that (as they pertain to your learning) for
may comprise written modules, tapes, CDs, DVDs discussion during the tutorial
and other referral materials for extra reading. All these
· The answers come from you while the
including radio, television, telephone, fax and email
can be used to deliver learning to you. As such, at tutor’s task is to confirm, spur further
the ZOU, we do not expect the tutor to lecture you discussion, clarify, explain, give
when you meet him/her. We believe that that task is additional information, guide the
accomplished by the learning package that you receive discussion and help you put together full
at registration. What then is the purpose of the six answers for each question that you bring
hour tutorial for each course on offer? · You must prepare for the tutorial by
bringing all the questions and answers
At the ZOU, as at any other distance and open that you have found out on the topics to
learning university, you the student are at the centre the discussion
of learning. After you receive the learning package, · For the tutor to help you effectively, give
you study the tutorial letter and other guiding him/her the topics beforehand so that in
documents before using the learning materials. During cases where information has to be
the study, it is obvious that you will come across gathered, there is sufficient time to do
concepts/ideas that may not be that easy to understand so. If the questions can get to the tutor
or that are not so clearly explained. You may also at least two weeks before the tutorial,
come across issues that you do not agree with, that that will create enough time for thorough
actually conflict with the practice that you are familiar preparation.
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arguments may begin. You may also find that an idea take part all the time through contributing in every
is not clearly explained and you remain with more way possible. You can give your views, even if
questions than answers. You need someone to help they are wrong, (many students may hold the same
you in such matters. wrong views and the discussion will help correct
 The Six Hour Tutorial Session At The Zimbabwe Open University

the errors), they still help you learn the correct thing as the tutor may dwell on matters irrelevant to the
as much as the correct ideas. You also need to be ZOU course.
open-minded, frank, inquisitive and should leave no
stone unturned as you analyze ideas and seek
clarification on any issues. It has been found that Distance education, by its nature, keeps the tutor
those who take part in tutorials actively, do better in and student separate. By introducing the six hour
assignments and examinations because their ideas are tutorial, ZOU hopes to help you come in touch with
streamlined. Taking part properly means that you the physical being, who marks your assignments,
prepare for the tutorial beforehand by putting together assesses them, guides you on preparing for writing
relevant questions and their possible answers and examinations and assignments and who runs your
those areas that cause you confusion. general academic affairs. This helps you to settle
down in your course having been advised on how
Only in cases where the information being discussed to go about your learning. Personal human contact
is not found in the learning package can the tutor is, therefore, upheld by the ZOU.
provide extra learning materials, but this should not
be the dominant feature of the six hour tutorial. As
stated, it should be rare because the information
needed for the course is found in the learning package
together with the sources to which you are referred.
Fully-fledged lectures can, therefore, be misleading

The six hour tutorials should be so structured that the

tasks for each session are very clear. Work for each
session, as much as possible, follows the structure given
below.

Session I (Two Hours)

Session I should be held at the beginning of the semester. The main aim
of this session is to guide you, the student, on how you are going to
approach the course. During the session, you will be given the overview
of the course, how to tackle the assignments, how to organize the logistics
of the course and formation of study groups that you will belong to. It is
also during this session that you will be advised on how to use your
learning materials effectively.
 The Six Hour Tutorial Session At The Zimbabwe Open University

Session II (Two Hours)

This session comes in the middle of the semester to respond to the
challenges, queries, experiences, uncertainties, and ideas that you are
facing as you go through the course. In this session, difficult areas in the
module are explained through the combined effort of the students and
the tutor. It should also give direction and feedback where you have not
done well in the first assignment as well as reinforce those areas where
performance in the first assignment is good.

Session III (Two Hours)

The final session, Session III, comes towards the end of the semester.
In this session, you polish up any areas that you still need clarification on.
Your tutor gives you feedback on the assignments so that you can use
the experience for preparation for the end of semester examination.

Note that in all the three sessions, you identify the areas
that your tutor should give help. You also take a very
important part in finding answers to the problems posed.
You are the most important part of the solutions to your
learning challenges.

Conclusion for this course, but also to prepare yourself to

contribute in the best way possible so that you
In conclusion, we should be very clear that six can maximally benefit from it. We also urge you
hours is too little for lectures and it is not to avoid forcing the tutor to lecture you.
necessary, in view of the provision of fully self-
contained learning materials in the package, to BEST WISHES IN YOUR STUDIES.
turn the little time into lectures. We, therefore,
urge you not only to attend the six hour tutorials ZOU
Contents

Module Overview
Module Overview ____________________________________________________________ 1

Unit One: The Concept of Strategy

1.0 ________ Introduction _____________________________________________________ 3
1.1 ________ Unit Objectives ___________________________________________________ 4
1.2 ________ What is a Strategy? ________________________________________________ 4
1.3 ________ General Perspective of Strategy ______________________________________ 5
__________ 1.3.1 The Classical Approach _________________________________________ 5
__________ 1.3.2 Evolutionary Approach _________________________________________ 5
__________ 1.3.3 Processual Approach ___________________________________________ 6
__________ 1.3.4 Systemic Approach ____________________________________________ 6
__________ Activity 1.1 _______________________________________________________ 6
1.4 ________ General Characteristics of Strategy ___________________________________ 6
__________ 1.4.1 Novelty ______________________________________________________ 7
__________ 1.4.2 Secretly devised _______________________________________________ 7
__________ 1.4.3 Intelligent ___________________________________________________ 7
__________ 1.4.4 Deceptive ____________________________________________________ 7
__________ 1.4.5 Cost effective _________________________________________________ 7
1.5 ________ The Process of Strategy Formulation _________________________________ 7
1.6 ________ What is Marketing Strategy? _________________________________________ 9
__________ 1.6.1 Strategic analysis ______________________________________________ 10
__________ 1.6.2 Formulating strategy ___________________________________________ 10
__________ 1.6.3 Implementation _______________________________________________ 11
1.7 ________ Reasons for Strategic Marketing _____________________________________ 11
__________ Activity 1.2 _______________________________________________________ 11
1.8 ________ Strategic Marketing versus Marketing Management ______________________ 12
__________ Activities 1.3 ______________________________________________________ 12
1.9 ________ Summary ________________________________________________________ 13
__________ References _______________________________________________________ 14

Unit Two: The Macro Environmental Analysis

2.0 ________ Introduction _____________________________________________________ 15
2.1 ________ Unit Objectives ___________________________________________________ 16
2.2 ________ Macro Environment _______________________________________________ 16
__________ 2.2.1 PESTLE factors _______________________________________________ 16
__________ Activity 2.1 _______________________________________________________ 18
__________ 2.2.2 Market analysis _______________________________________________ 18
__________ Activity 2.2 ______________________________________________________ 22
__________ 2.2.3 Customers analysis ___________________________________________ 22
 __________ 2.2.4 Competitor analysis __________________________________________ 26
2.3 ________ Micro Environment ______________________________________________ 32
__________ Activities 2.4 ____________________________________________________ 32
2.4 ________ Summary _______________________________________________________ 32
__________ References ______________________________________________________ 34

Unit Three: Internal Environment

3.0 ________ Introduction ____________________________________________________ 35
3.1 ________ Unit Objectives __________________________________________________ 36
3.2 ________ Components of Internal Marketing Environment ______________________ 36
__________ 3.2.1 Organisational assets __________________________________________ 36
__________ 3.2.2 Organisational competences ____________________________________ 37
__________ Activity 3.1 ______________________________________________________ 38
3.3 ________ The Internal Marketing Audit ______________________________________ 38
__________ 3.3.1 Problems and pitfalls of marketing audits __________________________ 41
__________ Activity 3.2 ______________________________________________________ 43
3.4 ________ Auditing Tools __________________________________________________ 43
__________ 3.4.1 Value chain _________________________________________________ 43
__________ Activity 3.3 ______________________________________________________ 47
__________ 3.4.2 Portfolio analysis ____________________________________________ 47
__________ Activity 3.4 ______________________________________________________ 49
__________ Activity 3.5 _______________________________________________________ 51
__________ 3.4.3 SWOT analysis _______________________________________________ 51
__________ Activity 3.5 ______________________________________________________ 54
3.5 ________ Summary _______________________________________________________ 54
__________ References ______________________________________________________ 55

Unit Four: Competitive Intelligence

4.0 ________ Introduction ____________________________________________________ 57
4.1 ________ Unit Objectives __________________________________________________ 58
4.2 ________ What Is Competitive Intelligence? ___________________________________ 58
4.3 ________ Useful Functions within an Organisation Competitive Intelligence _________ 58
4.4 ________ Competitive Intelligence Cycle _____________________________________ 58
__________ 4.411 Planning and direction ________________________________________ 59
__________ 4.4.2 Collection __________________________________________________ 59
__________ 4.4.3 Analysis ____________________________________________________ 60
__________ 4.4.4 Dissemination _______________________________________________ 60
__________ Activity 4.1 ______________________________________________________ 60
4.5 ________ Sources of Competitive Intelligence _________________________________ 60
4.6 ________ Competitive Intelligence Scope ______________________________________ 61
__________ 4.6.1 Competitive intelligence is focused on decision making ______________ 62
__________ Activities 4.2 ____________________________________________________ 62
4.7 ________ Ethical Issues in competitive Intelligence _____________________________ 62
__________ 4.7.1 Misrepresentation ____________________________________________ 62
__________ 4.7.2 Client conflict _______________________________________________ 63
__________ 4.7.3 Competitive intelligence conducts _______________________________ 64
__________ Activities 4.3 ____________________________________________________ 66
4.8 ________ Summary _______________________________________________________ 66
__________ References ______________________________________________________ 67
Unit Five: Segmentation, Targeting and Positioning
5.0 ________ Introduction ____________________________________________________ 69
5.1 ________ Unit Objectives __________________________________________________ 70
5.2 ________ Segmentation ___________________________________________________ 70
__________ 5.2.1 Reasons for segmentation ______________________________________ 70
__________ 5.2.2 The segmentation process _____________________________________ 70
__________ 5.2.3 Bases of segmentation _________________________________________ 71
__________ Activity 5.1 ______________________________________________________ 72
5.3 ________ Market Targeting ________________________________________________ 73
__________ 5.3.1 Factors influencing choice of targeting strategy ____________________ 74
__________ 5.3.2 Factors affecting the attractiveness of a Target Market _______________ 74
__________ Activity 5.2 ______________________________________________________ 74
5.4 ________ Positioning _____________________________________________________ 74
__________ 5.4.1 Factors influencing positioning success ___________________________ 76
__________ 5.4.2 Perceptual mapping __________________________________________ 76
__________ 5.4.3 Positioning alternatives _______________________________________ 77
__________ 5.4.4 Positioning mistakes __________________________________________ 78
__________ 5.4.5 Brand repositioning __________________________________________ 78
__________ Activities 5.3 ____________________________________________________ 79
5.5 ________ Summary _______________________________________________________ 79
__________ References ______________________________________________________ 80

Unit Six: Strategic Marketing Planning

6.0 ________ Introduction _____________________________________________________ 81
6.1 ________ Unit Objectives __________________________________________________ 82
6.2 ________ Why does Planning Matter? ________________________________________ 82
6.3 ________ Barrier to Successful Planning ______________________________________ 82
6.4 ________ Strategic Marketing Management Planning Process _____________________ 83
__________ 6.4.1 Mission ____________________________________________________ 83
__________ 6.4.2 Goals and objectives __________________________________________ 85
__________ Activities 6.1 _____________________________________________________ 86
__________ 6.4.3 Marketing strategies __________________________________________ 87
__________ Activities 6.2 ____________________________________________________ 88
__________ Activities 6.3 ____________________________________________________ 89
__________ Activities 6.4 _____________________________________________________ 91
__________ Activities 6.5 ____________________________________________________ 93
__________ Activities 6.6 ____________________________________________________ 97
6.5 ________ Summary _______________________________________________________ 97
__________ References ______________________________________________________ 99

Unit Seven: Marketing Mix Strategy

7.0 ________ Introduction ____________________________________________________ 101
7.1 ________ Objectives ______________________________________________________ 102
7.2 ________ The Product Strategy _____________________________________________ 102
__________ 7.2.1 Consumer goods classification __________________________________ 102
__________ 7.2.2 Industrial goods classification __________________________________ 102
__________ 7.2.3 Product differentiation factors __________________________________ 103
__________ 7.2.4 Service differentiation factors ___________________________________ 104
__________ 7.2.5 Five product levels ___________________________________________ 104
__________ 7.2.6 Product Mix ________________________________________________ 106
 __________ Activity 7.1 ______________________________________________________ 106
__________ 7.2.7 New product development _____________________________________ 106
__________ 7.2.8 Branding ___________________________________________________ 107
__________ 7.2.9 Packaging __________________________________________________ 111
__________ Activities 7.2 ____________________________________________________ 112
7.3 ________ Distribution Strategy ______________________________________________ 112
__________ 7.3.1 Types of utility distribution offers _______________________________ 112
__________ 7.3.2 Distribution channel decisions __________________________________ 112
__________ 7.3.3 Distribution strategies ________________________________________ 114
__________ Activities 7.3 ____________________________________________________ 116
7.4 ________ Pricing Strategy __________________________________________________ 116
__________ 7.4.1 Cost based pricing ____________________________________________ 116
__________ 7.4.2 Customer-based pricing _______________________________________ 116
__________ 7.4.3 Competitor-based pricing ______________________________________ 118
__________ Activity 7.4 ______________________________________________________ 118
7.5 ________ Promotion Strategy _______________________________________________ 118
__________ 7.5.1 Identifying the target audience __________________________________ 119
__________ 7.5.2 Determining the communications objective _______________________ 120
__________ 7.5.3 Designing the message ________________________________________ 120
__________ 7.5.4 The promotional mix _________________________________________ 121
__________ Activity 7.5 ______________________________________________________ 121
7.6 ________ Summary _______________________________________________________ 122
__________ References ______________________________________________________ 123

Unit Eight: Marketing Strategy Implementation

8.0 ________ Introduction ____________________________________________________ 125
8.1 ________ Objectives ______________________________________________________ 126
8.2 ________ What is Strategic Marketing Implementation? _________________________ 126
8.3 ________ Common Marketing Implementation Problems ________________________ 126
__________ 8.3.1 Purpose ____________________________________________________ 126
__________ 8.3.2 Process _____________________________________________________ 127
__________ 8.3.3 Employees __________________________________________________ 127
__________ Activities 8.1 _____________________________________________________ 127
__________ 8.3.4 Management ________________________________________________ 127
__________ Activity 8.2 ______________________________________________________ 130
8.4 ________ Overcoming the Potential Challenges of Strategy Implementation _________ 130
8.5 ________ Implementation Activities _________________________________________ 130
8.6 ________ Factors Supporting Strategy Implementation __________________________ 131
__________ 8.6.1 Action planning ______________________________________________ 131
__________ 8.6.2 Organisational structure _______________________________________ 131
__________ 8.6.3 Human resource factors _______________________________________ 131
__________ 8.6.3 The annual business plan ______________________________________ 132
__________ 8.6.4 Monitoring and control _______________________________________ 132
__________ 8.6.5 Linkage ____________________________________________________ 132
__________ 8.6.6 Culture _____________________________________________________ 133
__________ 8.6.7 Strategy ____________________________________________________ 133
__________ 8.6.8 Leadership __________________________________________________ 133
__________ Activity 8.2 ______________________________________________________ 134
8.7 ________ Summary _______________________________________________________ 134
__________ References ______________________________________________________ 135
Unit Nine: Marketing Control
9.0 ________ Introduction ____________________________________________________ 137
9.1 ________ Unit Objectives __________________________________________________ 138
9.2 ________ Meaning of Marketing Controls ____________________________________ 138
9.3 ________ Marketing Control - The Basic Principles _____________________________ 138
__________ 9.3.1 Requirements for an effective marketing control system ______________ 139
__________ 9.3.2 Marketing control system ______________________________________ 140
__________ Activity 9.1 ______________________________________________________ 141
9.4 ________ Problems of Marketing Control _____________________________________ 141
9.5 ________ Control Areas ___________________________________________________ 142
__________ 9.5.1 Finance ____________________________________________________ 142
__________ Activity 9.2 ______________________________________________________ 145
9.6 ________ Performance Appraisal ____________________________________________ 146
9.7 ________ Benchmarking ___________________________________________________ 147
__________ Activity 9.3 ______________________________________________________ 147
9.8 ________ Controlling Marketing Performance _________________________________ 147
9.9 ________ Characteristics of an Effective Control System _________________________ 148
9.10 _______ Five Major Marketing-Control Techniques ____________________________ 149
__________ Activity 9.4 ______________________________________________________ 150
9.11 _______ Summary _______________________________________________________ 150
__________ References ______________________________________________________ 151

Unit Ten: Case Studies

10.0 _______ Introduction ____________________________________________________ 153
10.1 _______ Unit Objectives __________________________________________________ 154
10.2 _______ Main Features of a Case Study ______________________________________ 154
10.3 _______ Case Study Roadmap ______________________________________________ 154
10.4 _______ Sample Case Study with Answers ____________________________________ 155
10.5 _______ Practice Case Studies _____________________________________________ 157
__________ 10.5.1 Econet Wireless lauded for enhancing customer value ______________ 157
__________ 10.5.2 TM Supermarkets ___________________________________________ 159
__________ 10.5.3 Innscor faces stiff competition _________________________________ 160
__________ 10.5.4 Zimbabwe United Passenger Company (ZUPCO), a sad story
__________ of things gone wrong _____________________________________________ 162
__________ 10.5.5 Delta launches Chibuku Super ________________________________ 164
__________ 10.5.6 EasyJet ____________________________________________________ 165
__________ 10.5.7 Ecoprods __________________________________________________ 167
__________ 10.5.8 Singapore Stan ______________________________________________ 168
__________ 10.5.9 Home Baker _______________________________________________ 169
__________ 10.5.10 Eau de Nuit _______________________________________________ 170
__________ 10.5.11 Remote applications _________________________________________ 171
10.6 _______ Summary _______________________________________________________ 173
__________ Reference _______________________________________________________ 174
Module Overview

F
or companies to thrive in a highly competitive marketplace, they must
develop strategic marketing plans that align them with their customers
and differentiate them from their competitors. Without integrated and in-
novative marketing strategies, corporate leaders will struggle to create value
and generate growth. This module explores the principal concepts and tools
of contemporary strategic marketing management, from environmental analy-
sis, market segmentation and product positioning to the design of marketing
mix strategy.
Strategic Marketing Management BMKT 405

Unit 1 covers the concept of strategy in general, strategic marketing process,

reasons for strategic marketing and difference between strategic marketing
and marketing management.

In Unit 2 we look at the macro environment analysis. Understanding this en-

vironment and its impact on the companies' activities helps marketing manag-
ers to adapt their marketing strategies according to the requirements of the
environment (PESTLE factors).

Unit 3 is about the internal environment. This environment is concerned with

the analysis of a company's strategic resources. These include organizational
assets (financial, physical, operational, people and marketing assets) and or-
ganizational competences (strategic, functional, operational, individual and team
competences). The internal environment is analysed through marketing audit
models which include the value chain, portfolio analysis tools (BCG, and GE)
and SWOT analysis.

In Unit 4 we look at competitive intelligence. Companies' success is deter-

mined by the actions of competitors. Companies in order to develop com-
petitive marketing strategies should gather, analyse, and disseminate informa-
tion relating to competitors' strategies, goals, procedures and products. Unit
5 covers the concepts of segmentation, targeting and positioning. These are
three pillars of modern marketing.

Units 6 and 7 are about strategic marketing planning which is a culmination of

opportunities identified from marco-environmental analysis and company ca-
pabilities identified through internal environmental analysis. Strategic market-
ing planning also involves planning for marketing mix variables (product, price,
place and promotion).

Units 8 and 9 cover marketing strategy implementation and control issues

respectively. Issues discussed include implementation problems, and factors
supporting effective marketing strategy implementation while control issues
discussed include control problems, marketing management control techniques,
and characteristics of an effective marketing control system. Unit 10 provides
practical case studies which allow students to relate real practical situations to
relevant marketing theories and concepts they have leant.

2 Zimbabwe Open University

 Unit One

The Concept of Strategy

1.0 Introduction

B
efore introducing the concept of strategic marketing, it is important to
give you grounding by explaining what strategy in general entails. In
this unit we give a better understanding of a strategy and its relation to
strategic marketing. In this unit we will cover general aspects of a strategy
and the subsequent units will cover the elements of Strategic Marketing Man-
agement.
Strategic Marketing Management BMKT 405

1.1 Unit Objectives

By the end of the unit, you should be able to:
 define the concept of strategy
 explore the evolution of strategy
 differentiate strategic management and strategic marketing management

1.2 What is a Strategy?

A strategy is the pattern or plan that integrates an organisation's major goals,
policies and action sequences into a cohesive whole. A well-formulated strat-
egy helps marshal and allocates an organization's resources into a unique and
viable posture based upon its relative internal competencies and shortcom-
ings, anticipated changes in the environment, and contingent moves by intelli-
gent opponents. Strategy is about winning (Baker, 2008). In simple terms a
strategy includes a method or plan chosen to bring about a desired future,
such as achievement of a goal or solution to a problem.

According Drummond, (2001) a strategy tend to focus on:

Business definition- A strategic fundamental is defining the business we are in.

Organizations need to anticipate and adapt to change by keeping in touch
with the external competitive environment. Business leaders need to define
the scope (or range) of the organisation's activities and determine the markets
in which the organisation will compete.

An integrative approach- Strategy has a wide-ranging impact and therefore

affects all functional areas within the organisation. Effective strategy is able to
co-ordinate the different functions/activities within the organisation in order to
achieve common goals. By taking a 'whole-organisation' view of the corpo-
ration, managers should be better able to target resources, eliminate waste
and generate synergy. Synergy occurs when the combined effect of functions/
activities is greater than their individual contribution.

Core competencies- The organisation must be competitive now and in the

future. Therefore, strategic decisions need to define the basis of sustainable
competitive advantage(s). This can be assessed through the following ques-
tions:
i) What skills and resources are needed in order to prosper within our
defined markets?

4 Zimbabwe Open University

Unit 1 The Concept of Strategy

ii) How can they be used to optimum advantage?

It is essential that this is considered over the long term and aims to match
organisational capability with desired goals and the external environment.

Consistency of approach- Strategy should provide a consistency of approach,

and offer a focus to the organisation. Tactical activities may change and be
adapted readily in response to market conditions, but strategic direction should
remain constant.

1.3 General Perspective of Strategy

Whittington, (1993) identifies four approaches to strategy namely classical,
evolutionary and processual.

1.3.1 The Classical Approach

According to Whittington, (1993), for classicists, profitability is the highest
goal of business and rational planning as the means to attain it. Whittington
quoted Alfred Sloan, former President of General Motors, who laid out the
cornerstone for the Classical strategy based on profit. In his biography My
Years with General Motors he said:

"The strategic aim of a business is to earn a return on capital, and if in any

particular case the return in the long run is not satisfactory, the deficiency
should be corrected or the activity abandoned".

1.3.2 Evolutionary Approach

Evolutionary approaches do not rely on top management's skill to plan and
act rationally. Instead of depending on managers, they believe that markets
will determine profit maximisation and not the managers. Whatever methods
the managers will adopt, the best performance will be the ones that survive.
Rational methods are not the basis for this approach because it is 'evolution
that is nature's cost-benefit analysis. In evolutionary perspectives, competi-
tion is not overcome by detached calculation such as in classical perspective
but by constant struggle for survival in the jungle. The biological principle of
natural selection is at the core of evolutionary theory wherein the most quali-
fied strategies often translate in the best performance allowing them to survive
and progress. The weaker performers are driven out of the market.

Zimbabwe Open University 5

Strategic Marketing Management BMKT 405

1.3.3 Processual Approach

Processual approaches also do not subscribe to rational strategy-making for-
warded by classical approach. They do not agree with the evolutionary per-
spective either of leaving the profit-maximising outcomes to the market. To
them, organisations and markets are wrought with confusion and mess. The
best processual method is not to strive for the ideal but to work with what the
reality offers.

1.3.4 Systemic Approach

Systemic theorists believe that the organisation is capable of planning and
acting effectively. According to systemic theorists economic activity cannot
be separated from social relations such as family, state or religion. These
social factors influence the means and ends of a systemic approach and de-
fine what the suitable behaviour is for their members. In a systemic approach,
the organisation is not just made up of individuals but of social groups with
interests. The variables that systemic contend with are class and professions,
nations and states, families and gender. The strategy then depends on the
social environment of the firm.

Activity 1.1

? 1. Explain why organisations spend a lot of money focusing on a strategy?

2. Discuss the approach to strategy is being used by your company?
3. Compare and contrast the four approaches to strategy and recommend
the one suitable for modern organisation.

1.4 General Characteristics of Strategy

Managers are responsible of making the strategy for the organisation and
they wish to make good strategies as the outcome of the strategic planning
process of the business. Therefore a manager needs to know the characteris-
tics of a good strategy. Warren K, (2008) identified Characteristics of a
good strategy as follows:

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Unit 1 The Concept of Strategy

1.4.1 Novelty
Strategy should be an outcome of innovative and creative thinking. It should
include new/novel areas which were not practiced before. If the strategy does
not include any novel aspect in it there is a high tendency that competitors will
be already having detailed knowledge about the strategy employed. There-
fore strategy should include a novel/creative aspect into to make it unique and
differentiate from competitors.

1.4.2 Secretly devised

Strategy should involve some confidential element in it which should only be
known to the management of the organisation. The secret element of the strategy
will always keep the competitors curious about the strategy. When develop-
ing the strategy it is considered to be a confidential activity where the man-
agement team has to keep the business secrets and should not reveal.

1.4.3 Intelligent
Strategy should be design in a clever and SMART (specific, measurable,
accurate, reliable and timeous) manner. If the strategy fails to obtain this char-
acteristic it will not be a strategy as only the SMART strategies will be able
to achieve desired objectives.

1.4.4 Deceptive
Strategy should involve an element of the deception and should be able to
cheat the target audience in an ethical manner. When incorporating the de-
ceiving element the care should be drawn not to go beyond the limits and
cheat people in unethical manner.

1.4.5 Cost effective

The strategy should be able to break even and recover the investment/cost
incurred. In other words, benefits received by the organisation by executing
the strategy has to be higher than the cost incurred in executing the strategy.

1.5 The Process of Strategy Formulation

According to Baker, (2008) strategy formulation refers to the process of
choosing the most appropriate course of action for the realization of organi-

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sational goals and objectives and thereby achieving the organisational vision.
The process of strategy formulation basically involves six main steps. Though
these steps do not follow a rigid chronological order, however they are very
rational and can be easily followed in this order.

Step One: Setting organisations' objectives

The key component of any strategy statement is to set the long-term objec-
tives of the organisation. It is known that strategy is generally a medium for
realization of organisational objectives. Objectives stress the state of being
there whereas Strategy stresses upon the process of reaching there. Strategy
includes both the fixation of objectives as well the medium to be used. While
fixing the organisational objectives, it is essential that the factors which influ-
ence the selection of objectives must be analyzed before the selection of ob-
jectives. Once the objectives and the factors influencing strategic decisions
have been determined, it is easy to take strategic decisions.

Step Two: Evaluating the organisational environment

The next step is to evaluate the general economic and industrial environment
in which the organisation operates. This includes a review of the organisations
competitive position. It is essential to conduct a qualitative and quantitative
review of an organisations existing product line. The purpose of such a review
is to make sure that the factors important for competitive success in the mar-
ket can be discovered so that the management can identify their own strengths
and weaknesses as well as their competitors' strengths and weaknesses.

After identifying its strengths and weaknesses, an organisation must keep a

track of competitors' moves and actions so as to discover probable opportu-
nities of threats to its market or supply sources.

Step Three: Setting quantitative targets

In this step, an organisation must practically fix the quantitative target values
for some of the organisational objectives. The idea behind this is to compare
with long term customers, so as to evaluate the contribution that might be
made by various product zones or operating departments.

Step Four: Aiming in context with the divisional plans

In this step, the contributions made by each department or division or prod-

uct category within the organisation are identified and accordingly strategic

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Unit 1 The Concept of Strategy

planning is done for each sub-unit. This requires a careful analysis of macr-
oeconomic trends.

Step Five: Performance analysis

Performance analysis includes discovering and analysing the gap between the
planned or desired performance. A critical evaluation of the organisations
past performance, present condition and the desired future conditions must
be done by the organisation. This critical evaluation identifies the degree of
gap that persists between the actual reality and the long-term aspirations of
the organisation. An attempt is made by the organisation to estimate its prob-
able future condition if the current trends persist.

Step Six: Choice of strategy

This is the ultimate step in Strategy Formulation. The best course of action is
actually chosen after considering organisational goals, organisational strengths,
potential and limitations as well as the external opportunities.

1.6 What is Marketing Strategy?

In a strategic role, marketing aims to transform corporate objectives and busi-
ness strategy into a competitive market position. Essentially, the concern is to
differentiate our activities/products by meeting customer needs more effec-
tively than competitors. Marketing strategy can by characterised by:
(a) Analysing the business environment and defining specific customer needs
(b) Matching activities/products to customer segments, and
(c) Implementing programmes that achieve a competitive position, supe-
rior to competitors.
Therefore, marketing strategy addresses three elements - customers, com-
petitors and internal corporate issues. Figure 2.1 below shows the strategic
marketing strategy process

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Strategic Marketing Process

Strategic Analysis
External Analysis Internal Analysis Customer Analysis
Future Orientation

Strategy Formulation
• Targeting Product Development Relationships
• Position Innovation Alliances
• Branding

Implementation
Implementation Control

Figure 1.1 Strategic Marketing Process

(Source: Drummond, Ensor and Ashford, 2001)

In general the marketing strategy involve three broad elements: Strategic analy-
sis; strategy formulation and implementation

1.6.1 Strategic analysis

To move forward you must first answer the question: where are we? This
stage entails a detailed examination of the business environment, customers
and an internal review of the organisation itself. Tools such as portfolio analy-
sis and industry structure models help management to assess objectively the
organisation's current position.

1.6.2 Formulating strategy

Having analysed our situation, you need then determine a way forward. For-
mulation involves defining strategic intent - what are our overall goals and
objectives? Managers need to formulate a marketing strategy that generates
competitive advantage and positions the organisation's products effectively.

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Unit 1 The Concept of Strategy

To be successful, this must be based on core competencies. During this stage,

product development and innovations are strategic activities, offering the po-
tential to enhance competitive position and further develop products and brands

1.6.3 Implementation
Consideration needs to be given to implementing the strategy. Marketing
managers will undertake programmes and actions that deliver strategic ob-
jectives. Such actions will often focus on individual elements of the marketing
mix. Additionally, a process of monitoring and control needs to be put in
place. This ensures compliance and aids decision making.

1.7 Reasons for Strategic Marketing

Strategic marketing is important to an organisation for number of reasons:
 organisational environments are dynamic
 competitors change both their strategies and offerings
 customer taste changes
 markets are dynamic and technology advances-requires suitable prod-
uct market strategies
 the battle for market share intensifies: strategic marketing brings extra
leverage in these battles
 globalisation and deregulation ushers in the need for strategic market-
ing
 customers are becoming enlightened and require customised offerings
 demographic shifts call for continual changes in marketing strategies
 innovation and expeditionary thinking is what is required to unlock new
markets

Activity 1.2

?
1. Explain the strategy formulation process and fully explain why
environmental analysis is important to all steps of the process.
2. Briefly explain the components of a marketing strategy.
3. Is a marketing strategy critical to your organisation? Support your
answer.

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1.8 Strategic Marketing versus Marketing

Management
Students usually faced a problem in trying to differentiate strategic marketing
from marketing management. Table 1.1 shows the difference between the
two.
Table 1.1 Differences between Strategic Marketing and Marketing
Management

Point of Difference Strategic Marketing Marketing Management

Time Frame Long range decisions Day to day decisions relevant
Orientation Inductive and intuitive Detective and analytical
Relationship with Dynamic environment Stable environment
environment perspective
Opportunity On going to seek Ad hoc search for new
Sensitivity opportunities opportunities
Organisational Achieve synergy between Pursue interest of the
behaviour components of the decentralised unit
organisation
Nature of job Requires high degree of Requires maturity, experience
creativity and control

Leadership style Requires proactive Requires reactive perspective

perspective
Mission Deals with that which Deals with running a
organisation has to delineated business.
emphasise

(Source: Du Plessis and Strydom, 2001)

Activities 1.3
1. Explain how does marketing strategy differ from a corporate strategy?
? 2. Discuss what is a strategic Intent?
3. Differentiate between strategic marketing and marketing management.

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1.9 Summary
Strategic planning plays a pivotal role and many firms now began to realise
that there was a missing link in the planning process. Without properly relating
the strategic planning effort to marketing, the whole process tended to be
static. Business exists in a dynamic setting, and by and large, it is only through
marketing inputs that perspectives of changing social, economic, political and
technical environments can be brought into the strategic planning process.
The unit highlighted marketing strategy as an important component of the
corporate strategy. Both corporate and marketing strategy processes share
similar components namely strategic analysis, formulation and implementa-
tion. In this unit we introduced the components of the strategic marketing
planning in brief and the subsequent units will discuss the components in de-
tail.

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References
Baker, M. (2008) The Strategic Marketing Plan Audit. Cambridge Strat-
egy Publications, UK.
Drummond, G., Ensor, J. and Ashford, R. (2001) Strategic Marketing: Plan-
ning and Control, (Second Edition), Oxford: Butterworth, Heinemann.
Du Plessis, C.J. and, Strydom, J.W. (2001) Applied Strategic Marketing,
Heinamann.
Homburg, C. Kuester, S. and Krohmer, H. (2009). Marketing Manage-
ment - A Contemporary Perspective (1st ed.), London.
Hunt, D.S. (2002). Foundations of Marketing Theory: Toward General
Theory of Marketing. Armonk: M.E. Sharpe Inc.
Warren, Kim, (2008) Strategic Management Dynamics, London: Wiley.

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 Unit Two

The Macro Environmental

Analysis

2.0 Introduction

I
n this unit we are going to focus on the analysis of macro environment.
Understanding of this environment and its impact on organisations' activi
ties will help marketing managers to adapt their marketing strategies ac-
cordingly to avoid strategic drift.
Strategic Marketing Management BMKT 405

2.1 Unit Objectives

By the end of the unit, you should be able to:
 explain the elements of the Macro Environment
 discuss the models that analyse the macro environment
 explain the impact of the macro environment to marketing strategy

2.2 Macro Environment

Consist of major external and uncontrollable factors that influence an organi-
sation's decision making, and affect its performance and strategies. The ele-
ments of the macro-environment consist of:
 PESTLE factors;
 the Market;
 customers; and
 competitors

2.2.1 PESTLE factors

According to Drummond, Ensor and Ashford (2001) PESTLE factors are
uncontrollable and firms should conform. PESTLE factors comprise of politi-
cal, economic, social, technological and legal.

Political-legal analysis
 political stability;
 risk of military invasion;
 legal framework for contract enforcement;
 intellectual property protection;
 trade regulations and tariffs;
 favoured trading partners;
 anti-trust laws;
 pricing regulations;
 taxation - tax rates and incentives;
 wage legislation - minimum wage and overtime;
 work week;
 mandatory employee benefits;
 industrial safety regulations; and
 product labelling requirements

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Economic analysis
 type of economic system in countries of operation;
 government intervention in the free market;
 comparative advantages of host country;
 exchange rates and stability of host country currency;
 efficiency of financial markets;
" infrastructure quality;
 skill level of workforce;
 labour costs;
 business cycle stage (for example prosperity, recession, recovery);
 economic growth rate;
 discretionary income;
 unemployment rate;
 inflation rate; and
 interest rates

Social analysis
 demographics;
 class structure;
 education;
 culture (gender roles, cultural values, beliefs, language norms and ma-
terial aspects.);
 entrepreneurial spirit;
 attitudes (health, environmental consciousness, and gender conscious-
ness.); and
 leisure interests

Technological analysis
 recent technological developments;
 technology's impact on product offering;
 impact on cost structure;
 impact on value chain structure; and
 rate of technological diffusion.

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Activity 2.1
1. Explain the importance of carrying out PESTLE analysis when
? formulating a marketing strategy?
2. Show how your organisation is affected by PESTLE factors.
3. Companies in Zimbabwe, for the period 2001-2009 have been
experiencing negative growth. To what extend did PESTLE factors
affect the Zimbabwe companies?

2.2.2 Market analysis

The goal of market analysis is to determine the attractiveness of a market and
to understand its evolving opportunities and threats as they relate to the
strengths and weaknesses of the firm.

Aaker, D (1995) outlined the following dimensions of a market analysis:

i. market size (current and future);
ii. market growth rate;
iii. market profitability;
iv. industry cost structure;
v. distribution channels;
vi. market trends, and;
vii. key success factors;
viii. risk of high growth markets; and
ix. market competitive position

Market size
The size of the market can be evaluated based on present sales and on poten-
tial sales if the use of the product were expanded. The following are some
information sources for determining market size:
i. government data;
ii. trade associations;
iii. financial data from major players; and
iv. customer surveys

Market growth rate

A simple means of forecasting the market growth rate is to extrapolate his-
torical data into the future. While this method may provide a first-order esti-

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mate, it does not predict important turning points. A better method is to study
growth drivers such as demographic information and sales growth in comple-
mentary products. Such drivers serve as leading indicators that are more ac-
curate than simply extrapolating historical data.

Important inflection points in the market growth rate sometimes can be pre-
dicted by constructing a product diffusion curve. The shape of the curve can
be estimated by studying the characteristics of the adoption rate of a similar
product in the past.

Ultimately, the maturity and decline stages of the product life cycle will be
reached. Some leading indicators of the decline phase include price pressure
caused by competition, a decrease in brand loyalty, and the emergence of
substitute products, market saturation, and the lack of growth drivers.

Market profitability
While different firms in a market will have different levels of profitability, the
average profit potential for a market can be used as a guideline for knowing
how difficult it is to make money in the market. Michael Porter devised a
useful framework for evaluating the attractiveness of an industry or market.
This framework, known as Porter's five forces, identifies five factors that
influence the market profitability:
i. buyer power;
ii. supplier power;
iii. barriers to entry;
iv. threat of substitute products; and
v. rivalry among firms in the industry

Industry cost structure

The cost structure is important for identifying key factors for success. To this
end, Porter's value chain model (explained fully in Unit 3) is useful for deter-
mining where value is added and for isolating the costs.

The cost structure also is helpful for formulating strategies to develop a com-
petitive advantage. For example, in some environments the experience curve
effect can be used to develop a cost advantage over competitors.

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Distribution channels
The following aspects of the distribution system are useful in a market analy-
sis:
i. existing distribution channels - can be described by how direct they are
to the customer
ii. trends and emerging channels - new channels can offer the opportunity
to develop a competitive advantage and
iii. channel power structure - for example, in the case of a product having
little brand equity, retailers have negotiating power over manufacturers
and can capture more margins

Market trends
Changes in the market are important because they often are the source of
new opportunities and threats. The relevant trends are industry-dependent,
but some examples include changes in price sensitivity, demand for variety,
and level of emphasis on service and support. Regional trends also may be
relevant.

Key success factors

The key success factors are those elements that are necessary in order for the
firm to achieve its marketing objectives. A few examples of such factors in-
clude:
i. Access to essential unique resources
ii. Ability to achieve economies of scale
iii. Access to distribution channels and
iv. Technological progress
It is important to consider that key success factors may change over time,
especially as the product progresses through its life cycle.

Risk of high growth markets

Risks exist in high growth markets. These can be identified as:
i. Competitive risks
 Superior competitive entry (entry by a competitor who has superior
assets and skills)
ii. Risks associated with market changes
 Changing key success factors;

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 Arrival of new technology; and

 Disappointing growth
iii. Firm limitations
 Resources constraints; and
 Unavailability of distribution channels.

Competitive Market Positions

Knowing competitive patterns in target markets helps the organisation to re-
shape its strategies. The competitive positions according to Proctor, (2000)
can be classified as:

i. Market Leader

The market leader has large market share in a relevant product market. He
leads in price changes, new products introductions, and distribution coverage
and promotion intensity. Competition challenges to market leader include:
 product innovation;
 aggressive advertising;;
 heavy marketing expenditure;
 loss of retail dominance;
 short term price promotions;
 low costs; and
 new innovation in how to do business
ii. Market challengers

A market challenger is a firm in a strong, but not dominant position that is

following an aggressive strategy of trying to gain market share.

The market challenger uses aggressive methods to challenge the leader for
example price discounts, cheaper goods, high quality products or lower prod-
ucts.

iii. Market follower

A market follower is a firm in a strong, but not dominant position that is con-
tent to stay at that position. They know how to keep their customers and how
to win fair of new customers.

iv. Market nicher

In this niche strategy the firm concentrates on a select few target markets. It is
also called a focus strategy. It is hoped that by focusing ones marketing ef-

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forts on one or two narrow market segments and tailoring your marketing mix
to these specialised markets. For nicher to succeed it is required to:
 Choosing a market niche where buyers have distinctive preferences,
special requirements, or unique needs
 Developing a unique ability (as compared to rivals) to serve the needs
of the target buyer segment.
A marketing to be suitable for focusing must be able to satisfy the following
conditions:
 Segment is big enough to be profitable;
 Segment has growth potential;
 Segment is not crucial to the success of major competitors;
 Focusing firm has the skills and resources to serve the segment effec-
tively; and
 Focuser can defend itself against challengers via the customer goodwill
it has built up and its superior ability to serve buyers in the segment

Activity 2.2
1. Identify and explain the goals of market analysis.
? 2. Give reasons why is it important for the marketer to carry out market
analysis?
3. Discuss why is it important for a company to know its position in a
market?
4. Econet is a market leader in mobile communication in Zimbabwe. What
challenges does it have?

2.2.3 Customers analysis

Customer analysis is the process of determining customer segmentation, value,
purchasing behaviour and motivation in order to better target marketing and
increase sales (Proctor, 2000). Issues that interest marketers as customers
according to include the following:
i. population growth rate;
ii. age, sex and lifestyles;
iii. population density;
iv. ethnic composition;
v. household and family structure;

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vi. wealth distribution for example, rising standard of living lead to increased
demand for certain types of consumer goods and
vii. employment
a) Uses of customer analysis

Customer analysis is very important in strategic marketing. Drummond et al.

(2001) identified the following as the uses of customer analysis:
1. Identifying WHO your best customer is - Customer analysis can help
you identify who your customer is and thereby improve the segmenta-
tion targeting and positioning process.
2. Planning out retention plans for your new customers - New customers
are important but so are returning customers. Thus customer analysis
can help convert your first time customers to returning customers
3. Inducing further buying from your existing customers - Cross selling,
impulse purchases are some of the methods which increase purchasing
by your existing customers.
4. Improving customer service - Once you know who your customer is,
you can know what kind of services they will demand. Thus customer
analysis will also help in service deliverability.
5. Effective campaign planning - The demography and purchasing habits
of your customers will help you with planning a highly effective cam-
paign thereby improving your target.
6. Increasing market share - Customer analysis enables strategic market-
ers to have clear understanding of the customers. This will make mar-
keters establish procedures that are better than competitors. The effect
is increase market share.
7. Increasing overall profitability - Businesses are established for profit
making. Overall profitability as well as well-being of the organisation
increases once its customers are satisfied. Customer satisfaction will
happen only through customer analysis.
Customer analysis also helps in categorising customers so that marketers will
be able to effectively target their marketing strategies.

b) Consumer categories-consumer characteristics

Consumer categories and their characteristics are critical in customer analy-

sis. Drummond et al. (2001) identified consumer categorises and their char-
acteristics in three groups: have most resources- actualisers; principle ori-
ented- fulfilleds, and principle oriented- believers

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i. Have most resources- actualisers

 they enjoy the "finer things";
 they are receptive to new products;
 they are skeptical of advertising; and
 frequent readers of wide range of publications;

ii. Principle oriented- fulfilleds

 have little interest in image or prestige;
 they are above average of products;
 like educational and public affair programmes; and
 read widely.

iii. Principle oriented- believers

 buy local products;
 slow to change their habits;
 bargain hunters; and
 watch TV more than average.
c) Other consumer categories

Homburg et al. (2007) categorised consumers in four groups: status oriented-

achievers; also status oriented- strivers; action oriented group- experiencers;
action oriented-makers and least resources-strugglers. These groupings are
also essential in customer analysis.
i. Status oriented- achievers
 attracted to premium products;
 prime target of a variety of products;
 average TV watchers; and
 read business, news, and self help publications.

ii. Also status oriented- strivers

 they are image conscious;
 limited discretionary income but carries credit cards;
 spend on clothing and personal care products; and
 prefer TV to reading.
iii. Action oriented group- experiencers
 follow fashion and fads;
 spend much of disposable income on socialising;
 buy on impulse;
 attend to advertising; and
 listen to rock music.

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iv. Action oriented- makers

 shop for comfort, durability and value;
 they are impressed by luxuries;
 buy basics;
 listen to radio; and
 read auto, home, mechanic, fishing outdoor magazines.
v. Least resources - strugglers
 they are brand loyal;
 use coupons;
 watch for sales;
 trust advertising; and
 read tabloids and women's magazines.
c) Techniques for Analysing Customers

Techniques for analysing customers include the segmentation approach and

motivation technique.

1. Customer analysis using segmentation approach

Customer segmentation analysis allows organisations to identify groups of

like customers based on their transaction history and then study behavioural
patterns within these groups. Armed with a better understanding of their cus-
tomer base, marketing managers can design targeted marketing and service
campaigns to reach specific customer segments with offers that are suited to
their needs and preferences. Segmentation analysis inputs customer transac-
tional, demographic and psychographic data, which is required by a marketer
in strategic marketing planning. Business intelligence provides statistical tech-
niques and data mining algorithms to analyse any number of customer at-
tributes to uncover patterns in behaviour. Ad hoc analysis functions are
seamlessly integrated with data mining to allow analysts to investigate the
characteristics of uncovered segments and generate specific customer lists
within each segment. These lists may feed campaign management systems, be
used for calling campaigns, or feed website content management applications
to serve up offerings relevant to the segment.

Customer analysis using motivation technique

Consumer motivation can be defined as the force that drives customers/ con-
sumers to behave the way they do when making their purchasing decisions.
Some of the questions in the analysis using this technique are:

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 What elements of the product/service do customers/consumers value

most?
 What are the customers'/consumers' objectives?
 What are they really buying?
 How do segments differ in their motivation priorities?
 What changes are occurring in the motivation of consumers/ custom-
ers?
Du Plessis, (2008) postulates consumer motivation model (Figure 2.1 below)
which shows how consumer buying behaviour and drivers of that buying be-
haviour.

Consumer motivation model

LEARNING

Unfulfilled Tension Drive Behaviour Goal/Need

Needs, Wants Fulfilled
and Desires

Cognitive Process

Tension Reduction

Figure 2.1 Consumer Motivation Model

(Source: Du Plessis, 2008)

2.2.4 Competitor analysis

The nature of competition and the factors which influence it are explored
along with how firms identify competitors and how they use product position-
ing to obtain a competitive advantage. Attention is paid to how firms define
their marketing strategies and analyse the competitive positions of rivals. Con-
sideration is given to the various sources of information available to firms that
enable them to gauge competitors' strengths and weaknesses.

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Success in the market place depends not only on an ability to identify cus-
tomer wants and needs but also upon an ability to be able to satisfy those
wants and needs better than competitors are able to do.

a) Factors influencing competition

Porter (1998) introduced five forces competition model (illustrated in Figure

2.2 below) which portray the various factors which influence competition and
how this influence is affected. The factors includes rivalry among competitors,
bargaining power of customers, bargaining power of suppliers, threats of new
entrants, and threats of substitutes.

Threats of New Entrants

Rivalry
Bargaining Power of
Bargaining Power
Among
Buyers
of Suppliers
Competitors

Threats of Substitutes

Figure 2.2 Porter's Forces of Competition (Source: Porter, 1998)

i) Rivalry among competitors

Competition in an industry is more intense if there are many comparable rivals

trying to satisfy the wants and needs of the same customers in the same mar-
ket or market segment. Moreover, competition increases where industry
growth is slow, costs are high and there is a lack of product differentiation.
High exit barriers from a market or industry contribute to increased competi-
tion. Firms may find it difficult to get out of a business because of the relation-
ship of the business with other businesses in which they are engaged.

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In pursuing an advantage over its rivals, a firm can choose from several com-
petitive moves:
 Changing prices - raising or lowering prices to gain a temporary ad-
vantage.
 Improving product differentiation - improving features, implementing
innovations in the manufacturing process and in the product itself.
 Creatively using channels of distribution - using vertical integration or
using a distribution channel that is novel to the industry. For example,
with high-end jewellery stores reluctant to carry its watches, Timex
moved into drugstores and other non-traditional outlets and cornered
the low to mid-price watch market.
 Exploiting relationships with suppliers.
The intensity of rivalry is influenced by the following industry characteristics:
1. A larger number of firms increase rivalry because more firms must com-
pete for the same customers and resources. The rivalry intensifies if the
firms have similar market share, leading to a struggle for market leader-
ship.
2. Slow market growth causes firms to fight for market share. In a grow-
ing market, firms are able to improve revenues simply because of the
expanding market.
3. High fixed costs result in an economy of scale effect that increases
rivalry. When total costs are mostly fixed costs, the firm must produce
near capacity to attain the lowest unit costs. Since the firm must sell this
large quantity of product, high levels of production lead to a fight for
market share and results in increased rivalry.
4. High storage costs or highly perishable products cause a producer to
sell goods as soon as possible. If other producers are attempting to
unload at the same time, competition for customers intensifies.
5. Low switching costs increases rivalry. When a customer can freely switch
from one product to another there is a greater struggle to capture cus-
tomers.
6. A low level of product differentiation is associated with higher levels of
rivalry. Brand identification, on the other hand, tends to constrain ri-
valry.
7. Strategic stakes are high when a firm is losing market position or has
potential for great gains. This intensifies rivalry.
8. High exit barriers place a high cost on abandoning the product. The
firm must compete. High exit barriers cause a firm to remain in an in-
dustry, even when the venture is not profitable. A common exit barrier
is asset specificity. When the plant and equipment required for manu-

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facturing a product is highly specialised, these assets cannot easily be

sold to other buyers in another industry.
9. A diversity of rivals with different cultures, histories, and philosophies
make an industry unstable. There is greater possibility for mavericks
and for misjudging rival's moves. Rivalry is volatile and can be intense.
The hospital industry, for example, is populated by hospitals that his-
torically are community or charitable institutions, by hospitals that are
associated with religious organisations or universities, and by hospitals
that are for-profit enterprises. This mix of philosophies about mission
has lead occasionally to fierce local struggles by hospitals over who
will get expensive diagnostic and therapeutic services. At other times,
local hospitals are highly cooperative with one another on issues such
as community disaster planning.
10. Industry Shakeout. A growing market and the potential for high profits
induce new firms to enter a market and incumbent firms to increase
production. A point is reached where the industry becomes crowded
with competitors, and demand cannot support the new entrants and
the resulting increased supply. The industry may become crowded if its
growth rate slows and the market becomes saturated, creating a situa-
tion of excess capacity with too many goods chasing too few buyers. A
shakeout ensues, with intense competition, price wars, and company
failures.
ii) Bargaining power of customers

Customers can exert influence on producers. Where there are a small number
of buyers, for example, or a predominant/single buyer, the producer's oppor-
tunities for action are limited. In the situation where one customer accounts
for a significant proportion of a supplier's business, then the one customer can
exert considerable influence and control over the price and quality of the
products that it buys. Such firms can demand the highest specification in prod-
ucts, with tight delivery times (for just-in-time manufacturing and hence re-
ducing the cost of raw material inventories) and customised products. Buyers
exert pressure in industries by hunting for lower prices, higher quality, addi-
tional service and through demands for improved products and services. In
general, the greater the bargaining power of buyers, the less advantage sellers
will have. Not all buyers have equal bargaining power with sellers; some may
be less sensitive than others to price, quality or service.

iii) Bargaining power of suppliers

Suppliers can exert pressures by controlling supplies. A powerful supplier is

in a position to influence the profitability of a whole industry by raising prices

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or reducing the quality of the goods it supplies. A firm that has few or only one
potential supplier may exert little influence over the prices it pays for bought in
materials and components. It may also experience difficulty in influencing the
quality of its raw materials and resources. If it is the only purchaser and con-
stitutes an important part of the supplier's business, however, it can exert a
great deal of influence over both prices and quality. Another form of supplier
power is 'lock-in'. This involves making it difficult or unattractive for a cus-
tomer to change suppliers. It can be put into effect, for example, by offering
specific services or product attributes that a competitor finds difficult to match.

iv) Threat of new entrants

The threat of new entrants can increase competitive activity in a market. Out-
siders will be tempted to enter a market or an industry if they feel that the
opportunity is sufficiently appealing in terms of profitability and sales. Mar-
kets which have grown to a substantial size become potentially attractive to
large powerful firms provided that the level of competitive activity enables
them to achieve the kind of market share, profits and sales volume they ex-
pect. This provides an incentive for the firms already operating in the market
to make the prospects appear less attractive to would-be entrants by in-
creasing the level of competitive activity. For example, lowering price levels
would increase the competition between firms within the market and it might
also deter other firms from entering because it would be more difficult to
obtain high profitability levels. Much depends, however, on the cost structure
of a would-be entrant.

v) Threat of substitute products or services

Substitutes, or alternative products that can perform the same function, im-
pose limits on the price that an industry can charge for its products. The
presence of substitutes is not obvious and may not be easily perceived by
firms operating in an industry. Substitutes may even be preferred by custom-
ers and incumbent firms may only be noticed when it is too late to arrest their
dominance

Substitute products that deserve the most attention strategically are those
that:
1. are subject to trends improving their price-performance trade-off with
the industry's product; or
2. are produced by industries earning high profits.

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Five forces model implications on marketing strategy

Understanding the forces that shape industry competition is the starting point
for developing marketing strategy. Every company should know the average
profitability of its industry and how it has been changing over time. The five
forces reveal why industry profitability is what it is. Understanding the Por-
ter's five competitive forces makes it possible for the strategic marketer to
incorporate industry conditions into marketing strategy. The forces reveal the
most significant aspects of the competitive environment. They also provide a
baseline for sizing the business. Using the five forces framework, creative
marketing strategists may be able to spot an industry with a good future be-
fore this good future is reflected in the prices of acquisition candidates. Most
importantly, an understanding of industry structure guides managers toward
fruitful possibilities for strategic action, which may include any or all of the
following: positioning the company to better cope with the current competi-
tive forces; anticipating and exploiting shifts in the forces; and shaping the
balance of forces to create a new industry structure that is more favourable to
the company.

Positioning the company- strategy can be viewed as building defences against

the competitive forces or finding a position in the industry where the forces
are weakest;

Exploiting industry change- industry changes bring the opportunity to spot

and claim promising new strategic positions if the strategist has a sophisti-
cated understanding of the competitive forces and their underpinnings; and

Shaping industry structure- when a company exploits structural change, it is

recognising, and reacting to, the inevitable. However, companies also have
the ability to shape industry structure. A firm can lead its industry toward new
ways of competing that alter the five forces for the better. In reshaping struc-
ture, a company wants its competitors to follow so that the entire industry will
be transformed.

b) Common pitfalls in industrial analysis

i. Defining the industry too broadly or too narrowly.
ii. Making lists instead of engaging in rigorous analysis.
iii. Paying equal attention to all of the forces rather than digging deeply into
the most important ones.
iv. Confusing effect (price sensitivity) with cause (buyer economics).
v. Using static analysis that ignores industry trends.
vi. Confusing cyclical or transient changes with true structural changes.

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vii. Using the framework to declare an industry attractive or unattractive

rather than using it to guide strategic choices.

2.3 Micro Environment

Kotler, (2003) posits that microenvironment consists of six forces close to
the company that affect its ability to serve its customers as follows:
i. the company itself (including departments);
ii. suppliers;
iii. marketing channel firms (intermediaries);
iv. customer markets;
v. competitors; and
vi. publics for example. financial publics, media publics, government pub-
lics, citizen-action publics).

Activities 2.4

? 1. Discuss how does both the macro and micro environment affect the
formulation of the marketing strategy?
2. Macro environment analysis is more important than micro environment
analysis. Discuss?
3. Identify and discuss the strategic issues in analysing the marketing
environment.
4. Explain how industrial analysis is important for your company?

2.5 Summary
In this unit we have discussed that in order to correctly identify opportunities
and monitor threats, the company must begin with a thorough understanding
of the marketing environment in which the firm operates. The marketing envi-
ronment consists of all the actors and forces outside marketing that affect the
marketing management's ability to develop and maintain successful relation-
ships with its target customers. Though these factors and forces may vary
depending on the specific company and industrial group, they can generally
be divided into broad micro environmental and macro environmental compo-
nents. For most companies, the micro environmental components are the
company, suppliers, marketing channel firms (intermediaries), customer mar-

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kets, competitors, and publics which combine to make up the company's

value delivery system. The macro environmental components are thought to
be demographic, economic, natural, technological, political, and cultural forces.
The wise marketing manager knows that he or she cannot always affect envi-
ronmental forces. However, smart managers can take a proactive, rather than
reactive, approach to the marketing environment. Understanding of the macro
environment is not enough for the crafting of a comprehensive marketing strat-
egy. The marketer should determine if the company is capable of exploiting
the opportunities and avoid threats. This determined by analysing the compa-
ny's internal environment which we will fully discuss in the Unit 3.

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References
Du Plessis. (2008). Marketing Management, (2nd Edition) Chicago: Rand
MacNally.
Kotler, P. (2003) Marketing Management, International Edition, (4th Edi-
tion) New Jersey Prentice Hall.
Nag, R. Hambrick, D. and Ming-Jer C. (2007). What is Strategic Manage-
ment, Really? Inductive Derivation of a Consensus Definition of the
Field. Strategic Management Journal, 28, 935–955.
Porter, M. (1998) Competitive Advantage: Creating and Sustaining Su-
perior Performance, Harvard Business Review.

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Internal Environment

3.0 Introduction

I
nternal environment is concerned with the analysis of an organisation's
resources. It creates the information and analysis necessary for an organi
sation to identify the key assets and competencies upon which a strategic
position can be built. In this unit we are going explores the nature of organisa-
tional assets, competencies and capabilities that give a company competitive
advantage. The auditing process is used to identify these assets and compe-
tencies.
Strategic Marketing Management BMKT 405

In Unit 2 we covered the external environment, which includes the market

and the customer analysis have been analysed. However, before an organisa-
tion can begin to review its strategic options it has to evaluate the enterprise's
relative ability to compete and satisfy customer needs in attractive market
areas. The organisation's current and potential capabilities have to be identi-
fied and this can be achieved by evaluating the assets and competencies that
make up the company's resources. Once this has been undertaken an organi-
sation can begin to develop a competitive position that matches organisa-
tional capabilities to the needs of consumers in market sectors identified as
attractive. In this unit we will fully discussed the above aspects which forms
the internal environment.

3.1 Unit Objectives

By the end of the unit, you should be able to:
 identify key components of the internal marketing environment
 discuss the elements of marketing audit
 explain the interrelationship of the macro/micro marketing environment
and internal marketing environment

3.2 Components of Internal Marketing Environment

According to Kotler, (2010) the internal marketing environment comprises of
two main categorises: organisational assets and organisational competences.

3.2.1 Organisational assets

Organisational assets are the accumulated capital, both financial and non-
financial, that a company has at its disposal. These assets are both tangible
and intangible (Kotler, 2010) and include:

 Financial assets - Such as, working capital, or access/availability of

investment finance, and creditworthiness;

 Physical assets - Ownership or control of facilities and property. In the

retail sector ownership of an outlet in a prime location could be a significant
asset;

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 Operational assets - production plant, machinery and process tech-

nologies;

 People assets - the quantity of human resources available to the or-

ganisation and the quality of this resource in terms of their background and
abilities;

 Legally enforceable assets - ownership of copyrights and patents, fran-

chise and licensing agreements; and

 Systems - management information systems and databases and the

general infrastructure for supporting decision-making activities.

 Marketing assets - of particular concern in the development of market-

ing strategy are of course marketing assets. These marketing assets fall into
four main categories:
i. Customer-based assets-These are assets that the customer perceives
as being important such as:
ii. Image and reputation
iii. Market leadership
iv. Country of origin for example Products like Mercedes and BMW ben-
efit from the perception of their country of origin and it reinforces their
quality positioning in the market.
v. Unique products and services. These are key assets. Their distinctive-
ness in the market can be built on a number of attributes such as price,
quality, design or level of innovation.
 Distribution-based assets - Distributing a product or service success-
fully into the market is a critical marketing activity. Therefore, a number
of potential assets lie in this area such as:
i. The size and quality of the distribution network
ii. Level of control over distribution channels

3.2.2 Organisational competences

Organisational competences combine the skills, information, performance
measures and the corporate culture that an organisation uses to achieve its
mission. Kolter, (2010) highlighted that organisational competences are criti-
cal when carrying out internal environmental analysis because they are the
direct pointers for success and include the following:
 Strategic competencies-for example, management skills (ability to cre-
ate strategic vision, communicate motivate, implement strategy, access
changing circumstances, learn and innovate).

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 Functional competencies- skills in finance management, marketing, and

production.
 Operational competencies-day to day corporate operations, for ex-
ample, sounds logistics systems.
 Individual competencies-employee talent across functional departments.
 Team competencies-for example, synergies and collaborations.

Activity 3.1

?
1. Clearly differentiate between organisational assets and organisational
competences.
2. Explain why is it important to know about organisational assets and
organisational competences in strategic marketing?

3.3 The Internal Marketing Audit

Kotler, (2010) defined marketing audit as a comprehensive, systematic, in-
dependent and periodic evaluation of a company's marketing assets. It is an
effective tool in reviewing the competence of a marketing strategy, analysing
the objectives, policies and strategies of the company's marketing depart-
ment as well as the manner and the means employed in attaining these goals.
According to Drummond, (2003) the internal marketing audit can be sub-
divided into five areas:

1. Marketing organisation audit

A complete marketing audit would have to cover the question of the effec-
tiveness of the marketing and sales organisation, as well as the quality of
interaction between marketing and other key management functions such as
manufacturing, finance, purchasing, and research and development.

At critical times, a company's marketing organisation must be reviewed to

achieve greater effectiveness within the company and in the marketplace.
Companies without product management systems will want to consider intro-
ducing them, companies with three systems may want to consider dropping
them, or trying product teams instead. Companies may want to redefine the
role concept of a product manager from being a promotional manager (con-
cerned primarily with volume) to a business manager (concerned primarily
with profit). There is the issue of whether decision-making responsibility should

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be moved up from the brand level to the product level. There is the perennial
question of how to make the organisation more market-responsive including
the possibility of replacing product divisions with market-centred divisions.

2. Marketing systems audit

A full marketing audit then turns to examine the various systems being used by
marketing management to gather information, plan, and control the marketing
operation. The issue is not the company's marketing strategy or organisation
per se but rather the procedures used in some or all of the following systems:
a. sales forecasting;
b. sales goal and quota setting;
c. marketing planning;
d. marketing control;
e. inventory control;
f. order processing;
g. physical distribution;
h. new products development; and
i. and product pruning;
The marketing audit may reveal that marketing is being carried on without
adequate systems of planning, implementation, and control. An audit of a
consumer products division of a large company revealed that decisions about
which products to carry and which to eliminate were made by the head of the
division on the basis of his intuitive feeling with little information or analysis to
guide the decisions. The auditor recommended the introduction of a new prod-
uct screening system for new products and an improved sales control system
for existing products. The auditor may have also observed that the division
prepared budgets but did not carry out formal marketing planning and hardly
any research into the market. He may recommend that the division establish a
formal marketing planning system as soon as possible.

3. Marketing productivity audit

A full marketing audit also includes an effort to examine key accounting data
to determine where the company is making its real profits and what, if any,
marketing costs could be trimmed. Using marketing cost accounting princi-
ples, the audit should seeks to measure the marginal profit contribution of
different products, end user segments, marketing channels, and sales territo-
ries.

It might be argued that the firm's own controller or accountant is charged with
the job of providing management with the results of marketing cost analysis.

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However a handful of firms have created the job position of marketing con-
trollers who report to financial controllers and spend their time looking at the
productivity and validity of various marketing costs. Where an organisation is
doing a good job of marketing cost analysis, it does not need a marketing
auditor to study the same. But most companies do not do careful marketing
cost analysis. Here a marketing auditor can be necessary to expose certain
economic and cost relations which indicate waste or conceal unexploited
marketing opportunities.

Zero-based budgeting is another tool for investigating and improving market-

ing productivity. In normal budgeting top management allots to each business
unit a percentage increase (or decrease) of what it got last time. The question
is not raised whether that basic budget level still makes sense. The manager of
an operation should be asked what he would basically need if he started his
operation from scratch and what it would cost. What would he need next and
what would it cost? In this way, a budget is built from the ground up reflecting
the true needs of the operation. When this is applied company may discover
that the company had three or four extra technical salesmen on its payroll.

4. Marketing function audit

This element of the audit looks in detail at all aspects of the marketing mix
which includes the products and services the organisation produces, pricing
policy, distribution arrangements, the organisation of the sales team, advertis-
ing policy, public relations and other promotional activities. The audit may
point to certain key marketing functions which are performing poorly. The
auditor might spot, for example, sales force problems that go very deep or he
might observe that advertising budgets are prepared in an arbitrary fashion
and such things as advertising themes, media, and timing are not evaluated for
their effectiveness. In these and other cases, the issue becomes one of notify-
ing management of the desirability of one or more marketing function audits if
managements agrees.

5. Marketing strategy audit

This analysis examines the organisation's current corporate and marketing

objectives to establish if they are relevant and explicit. The current strategy is
evaluated in terms of its fit with the set objectives. This element of the audit
also highlights whether adequate resources have been allocated for the suc-
cessful implementation of the strategy.

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3.3.1 Problems and pitfalls of marketing audits

While the foregoing has stressed the positive aspects of marketing audits and
their utility in a variety of situations, it is important to note some of the prob-
lems and pitfalls of the marketing audit process. Problems can occur in the
objective-setting step, the data collection step, or the report presentation step.

1. Setting objectives

When the marketing audit effort is being designed by the auditor and the
company officer who commissioned the audit, several problems will be en-
countered. For one thing, the objectives set for the audit are based upon the
company officer's and auditor's prior notions of what the key problems areas
are for the audit to highlight. However, new problem areas may emerge once
the auditor begins to learn more about the company and its marketing issues.
The original set of objectives should not constrain the auditor from shifting his
priorities of investigation.

Similarly, it may be necessary for the auditor to use different sources of infor-
mation than envisioned at the start of the audit. In some cases this may be
because some information sources he had counted on became unavailable. In
one marketing audit, the auditor had planned to speak to a sample of custom-
ers for the company's electro-mechanical devices, but the company officer
who hired him would not permit him to do so. In other cases, a valuable new
source of information may arise that was not recognised at the start of the
audit.

Another consideration at the objective-setting stage of the audit is that the

management most affected by the audit must have full knowledge of the pur-
poses and scope of the audit. Audits go much more smoothly when the ex-
ecutive who calls in the auditor either brings the affected management into the
design stage, or at least has a general introductory meeting where the auditor
explains his procedures and answers questions from the people in the af-
fected business.

2. Data collection

Despite reassurances by the auditor and the executive who brought him in,
there will still be some managers in the affected business who will feel threat-
ened by the auditor. The auditor must expect this, and realise that an individu-
al's fears and biases may colour his statements in an interview.

From the onset of the audit, the auditor must guarantee and maintain confi-
dentiality of each individual's comments. In many audits, personnel in the com-

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pany will see the audit as a vehicle for unloading their negative feelings about
the company or other individuals. The auditor can learn a lot from these com-
ments, but he must protect the individuals who make them. The auditor must
question interviewees in a highly professional manner to build their confidence
in him, or else they will not be entirely honest in their statements.

Another area of concern during the information collection step is the degree
to which the company executive who brought in the auditor will try to guide
the audit. It will be necessary for this officer and the auditor to strike a bal-
ance in which the executive provides some direction, but not too much. While
over control is the more likely excess of the executive, it is possible to under
control. When the auditor and the company executive do not have open and
frequent lines of communication during the audit, it is possible that the auditor
may place more emphasis on some areas and less on others than the execu-
tive might have desired. Therefore, it is the responsibility of both the auditor
and the executive who brought him in to communicate frequently during the
audit.

3. Report presentation

One of the biggest problems in marketing auditing is that the executive who
brings in the auditor, or the people in the business being audited, may have
higher expectations about what the audit will do for the company than the
actual report seems to offer. In only the most extreme circumstances will the
auditor develop surprising panaceas or propose startling new opportunities
for the company. More likely, the main value of his report will be that it places
priorities on ideas and directions for the company, many of which have al-
ready been considered by some people within the audited organisation. In
most successful audits, the auditor, in his recommendations, makes a skilful
combination of his general and technical marketing background (for example,
design of salesman's compensation systems, his ability to measure the size
and potential of markets) with some opportunistic ideas that people in the
audited organisation have already considered, but do not know how much
importance to place upon them. However, it is only in the company's imple-
mentation of the recommendations that the payoff to the company will come.

Another problem at the conclusion of the audit stems from the fact that most
audits seem to result in organisational changes. Organisational changes are a
common outcome because the audit usually identifies new tasks to be ac-
complished and new tasks demand people to do them. One thing the auditor
and the executive who brought him in must recognise, however, is that organi-
sational promotions and demotions are exclusively the executive's decision. It

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is the executive who has to live with the changes once the auditor has gone,
not the auditor. Therefore, the executive should not be lulled into thinking that
organisational moves are any easier because the auditor may have recom-
mended them.

The final problem is that important part of an audit may be implemented in-
correctly, or not implemented at all by the executive who commissioned the
audit. Non-implementation of key parts of the audit undermines the whole
effectiveness of the audit.

Activity 3.2

?
1. Explain why marketing audit is important in crafting a marketing
strategy?
2. Carry out marketing audit for your company.
3. Discuss the linkage among the components of the marketing audit.
4. Identify and explain the marketing audit problems that might be
encountered in your company.

3.4 Auditing Tools

There is a range of tools that can be applied during the auditing process that
are capable of providing useful insights into the company's situation. These
include the value chain, BCG, general Electric multifactor portfolio matrix,
and SWOT analysis.

3.4.1 Value chain

To better understand the activities through which a firm develops a competi-
tive advantage and creates shareholder value, it is useful to separate the busi-
ness system into a series of value-generating activities referred to as the value
chain. In his 1985 book Competitive Advantage, Michael Porter introduced
a generic value chain model that comprises a sequence of activities found to
be common to a wide range of firms. Porter (1985) identified primary and
support activities as shown in Figure3.1 below:

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Firm Infrastructure

Supporting Human Resource Management

Activities Technology Margin

Procurement

In-bound

Primary Operations Out-bound Marketing Services

Activities Logistics Logistics and

Sales Margin

Figure 3.1 Value Chain Analysis (Source: Porter, 1985)

The goal of these activities is to offer the customer a level of value that ex-
ceeds the cost of the activities, thereby resulting in a profit margin.

The primary value chain activities are:

 Inbound logistics: the receiving and warehousing of raw materials and
their distribution to manufacturing as they are required.
 Operations: the processes of transforming inputs into finished products
and services.
 Outbound logistics: the warehousing and distribution of finished goods.
 Marketing and sales: the identification of customer needs and the gen-
eration of sales.
 Service: the support of customers after the products and services are
sold to them.
These primary activities are supported by:
 The infrastructure of the firm: organisational structure, control systems,
and company culture
 Human resource management: employee recruiting, hiring, training,
development, and compensation.
 Technology development: technologies to support value-creating ac-
tivities.
 Procurement: purchasing inputs such as materials, supplies, and equip-
ment.

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The firm's margin or profit then depends on its effectiveness in performing

these activities efficiently, so that the amount that the customer is willing to pay
for the products exceeds the cost of the activities in the value chain. It is in
these activities that a firm has the opportunity to generate superior value. A
competitive advantage may be achieved by reconfiguring the value chain to
provide lower cost or better differentiation.

The value chain model is a useful analysis tool for defining a firm's core com-
petencies and the activities in which it can pursue a competitive advantage as
follows:
 Cost advantage: by better understanding costs and squeezing them out
of the value-adding activities.
 Differentiation: by focusing on those activities associated with core com-
petencies and capabilities in order to perform them better than do com-
petitors.

Cost advantage and the value chain

A firm may create a cost advantage either by reducing the cost of individual
value chain activities or by reconfiguring the value chain.

Once the value chain activities are clearly defined, a cost analysis can be
performed by assigning costs to them (value chain activities). The costs ob-
tained from the accounting report may need to be modified in order to allo-
cate them properly to the value creating activities.

Porter identified 10 cost drivers related to value chain activities:

a. economies of scale;
b. learning;
c. capacity utilisation;
d. linkages among activities;
e. interrelationships among business units;
f. degree of vertical integration;
g. timing of market entry;
h. firm's policy of cost or differentiation;
i. geographic location; and
j. institutional factors (regulation, union activity, taxes,)
A firm develops a cost advantage by controlling these drivers and it should
thrive to do this more than competitors.

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Differentiation and the value chain

A differentiation advantage can arise from any part of the value chain. For
example, procurement of inputs that are unique and not widely available to
competitors can create differentiation, as can distribution channels that offer
high service levels. Differentiation stems from uniqueness. A differentiation
advantage may be achieved either by changing individual value chain activities
to increase uniqueness in the final product or by reconfiguring the value chain.
Porter identified the following drivers of uniqueness as follows:
a. policies and decisions;
b. linkages among activities;
c. timing;
d. location;
e. interrelationships;
f. learning;
g. integration;
h. scale (for example. better service as a result of large scale); and
i. institutional factors
Many of these also serve as cost drivers. Cost advantage is achieved through
managing them effectively, for example limiting cost of non-conformance
through training. Differentiation often results in greater costs, resulting in
tradeoffs between cost and differentiation.

Linkages between value chain activities

Value chain activities are not isolated from one another but each value chain
activity often affects the cost or performance of other ones. Linkages may
exist between primary activities and also between primary and support activi-
ties. For example, inbound logistics can affect the costs of operations (both
primary activities) or technology (supporting activity) directly affects the costs
of operations (primary activity).

Outsourcing value chain activities

A firm may specialise in one or more value chain activities and outsource the
rest. The extent to which a firm performs upstream and downstream activities
is described by its degree of vertical integration. A thorough value chain analysis
can illuminate the business system to facilitate outsourcing decisions. To de-
cide which activities to outsource, managers must understand the firm's
strengths and weaknesses in each activity, both in terms of cost and ability to

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differentiate. Managers may consider the following when selecting activities

to outsource:
 whether the activity can be performed cheaper or better by suppliers;
 whether the activity is one of the firm's core competencies from which
stems a cost advantage or product differentiation?;
 the risk of performing the activity in-house. if the activity relies on fast-
changing technology or the product is sold in a rapidly-changing mar-
ket, it may be advantageous to outsource the activity in order to main-
tain flexibility and avoid the risk of investing in specialised assets; and
 whether the outsourcing of an activity can result in business process
improvements such as reduced lead time, higher flexibility, and reduced
inventory, (Proctor, 2000).

Activity 3.3

? 1. Explain how you can use the value chain analysis to reduce cost of
operations in your company?
2. Identify and discuss the cost drivers which affect any organisation of
your choice.
3. 'Value chain analysis model can be used as a competitive tool'. Discuss
this statement.
4. Your company is thinking of outsourcing some of its activities. Are
there any advantages of outsourcing in relation to costs?

3.4.2 Portfolio analysis

There are a number of portfolio models that are used to identify the current
position of business units or products.

A) The Boston Consultancy Group (BCG) growth share

matrix
This is one of the most well-known portfolio models. The growth share ma-
trix according to Wilson (2002) is concerned about the generation and use of
cash within a business and can be used to analyse either strategic business
units (SBUs) or products. The two axes on the model represent relative mar-
ket share and market growth (see Figure 3.2). Relative market share is seen
as a predictor of the product's capacity to generate cash. The proposition is
that products with a dominant position in the market will achieve high sales,

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but will need relatively less investment as they are already an established brand
and should have lower costs through economies-of-scale advantages.

Relative Market Share

High Low

High STAR QUESTION

MARK
Market Growth Rate

CASH COW DOG

Low

Figure 3.2 BCG Matrix (Source: Kotler, 2010)

Placing products in the BCG matrix results in 4 categories in a portfolio of a

company:

STARS (high growth, high market share)

 Stars are defined by having high market share in a growing market.
 Stars are the leaders in the business but still need a lot of support for
promotion a placement.
 If market share is kept, Stars are likely to grow into cash cows.
QUESTION MARKS (high growth, low market share)
 These products are in growing markets but have low market share.
 Question marks are essentially new products where buyers have yet
to discover them.
 The marketing strategy is to get markets to adopt these products.
 Question marks have high demands and low returns due to low mar-
ket share.
 These products need to increase their market share quickly or they
become dogs.
 The best way to handle Question marks is to either invest heavily in
them to gain market share or to sell them.

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CASH COWS (low growth, high market share)

 Cash cows are in a position of high market share in a mature market.
 If competitive advantage has been achieved, cash cows have high profit
margins and generate a lot of cash flow.
 Because of the low growth, promotion and placement investments are
low.
 Investments into supporting infrastructure can improve efficiency and
increase cash flow more.
 Cash cows are the products that businesses strive for.
DOGS (low growth, low market share)
 Dogs are in low growth markets and have low market share.
 Dogs should be avoided and minimised.
 Expensive turn-around plans usually do not help.
Limitations of BCG Matrix

Some limitations of the BCG matrix model include:

 The first problem can be how we define market and how we get data
about market share
 A high market share does not necessarily lead to profitability at all times
 The model employs only two dimensions - market share and product
or service growth rate
 Low share or niche businesses can be profitable too (some Dogs can
be more profitable than cash Cows)
 The model does not reflect growth rates of the overall market
 The model neglects the effects of synergy between business units
 Market growth is not the only indicator for attractiveness of a market

Activity 3.4

? 1. Discuss how can the BCG model can be used to increase marketing
fortunes of your organisation?
2. Apply the BCG model to any organisation of your choice.
3. Some researchs say, the BCG is useless an analytical tool. Do you
agree?
4. Explain how the Boston Consulting Group (BCG) model might be
used to assess the health of a firm's product mix and to suggest
strategies.What are the limitations of the BCG model?

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B) The general electric multifactor portfolio matrix

This model has two axes: market attractiveness on one axis and competitive
strength on the other (Kotler, 2010). Industry/market attractiveness is as-
sessed on a range of weighted criteria including:
 market size;
 market growth rate;
 strength of competition;
 profit potential; and
 social, political and legal factors
Competitive strength is also assessed on a range of weighted criteria such as:
 market share;
 potential to develop differential advantage;
 opportunities to develop cost advantages;
 channel relationships; and
 brand image and reputation

Strong Average Weak

High Green Green Yellow

Medium
Green Yellow Red

Low Yellow Red Red

Figure 3.3 General Electric Multifactor Portfolio Matrix (Source: Kotler,

2010)

 Green SBU - go ahead and invest in the long-run

 Yellow SBU - be cautious, SBU "maintenance"
 Red SBU - stop, drive SBU out of market

Limitations of GE Multifactor Matrix

The following are some of the limitations of GE multifactor matrix:
 No proven relationship between market attractiveness and business
position.

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Unit 3 Internal Environment

 The relationships between different units are not taken into account.
 The core-competencies that lead to value creation are not taken into
consideration.
 The approach requires extensive data gathering.
 Scoring is personal and subjective (risk of bias)
 There is no hard and fast rule on how to weight elements.
 The GE offers a broad strategy and does not indicate how best to
implement it.

Six steps are necessary to implement the GE

1. Determine which factors are relevant for the corporation in the industry
where it operates
2. Assign a weight to each factor
3. Score each factor
4. Multiply the relative scores and weights
5. Sum all up and interpret the graph
6. Perform a review / sensitivity analysis
The plotted circles convey the information in the following way:
 The size of the circle represents the market size of the SBU
 The share owned by the SBU is expressed as a pie slice with its rela-
tive percentage inside
 The expected future direction of the SBU is represented with an arrow.

Activity 3.5

? 1. Differentiate the BCG from the GE.

2. Show how you can apply the GE model to any organisation

3.4.3 SWOT analysis

The SWOT (strengths, weaknesses, opportunities and threats) analysis is
another tool that is commonly used during the auditing process (Drummond,
2001). The SWOT analysis draws together the key strengths, weaknesses,
opportunities and threats from the audit.

Strengths
 Unique product
 Location of your business

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 Workers' unique skill set

 Quality of the product Weaknesses
 Location of your company
 Lack of quality and customer service
 Poor marketing and sales
 Undifferentiated products or services

Opportunities
 A new emerging or developing market(niche product, place, new coun-
try, less country)
 Merger, joint ventures, or strategic alliance. Threats
 New completion in the market, possibly with new products or services
 Price wars
 Competitor oligopoly, or monopoly
 Taxation

Strengths Weaknesses
• Unique product • Location of your company
• Location of your business • Lack of quality and customer service
• Workers’ unique skill set • Poor marketing and sales
• Quality of the product • Undifferentiated products or services
Opportunities Threats
• A new emerging or developing • New compl etion in the market, possibly
market(niche product, place, new with new products or services
country, less country) • Price wars
• Merger, joint ventures, or strategic • Competitor oligopoly, or monopoly
alliance. • Taxation

Figure 3.4 SWOT Analysis Model (Source: Drummond, Ensor and

Ashford, 2001)
SWOT analysis is one of the most used forms of business analysis. A SWOT
examines and assesses the impacts of internal strengths and weaknesses, and
external opportunities and threats, on the success of the "subject" of analysis.
An important part of a SWOT analysis involves listing and evaluating the
firms' strengths, weaknesses, opportunities, and threats.

Strengths: Strengths are those factors that make an organisation more com-
petitive than its marketplace peers. Strengths are what the company has a
distinctive advantage at doing or what resources it has that is strategic to the
competition. Strengths are, in effect, resources, capabilities and core compe-

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tencies that the organisation holds that can be used effectively to achieve its
performance objectives.

Weaknesses: A weakness is a limitation, fault, or defect within the organisa-

tion that will keep it from achieving its objectives; it is what an organisation
does poorly or where it has inferior capabilities or resources as compared to
the competition.

Opportunities: Opportunities include any favourable current prospective situ-

ation in the organisations environment, such as a trend, market, change or
overlooked need that supports the demand for a product or service and per-
mits the organisation to enhance its competitive position.

Threats: A threat includes any unfavourable situation, trend or impending change

in an organisations environment that is currently or potentially damaging or
threatening to its ability to compete. It may be a barrier, constraint, or any-
thing that might inflict problems, damages, harm or injury to the organisation.

Advantages of SWOT analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a
strong tool, but it involves a great subjective element. It is best when used as
a guide, and not as a prescription. Successful businesses build on their strengths,
correct their weakness and protect against internal weaknesses and external
threats. They also keep a watch on their overall business environment and
recognise and exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in the following manner-

a. it is a source of information for strategic planning;
b. builds organisation's strengths;
c. reverse its weaknesses;
d. maximise its response to opportunities;
e. overcome organisation's threats;
f. it helps in identifying core competencies of the firm;
g. it helps in setting of objectives for strategic planning; and
h. it helps in knowing past, present and future so that by using past and
current data, future plans can be developed.

Limitations of SWOT analysis

SWOT Analysis is not free from its limitations. It may cause organisations to
view circumstances as very simple and the organisations might overlook cer-

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tain key strategic contact which may occur. Moreover, categorising aspects
as strengths, weaknesses, opportunities and threats might be very subjective
as there is great degree of uncertainty in market. SWOT analysis does stress
upon the significance of these four aspects, but it does not tell how an organi-
sation can identify these aspects for itself (Proctor, 2000).

Activity 3.5
1. Explain why it is important to carry out an SWOT analysis when you
? want to develop a marketing strategy?
2. Show how you would audit to check the competitive readiness of a
company using the SWOT analysis?
3. Discuss the relationship between the SWOT analysis and the PEST
analysis.

3.5 Summary
In this unit we have discussed that the internal environment analysis aims to
identify the organisation's key resources which are its assets and competen-
cies. Out of these arise organisational capabilities. There are a number of
tools to help with this process in marketing audit process and some include
the value chain, portfolio analysis models (BCG and GE) and SWOT analy-
sis. The aim is to identify these assets and competencies, their current usage
and decide how they may be potentially applied to achieve competitive ad-
vantage for the company. Internal environment analysis also makes it possible
for the company to anticipate future changes in the environment that these
assets and competencies can effectively address. Organisation's assets and
competences determine its capability to achieve competitive advantage. How-
ever, this is not adequate unless the organisation have knowledge about its
competitors. In the next unit we will cover how the organisation gathers infor-
mation about its competitors.

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References
Drummond, G., Ensor, J. and Ashford, R. (2001) Strategic Marketing: Plan-
ning and Control, (Second Edition), Oxford: Butterworth, Heinemann.
Kotler, P. (2010) Marketing Management, (11th Edition), Prentice hall.
Porter, M. (1998) Competitive Advantage: Creating and Sustaining Su-
perior Performance, Harvard Business Review.
Proctor, T. (2000) Strategic Marketing, an Introduction, London: Routledge.
Wilson, D.B. et al. (2002) Marketing, Management and Motivation, The
Law Society, London.

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56 Zimbabwe Open University

 Unit Four

Competitive Intelligence

4.0 Introduction

B
usiness success is as much determined by the actions of competitors,
as by the actions of the organisation itself. In this unit we explore the
increasingly vital practice of competitive intelligence and examine how
organisations can use such a function to support/develop successful market-
ing strategies. Gathering, analysing and disseminating intelligence relating to
competitors' strategies, goals, procedures and products greatly underpins com-
petitiveness.
Strategic Marketing Management BMKT 405

4.1 Unit Objectives

By the end of unit, you be able to:
 define what is competitive intelligence
 identify sources of competitive intelligence
 explain ethical issues required in competitive intelligence
 evaluate how competitive intelligence is used (its purpose)

4.2 What Is Competitive Intelligence?

Competitive intelligence is a structured, ethical and legal process designed to
gather, analyse and distribute data/information relating to current, and poten-
tial, competitors. The key to successful competitive intelligence is the ability
to turn basic raw data into actionable intelligence. Actionable intelligence in-
volves providing decision makers with timely, appropriate information which
facilitates action.

4.3 Useful Functions within an Organisation

Competitive Intelligence
i. anticipating competitors' activities
ii. analysing industry trends
iii. learning and innovation
iv. improved communication
v. enables organisations to overcome many problems associated with in-
formation overload
The reality is that most organisations have some form of competitive intelli-
gence. For example, they conduct benchmarking exercises, commission mar-
ket research or monitor competitors' prices. Competitive Intelligence offers
the opportunity to bring together the various strands of information which
already exist into one cohesive, practical system.

4.4 Competitive Intelligence Cycle

According to Proctor, (2000) the competitive intelligence cycle consists of
four steps namely planning and direction; collection; analysis and dissemina-
tion as illustrated by Figure 4.1 below.

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1. Planning and Direction 2. Collection

Competitive Intelligence Cycle

4. Dissemination 3. Analysis

Figure 4.1 Competitive Intelligence Cycle (Source: Proctor, 2000)

4.4 1 Planning and direction

The cycle begins with establishing intelligence requirements. It is important to
prioritise information needs and set appropriate time-scales/reporting peri-
ods. This phase requires a detailed understanding of business decisions being
taken and how information will be used. When prioritising information it is
important to differentiate between 'targeted intelligence'- collected to achieve
a specific objective- and 'awareness intelligence'- general information which
will be 'filtered' in order to build a general picture of the competitive environ-
ment.

Targeted intelligence is used to resolve specific problems, while awareness

intelligence is designed to monitor the competitive environment on an ongoing
basis. The planning process is concerned with obtaining the correct balance
between the two.

4.4.2 Collection
Based on established intelligence requirements, a collection strategy is now
developed. Pollard (1999) advocates translating key intelligence requirements
into more specific key intelligence questions and then identifying and monitor-
ing intelligence indicators. These intelligence indicators are identifiable signals
that are likely to precede particular competitor actions. Table 4.1 illustrates
this process.

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Table 4.1 Intelligence Indicators

Key Intelligence Question Intelligence Indicators

• Is the competitor about to initiate • Actively recruiting customer
a customer loyalty scheme? service staff
• Buying media advertising space

4.4.3 Analysis
Analysis is concerned with converting raw data into useful information. The
process involves classification, evaluation, collation and synthesis. Once in-
formation has been processed informed judgments relating to competitors'
intent can be established.

4.4.4 Dissemination
Competitive Intelligence has to be tailored to meet user needs. Effective dis-
semination is based on clarity, simplicity and appropriateness to need. Com-
petitive Intelligence should form the basis of competitive action plans.

Activity 4.1
1. Describe the competitive intelligence cycle.
? 2. Explain the importance of competitive intelligence in modern marketing.
3. Competitive intelligence is important to marketing strategy. Discuss.

4.5 Sources of Competitive Intelligence

Drummond et al. (2001) identified the sources of competitive intelligence as
follows:
a. public domain- information available to anyone;
b. internal information- it is often surprising just how much information
organisations already hold on competitors;
c. third party information- specific sources not directly connected to the
competitor (for example- market research agencies, media/journalists,
credit rating organisations and consumer groups);
d. electronic sources for example- internet;
e. intermediaries;

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f. competing organisation employees;

g. suppliers; and
h. government

4.6 Competitive Intelligence Scope

Competitive intelligence is usually composed of five major areas of endeav-
our, and is performed under three main approaches in the Competitive Intel-
ligence framework:
 assessment of strategies;
 competitor perceptions;
 effectiveness of current operations;
 competitor capabilities; and
 long-term market prospects
Strategic intelligence is concerned mainly with competitor analysis or gaining
an understanding of a competitor's future goals, current strategy, assumptions
held about itself and the industry, and capabilities- diagnostic components.
Intelligence about the firm's major customers, suppliers and partners (in mar-
keting or research and development alliances) is often also of strategic value.

Tactical intelligence is generally operational and on a smaller-scale, not so

centred on being predictive. Tactical issues include competitors' terms of sale,
their price policies and the plans they have for changing the way in which they
differentiate one or more of their products from yours. Middle-level market-
ing and sales managers number among some of the main users of tactical
intelligence. They want to know how to win the battle of winning customers,
today.

Counter intelligence is defending company secrets. Every firm has competi-

tors interested in knowing your plans as you are in knowing theirs, maybe
even more so. Often, this area of endeavour will involve security and informa-
tion technology, but others are often overlooked, such as hiring and firing
employees, to contain competitive opportunities within the firm.

Competitive intelligence is the determination of solutions to these principle

factors and determinants of ongoing competitive advantage:
 What is the basis of competition?
 Where the firm does competes?
 Who does the competitor compete against?
 How does the firm compete?

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4.6.1 Competitive intelligence is focused on decision making

Seldom do people realise that business, just like life is merely a series of
decisions. Global firms have a growing need for the necessary information on
which to base decisions concerning the conduct and development of each of
their firm's strategic objectives, and the protection of their organisations against
threats from their competitors (Porter, 1995).

Activities 4.2
1. Carry out a competitive intelligence of your company's market.
? 2. Explain the relationship between competitive intelligence and
benchmarking?
3. Apply the three approaches to competitive intelligence framework to
the market your company is competing in.

4.7 Ethical Issues in Competitive Intelligence

According to Drummond, Ensor, and Ashford (2001) competitive intelligence
is exposed to ethical issues. Competitive intelligence practitioners, some of
them try to solicit information using whatever means. Some ethical issues in
competitive intelligence include misrepresentation, client conflict, and com-
petitive intelligence conducts.

4.7.1 Misrepresentation
Misrepresentation is falsely identifying oneself in order to receive or access
information that would not have been provided if one's identity was used.
There are three common cases of misrepresentation where there is some
ambiguity as follows
1. omitting some details about one's identity;
2. not revealing one's identity in a public venue after overhearing classified
information; and
3. not disclosing true intent on how information will be used

1. Omitting some details about one's identity

Competitive intelligence practitioners agree that lying about one's true identity
to obtain information that would not have been provided if someone had

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given their true identity is unethical (Drummond, Ensor, and Ashford, 2001).
However some practitioners believe that it is acceptable to omit details about
one's true identity to get information. For instance if someone has two identi-
ties, a part-time student and a director for a major company, and this person
has a school assignment to collect information about a company that happens
to be a competitor of the person's employer, some competitive intelligence
practitioners believe it is fine not to reveal that they work for a competitor in
order to receive the information they need to complete the school assignment.
Although this raise some concerns because the competitor may have not pro-
vided any information to the person if the competitor found out that this per-
son worked for a direct competitor.

2. Not revealing one's identity in a public venue after

overhearing classified information
Another issue where some competitive intelligence practitioners felt it was not
necessary to reveal their identity is when they overhear classified information
about a competitor at a public place. Competitive intelligence practitioners
argue that the person who disclosed the classified information is at fault be-
cause they should have been aware of their surroundings. At the same time
some people argue that competitive intelligence practitioners could have
planned to be in the vicinity in hopes to hear any unravelling information about
a competitor.

3. Not disclosing true intent on how information will be

used
Another misrepresentation issue is not disclosing the true intent on how the
information will be used. Many competitive intelligence practitioners are con-
sultants who are paid by their clients to get information about their competi-
tors. Some competitive practitioners would get the information required by
surveying the competitors and suggesting to the competitor that they are col-
lecting industry information although not revealing the true intent on how in-
formation will be used.

4.7.2 Client Conflict

Client conflict arises mostly with competitive intelligence practitioners who
are consultants. Competitive intelligence consultants agree that they should
never service competing clients at the same time because the practitioner may
act in favour of one of the clients and share classified information about a

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competitor. On the other hand many competitive intelligence consultants are

industry experts and there are going to be instances where their experience
and knowledge they gained from the industry over the years may bring them
to face an ethical stance on which information he can share with a client be-
cause it could be classified information about a competitor.

Another conflicting issue is the client and competitive intelligence consultant

relationship. Usually clients often seek competitive intelligence consultants to
gather information about their competitors. The ethical issue is at what cost or
length does the clients expect the competitive intelligence consultants to get
the information. Competitive intelligence consultants are faced with a lot of
pressures to provide the information that the clients are seeking and they tend
to encounter ethical issues when getting the information. One of the reasons
the clients hire a competitive intelligence consultant is to try to distance them-
selves from facing those ethical situations.

4.7.3 Competitive intelligence conducts

Competitive Intelligence practitioners are expected to exercise utmost good
faith. In some countries there are codes of conduct to be followed which
include dos and don'ts. Table 4.2 below shows some of the general 'dos' and
'don'ts'.

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Table 4.2 Dos and Don'ts for Competitive Intelligence Practitioners

Situation Don’ts Dos
Passing yourself as someone Use a supplier badge or customer Display your badge clearly and do not hesitate to tap
else badge to suck information out of a friendly customers and suppliers for information. Do
competitor during a congress not hesitate to make contact with competitors.
Steal documents Steal documents or brief’s case Wait for the exhibition to end, and then do the
from a competitor’s stand rounds of vacated stands.
A family member (for example Tell each other everything Set clear game rules as to what you say and cannot
a spouse) working for the say. Discuss these game rules with your colleague
competition. and immediate superior.
Asking a job applicant Promise applicant a job under Put your cards on the table. If you do not want the
indiscreet questions false pretences. applicant tell clearly that there is no job for him, but
that you would like to discuss the market and
competitor situation with him/her.
A new recruit joins the Circulate them internally Read them and check if they can serve a genuinely
company with documents from useful purpose. If not return them to the competitor
former employer saying that they came by accident or destroy them.
A competitor’s employee is so Name him in a weekly circulated Mention the type of the source in the report, but not
incapable of holding his tongue report. the name of the person.
that it could compromise his
career
Playing on the informer’s Systematically target members of Be aware of the divided-loyalty phenomenon and
divided loyalties (racial. certain minority groups for define clear game rules in your business
Ethnic, sexual, political, interviews.
collusion)
Recording conversation Use them to compromise Use the recording as a back-up for written notes
individuals and force them to talk. taking. Destroy them once the report is written.
Familiarise yourself with local regulation in force on
recordings made without the knowledge of the
person being interviewed.
A competitor employee is Blackmail him/her Do not put it in writing
known to be cheating on
his/her spouse
Seeking personal information Desist from seeking personal Comply with rules laid down by Data Protection
about an individual information. Source such Authority. Do not refrain from creating
information in a database. psychological profiles of competitor decision-
makers.
Using intermediaries and Expect them to break the law or Require suppliers to sign a good practices clause.
informers rules of professional conduct in Ask the supplier to do the same with his own
their work suppliers.
Monitoring staff e-mails Do it unobtrusively Abide by the law. Warn employees that the company
reserves the right to do this. Introduce automatic
warning systems. Carry out spot checks. Do not hold
back from analysing content flows statistically
(Source: CIMA study Text, 2000)

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Activities 4.3
1. Identify and explain important ethical issues in competitive intelligence.
? 2. Explain why you think ethnical issues are in important in competitive
intelligence?
3. Discuss ethical issues concerning information gathering which are
applicable to Zimbabwe situation.

4.8 Summary
Many companies use competitive intelligence to take market share from known
competitors. A more productive use is to use it to help formulate long term,
non-competitive strategies. In this unit we discussed competitive intelligence
as helpful in describe the current environment; forecast the future environ-
ment; challenge underlying assumptions about economic, political, techno-
logical, or market-related factors; identify and compensate for exposed weak-
nesses; adjust an existing strategy to the changing environment or determine
when a strategy is no longer sustainable. However in gathering vital informa-
tion on behalf of their organisations, competitive intelligence practitioners should
be ethical. Competitive intelligence also enables the organisation to have a
thorough knowledge about the competitors as well as their markets. This
information can be used for segmenting and targeting profitable markets hence
the next unit will show how a marketing firm can segment, target a particular
market and position its products.

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References
CIMA Study Text (2000), BPP Publishing. UK.
Drummond, G. Ensor, J. and Ashford, R. (2001), Strategic Marketing, Plan-
ning and Control, (2nd Edition), Oxford: Butterworth, Heinemann.
Johnson, G., Scholes, K. and Whittington, R. (2002), Exploring Corporate
Strategy, Prentice Hall.
Porter, M.E. (1995) Competitive Advantage: Creating and Sustaining Su-
perior Performance, UK: Harvard Business School.

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68 Zimbabwe Open University

 Unit Five

Segmentation, Targeting and

Positioning

5.0 Introduction

T
he market that the organisation sees through the strategic window is a
very complex entity. In evolving strategies to take advantage of the op
portunities that exist within the market, the organisation has to divide it
into manageable chunks at which it can direct its relevant resources and ca-
pabilities. Segmentation, targeting and positioning are three of the pillars of
modern marketing strategy. There are few markets these days in which an
undifferentiated approach will pay dividends. The approach today is to ac-
cept that there are different demands in the market place and that a product
or service needs to be tailored-in specifically to meet these differing demands
if it is to stand the best chance of success. This unit is dedicated to the con-
cept of segmentation, targeting and positioning.
Strategic Marketing Management BMKT 405

5.1 Unit Objectives

By the end of the unit, you should be able to:
 explain the step (segmentation, targeting and positioning) process
 identify the role of segmentation in establishing competitive advantage
 discuss the importance of targeting
 examine the importance of positioning in establishing competitive
advantage

5.2 Segmentation
Segmentation is a strategic marketing management technique which can help
firms find ways of establishing a competitive advantage. A market segment is
a section of a market which possesses one or more unique features that both
give it an identity and set it apart from other segments (Kotler, 2010). Market
segmentation amounts to partitioning a market into a number of distinct sec-
tions, using criteria which reflect different and distinctive purchasing motives
and behaviour of customers. Segmentation makes it easier for firms to pro-
duce goods or services that fit closely with what people want.

5.2.1 Reasons for segmentation

According to Bonoma and Shamiro, (1995) postulates segmentation as a
critical component of marketing strategy and is important for the following
reasons:
 to meet consumer needs more precisely;
 to increase profits- segmentation allows an organisation to gain the best
price it can in every segment, effectively raising the average price and
increasing profitability;
 to gain segment leadership;
 to retain customers; and
 to focus marketing communications.

5.2.2 The segmentation process

The segmentation process involves establishing criteria by which groups of
consumers with similar needs can be identified. These criteria have to estab-
lish consumer groups that have the following characteristics (Kotler, 2010):
 the consumers in the segment respond in the same way to a particular
marketing mix;

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 the consumers within the segment have to react in a clearly different

way from other groups of consumers to the marketing mix on offer;
 the group has to be large enough to provide the return on investment
necessary to the organisation ; and
 the criteria used to identify the segment have to be operational.

5.2.3 Bases of segmentation

One can segment consumer markets using many different variables including:
 geographic;
 psychographic;
 demographic;
 behaviour patterns; and
 geo-demographic.
Geographic- Segments mean location and this can include: streets, towns,
cities, regions, countries, continents, trading blocs like the SADC and
COMESA.

Demographics or social statistics includes: age, sex, family, life cycle, job
type/socio-economic and group income level.

Geo-demographics mixes geographic and demographic data to create cat-

egories of house types and locations, for example, people who live in de-
tached houses in exclusive suburbs.o

Psychographics- Attempts to segment according to psychological profiles of

people in terms of their life-styles, attitudes and personalities.

Behavioural- Segments address behaviour patterns which include: usage, for

example heavy or light users) and uses, the way a product or service is used,
in other words, the benefit enjoyed.

A market can be segmented by the benefits enjoyed-different segments buy

the same product for different reasons. Some people use toothpaste for healthy
teeth, others to prevent bad breath, and some people buy it for both reasons.
More than one variable can be used when segmenting markets, and indeed,
the more variables the better since it helps to focus on a tighter target market.

Industrial, organisational or business-to-business markets can also be broken

into segments and the most appropriate ones selected as target markets as
indicated in Table 5.1 below.

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Table 5.1 Organisational Macro and Micro Segmentation

Variables Examples
Macro segmentation • Large, medium or small;
• Size of organisation; • Local, national, Continental, worldwide;
• Geographical location; • Retail, engineering, financial services; and
• Industrial sector ; • Defined by product or service.
• End market served.

Micro segmentation
• Choice criteria Structure of • Quality, delivery, value in use, supplier
decision-making unit; reputation, price;
• Decision-making process; • Complexity, hierarchical, effectiveness;
• Buy class; • Long, short, low or high conflict;
• Importance of purchasing; • New task, straight or modified re-buy;
• Type of purchasing • High or low importance;
organisation; • Matrix, centralised, decentralised;
• Innovation level of • Innovative, follower, laggard;
organisation; • Optimizer, satisficer; and
• Purchasing strategy; and • Age, educational background, risk
• Personal attributes. taker/adverse, confidence level.

(Source: Wilson, D.B., 2002)

Activity 5.1

?
1. Explain the importance of market segmentation.
2. Market segmentation is regarded as an important component of
marketing strategy. Discuss
3. Differentiate between consumer market segmentation and industrial
market segmentation.
4. Outline how you can help your company to segment its market?

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5.3 Market Targeting

A target market is the market or market segments which form the focus of the
firm's marketing efforts. Once segments have been identified, decisions about
how many and which customer groups to target must be made (Drummond,
2001). The options include mass marketing strategy, single segment strategy
and multi-segment strategy, product specialisation and market specialisation.

1. Mass marketing strategy

Offering one product/service concept to most of the market, across many
market segments. Although economies of scale can be achieved, there is a
risk that few customers will be adequately satisfied. The underlying assump-
tion of this approach, referred to as undifferentiated marketing, is that all cus-
tomers in the market have similar needs and wants. It is argued that they can
therefore be satisfied with a single marketing mix- that is a standard product
or service, similar price levels, one method of distribution and a promotional
mix which is directed to everyone. Coca Cola's original marketing strategy
was based on this format when they offered one product, which they believed
had universal appeal.

2. Single segment strategy

Concentrating on a single segment with a product/service concept. This is
relatively cheap in resources, but there is a risk of putting all the eggs in one
basket-if the segment fails the company's financial strength will decline rap-
idly.

3. Multi-segment strategy
Targeting a different product or service concept at each of a number of seg-
ments and develop a marketing mix strategy for each of the selected seg-
ments. Although this approach can spread the risk of being over-committed
in one area, it can be extremely resource demanding.

4. Product specialisation
The firm specialises in a particular product and tailors it to different market
segments.

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5. Market specialisation
The firm specialises in serving a particular market segment and offers that
segment an array of different products.

5.3.1 Factors influencing choice of targeting strategy

There are several factors that influence the choice of targeting strategy and
the following are the most common ones:
1. stage of product-market maturity- product is target differently in the
product life cycle;
2. extent of buyer differentiation;
3. market position- company market share in the existing product mar-
ket;
4. structure and intensity of competition;
5. adequate resources; and
6. production and marketing economies of scale

5.3.2 Factors affecting the attractiveness of a target market

Five factors govern the attractiveness of a segment (Kotler, 2010) as are
follows:
 Segment size;
 Current and potential competition;
 Segment growth;
 Capabilities of the business; and
 Profitability of the segment.

Activity 5.2

?
1. "Targeting is the end of a process" Discuss.
2. Outline the factors that affect the choice of target market
3. Recommend targeting strategies which can be used a fast moving
consumer goods company (FMCG).

5.4 Positioning
After selecting target market or markets the organisation then has to decide
on what basis it will compete in the chosen segment(s). How best can it com-

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bine its assets and competencies to create a distinctive offering in the market?
This has to be done in such a way that consumers can allocate a specific
position to the company's product or service within the market, relative to
other products. Consumers will position a product in their mind in relation to
other products on the market based on their perception of the key attributes
it contains.

Companies can attempt to associate various qualities with their product as a

way to help shape consumers' perceptions of their position in the market. A
brand can be positioned using a range of associations (Kotler, 2010) as fol-
lows:
1. Product attributes- Heinz positions it products on the attributes of no
artificial colouring, flavouring or preservatives

2. Product benefits- Volvo positions itself using the product benefits of

safety and durability.

3. Usage occasions- The convenience store SPAR eight-till-late shops

are positioned on the usage occasion. Customers use the shops when
they need to shop out of normal hours or near to their homes.

4. Users- Ecocover cleaning products are positioned as environmentally

friendly products for the green customer.

5. Activities- Lucozade is positioned as an isotonic drink for sporting ac-

tivities.

6. Personality- Harley Davidson motorbikes are positioned as a macho

product with a free spirit.

7. Origin- Audi clearly illustrates its German origins in the UK market by

the use of the 'Vorsprung durch technik' slogan. The hope is that the
product will be linked to the German reputation for quality engineering.

8. Competitors- Pepsi-Cola is positioned as the choice of the next gen-

eration reflecting the fact that in blind tasting tests, younger people pre-
ferred Pepsi over competitors' offerings.

9. Product class- Kellogg's Nutri grain bars are positioned as 'morning

bars', a substitute for the traditional breakfast.

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10. Symbol- Esso petrol has used the symbol of the tiger to position itself
in the market.

5.4.1 Factors influencing positioning success

Drummond, Ensor and Ashford (2001) highlighted that for a product posi-
tioning to be successful the following factors should be considered:
a) Credence-The attributes used to position the product have to be per-
ceived to be credible by the target customers. It would be very difficult
for a nuclear power generator to position itself as environmentally friendly.
b) Competitiveness- The product should offer the consumer benefits which
competitors are not supplying.
c) Consistency- A consistent message over time is invaluable in helping to
establish a position against all the other products and services fighting
for a share of the market. An organisation that changes its positioning
on a regular basis causes confusion in the consumer's mind. This will
mean they have an unclear perception of exactly what are the key char-
acteristics of the product.
d) Clarity- The positioning statement an organisation chooses has to cre-
ate a clearly differentiated position for the product in the minds of the
target market.

5.4.2 Perceptual mapping

Mapping consumer perceptions can allow an organisation to see where it is
currently placed compared with competitors' offerings. A simple perceptual
map is based upon two axes representing key attributes in a particular mar-
ket. These attributes are identified though market research and are deter-
mined by consumers' perceptions of the important factors in a market.

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High Quality
Belgium Chocolates

Ferrero Rocher

Milk Tray
Cadburys Roses

Low Price High Price

Cadburys Fruits & Nuts

Mar Bar
Twix
Low Quality

Figure 5.1 Perceptual Map of Chocolate Confectionery Brands

(Source: Proctor, 2000)
In Figure 5.1 two dimensions price and quality have been used. If we plot the
chocolate market, we can identify where existing chocolate brands have been
positioned by manufacturers. For example our fictional brand of Belgian choco-
lates called Belgium Chocolates are high quality and high price so they are
placed in the top right hand box, whilst Twix is an affordable "every day" treat
chocolate so it has been placed in the bottom left hand square, in the low
quality low price brand box.

Perceptual maps can help identify where (in the market) an organisation could
position a new brand. In our example this could be at the medium price and
medium quality position, as there is a gap there. There is also a gap in high
price low quality but consumers will not want to pay a lot of money for a low
quality product. Similarly the low price high quality box is empty because
manufacturers would find it difficult to make a high quality chocolate for a
cheap price or make a profit from selling a high quality product at a low price
(Kotler, 2010).

5.4.3 Positioning alternatives

DuPless, (2008) argued that it is advantageous to identify other alternatives
positioning of their products or services for future use as follows:

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 An organisation can build on a current position to create a distinctive

perception of the brand by consumers.
 Having established the attributes that are most important to the con-
sumer, the organisation can see if there are any unoccupied positions
that are desirable in consumers' minds and therefore viable opportuni-
ties.
 Due to changes in consumer behaviour, or where perhaps there has
been a failure of the original positioning, a third alternative can be con-
sidered which is to reposition the brand.

5.4.4 Positioning mistakes

According to Proctor, (2000) firms should try to be realistic in their position-
ing and identified positioning mistakes as follows:
 under positioning- in this situation consumers have only a very limited
perception of the brand and are unaware of any distinguishing features;
 over positioning- consumers have a perception that the brand is only
active in a much focused area, when in fact the brand covers a much
broader product range; and
 confusion- consumers have an unclear view of how the brand relates to
competitive offerings.

5.4.5 Brand repositioning

Brand repositioning is undertaken in order to increase a brand's competitive
position and therefore increase sales volume by seizing market share from
rival products. When repositioning companies can change aspects of the prod-
uct, change the brand's target market or both. According to Kotler, (2010)
there are four repositioning options as follows:
i. Image repositioning- This takes place when both the product and the
target market remain unchanged. The aim is to change the image of the
product in its current target market.
ii. Market repositioning- Here the product remains unchanged but it is
repositioned to appeal to a new market segment.
iii. Product repositioning- In this situation the product is materially changed
but is still aimed to appeal to the existing target market.
iv. Total repositioning- This option involves both a change of target mar-
ket and accompanying product modifications.

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Activities 5.3

? 1. Discuss ways in which a company can position its products.

2. Explain why positioning crucial to strategic marketing?
3. Develop a perceptual map relevant to your organisation which is
intending to launch a new product in the market. Support your answer.

5.5 Summary
In this unit we have illustrated how an in-depth knowledge of both consumer
and organisational buyer behaviour is needed to identify successfully useful
segmentation criteria. This led to an exploration of a wide range of criteria
that can be used to segment both consumer and organisational markets. This
is the first step in the critical strategic process of establishing market segments
that are available for a company to serve. Companies have to evaluate the
potential of these segments and to make choices about which groups to serve
(targeting) and on what competitive basis (positioning). When a company has
identified a specific target market it can now be able to develop a suitable
marketing strategy. Next unit will therefore show how a company can come
up with a strategic marketing planning to be used in a specific target market

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References
Bonoma, T.V. and Shapiro B.P. (1995), Segmenting the Industrial Mar-
ket, Lexington Books, D.C. Heath and Company.
CIMA. Study Pack (2000) BPP Publishing
Drummond, G., Ensor, J. and Ashford, R. (2001) Strategic Marketing, Plan-
ning and Control, (Second Edition), Oxford: Butterworth, Heinemann.
DuPlessis, P.J., Christaan Johannes Jooste and Wilhelm Strydom (2001).
Applied Strategic Marketing. Heinemann.
Kotler, P. (2010) Marketing Management, (11th Edition), Prentice hall.
Proctor, T. (2000) Strategic Marketing, An Introduction, London: Routledge.
Wilson, D.B. et al. (2002) Marketing, Management and Motivation, Lon-
don: The Law Society.

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 Unit Six

Strategic Marketing Planning

6.0 Introduction

I
n this unit we examine the putting together of the strategic marketing plan
based upon our analysis of the marketing environment covered in the pre
vious 5 units. The unit will cover how strategic marketing plans will be
developed for different types of markets. The unit will also discuss the impor-
tance of planning and barriers that affect effective marketing planning.
Strategic Marketing Management BMKT 405

6.1 Unit Objectives

By the end of the unit, you are supposed to:
 develop a strategic planning process of any company
 explain the importance for marketing planning
 outline suitable strategies for market leader, market challenger and
market follower

6.2 Why does Planning Matter?

The organisation needs a strategic marketing plan in order to adapt to a chang-
ing business environment. Given the basic business premise of 'success through
effectively meeting customer needs' it is clear that organisations must continu-
ally adapt and develop to remain successful. Strategic marketing facilitates
this process and provides robust solutions in an increasingly competitive world
(Homburg, (2009). Essentially, the plan should provide a systematic frame-
work with which to analyse the market place and supply a well-defined way
to pursue strategic goals. Key reasons for planning are:
 adapting to change;
 resource allocation;
 consistency;
 integration;
 communication and motivation; and
 control.

6.3 Barrier to Successful Planning

Drummond, (2001) submit that a firm may come up with a very good plan but
the plan fails to yield positive results because of the following barriers:
 culture;
 power and politics;
 analysis not action;
 resource issues; and
 skills.
Before an organisation starts to make judgments about how it is going to com-
pete, fundamental decisions about the organisation's overall method of operation
and the areas it wishes to serve have to be articulated. A conscious statement of
the primary direction and purpose of the organisation has to be the key foundation

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upon which objective and strategy is based. This rationale behind the company's
existence usually comes in the form of a mission statement and is meant to act as
a guiding light to all personnel within the organisation.

6.4 Strategic Marketing Management Planning

Process
According to Drummond, Ensor, and Ashford, (2001) the strategic market-
ing management process consists a series of steps as illustrated by Figure 6.1.

6.4.1 Mission
The mission of the organisation is the unique purpose that distinguishes it from
other companies and defines the boundaries of its operations. The mission
statement is a proclamation of the organisation's primary objective that en-
capsulates its core values. The organisation's aims and aspirations are the
result of a series of influences.

Mission Statement underlines the company's existence and four major sources
of influencing acting upon the company's existence include:
i. Corporate governance: to whom should the organisation be account-
able and within what regulatory framework should executive decisions
be overseen and reviewed?
ii. Stakeholders-stakeholders in an organisation include such groups as
customers, suppliers, shareholders, employees, financiers, and the wider
social community.
iii. Business ethics-an ethical dimension also affects the mission and ob-
jectives that an organisation should fulfil. This mainly relates to the cor-
poration's social responsibility to stakeholder groups, in particular to
those whose powers and influence is marginal, such as a local commu-
nity
iv. Cultural context-the aspects of mission that are prioritised will reflect
the cultural environment that surrounds the corporation. This influence
will occur at several levels as follows:
a) at a broad level where wider national cultures will be influential;
b) individuals in functional areas which will be influenced by the culture of
their professional reference groups; and
c) internal subcultures operating at divisional or functional level within the
company.

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Strategic Marketing Management Planning Process

Corporate Mission and Objectives

External Analysis Internal Analysis

The Macro Environment SWOT/TOWS
The Market
Customers
Competitors

SWOT Analysis

Marketing Objective

Marketing Strategy
Competitive Advantage Strategies Global
Competitive Strategies
Marketing Mix and Life value Strategies Relationship Building Strategies

Marketing Strategy

Target Markets and Mix Marketing Value

Implementation
Scheduling of key tasks
Resources Allocation
Budgets

Control
Assumptions made
Critical success factors
Benchmarks established How measured
Financial forecasts

Figure 6.1 Comprehensive Strategic Marketing Management Process

(Source: Drummond, 2001)

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 Characteristics of a good mission

i. Credibility- The mission statement has to set realistic ambitions for the
organisation.
ii. Uniqueness- The mission has to relate to the particular organisation. It
should not be a statement that could be generically applied to a range
of other organisations.
iii. Specific capabilities-The mission should also embrace the core capa-
bilities of the organisation and emphasise their core role in the future of
the organisation.
iv. Inspirational- The mission needs to motivate individuals by giving them
a statement that has significance to the work they undertake.
The Mission should also include:
a) Product scope- This is defined in terms of the goods and services the
enterprise supplies to customers.
b) Market scope- There are a number of criteria that are helpful in defin-
ing market scope, such as:-type of industry sector targeted-channels of
distribution-demographics-salient features of the consumer.
c) Geographical scope- This should be defined at an appropriate level of
aggregation - in strictly local terms, for a small business, through to
national and international regions for large organisations.
 Strategic intent (vision)

Some people see strategic intent, or the corporate vision, as a concept sepa-
rate from the mission. They would argue that a mission statement merely states
what the organisation is currently doing and that a statement of intent, or a
vision statement, is also needed. A statement of strategic intent describes what
the organisation aspires to become. However, many companies strive to
achieve both objectives within the single mechanism of the mission statement.

The mission statement, and statement of strategic intent (vision), operates as

a guiding light that acts as a reference point when making strategic decisions
in general and when forming objectives in particular.

6.4.2 Goals and objectives

The mission statement acts as a guide and leads to the development of a
hierarchy of objectives. Objectives are the specific intended outcomes of
strategy. Most writers used goals and objectives interchangeably as they mean
the same while they are not. Goals are less specific than objectives. Goals are
general aspirations that the organisation needs to achieve but difficult to meas-

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ure or put into specific time scale. Objectives are more specific and state
clearly what is to be achieved within specified period of time.

Objectives should meet the following criteria:

a) specific- state clearly what to be achieved
b) measurable- state tangible targets
c) inspirational- should provide motivation
d) realistic- objectives should be achievable
e) time scaled- time-based
Successful objectives should further satisfy the following characteristics:
a) acceptability;
b) flexibility; and
c) comprehensibility
 Hierarchy of objectives

Objectives cascade down through an organisational structure effectively forming

a hierarchy from corporate objectives, to functional objectives and then to
operational objectives.

Corporate objectives- objectives at a corporate level relate to the organisa-

tion's overall direction in terms of its general attitude towards growth.

Functional objectives- at a functional level expanding market share become

an objective. Each functional area - finance, human resources, operations
and marketing - will develop a strategy to support this objective.

Operational objectives- at this level the functional level marketing strategy

becomes the objective. Strategies have to be developed for each element of
the marketing mix to support these operational objectives.

Activities 6.1
1. 'Every company tries to plan their activities; though little is obtained
? from their planning efforts' says the company executive. What may be
reasons for this? Stimulate your answer with practical examples.
2. Explain the purpose of a mission statement.
3. Outline the relationship between a mission and a strategic intent?

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6.4.3 Marketing strategies

Marketing strategies should create competitive advantage. The notions of
competitive advantage and marketing strategy are intrinsically linked. Com-
petitive advantage is the process of identifying a fundamental and sustainable
basis from which to compete. The marketing strategies fall into the following
categories:
A. generic strategies
B. market position strategies
C. offensive and defensive strategies
D. product/market strategies

A. Generic strategies
Porter (1998) identifies three generic strategies as fundamental sources of
competitive advantage. These are cost leadership, differentiation and focus.

 Cost leadership

One potential source of competitive advantage is to seek an overall cost lead-

ership position within an industry, or industry sector. Here the focus of strate-
gic activity is to maintain a low cost structure. The desired structure is achiev-
able via the aggressive pursuit of policies such as controlling overhead cost,
economies of scale, cost minimisation in areas such as marketing and R and
D, global sourcing of materials and experience effects. The basic drivers of
cost leadership include:
i. economy of scale;
ii. linkages and relationships;
iii. location;
iv. availability of skills;
v. governmental support; and
vi. infrastructure

 Differentiation

Here the product offered is distinct and differentiated from the competition.
The source of differentiation must be on a basis of value to the customer. The
product offering should be perceived as unique and ideally offer the opportu-
nity to command a price premium. Will customers pay more for factors such
as design, quality, branding and service levels?

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Common sources of differentiation include:

1. product performance;
2. product perception; and
3. product augmentation
 Focus

The organisation concentrates on a narrower range of business activities. The

aim is to specialise in a specific market segment and derive detailed customer
knowledge. This focus, or niche, strategy can also generate the benefits of
cost leadership or differentiation within a defined market segment.

A focus strategy is based on factors such as:

1. geographic area;
2. end-user focus; and
3. product/product line specialist

Activities 6.2
1. Explain how a company do to achieve competitive advantage through
? cost leadership strategy?
2. Discuss the factors that affect the choice of differentiation strategy.
3. Discuss the conditions that are required by a company to follow a
focus strategy?

B. Market position strategies

The position of the organisation (or product) within a given market will clearly
influence the strategic options available. An organisation's market position
according to Kotler, (2010) fall into four general categories: market leaders,
market challengers, market followers and market nichers.

 Market leaders

A market leader is dominant within the given industry or segment. This domi-
nance is normally due to market share. However, some organisations may
achieve 'leadership' via innovation or technical expertise for example Econet
in the mobile communication. The market leader will be a constant target for
aggressive competitors and must remain vigilant and proactive. To keep its
fort the market leader may employ the following strategies:

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i. expanding the market;

ii. offensive strategy;
iii. by aggressively pursuing market share, the fight is taken to the com-
petitors; and
iv. defensive strategy- equally, it is important to protect your existing cus-
tomer base and ensure that market share is retained.
 Market challenger

Market challengers seek confrontation and aggressively pursue market share.

Often, such organisations are large and well resourced. They are seeking
market leadership and present a long-term sustained challenge to the current
leader. Strategies available to challengers include:
i. selective targeting- the challenger can target certain competitors
ii. attack the leader- challenger can directly challenge the dominant player
 Market follower

Market followers tend to 'shadow' the market leader as opposed to chal-

lenge them, unless there is a high degree of certainty that a challenge will be
successful - they follow the leader. Common strategies they use:
i. duplication- duplication products in every way they can. however they
are vulnerable to litigation because of patents and copyrights of the
product; and
ii. adaptation - the adapt to the basis product offering and can add some
improvements
 Market nichers

Niche players focus on specific market segments. They are more specialised
in nature and seek to gain competitive advantage by adding value in some
way appropriate to specific target groups usually considered unattractive by
market leaders.

Activities 6.3

? 1. 'All companies big or small aims to achieve the same objective of

growth'. Discuss.
2. Identify a market and categorise the companies marketing their products
in the identified market according to their market position. Give tangible
evidence to justify you categories.

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C. Offensive and defensive strategies

Two fundamentals exist in the battle for market share - the ability to gain
market share and being able to retain existing market share. To achieve these
objectives, organisations need offensive (attacking) and defensive strategies
(Hunt, 2002).

i). Offensive strategies

Frontal attack- This is an all-out attack on a competitor. Generally, such an

attack requires a sustained effort. Attackers must be certain they have the
resources to endure a long hard struggle and survive potentially heavy initial
losses.

Flank attack - This draws on the concept of the battlefield, where the flanks
were always the weakest point of any army. This can be the case in the busi-
ness world and 'flanking' is achieved by attacking selective market segments
where the competitor is relatively weak. By concentrating resources on nar-
row areas it is possible to achieve superiority.

Encirclement attack - Here we aim to offer a range of products that effec-

tively encircle the competitor. Each of these products will tend to stress a
different attribute and leave the competitor's product facing a series of more
focused rivals.

Bypass attack - This is perhaps more a policy of avoidance than attack. The
attacker moves into areas where competitors are not active. This may involve
targeting different geographic areas, applying new technologies or developing
new distribution systems.

Guerrilla attack - Tactical (short-term) marketing initiatives are used to gradually

weaken the opposition. Sudden price cuts, bursts of promotional activity or
other such tactics are used to create product awareness and slowly erode
market share.

ii). Defensive strategies

It is true to say that for every offensive move a defensive counter exists.
Indeed, the 'backbone' of any marketing strategy must be to maintain market
share (Hunt, 2002); Kotler, 2010).

Position defence- A position defence aims to strengthen the current position

and shut out the competition. The defending firm can offer differentiated, value-

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added product to customers its market position will be maintained, if not

enhanced.

Flank defence- Not only do organisations need to protect their main areas of
operation, but they must also protect any weak spots (flanks).

Pre-emptive defence- This involves striking at potential competitors before

they attack you. The aim is to pre-empt their actions and reduce the potential
competitive threat.

Counter-defence- When attacked, most organisations will respond with a

counter-attack.

Mobile defence- A mobile defence involves a flexible and adaptive response,

allowing the defender to switch into new areas of interest as threats or oppor-
tunities materialise. It is achieved by broadening current markets or by diver-
sifying into unrelated activities.

Contraction defence- It may prove impossible to defend all operational ac-

tivities. Therefore, a selective strategic withdrawal could be the best option.
By sacrificing some activities, resources are freed to defend core activities.

Activities 6.4

? 1. Identify and explain the conditions in which the offensive and defensive
strategies can be used.
2. Explain how offensive strategies can be used by market challengers.
3. Explain strategies that can be used by Econet Zimbabwe and why?

D) Product/Market strategies
These strategies address the specific market impact of a product or product
line. Common ones are the product/market matrix (Ansoff matrix), PIMS
(product impact of market strategy) analysis and the product life cycle (PLC)
(Kotler, 2010).

i.) Product/market matrix (Ansoff matrix)

The matrix considers four combinations of product and market. Each combi-
nation suggests a growth strategy.

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Ansoff Matrix

Existing Markets New Markets

Existing
Product Product Product
Penetration Development

New Product
Market Diversification
Development

Figure 6.1 Product/Market Matrix ( Ansoff Matrix)

(Source: Drummond, Ensor and Ashford, 2001)

Market penetration- The aim is to increase sales of existing products in cur-

rent markets. An aggressive marketing drive, via factors such as competitive
pricing, sales promotion or advertising, can expand the share of an existing
market. Dealing with familiar customers and products is low risk and pro-
vides a starting point to planned growth.

Market development- Market development aims to find new markets for

existing products. This could involve new geographic markets (for example
exporting), adding distribution channels or finding new market segments.

Product development- Organisations must update their product portfolio to

remain competitive.

Diversification- This involves moving beyond existing areas of operation and

actively seeking involvement in unfamiliar activities. Diversification can be re-
lated thus having linkages to existing activities or unrelated-venturing into to-
tally new activities. While unrelated diversification may spread risk, it can be
difficult to achieve.

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Activities 6.5
1. Explain how the Ansoff Matrix can be used to grow the business.
? 2. Discuss the strategic option(s) for a company operating in a saturated
market?

ii) PIMS Analysis

Marketing studies have established that there is the link between profit and
marketing strategy. PIMS (profit impact of marketing strategy) model identi-
fies key drivers of profitability and have recognised the importance of market
share as one of the driver (Du Plessis, 2001).

The PIMS leads us to such considerations while deciding on strategies like:

a) forecasting profit;
b) allocating resources;
c) measuring performances; and
d) appraising new business proposition
The final move of PIMS program gives emphasis on competitive position,
product structure and the attractiveness of the target market. Figure 6.3 be-
low illustrate the components of the PIMS model.

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PIMS Model
Market Structure Strategies and Tactics Performance

• Market • Pricing • Profitability

Differentiation • R & D spending (ROS, ROI)

• Market Growth • New Product • Growth

Rate Introduction • Cash Flow

• Entry Conditions • Change in relative • Value

• Capital Intensity quality and variety of Enhancement

products or service • Stock (Share)
Competitive Position
• Marketing Expenses price
• Distribution channels
• Relative Perceived
• Work force
Quality
productivity
• Relative Market
Share
• Relative Capital
Intensity
• Relative Cost

Figure 6.3 PIMS Model (Source: Drummond, Ensor, and Ashford, 2001)
The profits model assumes that profit increase in line with relative market
share. This relationship has influenced marketing thinking, promoting actions
aimed at increasing market share as a route to profitability.

iii) The product life cycle (PLC)

Any strategy considering products and markets will be influenced by the PLC.
The basic concept entails that the products passes through four stages: intro-
duction, growth, maturity and decline. Sales will vary with each phase of the
life cycle.

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Sales

Profit

Introduction Growth Maturity Decline

Figure 6.4 Product Life Cycle (Source: Kotler, 2010)

 Introduction

It takes time for sales to grow and the introductory phase sees awareness and
distribution of the product increasing. Some organisations will specialise in
innovation and aim to consistently introduce new products to the market place.
Common strategies in this stage include:
i. Skimming- where a high price level is set initially, in order to capitalize
on the product's introduction and optimise financial benefit in the short
term or
ii. Penetration, with pricing being used to encourage use and build market
share over time.
 Growth

This phase sees a rapid increase in sales. Additionally, competition begins to

increase and it is likely that prices will be static, or fall, in real terms. The
growth stage sees the product being offered to more market segments, in-
creasing distribution and the development of product variations.

 Maturity

Here product sales peak and settle at a stable level. This is normally the
longest phase of the PLC, with organisations experiencing some reduction in
profit level. This is due to the intense competition common in mature markets.
Since there is no natural growth exists, market share is keenly contested and

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marketing expenditure is increased. Marketers may try to expand their po-

tential customer base by encouraging more use or finding new market seg-
ments.

 Decline

The decline stage can be gradual or rapid. It is possible to turnaround declin-

ing products and moves them back into the mature phase of the cycle. The
alternative is replacement. A residual demand will exist, with current users
needing parts, services and ongoing support. Often the decline phase offers
the following choice:
1. reinvesting (turnaround/replace)
2. harvesting (maximising financial returns from the product and limiting
expenditure)
To use PLC effectively as a marketing strategic tool marketing managers
should have a thorough understanding of the concept and the following should
be considered:
i. industry and product line
ii. shape of the plc
iii. volatility
iv. duration of stages
 Strategic wear-out

Nothing lasts forever and this applies to Marketing strategy. Causes of strate-
gic wear-out include:
i. changes in customer requirements
ii. changes in distribution systems
iii. innovation by competitors
iv. poor control of company costs
v. lack of consistent investment
vi. ill-advised changes in successful strategy

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Table 6.1 PLC Characteristics

Introduction Early Growth Late Growth Maturity Decline

Customer Innovators Early adopters Early majority Late majority Laggards
Type and opinion
leaders
Customer Features Product Price/performa Service/support Cheapest
need capability nce education price and solution
and capability assurance of
quality
Basis of First to Capability Price/performa Price and unique Market
competitors market and nce education fit to their needs share gains
real benefit on how to use (segmentation)
Number of Few/none Some but little Several Many Poor
competitors contention due competing competition kills profitability
to expanding head to head some off and so only the
market consolidation largest
begins survive
Profitability Uncertain High Declining Declining Minimal
Risks High Lower Higher Higher Highest

(Source: Drummond, Ensor and Ashford, 2001)

Activities 6.6

? 1. Discuss the usefulness of the concept of the product life cycle as a

planning tool. What are its major weaknesses?
2. Explain why firms need to have a balanced product/service portfolio
with elements at different stages in the product life cycle to ensure
long-term survival and growth.

6.7 Summary
In this unit we discussed that an organisation needs a strategic marketing plan
in order to adapt to a changing business environment. For an organisation to
be able to develop an effective strategic marketing plan, it should know its
market position. Market positions which an organisation can adopt are clas-
sified under four groups: market leader, market follower, market challenger
and market nicher. From these positions organisations can choose to adopt
one of the generic strategies: cost leadership, differentiation and focus. The
organisations can also adopt product/market strategies. These strategies ad-

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dress the specific market impact of a product or product line. Common ones
are the product/market matrix (Ansoff matrix), PIMS (product impact of
market strategy) analysis and the product life cycle (PLC). The marketing
mix variables are important in strategic marketing planning and therefore the
next unit we will discuss how an organisation is supposed to strategically
manage its marketing mix variables to achieve competitive advantage at the
marketplace.

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References
Baker, M. (2008) The Strategic Marketing Plan Audit. UK: Cambridge
Strategy Publications.
Drummond, G., Ensor, J. and Ashford, R. (2001) Strategic Marketing, Plan-
ning and Control, (Second Edition), Oxford: Butterworth, Heinemann.
DuPlessis, P.J., Jooste, C.J. and Strydom, W. (2001). Applied Strategic
Marketing. Heinemann.
Homburg, C., Kuester, S. and Krohmer, H. (2009): Marketing Manage-
ment - A Contemporary Perspective (1st ed.), London.
Hunt, S.D. (2002). Foundations of Marketing Theory: Toward a General
Theory of Marketing. Armonk: M. E. Sharpe Inc.

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 Unit Seven

Marketing Mix Strategy

7.0 Introduction

I
n the previous unit we discussed the strategic marketing planning process
and its importance to the organisation. Strategic marketing planning for
any organisation is centred on the marketing mix strategies. In this unit we
will discuss the marketing mix strategies which a firm can adopt to achieve
competitive advantage in the marketplace. The unit will also discuss the func-
tions of each marketing mix variable and how they interrelate. The point is
that the elements of the marketing mix should not be seen as individual enti-
ties, but as a set of interrelated entities which have to be set in conjunction
with one another.
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7.1 Objectives
By the end of the unit, you should be able to:
 explain the components of the product strategy
 develop the pricing strategy
 develop the promotion strategy
 outline distribution strategies which can be used by an organisation

7.2 The Product Strategy

Kotler, (2000) define product as "Anything that can be offered to a market
for attention, acquisition, use or consumption that might satisfy a want or
need"

A product is anything that can be offered to a market to satisfy a want or

need, including physical goods, services, experiences, events, persons, places,
properties, organisations, information, and ideas.

Marketers broadly define a product as a bundle of physical, service, and

symbolic attributes designed to satisfy consumer wants. Therefore, product
strategy involves considerably more than producing a physical good or serv-
ice.

7.2.1 Consumer goods classification

A variety of classifications have been suggested for consumer goods, but the
mostly used has three sub-categories: convenience goods, shopping goods
and specialty goods.
 convenience goods- products that consumers seek to purchase fre-
quently, immediately, and with a minimum of effort
 shopping goods- products purchased only after the consumer has com-
pared competing goods in competing stores
 specialty goods are particular products desired by a purchaser who is
familiar with the item sought and is willing to make a special effort to
obtain it

7.2.2 Industrial goods classification

According to Kotler, (2010) industrial goods fall into six groups as follows:

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1. raw material;
2. installations;
3. accessory equipment;
4. supplies;
5. components materials and parts; and
6. services

1. Raw Materials - are goods that become a part of a product but have
not undergone any more processing than what is needed for safe, con-
venient, economical transport and handling. Examples include oil, crude,
iron, and wood.
2. Installations - large and expensive items that do not become part of the
final product but are expended, depleted, or worn out during the years
of use. Examples include computers, tractors, and generators.
3. Accessory Equipment - does not become part of a product but less
expensive than installation, more standardised and shorter live. Exam-
ples include writers, cash registers, desk and small power tools.
4. Supplies - convenience goods of the industrial market; short-lived; and
low-priced items.
5. Component Materials and Parts - become part of the finished product;
undergo more processing than raw material.
6. Services - a non-physical offerings that are valuable in supporting the
operations of a firm.
Examples include security, cleaning, engineering, advertising, consulting, and
legal.

7.2.3 Product differentiation factors

Differentiation can be a source of competitive advantage. Product differentia-
tion is the process of describing the differences between products or serv-
ices, or the resulting list of differences. This is done in order to demonstrate
the unique aspects of a firm's product and create a sense of value. The com-
mon list of the differentiation factors is as follows:
a) product form;
b) features;
c) customisation;
d) performance;
e) conformance;
f) durability;
g) reliability;

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h) repairability; and
i) style

7.2.4 Service differentiation factors

Physical product can be differentiated easily, as compared to services which
are mainly intangible. The main factors which can be used for service differ-
entiation are:
a) ordering ease;
b) delivery;
c) installation;
d) customer training;
e) customer consulting;
f) maintenance and repair; and
g) returns
People purchase products (goods and services) to satisfy needs or wants and
obtain benefits as a result. Organisations have to understand the nature of the
needs and wants of customers in order to appreciate the kind of benefits
people expect to obtain. Product decisions have to be made with respect to
these various attributes. The attributes include quality, features, options, style,
brand name, packaging, sizes, services, warranties, returns. One of the most
important of these is quality.

7.2.5 Five product levels

In planning its market offering, the marketer needs to think through five levels
of product. Each level adds more customer value, and the five constitute
customer value hierarchy.
a) core benefit;
b) basic product;
c) expected product;
d) augmented product; and
e) potential product
The most fundamental level is the core benefit which concerns the fundamen-
tal service or benefit that the customer is really buying. A hotel guest is buying
"rest and sleep." The purchaser of a drill is buying "holes". Marketers must
see themselves benefit providers.

At the second level, the marketer has to turn the core benefit into a basic
product. Thus a hotel room includes a bed, bathroom, towels, and desk.

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There are additions to the core product or service.

At the third level, the marketer prepares an expected product, a set of at-
tributes and conditions buyers normally expect when they purchase this product.
Hotel guests expect a clean bed, fresh towels, working lamps, and a relative
degree of quiet. Most hotels can meet this minimum expectation, the traveller
normally will settle for whichever hotel is most convenient or least expensive.

At the fourth level, the marketer prepares an augmented product that ex-
ceeds customer expectations. A hotel can include a remote-control television
set, fresh flowers, rapid check-in, express checkout, and fine dining and room
services.

Today's competition essentially takes place at the product-augmentation level.

(In less developed countries, competition takes place mostly at the expected
product level). Product augmentation leads the marketer to look at the user's
total consumption system which includes the way the user performs the tasks
of getting and using products and related services. According to Levitt (2004),
the new competition is not between what companies produce in their facto-
ries, but between what they add to their factory output in the form of packag-
ing, services, advertising, customer advice, financing, delivery arrangements,
warehousing, and other things that people value.

Some important points should be noted about product-augmentation strat-

egy. First, each augmentation adds cost. Second, augmented benefits soon
become expected benefits. Today's hotel guests expect a remote-control tel-
evision set. This means competitors will have to search for still other features
and benefits. Third, as companies raise the price of their augmented product,
some competitors offer a "stripped-down" version at a much lower price.

At the fifth level stands the potential product, which encompasses all the pos-
sible augmentations and transformations the product or offering might un-
dergo in the future. Here is where companies search for new ways to satisfy
customers and distinguish their offer. Richard Branson of Virgin Atlantic is
thinking of adding a casino and a shopping mall in the 600-passenger planes
and consider the customisation platforms new e-commerce sites are offering,
from which companies can learn by seeing what different customers prefer.

Successful companies add benefits to their offering that not only satisfy cus-
tomers but also surprise and delight them. Delighting customers is a matter of
exceeding expectations.

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7.2.6 Product mix

It is rare to find a firm offering a single product or service. It is much more
common to find firms offering a mix of products or services. The product mix
according to Drummond, Ensor and Ashford (2001) has the following:
a) Width - quantity of lines the firm carries, for example radios, TVs, and
video recorders.
b) Length -quantity of items in the product mix, for example three kinds of
radio and four kinds of TV.
c) Depth - number of variants of each product offered in the line, for
example clock radios, car radios, and pocket radios.
d) Consistency - how closely related the various product lines are in terms
of the use to which they are put, for example, all electrical leisure/enter-
tainment goods.

Activity 7.1

?
1. Explain the factors that differs consumer goods from industrial goods.
2. Describe the factors that make service unique.
3. Choose a product and explain how it develops through the five product
levels.

7.2.7 New product development

New product development tends to happen in stages. Although firms often go
back and forth between these idealised stages, the following sequence is illus-
trative of the development of a new product (Donnelly and Peter, 2009):
a) New product strategy development- Different firms will have different
strategies on how to approach new products. Some firms have stock-
holders who want to minimize risk and avoid investing in too many new
innovations. Some firms can only survive if they innovate frequently
and have stockholders who are willing to take this risk. For example,
Hewlett-Packard has to constantly invent new products since com-
petitors learn to work around its patents and will be able to manufac-
ture the products at a lower cost.
b) Idea generation-Firms solicit ideas as to new products it can make.
Ideas might come from customers, employees, consultants, or engi-
neers. Many firms receive a large number of ideas each year and can
only invest in some of them.

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c) Screening and evaluation-Some products that after some analysis are

clearly not feasible or are not consistent with the core competencies of
the firm are eliminated.
d) Business analysis- Ideas are now exposed to more rigorous analysis.
Profit projections, risks, market size, and competitive response are
considered.
e) Development: The product is designed and manufacturing facilities are
planned.
f) Market testing- Frequently, firms will try to "test" a product in one
region to see if it will sell in reality before it is released nationally and
internationally. There is a lesser risk if the firm only commits money to
advertising and other marketing efforts in one region. Retailers will also
be more receptive in other parts of the country and world if it has been
demonstrated that the product sold well in one region. The firm may
also experiment with different prices for the product.
g) Commercialisation- Facilities to manufacture the product on a larger
scale are now put into operation and the firm starts a national market-
ing campaign and distribution effort.

7.2.8 Branding
According to Kotler, (2010) branding is the process of using a word or an
image to identify a company or its products. It is what separates competitors
and helps consumers remember a product. The purpose of a brand is to
increase sales by making the product or service the most visible and desired
by the consumer. Branding is becoming more than a logo or a product. It is
becoming a promise of quality and reputation. It encompasses everything
about a company, sometimes good and sometimes bad, depending on the
public's perception. Branding leads to brand identity. Brand identity is a vital
part of a business, and it should be incorporated the following:
a) Brand name which can be the spoken, including letters, and words.
Brand names simplify shopping, guarantee a certain level of quality and
allow for self expression;
b) Brand mark-elements of the brand that cannot be spoken;
c) Trade mark-legal designation that the owner has exclusive rights to the
brand or part of a brand;
d) Trade name-The full legal name of the organization;
e) Marketing materials and advertising;
f) Websites; and
g) uniforms

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Benefits of branding

Cravens and Piercy, (2003) provides benefits to buyers and sellers as fol-
lows:

To Buyer:
a) help buyers identify the product that they like/dislike;
b) identify marketer;
c) helps reduce the time needed for purchase;
d) helps buyers evaluate quality of products especially if unable to judge a
products characteristics;
e) helps reduce buyers' perceived risk of purchase; and
f) buyer may derive a psychological reward from owning the brand, for
example Rolex or Mercedes.

To Seller:
a) differentiate product offering from competitors;
b) helps segment market by creating tailored images;
c) brand identifies the company's products, making repeat purchases easier
for customers;
d) reduce price comparisons;
e) brand helps firm introduce a new product that carries the name of one
or more of its existing products
f) easier cooperation with intermediaries with well known brands;
g) facilitates promotional efforts;
h) helps foster brand loyalty helping to stabilise market share; and
i) firms may be able to charge a premium for the brand.

Branding strategies
A branding strategy helps establish a product within the market and to build a
brand that will grow and mature in a saturated marketplace. Making smart
branding decisions up front is crucial since a company may have to live with
the decision for a long time. According to Cravens and Piercy, (2003) the
following are commonly used branding strategies:

Company name
In this case a strong brand name (or company name) is made the vehicle for
a range of products (for example, Mercedez Benz).

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Individual branding
Each brand has a separate name, putting it into a de facto competition against
other brands from the same company. Individual brand names naturally allow
greater flexibility by permitting a variety of different products, of differing quality,
to be sold without confusing the consumer's perception of what business the
company is in or diluting higher quality products.

Attitude branding and iconic brands

This is the choice to represent a larger feeling, which is not necessarily con-
nected with the product or consumption of the product at all. Companies that
use attitude branding include Nike, Starbucks, and Apple, Inc. Iconic brands
are defined as having aspects that contribute to the consumer's self-expres-
sion and personal identity.

Brands whose value to consumers comes primarily from having identity value
are said to be "identity brands." Some brands have such a strong identity that
they become "iconic brands" such as Apple, Nike, and Coca-Cola.

"No-brand" branding
Recently a number of companies have successfully pursued "no-brand" strat-
egies by creating packaging that imitates generic brand simplicity. "No brand"
branding may be construed as a type of branding as the product is made
conspicuous through the absence of a brand name.

Brand extension and brand dilution

The existing strong brand name can be used as a vehicle for new or modified
products. For example, many fashion and designer companies extended brands
into fragrances, shoes and accessories, furniture, and hotels. Frequently, the
product is no different than what is already on the market, except it has a
brand name marking. The risk of over-extension is brand dilution, which is
when the brand loses its brand associations with a market segment, product
area, or quality, price, or cachet.

Multi-brands strategy
Alternatively, in a very saturated market, a supplier can deliberately launch
totally new brands in apparent competition with its own existing strong brand
(and often with identical product characteristics) to soak up some of the share

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of the market. The rationale is that having 3 out of 12 brands in such a market
will give a greater overall share than having 1 out of 10.

Cannibalisation is a particular problem of a multi-brands strategy approach,

in which the new brand takes business away from an established one which
the organisation also owns. This may be acceptable (indeed to be expected)
if there is a net gain overall.

Private labels
Also called own brands, or store brands, these have become increasingly
popular. Where the retailer has a particularly strong identity, own brand may
be able to compete against even the strongest brand leaders, and may out-
perform those products that are not otherwise strongly branded. For exam-
ple, OK's Pot 'O' Gold, and TM's Super Saver.

Individual and organisational brands

These are types of branding that treat individuals and organisations as the
products to be branded. Personal branding treats persons and their careers
as brands. Faith branding treats religious figures and organisations as brands.

Crowd-sourcing branding
These are brands that are created by the people for the business, which is
opposite to the traditional method where the business creates a brand. This
type of method minimises the risk of brand failure, since the people that might
reject the brand in the traditional method are the ones who are participating in
the branding process.

Protecting a brand
There is need to design a brand name that can be protected through registra-
tion. Generic words are not protectable, surnames and geographic or func-
tional names are difficult to protect. To protect exclusive right to a brand, the
marketer must be certain that the brand is not likely to become considered an
infringement on any existing registered brand. Guard against a brand name
becoming a generic term used to general products. Generic names cannot be
protected.

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7.2.9 Packaging
Packaging is now generally regarded as an essential component of our mod-
ern life style and the way business is organised. Packaging is the enclosing of
a physical object, typically a product that will be offered for sale. It is the
process of preparing items of equipment for transportation and storage and
which embraces preservation, identification and packaging of products. Pack-
ing is recognised as an integral part of modern marketing operation, which
embraces all phases of activities involved in the transfer of goods and services
from the manufacturer to the consumer. Packaging is an important part of the
branding process as it plays a role in communicating the image and identity of
a company (Kotler, 2003).

Packaging functions
According to Kotler, (2010) packaging plays a crucial role in marketing and
some functions include the following:
a) Physical protection- The objects enclosed in the package may require
protection from, among other things, mechanical shock, vibration, elec-
trostatic discharge, and compression, and temperature.
b) Information transmission- Packages and labels communicate how to
use, transport, recycle, or dispose of the package or product. With
pharmaceuticals, food, medical, and chemical products, some types of
information are required by governments. Some packages and labels
also are used for track and trace purposes.
c) Marketing-The packaging and labels can be used by marketers to en-
courage potential buyers to purchase the product. Package graphic
design and physical design have been important and constantly evolv-
ing phenomenon for several decades. Marketing communications and
graphic design are applied to the surface of the package and (in many
cases) the point of sale display.
d) Convenience- Packages can have features that add convenience in dis-
tribution, handling, stacking, display, sale, opening, re-closing, use, dis-
pensing, reuse, recycling, and ease of disposal.
e) Barrier protection: A barrier from oxygen, water vapour, and dust is
often required. Permeation is a critical factor in design. Some pack-
ages contain desiccants or oxygen absorbency to help extend shelf life.
Modified atmospheres or controlled atmospheres are also maintained
in some food packages. Keeping the contents clean, fresh, sterile and
safe for the intended shelf life is a primary function.
f) Security: Packaging can play an important role in reducing the security
risks of shipment. Packages can be made with improved tamper resist-

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ance to deter tampering and also can have tamper-evident features to

help indicate tampering. Packages can be engineered to help reduce
the risks of package pilferage.

Activities 7.2
1. Branding is regarded as part of actual product. Discuss.
? 2. Explain how you can develop a new product.
3. Explain the marketing benefits of branding.
4. Outline the role of packaging in marketing.
5. Discuss the critical components of the product strategy.
6. Explain how branding is important to both the producing company and
the one buy who buys the product?

7.3 Distribution Strategy

Distribution is concern with activities that make products available to custom-
ers when and where they need them. A channel of distribution or marketing
channel is a group of individuals and organisations that directs the flow of
products from producers and customers (Cravens and Piercy, 2003).

7.3.1 Types of utility distribution offers

Kotler, (2003) identified the following as the types of utility offered by distri-
bution:
 time- when the customers want to purchase the product;
 place- where the customers want to purchase the product;
 possession- facilitates customer ownership of the product; and
 form- sometimes, changes are made to the product in the distribution
channel.

7.3.2 Distribution channel decisions

There are six basic distribution channel decisions to make as follows:
1. Whether to distribute direct to the customer or indirectly through mid-
dlemen- The advantages of going direct are that it enables firms to
exercise more control over marketing activities and it reduces the amount
of time spent in the channel. The disadvantages are that it is difficult to

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obtain wide spread distribution and more resources are required to

maintain distribution.
2. Whether to adopt single or multiple channels of distribution- The ad-
vantages of using a single channel are that it guarantees a minimum level
of sales and the exclusivity of using a single channel guarantees atten-
tion to the product.
3. How long the channel of distribution should be?- In determining the
best channel length to adopt, the following factors have to be taken into
account:
 The financial strength of the producer-those in a strong position can
carry out the functions provided by intermediaries.
 Size and completeness of the product line-the costs of carrying out the
distribution function can be spread across the various items in the product
line. The more items, the more economical it might be to consider a
shorter distribution channel.
 The average order size-large orders may be distributed direct to cus-
tomers.
 The geographical concentration of customers-geographically dispersed
customers merit a longer distribution channel since servicing them re-
quires substantial investment of resources.
 The distance of the distributor from the market-geographical distance
makes it less attractive for the producer to want to supply direct.
4. The types of intermediaries to use- This effectively means choosing
between different types of retailer in the case of consumer goods, for
example supermarkets as opposed to cash and carry, and different
types of distributor in the case of industrial goods, for example whether
to use franchised dealerships or not.

5. The number of distributors to use at each level- In principle, more dis-

tributors are required if:
a) the unit value of the product is low and/or the physical quantity of stock
held is likely to be high;
b) the product is purchased frequently;
c) there is a high degree of technological complexity in the product;
d) the service requirement is high;
e) the inventory investment is high;
f) geographic concentration is low;
g) total market potential is high;
h) the market share of the producer is high; and
i) competition is intense.

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6. Which intermediaries to use- This is a qualitative decision and reflects

whether the image of the particular outlet, the way in which it performs
and the deals which can be struck with the distributor are satisfactory

7.3.3 Distribution strategies

Distribution strategies fall into three groups as follows:
a) general distribution strategies
b) vertical marketing systems
c) horizontal marketing systems

1. General strategies
Donnelly, (2003) categorises general distribution strategies under three groups
as follows:
 intensive - use all possible intermediaries.
 selected - select few specialised intermediaries.
 exclusive- chooses one specialised intermediary in a geographic area.
Intensive distribution A marketing strategy under which a company sells through
as many outlets as possible, so that the consumers encounter the product
virtually everywhere they go. For example in supermarkets, drug stores, and
gas stations. Soft drinks are generally made available through intensive distri-
bution.

Selective distribution is distribution of a product through only a limited number

of channels. This arrangement helps to control price cutting. By limiting the
number of retailers, marketers can reduce total marketing costs while estab-
lishing strong working relationships within the channel. Moreover, selected
retailers often agree to comply with the company's rules for advertising, pric-
ing, and displaying its products. Where service is important, the manufacturer
usually provides training and assistance to dealers it chooses. Cooperative
advertising can also be utilized for mutual benefit. Selective distribution strat-
egies are suitable for shopping products such as clothing, furniture, household
appliances, computers, and electronic equipment for which consumers are
willing to spend time visiting different retail outlets to compare product alter-
natives. Producers can choose only those wholesalers and retailers that have
a good credit rating, provide good market coverage, serve customers well,
and cooperate effectively. Wholesalers and retailers like selective distribution
because it results in higher sales and profits than are possible with intensive
distribution where sellers have to compete on price.

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Exclusive distribution is distribution of a product through one wholesaler or

retailer in a specific geographical area. The automobile industry provides a
good example of exclusive distribution. Though marketers may sacrifice some
market coverage with exclusive distribution, they often develop and maintain
an image of quality and prestige for the product. In addition, exclusive distri-
bution limits marketing costs since the firm deals with a smaller number of
accounts. In exclusive distribution, producers and retailers cooperate closely
in decisions concerning advertising and promotion, inventory carried by the
retailers, and prices. Exclusive distribution is typically used with products that
are high priced, that have considerable service requirements, and when there
are a limited number of buyers in any single geographic area. Exclusive distri-
bution allows wholesalers and retailers to recoup the costs associated with
long selling processes for each customer and, in some cases, extensive after-
sale service. Specialty goods are usually good candidates for this kind of
distribution intensity.

2. Development of vertical marketing systems

The trend is towards vertical marketing systems in which channel activities
are integrated and managed by one member of the channel- either a manufac-
turer, intermediary or retailer. Such systems reduce cost, minimize conflict
among channel members, and build on the experience and expertise of chan-
nel members (Kotler, 2003).

3. Development of horizontal marketing systems

Strategic alliances and networks facilitate the development of horizontal mar-
keting systems. They reflect the readiness of two or more autonomous units,
who may even be competitors, at the same level in a channel to co-operate.
Co-operation reduces the risks for an individual firm. It facilitates access to
other channels of distribution thereby accelerating market penetration Kotler,
2003).

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Activities 7.3
1. Explain the role of distribution strategy in marketing.
? 2. Outline critical distribution decisions in marketing.
3. Identify and explain a distribution strategy which is suitable for your
company.
4. Explain how a company can determine the length of a channel of
distribution.
5. Explain how the distribution strategy complements product strategy.

7.4 Pricing Strategy

According to Drummond, Ensor and Ashford (2001), there are three main
approaches a business takes in setting price as follows:
a) Cost-based pricing: price is determined by adding a profit element on
top of the cost of making the product.
b) Customer-based pricing: where prices are determined by what a firm
believes customers will be prepared to pay.
c) Competitor-based pricing: where competitor prices are the main influ-
ence on the price set. Let's take a brief look at each of these approaches.

7.4.1 Cost based pricing

This involves setting a price by adding a fixed amount or percentage to the
cost of making or buying the product. In some ways this is quite an old-
fashioned and somewhat discredited pricing strategy, although it is still widely
used. Customers are not too bothered what it cost to make the product - they
are interested in what value the product provides them.

Cost-plus (or "mark-up") pricing is widely used in retailing, where the retailer
wants to know with some certainty what the gross profit margin of each sale
will be. An advantage of this approach is that the business will know that its
costs are being covered. The main disadvantage is that cost-plus pricing may
lead to products that are priced un-competitively.

7.4.2 Customer-based pricing

There are five customer-based pricing approaches as follows:
1. Penetration pricing;
2. Skimming pricing;

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3. Loss leaders;
4. Predatory pricing; and
5. Psychological pricing
Penetration pricing is the pricing technique of setting a relatively low initial
entry price, usually lower than the intended established price, to attract new
customers. The strategy aims to encourage customers to switch to the new
product because of the lower price. Penetration pricing is most commonly
associated with a marketing objective of increasing market share or sales
volume. In the short term, penetration pricing is likely to result in lower profits
than would be the case if price were set higher. However, there are some
significant benefits to long-term profitability of having a higher market share,
so the pricing strategy can often be justified. Penetration pricing is often used
to support the launch of a new product, and works best when a product
enters a market with relatively little product differentiation and where demand
is price elastic - so a lower price than rival products is a competitive weapon.

Price skimming involves setting a high price before other competitors come
into the market. This is often used for the launch of a new product which
faces little or no competition - usually due to some technological features.
Such products are often bought by "early adopters" who are prepared to pay
a higher price to have the latest or best product in the market.

There are some other problems and challenges with this approach which in-
cludes:
 Price skimming as a strategy cannot last for long, as competitors soon
launch rival products which put pressure on the price;
 Distribution (place) can also be a challenge for an innovative new prod-
uct. It may be necessary to give retailers higher margins to convince
them to stock the product, reducing the improved margins that can be
delivered by price skimming; and
 A firm may slow down the volume growth of demand for the product.
This can give competitors more time to develop alternative products
ready for the time when market demand (measured in volume) is strong-
est.
Loss leaders are a method of sales promotion. A loss leader is a product
priced below cost-price in order to attract consumers into a shop or online
store. The purpose of making a product a loss leader is to encourage custom-
ers to make further purchases of profitable goods while they are in the shop.
But does this strategy work? Using a loss leader is essentially a short-term
pricing tactic for any one product. Customers will soon get used to the tactic,

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so it makes sense to change the loss leader or its merchandising every so

often.

Predatory pricing, prices are deliberately set very low by a dominant com-
petitor in the market in order to restrict or prevent competition. The price set
might even be free, or lead to losses by the predator. Whatever the approach,
predatory pricing is illegal under competition law.

Psychological pricing, sometimes prices are set at what seem to be unusual

price points. For example a good could be sold at $9.99 instead of $10. The
aim of psychological pricing is to make the customer believe the product is
cheaper than it really is.

7.4.3 Competitor-based pricing

If there is strong competition in a market, customers are faced with a wide
choice of who to buy from. They may buy from the cheapest provider or
perhaps from the one which offers the best customer service. But customers
will certainly be mindful of what is a reasonable or normal price in the market.
An advantage of using competitive pricing is that selling prices should be line
with rivals, so price should not be a competitive disadvantage.

Activity 7.4
1. Explain the main approaches in pricing.
? 2. Identify and discuss a situation in which customer-based pricing strategy
can be used.
3. Competitor-based pricing strategy is beneficial to the customer but
not the best to the company. Discuss.

7.5 Promotion Strategy

Promotion is an important part of any marketing strategy. There are three
basic types of promotional strategies thus a push strategy, a pull strategy or a
combination of the two.

In general, a push strategy is sales oriented, a pull strategy is marketing-ori-

ented and a push-pull strategy is a combination of the two (Kotler, 2010).

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Push strategy-A push promotional strategy works to create customer de-

mand for your product or service through promotion, for example through
discounts to retailers and trade promotions. Push promotional strategies also
focus on selling directly to customers, for example, through point of sale dis-
plays and direct approaches to customers.

Pull strategy-A pull promotional strategy uses advertising to build up cus-

tomer demand for a product or service. For example, advertising children's
toys on children's television shows is a pull strategy. The children ask their
parents for the toys, the parents ask the retailers and the retailers then order
the toys from the manufacturer.

Combination strategies- Some companies use a combination of both push

and pull strategies.

In developing an effective promotion strategy the basic steps involve:

 identifying the target audience;
 determining the communications objective;
 designing the message;
 selecting the communications channels;
 allocating the total promotions budget;
 deciding on the promotions mix; and
 Measuring the results of the promotion.

7.5.1 Identifying the target audience

The target audience is a complex combination of persons. It includes the
person who ultimately buys the product, as well as those who decide what
product will be bought (but don't physically buy it), and those who influence
product purchases, such as children, spouse, and friends. In order to identify
the target consumer, and the forces acting upon any purchasing decision, it is
important to define three general criteria in relation to that consumer, as iden-
tified by Gilligan and Wilson, (2003).
1. Demographics- Age, gender, job, income, ethnicity, and hobbies;
2. Behaviours- When considering the consumers' behaviour an advertiser
needs to examine the consumers' awareness of the business and its
competition, the type of vendors and services the consumer currently
uses, and the types of appeals that are likely to convince the consumer
to give the advertiser's product or service a chance; and
3. Needs and Desires- The advertiser must determine the consumer needs-
both in practical terms and in terms of self-image,- and the kind of

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pitch/message that will convince the consumer that the advertiser's serv-
ices or products can fulfil those needs.

7.5.2 Determining the communications objective

Promotion efforts can have different objectives which may include the follow-
ing.
 to create awareness of a product or service;
 to provide information about a product or service'
 to generate enquiries;
 to build recognition of a company name;
 to reach those people who are beyond the reach of salesmen'
 to evoke desire for a product or service;
 to make the selling task easier;
 to overcome prejudices;
 to remind people about a product's benefits; and
 to allay cognitive dissonance.

7.5.3 Designing the message

Effective communications have to appeal to the needs and wants of the re-
cipients. The communication message should give the recipient a motive or
incentive to act. In addition the communication message should also spell out
exactly what course of action it is expected that the recipient will follow. Get-
ting people to consider purchasing a product or service can be achieved through
appeal to their cognitive processes. One needs to arouse desire, indicate a
need or give a logical reason why a product or service offers the best means
of satisfying a need. In so doing the message becomes implanted in the recipi-
ent's memory and can be triggered by future needs, motives and associations.

The appeal, theme, idea or unique selling proposition is what the communica-
tor has to get over to the target audience in order to produce the desired
response. Benefit, identification, motivation are all concepts that can be built
into the message. Messages can be built around rational, emotional or moral
appeals, themes, ideas or unique selling propositions. Economy, value and
performance are used in messages with a rational content.

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7.5.4 The promotional mix

There are a number of promotional vehicles available to a firm as follows:
1. advertising;
2. sales promotion;
3. publicity;
4. personal selling; and
5. direct marketing
The most appropriate promotional mix for a product will be influenced by the
following factors:
a) the available budget;
b) the promotional message;
c) the complexity of the product or service;
d) market size and location;
e) the complexity of the product or service;
f) market size and location;
g) distribution channels;
h) life cycle; and
i) competition

Activity 7.5
1. Outline issues that you have to consider when developing an effective
? message to produce desired response?
2. Describe the factors that affect the choice of promotional mix.
3. Explain the stages involved in promotional mix.
4. Identify and explain promotional objectives which a company can
pursue.
5. Discuss how s the 4Ps complements each other in the marketing
strategy?

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7.6 Summary
In this unit we have discussed how the marketing mix strategy is used in achiev-
ing marketing objectives through proper analysis of the 4 Ps or elements of
marketing namely the product, price, place and promotion. Also the unit dis-
cussed that a successful marketing mix depends on the right combination of
these marketing elements. Marketing mix is a tool that assists in defining a
marketing strategy for the product or service. Proper marketing mix analysis
is very important for implementation of a strategic marketing plan to achieve
business goals or objectives. A marketing mix strategy cannot be effective
until it is implemented. Therefore the next unit is dedicated to strategic mar-
keting plan and marketing mix strategy implementation.

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References
Cravens, D. and Piercy, N. (2003) Strategic Marketing, (7th Edition), New
York: McGraw.
Donnelly, J.H. and Peter, P.J. (2009) Marketing Management Knowledge
and Skills, McGraw-Hill.
Drummond, G., Ensor, J. and Ashford Ruth (2001) Strategic Marketing,
Planning and Control, (Second Edition), Oxford: Butterworth,
Heinemann.
Gilligan, C. Wilson, Richard M.S. (2003) Strategic Marketing Planning,
Burlington, MA: Butterworth-Heinemann Publications.
Kotler, P. (2000) Marketing Management, Analysis, Planning, Implemen-
tation and Control, 9th Edition, New York: McGraw-Hill.
Kotler, P. (2010) Marketing Management, (Millennium Edition), Prentice
Hall.
Proctor, T. (2000) Strategic Marketing, An Introduction, London: Routledge.

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 Unit Eight

Marketing Strategy
Implementation

8.0 Introduction

I
n the previous two units (6 and 7) we discussed how strategic marketing
plan and marketing mix strategy are formulated. Once these are formu
lated, the next problem is to put them into action for successful marketing
performance. In other words, a well formulated marketing strategy does not
always attain the intended results. It depends on how good its implementation
is. A combination of good strategy formulation and good strategy implemen-
tation leads to a successful marketing campaign. Marketing Strategy Imple-
mentation is a key process in the marketing campaign of any organisation,
hence this unit is going to discuss how a firm implements a strategic marketing
plan and the problems it is likely to encounter during the implementation proc-
ess.
Strategic Marketing Management BMKT 405

8.1 Objectives
By the end of the unit, you should be able to:
 explain the common implementation problems
 explain ways to overcome implementation challenges
 Outline factors supporting strategy implementation

8.2 What is Strategic Marketing Implementation?

Strategic marketing implementation is the process that turns marketing plans
into action assignments and ensures that such assignments are executed in a
manner that accomplishes the plan's stated objectives. Marketing implemen-
tation involves putting the marketing design, execution and scheduling into
development. This phase requires the giving of specific tasks and timelines to
individuals and groups. The business employees gather the necessary resources
to execute the marketing program and release the organisation's product or
service to the public. The heart of the implementation of a marketing plan is
the execution, the actual "doing" of the planned marketing activities. Initiatives
don't get completed by stating them on paper--they require action, manage-
ment and follow up.

8.3 Common Marketing Implementation Problems

Proctor, (2000) identified the most common implementation problems under
four categories: purpose, process, employees and management.

8.3.1 Purpose
The purpose of implementation should be very clear to all important
stakeholders. Implementation is difficult when the purpose is:
a) unclear;
b) generic;
c) impossible;
d) too easy;
e) not shared with others; and
f) incongruent

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8.3.2 Process
Effective implementation of a strategic marketing plan may be difficult if the
process is not sequentially arranged. Implementation will be negatively af-
fected when the process is:
a) not clearly defined;
b) too detailed;
c) information on the process is not available;
d) when responsibilities not clearly define; and
e) people not capable

8.3.3 Employees
Employees are crucial in the success of any marketing plan. Most good plans
fail to yield positive results because of the following factors:
a) not involved in planning;
b) not trained;
c) lack of authority;
d) not clear accountability;
e) motivation; and
f) culture

Activities 8.1

? 1. Identify and explain the situations in which strategic marketing plan

implementation becomes difficult.

8.3.4 Management
Management is very important in strategy implementation. Most strategy blue-
prints fail because of the following factors:
 weak support from top management;
 lack of line management support; and
 lack of leading talent
No-one can doubt that the support of top management and the active in-
volvement of staff in the planning and implementation processes are the main
keys to successful implementation of any plan. Successful implementation of
the plan will vary in accordance with how the two variables are balanced, as
you can see in the model in Figure 8.1.

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Implementation Variables

High Senior Staff Involvement Low Senior Staff Involvement

Staff will struggle.

High Staff Successful Implementation will be
Involvement implementation will occur impeded.

Low Staff
Staff is likely to resist the plan. Plan resisted in all ways.
Involvement Implementation will be impeded. Implementation stage unlikely
to succeed.

Figure 8.1 Implementation Variables (Source: Proctor, 2001)

Management support
The main difficulties to be found in marketing plan implementation come from
the senior management who do not think it is necessary. Some may see the
new way of thinking as being a "threat" to the established systems which have
proved relatively efficient. New thinking is often seen as being radical and,
especially if the company has been established for a long time, there will al-
ways be people who resist it. People fear for their positions and the status
they have acquired. They worry that people with new ideas will take over and
that they will lose their jobs. If they can see that to accept the validity that the
customer is important and that everyone should be working together is so
significant they will eventually change their opinions.

Employee involvement - participation and empowerment

One of the key concerns of management is how the human dimension can be
brought into harmony with the demands of the formal organisation to improve
its functioning. For some, the key is employee involvement through the twin
processes of participation and empowerment.

Participation is all about involving people in their work in a more meaningful

way, usually through taking part in the decision making process usually re-
served for management alone. It is especially appropriate for those decisions
which closely affect subordinates, but may be extended to include any form
of decision. Donnelly and Peter (2009) identified four principles of participa-
tion.

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1. Constructive conflict - This is the concept that conflict is neither good

nor bad it is merely the expression of divergent interests - and manage-
ment must try to synthesise these interests, rather than seeking to im-
pose a view which is contrary to them. It is built upon respect for the
opinions of others and upon seeking ways of involving all parties in the
resolution of problems.
2. Giving orders - This should be based on analysis of the situation to
which the decision is being applied. For example, when the heads of a
sales department and a production department are making a decision
on a product, the solution is found by studying the market and discov-
ering the solution which meets the needs of the situation. The issue,
then, when trying to make others adopt a strategy should not be one of
how to persuade people to think as we do, but how to help others to
see the solution which exists within the situation.
3. Group responsibility - An undertaking should be so organised that eve-
ryone feels responsibility for the whole organisation, not just the achieve-
ment of their own area of work. Participation in decision-making, in-
volving members of the organisation at all levels and implementing the
law of the situation, will all help to develop collective responsibility.
Also, employees need to see the contribution they are making to the
organisation as a whole and this demands that there must be good co-
ordination of all parts.
4. Authority and responsibility - Authority is rarely one person acting on
their own and responsibility is usually the result of a pooling of re-
sources of many individuals. Therefore, there is a need to share re-
sponsibility and involve people - for example, "power with" should re-
place "power over", with consultation taking the place of dictatorship.
For employee participation to become a reality, management have to believe
that participation is a valuable asset in carrying out their role. This involves
accepting a change in perception for many from a concern with "how can we
make people work harder for us?" to "how can we help people to want to
work more productively with us?" This is a necessary underpinning to involv-
ing a wider circle of participants in the decision making process.

When the implementation starts, there will always be a number of barriers to

slow down the process as follows;
 internal resistance of an organisation to accept change and faulty per-
spectives of team members about the new strategy;
 conflicts with existing power structure due to difference in professional
ideologies; and

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 lack of information sharing and communication between individuals and

business units or top management and organisational members.

Activity 8.2

?
1. In Zimbabwe most plans fail because of implementation. Discuss
2. One factor which affects strategy implementation is internal resistance.
How can a company resolve this?

8.4 Overcoming the Potential Challenges of Strategy

Implementation
According to Kotler, (2010) managers should anticipate a lot challenges in
strategy implementation, and therefore they should limit them through the fol-
lowing;
 engage all levels of your company in the strategy planning process;
 communicate the need and how decisions were made to fill that need;
 obtain buy-in by all key employees and stakeholders involved in imple-
menting the strategy;
 conduct informational sessions or training to achieve a comfort level
with new strategic processes and procedures; and
 implement the new strategy with fanfare

8.5 Implementation Activities

 Altering sales territories
 Adding new departments
 Closing facilities
 Hiring new employees
 Cost-control procedures
 Modifying advertising strategies
 Building new facilities

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8.6 Factors Supporting Strategy Implementation

Proctor, (2000) pointed out that organisations that are successful at strategy
implementation should effectively manage the following key supporting fac-
tors:
1. action planning;
2. organisational structure;
3. human resources factors;
4. the annual business plan;
5. monitoring and control;
6. linkage;
7. culture;
8. strategy; and
9. leadership

8.6.1 Action planning

Organisations successful at implementing strategy develop detailed action
plans---chronological lists of action steps (tactics) which add the necessary
detail to their strategies. They assign responsibility to a specific individual for
accomplishing each of those action steps. Also, they set a due date and esti-
mate the resources required to accomplish each of their action steps. Thus
they translate their broad strategy statement into a number of specific work
assignments.

8.6.2 Organisational structure

Those successful at implementing strategy give thought to their organisational
structure. They ask if their intended strategy fits their current structure. They
also ask deeper question as well... "Is the organisation's current structure
appropriate to the intended strategy?"

8.6.3 Human resource factors

Organisations successful at strategy implementation consider the human re-
source factor in making strategies happen. Further, they realise that the hu-
man resource issue is really a two part story. First, consideration of human
resources requires that management think about the organisation's communi-
cation needs. They articulate the strategies so that those charged with devel-
oping the corresponding action steps (tactics) fully understand the strategy
they're to implement.

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Second, managers successful at implementation are aware of the effects each

new strategy will have on their human resource needs. They ask themselves
the questions... "How much change does this strategy call for?" "How quickly
must we provide for that change?" "What are the human resource implica-
tions of our answers to those two questions?"

In answering these questions, they'll decide whether to allow time for em-
ployees to grow through experience, to introduce training, or to hire new
employees.

8.6.3 The annual business plan

Organisations successful at implementation are aware of their need to fund
their intended strategies. And they begin to think about that necessary finan-
cial commitment early in the planning process. First, they "ballpark" the finan-
cial requirements when they first develop their strategy. Later when develop-
ing their action plans, they "firm up" that commitment. That way, they link their
strategic plan to their annual business plan (and their budget). And they elimi-
nate the "surprises" they might otherwise receive at budgeting time.

8.6.4 Monitoring and control

Monitoring and controlling the plan includes a periodic look to see if you're
on course. It also includes consideration of options to get a strategy once
derailed back on track. Those options (listed in order of increasing serious-
ness) include changing the schedule, changing the action steps (tactics), changing
the strategy or (as a last resort) changing the objective.

8.6.5 Linkage
Many organisations successfully establish the above supporting factors. They
develop action plans, consider organisational structure, take a close look at
their human resource needs, fund their strategies through their annual business
plan, and develop a plan to monitor and control their strategies and tactics.
They still fail to successfully implement those strategies and tactics. The rea-
son, most often, is they lack linkage. Linkage is simply the tying together of all
the activities of the organization to make sure that all of the organisational
resources are moving in the same direction. It isn't enough to manage one,
two or a few strategy supporting factors. To successfully implement your
strategies, you've got to manage them all. Also make sure you link them to-
gether.

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Strategies require "linkage" both vertically and horizontally. Vertical linkages

establish coordination and support between corporate, divisional and de-
partmental plans. Linkages which are horizontal are across departments, across
regional offices, across manufacturing plants or divisions which require coor-
dination and cooperation to get the organisational units "all playing in har-
mony."

8.6.6 Culture
Culture can be defined as a combination of shared values and beliefs. These
are commonly reinforced with corporate symbols and symbolic behaviour.
Great care must be taken when implementing marketing strategy. If the strat-
egy goes against the dominant culture it is likely to fail unless a major effort is
made to develop and maintain support. This could be achieved via staff train-
ing, appraisal and restructuring. The strategist needs to be sensitive to the
shared values that exist within the organisation. Normally it is best to work
with, as opposed to against, such values.

8.6.7 Strategy
To state the obvious, there must be a strategy to implement. However, the
fact that a strategy exists may not be apparent to everyone. Additionally, the
strategy may not be seen as appropriate by all staff. The project leader must
ensure people are aware of the strategy, the reason for it and their role in
making it work.

8.6.8 Leadership
The role of the leader is to get the best out of people and deal with the unex-
pected. They should be viewed as facilitators. This is achieved by creating an
environment where actions can take place. Leaders require effective people
skills such as negotiation and delegation. Often leaders acquire their leader-
ship position by means of technical expertise. This can be dangerous, since
their primary function is to facilitate rather than undertake the work them-
selves. The leader needs transferable management skills in addition to techni-
cal and marketing competence.

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Activity 8.2

? 1. Explain how an organisation can overcome implementation challenges.

2. Outline why linkages are very important in strategy implementation?
3. 'Leadership influences organisations culture' one analyst said. Do you
think leadership influence organisational culture in strategy
implementation?

8.7 Summary
In this unit we have discussed that most strategic marketing plans fail during
the implementation phase because of not paying attention to key implementa-
tion factors. Key factors to successful implementation are the application of
basic management principles - leadership, systems and resourcing are all im-
portant. Such factors must be taken within the context of the organisational
culture and business environment that exists. Prior to implementation, it is
wise to consider how easy the tasks are likely to be. This relates to the impor-
tance of the task and the level of associated change. The attitude and influ-
ence of interested parties will also have a significant impact on the ease, or
otherwise, of implementation. A firm should closely monitor all activities dur-
ing implementation; hence it should develop effective control systems for
monitoring. In the next unit we are going to discuss the control systems which
a firm can put in place in the strategic marketing plan implementation.

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References
Cravens, D. and Piercy N. (2003) Strategic Marketing, (7th Edition), New
York: McGraw-Hill.
Donnelly, J.H. and Peter, P.J. (2009) Marketing Management Knowledge
and Skills, McGraw-Hill.
Kotler, P. (2000) Marketing Management, Analysis, Planning, Implemen-
tation and Control, (9th Edition), New York: McGraw-Hill.

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136 Zimbabwe Open University

 Unit Nine

Marketing Control

9.0 Introduction

I
n this unit we are going to discuss control systems which can be used in
strategic marketing plan implementation. Control is concerned with guar
anteeing that behaviour and systems conform to, and support, predeter-
mined corporate objectives and policies. Such 'hard edged' views illustrate
the importance of linking behaviour to overall strategic direction. This is a
fundamental reason for having control systems.
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9.1 Unit Objectives

By the end of unit, you will be able to:
 explain the basic principles of control
 outline marketing control areas
 discuss marketing control process

9.2 Meaning of Marketing Controls

According to Kotler, (2010) marketing control refers to the process by which
a company manipulates its marketing plans to reach its original goals. This
process is achieved by setting up performance standards that will ideally be
reached at each step of a marketing campaign. If these standards are not
being met, corrective action needs to be taken. There are many methods of
achieving marketing control, which can include but are not limited to market
research, analysis of financial signposts like market share, sales, and cash
flow, and customer relations information gleaned from customer feedback
and service levels.

Few effective marketing campaigns are achieved through random action.

Successful marketing is usually achieved through a general process within
which many variations are possible. The basic blueprint involves drawing up
goals that the campaign is designed to meet and then drawing up the plans
and strategies that are intended to achieve those goals. If those plans start to
fall short of the desired standards, they then need to be adjusted to get the
campaign once again pointed in the right direction. Marketing control involves
the analysis of where the original plans are falling short and the steps taken to
correct those problems.

9.3 Marketing Control - The Basic Principles

The basis of control is the ability to measure. In essence it compares what
should have happened with what actually happened or is likely to happen.
Given the importance of measurement, a tendency exists to measure what is
easy to quantify rather than what is important. Project managers must guard
against this and focus on the key areas. Good control systems often detect
and rectify problems before they become significant and managers should
remember that prevention is better than cure. Try to be proactive rather than
reactive.

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The process is broken down into a series of simple steps. Firstly, a target is
set. Ideally, this is integrated into overall strategic planning. Secondly, a method
of measurement has to be determined and implemented. Finally, measured
results are compared with the pre-determined target(s) and corrective action,
if required, is undertaken. There are two sides to the control equation - inputs
and outputs. If only output is considered then the system is one of inspection
as opposed to control. Correctly addressing both sides of the equation al-
lows management to optimise the process and take a strategic view. Control
is exercised effectively when adequate resources (inputs) have been availed
for effective implementation. Some of the inputs include the following:
1. Finance: adequate investment, working capital and cash;
2. Operations: adequate capacity, usage, efficiency and application of
machines, systems and other assets; and
3. People: adequate numbers, quality and skills of staff.
Output is measured in terms of overall system performance. Performance is
derived from a combination of efficiency and effectiveness:
a. Efficiency- How well utilised are the inputs? Do we make maximum
use of finance, minimize cost and operate at optimum levels of capac-
ity?
b. Effectiveness- Are we doing the right things? This relates to actual per-
formance and will include sales revenue, profit, and market share and
measures of customer satisfaction.

9.3.1 Requirements for an effective marketing control

system
The following principles are required in an effective control system:

Involvement-This is achieved by encouraging participation in the process.

Management can achieve desired results via consultation. For example,
salespeople could contribute towards setting marketing targets.

Target setting-There are two important factors. Firstly, the target criteria should
be objective and measurable. How this is assessed needs to be communi-
cated and agreed in advance. Secondly, the target set (sales volume, aware-
ness levels and market share targets) needs to be achievable but challenging.

Focus- Recognise the difference between the symptoms and the source of a
problem. While it may be expedient to treat the symptoms, tackling the source
of the problem should eliminate it once and for all. For example sales decline
may a symptom of the wrong of marketing mix being used.

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Effectiveness-The tendency exists to measure efficiency as opposed to effec-

tiveness. Efficiency is the usage and productivity of assets. Effectiveness is
about doing the right things. Ideally, we want measures of efficiency applied
to areas of effectiveness. In reality we tend to apply efficiency measures to
areas easiest to measure. Be careful to measure what is important, not what is
easy to quantify. Additionally, measurement should be accurate, valid and
consistent.

Management by exception- Management attention is directed to areas of

need. Identifying what constitutes an exception to the norm is a useful exer-
cise in its own right. The process involves setting tolerances and benchmarks
for normal marketing operation. Management action only becomes a priority
when pre-set limits are breached.

Action- Good control systems promote action. Such systems do not just
detect problems, they solve problems. Basically, actions adjust the inputs to
the process.

9.3.2 Marketing control system

Kotler (2003) suggested four key issues in marketing control which includes
control of the annual marketing plan, control of profitability, control of mar-
keting efficiency, strategic marketing control. He then suggested that of these
four, the first and the last are of prime concern. Expressed in diagrammatic
form, Figure 9.1 represents the cycle of control at both the functional and
tactical/operational levels.

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Marketing Control System

Marketing planning
• Objectives
• Strategies
• Operational

Set performance criteria and

performance standards

Ascribe personal responsibilities

Measure performance against

standards

Action to communicate
Action on Action to alter
Variance correction
Correction performance
Standards
Take corrective marketing action

Figure 9.1 The Cycle of Marketing Control System

Activity 9.1
1. Outline the difference between inspection and control.
? 2. Explain the features of an effective marketing control system.
3. Identify and explain what is controlled in an organisation.

9.4 Problems of Marketing Control

According to Kotler, (2010) there are problems associated with marketing
controlling and some are as follows:
a) a good control system is not easy to develop;

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b) benefits of control and subsequent improvements are outweighed by

the cost of the control mechanism;
c) control systems stifle effort and creativity, such systems promote uni-
formity and conformance to pre-set targets; and
d) control promotes a view of inspection as opposed to development.

9.5 Control Areas

Management control will focus on finance, performance appraisal and
benchmarking.

9.5.1 Finance
Financial control techniques are vital to successful strategy. We will focus on
three main financial control activities: ratios, budgeting and variance analysis.

i) Ratios

A simple and effective control technique is to express performance in terms of

ratios. Ratios represent a snapshot of the firm's financial/productivity position
and fall into four general categories profitability, liquidity, debt and activity
(Wood, Sangster, and Allan, 2008).

 Profitability ratios

Here, effectiveness is measured by evaluating the organisation's ability to pro-

duce profit. Profit margin is expressed in terms of a ratio of profit to sales.
The profit margin is a key trading concern. Clearly, the profit margin can be
enhanced by raising selling price and/or reducing costs.

Example
Gross Profit Margin = Profit
Sales Revenue
The gross profit margin ratio is used as one indicator of a business's financial
health. It shows how efficiently a business is using its materials and labour in
the production process and gives an indication of the pricing, cost structure,
and production efficiency of your business. The higher the gross profit margin
ratio the better.
Net Profit Margin = Profit after Tax
Sales Revenue

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The net profit margin ratio show the proportion of every dollar of sales that is
left after all expenses have been paid, and remains as net profit. Net profit is
used to pay for interest, tax and distribution to the owners. The higher the net
profit margin ratio the better.
Return on Capital employed = Net Profit
Capital employed

ROCE is used to prove the value the business gains from its assets and liabili-
ties. A business which owns lots of land but has little profit will have a smaller
ROCE to a business which owns little land but makes the same profit. It
basically can be used to show how much a business is gaining for its assets, or
how much it is losing for its liabilities.

 Liquidity ratios

Liquidity ratios evaluate the ability to remain solvent and meet current liabili-
ties. The firm needs to be able to convert assets into cash in order to meet
payment demands. If the current ratio is more than 1, sufficient assets exist to
meet current liabilities. The quick (or acid-test) ratio gives a stricter appraisal
of solvency as it assumes stock is not automatically convertible into cash.
Ideally, this ratio should be 1:1. However, many businesses operate with lower
acceptable ratios. If the ratio is too high it may suggest that the organisation
does not make optimum use of its financial assets (for example holding too
much cash).

Examples
Current Ratio = Current Assets
Current Liability
The current ratio is another test of a company's financial strength. It calculates
how many dollars in assets are likely to be converted to cash within one year
in order to pay debts that come due during the same year.
Quick Ratio = Current Assets - Inventory
Current Liability
In finance, the acid-test or quick ratio or liquid ratio measures the ability of a
company to use its near cash or quick assets to extinguish or retire its current
liabilities immediately. Quick assets include those current assets that presumably
can be quickly converted to cash at close to their book values. A company with a
quick ratio of less than 1 cannot currently pay back its current liabilities.

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 Debt ratios

These ratios help determine the company's ability to handle debt and meet
scheduled repayments. They examine the extent to which borrowed funds
finance business operations. If creditors begin to outweigh debtors this may
signify overtrading - an inability to collect money owed.

Examples
Debt to Asset Ratio = Total Liabilities
Total Assets
Total liabilities divided by total assets. The debt/asset ratio shows the propor-
tion of a company's assets which are financed through debt. If the ratio is less
than one, most of the company's assets are financed through equity. If the
ratio is greater than one, most of the company's assets are financed through
debt. Companies with high debt/asset ratios are said to be "highly leveraged,"
and could be in danger if creditors start to demand repayment of debt.
Debt to Credit Ratio = Debtors
Credits
The amount of debt owed on revolving lines of credit relative to the total
amount of all available credit limits on all revolving accounts. Lenders assume
that borrowers with a lower debt to credit ratio are more likely to be using
credit responsibly and less likely to default. A debt to credit ratio below 30%
is considered good.

 Activity ratios

These ratios determine how effective the organisation is at generating activity,

such as sales from assets. These activities often relate to business cycles or
processes, such as the time taken to turn over stock or collect debts.

Example
Inventory Turnover = Sales
Inventory
The inventory turnover ratio is often interpreted as a measure of the number
of times that the company sold through its inventory during the year. Thus, for
example, an inventory turnover ratio of 4.0 indicates that the company sells
through its stock of inventory each quarter - in other words, there is a three
month supply of inventory on hand.

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Activity 9.2
1. Identify and explain the problems of control in any organisation of your
? choice.
2. Explain the reason why is important to understand ratios in strategic
marketing?

ii) Budgeting
The processes of strategic development and budgeting are intrinsically linked.
To be blunt; no budget equals no strategy! The budgeting process translates
marketing strategy into financial terms which, whether we like it or not, are
the way all plans are expressed, evaluated and controlled. Budgeting is the
single most common control mechanism. It serves not only to quantify plans
but also to co-ordinate activities, highlight areas of critical importance and
assign responsibility.

The objectives of a Budgetary Control System include the following:

1. Definition of goals: Portraying with precision, the overall aims of the
business and determining targets of performance for each section or
department of the business.
2. Defining responsibilities: Laying down the responsibilities of each indi-
vidual so that everyone knows what is expected of him/her and how
he/she will be judged.
3. Basis for performance evaluation: Providing basis for the comparison
of actual performance with the predetermined targets and investigation
of deviation, if any, of actual performance and expenses from the budg-
eted figures. It helps to take timely corrective measures.
4. Optimum use of resources: Ensuring the best use of all available re-
sources to maximise profit or production, subject to the limiting fac-
tors.
5. Coordination: Coordinating the various activities of the business and
centralising control, but also making a facility for the management to
decentralise responsibility and delegate authority.
6. Planned action: Engendering a spirit of careful forethought, assessment
of what is possible and an attempt at it. It leads to dynamism without
recklessness. It also helps to draw up long range plans with a fair measure
of accuracy.
7. Basis for policy: Providing a basis for revision of current and future
policies.

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Limitations of budgetary control

1. Estimates: Budgets may or may not be true, as they are based on esti-
mates. The assumptions about future events may or may not actually
happen.
2. Rigidity: Budgets are considered as rigid document. Too much empha-
sis on budgets may affect day to day operations and ignores the dy-
namic state of organisational functioning.
3. False sense of security: Mere budgeting cannot lead to profitability.
Budgets cannot be executed automatically. It may create a false sense
of security that everything has been taken care of in the budgets.
4. Lack of coordination: Staff cooperation is usually not available during
budgetary control exercise.
5. Time and cost: The introduction and implementation of the system may
be expensive.

iii) Variance analysis

This examines the variation between actual and planned results and is a con-
cept applicable to a range of activities (Wood, F. et al., 2008). It is commonly
used along with budgetary control. The actual results are compared with budg-
eted forecasts and then the variance is examined in order to determine the
reason for the difference. Variance analysis allows the organisation to identify
the main areas of concern and break problems down into component parts.
For example, in marketing, variance analysis is often applied to sales price
and sales volume.

Variance in sales revenue = Actual revenue - planned revenue

Variance due to price = Actual volume × (planned price - actual price)

Variance due to volume = Planned price × (actual volume - planned volume)

9.6 Performance Appraisal

Performance appraisal concerns achieving better results from groups and in-
dividuals. A performance appraisal framework is based on planned objec-
tives, levels of achievement and competence. The focus is on the control and
development of staff, and is critical to strategy implementation.

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9.7 Benchmarking
In order to be 'the best you can be', it pays for organisations to compare
themselves with leading performers. Benchmarking provides a method of
enabling such comparisons to take place. Benchmarking is defined as: A sys-
tematic and ongoing process of measuring and comparing an organisation's
business processes and achievements against acknowledged process leaders
and/or key competitors, to facilitate improved performance. Benchmarking is
more than just copying. The process is about continuous improvement and
becoming a learning organisation. Benchmarking falls into three general areas
as follows:

Competitive analysis - reviewing competitors' activities, strategy and opera-

tions so that the organisation can improve its performance.

Best practice - determining the best way of undertaking an activity. This could
involve examining activities in unrelated areas of business or industry. For
example, a computer manufacturer could benchmark a mail-order retail com-
pany in order to improve its stock control system. Equally, best internal prac-
tice could be identified and spread to other units or departments within the
organisation.

Performance standards - targets to be met or surpassed.

Activity 9.3

?
1. Explain ways which budgeting can be used as a control measure.
2. Define Benchmarking? Discuss how benchmarking can aid in
controlling.

9.8 Controlling Marketing Performance

Measuring marketing performance is a process of determining appropriate
criteria by which to judge activity. Kotler (2010) identifies four main areas
associated with the control of marketing activity as follows:
1. Annual planning - This has the purpose of evaluating the extent to which
marketing efforts, over the year, have been successful. Evaluation will
focus on analysing sales, market share, expenses and customer per-
ception. Commonly, sales performance is a major element of this analysis.

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All other factors provide explanation of any variance in sales perform-

ance;
2. Profitability - All marketing managers are concerned with controlling
their profit levels. By examining the profitability of products, or activi-
ties, it is possible to make decisions relating to the expansion, reduction
or elimination of product offerings;
3. Efficiency control - Efficiency is concerned with gaining optimum value
from the marketing assets. Managers are looking to obtain value for
money in relation to marketing activity. The promotional aspects of
marketing (sales, advertising, and direct marketing.) are commonly sub-
ject to such controls; and
4. Strategic control - There is a need to ensure that marketing activities
are being directed towards strategic goals and that marketing is an
integral part of the overall process of delivering value. A strategic re-
view will aim to assess that marketing strategy, and subsequent imple-
mentation, is appropriate to the market place. A review of this nature
will take the form of a marketing audit - a comprehensive examination
of all marketing activity to assess effectiveness and improve marketing
performance.

9.9 Characteristics of an Effective Control System

The management of any organisation must develop a control system tailored
to its organisation's goals and resources. Effective control systems share sev-
eral common characteristics. These characteristics are as follows:
 A focus on critical points. For example, controls are applied where
failure cannot be tolerated or where costs cannot exceed a certain
amount. The critical points include all the areas of an organisation's
operations that directly affect the success of its key operations.
 Integration into established processes. Controls must function harmo-
niously within these processes and should not bottleneck operations.
 Acceptance by employees. Employee involvement in the design of con-
trols can increase acceptance.
 Availability of information when needed. Deadlines, time needed to
complete the project, costs associated with the project, and priority
needs are apparent in these criteria. Costs are frequently attributed to
time shortcomings or failures.
 Economic feasibility. Effective control systems answer questions, such
as, How much does it cost? What will it save?" or "What are the re-
turns on the investment?" In short, comparison of the costs to the ben-

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efits ensures that the benefits of controls outweigh the costs.

 Accuracy. Effective control systems provide factual information that's
useful, reliable, valid, and consistent.
 Comprehensibility. Controls must be simple and easy to understand.

9.10 Five Major Marketing-Control Techniques

Kotler, (2010) identified the following as the major marketing control tech-
niques:
1. cost assessment
2. market research- competitors
3. market research- customers
4. feedback
5. strategic control
Cost assessment

If a business already has marketing efforts underway and no clear marketing-

control techniques, as many businesses do, a cost analysis can prove a ben-
eficial place to start. A cost analysis should include the total costs of all mar-
keting, as well as a breakdown of the costs for individual marketing activities.
It should also include, as far as possible, a breakdown of the return on invest-
ment of each activity. A cost analysis can help to expose costly and ineffective
marketing efforts that the business can cut or reduce in favour of more benefi-
cial activities.

Market research - competitors

Many businesses perform a preliminary assessment of their competitors as

part of developing a business plan, but continuing to analyse your competitors
over time can offer you key insights into them and the market. Knowing who
your competitors target lets you look for other market segments that you can
market to with less competition. In some cases, you can also adapt your
competitors' successful strategies for your own uses and reduce development
time for marketing materials. Watching what strategies fail for your competi-
tors can also help you avoid the same mistakes altogether or eliminate a strat-
egy early.

Market research - customers

Assessing your customer base, both in demographic terms and shopping habits,

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can also help you control and shape marketing to best effect. One particularly
useful piece of information is the zip code where your customers live. Under-
standing where most of your customers live allows you to focus marketing in
that area. You might also analyse how much the typical customer spends per
visit and craft advertising that promotes products near or beneath that spend-
ing threshold.

Feedback

A core marketing idea is that a business essentially exists to satisfy the needs
of some market segment. Customer feedback offers one of the most direct
ways to assess whether the business, generally, or a product, specifically,
achieves that goal. A business can employ surveys, suggestion boxes and
focus groups to help gather both qualitative and quantitative feedback.

Strategic control

Strategic control entails a high-level analysis of marketing efforts within the

framework of the existing and expected market conditions. In essence, this
approach looks at whether or not the various marketing objectives make
sense for the market conditions and if the implementation of those strategies
though various communication channels represents the best approach. For
example, in a recession, a business may choose to focus marketing efforts on
lower-priced products. If economic outlook suggests improvement, then a
business might want to alter its strategy to market products in the middle-tier
price range.

Activity 9.4
1. Outline the reasons why control is regarded as an integral part of the
? overall strategic planning?
2. Explain the factors that constitute an effective control system.

9.11 Summary
In this unit we have discussed that control provide essentially checks and
balances within a business. Its objective is to reduce errors, limit financial
losses and prevent fraud. They also segregate duties within the company and
limit one persons control over an entire area.

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References
Cravens, D. and Piercy, N. (2003) Strategic Marketing, (7th Edition), New
York: McGraw-Hill.
Donnelly, J.H. and Peter, P.J. (2009) Marketing Management Knowledge
and Skills, McGraw Hill.
Kotler, P. (2000) Marketing Management, Analysis, Planning, Implementa-
tion and Control, (9th Edition), New York: McGraw-Hill.
Wood, F. and Sangster, A. (2008) A Business Accounting, (11th Edition),
Financial Times, Prentice Hall.

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152 Zimbabwe Open University

 Unit Ten

Case Studies

10.0 Introduction

I
n this unit we are going to discuss, you are to identify and solve marketing
problems through a case study. A case study is a description of a series of
problems, challenges or issues that need to be investigated and solved.
Subject tutors/lecturers use case studies because they approximate real-world
situations, thus they add a dimension of reality to your studies. They are also
used to assess how well you have understood the relevant theories and con-
cept, by your ability to apply these to solve the problems detailed in the case
study. Your task is to read, analyse and present a solution to the case study.
Strategic Marketing Management BMKT 405

10.1 Unit Objectives

By the end of the unit, you should be able to:
 apply various theories to practical situations
 discuss the complexity of problems that can arise in practice through a
case study
 analyse practical marketing problems
 create convincing, and reasoned arguments
 propose solutions to genuine problems

10.2 Main Features of a Case Study

 It's taken from real life (although true identities will be concealed);
 It's believable for the reader (the case contains the setting, personali-
ties, sequence of events, problems and conflicts); and
 It includes sufficient information for the reader to appreciate the prob-
lems and issues.

10.3 Case Study Roadmap

1. Read the case study through without stopping to analyse it. Do this to
get a basic understanding of what happened, who was involved and
the general problems.
2. Read it a second time to identify the key elements including what hap-
pened, the sequence of events, who was involved, any significant rela-
tionships, the facts and problems.
3. With an understanding of what you have been asked to do (the assign-
ment question), re-read the case study, this time clarifying the key is-
sues and identifying the problems that need to be solved. Remember,
case studies are written so that you can propose solutions. As with
real-life situations, there is usually more than one way to solve any
problem.
4. Integrate the problems using the theories and concepts that you come
to understand from your readings. Do not just simply describe the prob-
lems or theories. Instead you need to analyse them. If you need to
make assumptions to fill in any gaps that are not provided in the case
study, you will need to explain your reasoning.
5. Consider a range of possible solutions to the problems. Evaluate the
problems by giving your opinion or some expert's opinions, by consid-

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ering the advantages and disadvantages of each solution. Justify your

choices.
6. Depending on your assignment question, detail your response to the
case study in the form of a report.
As you write up a response to a case study, you may like to think about, and
try to answer a range of questions:
 What is this case study about in general?
 What specific issues are associated with it?
 What do I already know about these issues?
 How do they link with the theories you have studied?
 What alternative approaches to dealing with the issues would be ap-
propriate?
 If an alternative approach were used, what impact might it have?

10.4 Sample Case Study with Answers

Marketing and distribution of mushroom
Saruchera and Mandla are two enterprising youth. They have been retrenched
from National Railways of Zimbabwe. They thought instead of looking for a
job, they will launch fresh vegetables in the markets. Having learnt of the
future conventional foods, they decided to venture into cultivation of mush-
rooms. Mushrooms are known to be the best alternative food for vegetar-
ians. For Saruchera and Mandla fund raising was a serious handicap for mass
production. However, the first trial batch of mushrooms that they produced
was bought by Holiday Inn Hotel in Harare.

Further, the hotel placed orders for supply of 20 kgs every day. Now mush-
room industry is run by small entrepreneurs, like Saruchera and Mandla. An-
other big player Gushungo Mushrooms, equipped with cold storage facility
was more interested in the export market. Saruchera and Mandla have set
their sights high. They aim to sell mushrooms in a very big way all over Zimba-
bwe. Mushrooms have a great market potential and is a perishable food.

Questions
1. How will you advise Saruchera and Mandla, as how to increase the
consumer awareness about this new food? (10marks)
2. What would be your suggestions for distribution channel for
mushrooms? (15 marks)

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Possible solutions
1. How will you advise Saruchera and Mandla, as how to increase the con-
sumer awareness about this new food?

First it is important for you to identify the target market so that you can deter-
mine the proper awareness strategy applicable to the each group.

Targeted customers may include:

1. Hotels
2. Household sector
3. Restaurants
4. Industrial canteens (1marks)
Consumer awareness can be created by the following:.
1. through sales persons
2. test marketing
3. customer response to the product
4. samples can be distributed in big malls and Variety store
5. through outdoor publicity such as wall hoardings, banners, insertions in
news papers
6. Dealer push through sales promotion campaign.
7. Press meetings can be a way to consumer awareness. Editors, journal-
ists of newspapers having maximum circulation can be contacted and
samples to be distributed to them (such as 250 gm or 100 gm packs).
8. Packaging should be attractive.
(1 marks for each for the first 5 correct answers) Total- 5marks

For different kinds of selling modes they can target different customers

Institutional sale: Hotel / Restaurants/Industrial canteens

1. Approach to hotel industry can be made and product benefit can be
shown to convince the customer. Mushroom related recipe booklet
can be given to them for use. (2marks)
Individual sale: Household
1. Can approach the T.V programs for example Husavi Mix program to
show different recipes of Mushrooms in their shows (2marks)
(Total - 10 marks)

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Distribution network
First highlight the characteristics of the product to determine the type of distri-
bution:
 Product is perishable; company should go for faster and effective dis-
tribution network (2marks)
 Direct distribution is the most suitable -Distribution through company
delivery vans in local market and distribution through rail or road trans-
port to urban markets (2marks)

Possible distribution channel

 Producer direct to Consumer (usually institutional buyers)
 Producer to Retailer (for example OK and TM) and then to the Con-
sumer ( Intensive distribution)
 Producer to Wholesalers (for vegetable wholesales) to Retailer and
then to the Consumer (Intensive distribution)
(3marks for each supported distribution channel) Total - 9marks

Wholesalers and retailers are called channel intermediaries and they should
have cold storage facility (1mark)

(Total - 15marks)

10.5 Practice Case Studies

10.5.1 Econet Wireless lauded for enhancing customer value
LEADING telecommunications provider, Econet Wireless, has been lauded
for enhancing customer value through its strong ethical commitment to
prioritising consumers in the implementation of its strategies. The telecommu-
nications giant was also recently awarded by the Ministry of Information
Communications and Technology at the ICT Achievers awards held recently
for being the Top Innovative Company and the Top ICT Company.

Corporate communications manager Mr Ranga Mberi said the company was

recognised by Frost and Sullivan, a global growth consulting company, based
on its recent analysis of the broadband communications market in Africa.
"Frost and Sullivan recognises Econet Wireless with the 2011 Africa Frost
and Sullivan Award for customer value enhancement.

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"Econet Wireless is lauded for its strong ethical commitment to prioritising

consumers in the implementation of its strategies," said the company in a state-
ment. The Frost and Sullivan Award for Customer Value Enhancement is
presented to the company that has demonstrated excellence in implementing
strategies that proactively create value for its customers with a focus on im-
proving the return on the investment that customers make in its services or
products.

This award recognises the company's inordinate focus on enhancing the value
that its customers receive, beyond simply good customer service, leading to
improved customer retention and ultimately customer base expansion. Ac-
cording to a statement that was released by Frost & Sullivan Research Ana-
lyst, Econet Wireless continued to upgrade and expand its network infra-
structure and its mobile network has the widest geographic coverage avail-
able currently in all the major cities in the country.

"The data services that Econet Wireless offers suit almost every segment of
the Zimbabwean broadband market. "Its proactiveness in combating the re-
straints in the broadband market, such as power outages and low disposable
income, has resulted in the introduction of affordable, cost-effective access
devices". On being the Top innovative company, Mr Mberi said Econet Wire-
less designs and offers a wide range of innovative value added services aimed
at addressing different consumer segments. "For low-income earners, there is
an eTXT service which offers access to receive and send emails on any kind
of handset in the form of an SMS. The eTXT service also gives GSM phones
access to social network sites like Facebook via SMS.

Other products and services aimed at enhancing subscriber value include

EcoCash which offers mobile transfer of money and econetmail.com, a cloud
based email service which is offered free to broadband subscribers," said Mr
Mberi.

On other innovations, he said they had managed to overcome the challenge of

erratic power supply by deploying more energy efficient solutions to power
the network infrastructure and reduce network downtimes. The Marketers
Association of Zimbabwe recently also awarded Econet the first prize in the
top super-brands of the year for the second consecutive time. Mr Mberi
added that the telecoms giant had introduced a multi-media service (MMS)
that allows customers to share multimedia such as pictures, sound and video
clips with their friends and family.

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"This will obviously add more excitement to their experience on the network.
As a special gift to our customers, this service is free until 31 December," he
said. The service was introduced on 11 December 2011 and from 1 January,
tariffs of 15 cents per MMS will apply during peak hours, and 14 cents off-
peak.
1. Show the evidence that Econet is customer oriented (10 marks)
2. Evaluate Econet's marketing mix strategy (15 marks)

10.5.2 TM Supermarkets
TM Supermarkets is part of the retail arm of Meikles Limited, a listed con-
cern on the ZSE. It is one of the leading Food and Grocery retail brand in
Zimbabwe according to independent market research. Since its inception in
March 1978, TM Supermarket has grown and currently comprises of a branch
network of 50 stores country wide. The store formats range from convenient
small supermarkets to Hypermarkets, with Borrowdale' and Hyper in Harare
and Bulawayo respectively, being the biggest branches.

The supermarket chain also has Pick'n'Pay of South Africa as a shareholder

with a 25% stake. The current relationship with Pick'n'Pay South Africa will
soon be enhanced to encompass the sharing of technical expertise and sourcing
of the much needed product brands from South Africa to compliment the
Zimbabwean range in an effort to meet and exceed customer expectations. In
addition Pick'n'Pay will soon be increasing its shareholding in TM Supermar-
kets to 49%.

From its inception, TM Supermarkets has gained significant experience in the

FMCG, and has become one of the most trusted retail brands in Zimbabwe.
With its pay off line "Real Value Always" customers are offered a shopping
experience in clean stores where they get a wide range of groceries at com-
petitive prices. Our customers always look for bargains and TM always meet
this expectation hence the reason why it is the biggest and the most preferred
retail chain in Zimbabwe.

With its spread, TM Supermarkets draws its customer base from low end to
upper end across the whole country and is the most preferred channel by
suppliers for their products. TM maintains strictly a professional relationship
with its valued suppliers, and acts in the best interest of its customers, as such
it has gained advantage over its competitors by being the most preferred
channel by both Suppliers and customers. TM is currently upgrading its
branches with Kamfinsa in Harare currently under renovations with the aim of

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giving our suppliers and customers real value through modern shopping expe-
rience.

TM Supermarkets is managed by a team with vast experience in retail and

this has helped in building strong relationships with suppliers, customers and
all other stakeholders.

TM Supermarkets acknowledges that for it prosper, it has to work closely

with the society and as such, it supports the less privileged through various
charitable organisation country wide where it is represented, thereby pro-
moting the culture of compassionate and responsible corporate citizenship.
Our employees will be professional and honesty in their dealings with all our
stakeholders. TM Supermarkets seeks to provide a stimulating and safe en-
vironment for all stakeholders. In this context, TM Supermarkets believes
and acknowledges that good sustainability practice equates to responsible
business practice, and that a well managed company is motivated to act re-
sponsibly.
1. Identify and explain marketing strategic factors that make TM a store
of choice. (25Marks)

10.5.3 Innscor faces stiff competition

Report by Taurai Mangudhla

INNSCOR Africa Limited (INNSCOR)'s fast food division is facing poten-

tially stiff competition from global brands such as the United States of Ameri-
ca's KFC, with information indicating the two have taken up space for drive-
in outlets at Ken Sharpe's proposed US$100 million Mall of Zimbabwe to be
constructed in the plush Borrowdale area.

In an interview, the manager of West Properties - owners of the property -

Mike van Blerk told business digest the two will join major brands like
Pick'n'Pay at the new mall, now expected to be completed by October 2014.

This comes as market information has linked KFC to a partnership with a

local company, where it will open outlets at strategic points across the coun-
try.

In the past two years, the local fast food industry has seen the emergence of
new outlets in major towns, prominent ones being Tawanda Mutyebere's
Chicken Slice and Tawanda Nyambirai's TN Grill. In September TN ex-
panded its fast food division with the addition of ice cream and pizza outlets
across its network.

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The growing competition has seen players reducing prices, with consumers
now buying a two-piece chicken and-chips combo for as little as US$3.50
compared to US$4.50 previously.

Chicken Inn launched its dollar meal promotion which has seen pieces of
chicken or a standard size of chips going for US$1 from the previous US$2.

At INNSCOR's full year results briefing for the year ended June 30 2012,
group chief executive Tom Brown admitted the group was feeling the heat
coming from competitors in the fast food division.

To maintain an edge, he said, shareholders had approved a US$50million

investment to facelift their products and improve the branch network.

"About US$38 million of that will be spent on our bakeries, fast foods, poul-
try business, Colcom and some on Capri," Brown said. "We are going to
continue with our expansion, improve efficiencies and hope to maintain rev-
enue growth of 15%," he added.

INNSCOR finance director Julian Schonken said the investment will see the
company expand by adding 33 fast food outlets this year comprising Chicken
Inn, Pizza Inn and Nandos.

An additional bakery production line with a capacity of 100 000 loaves per
day is on schedule for installation this month, to bring capacity to 500 000
loaves per day.

INNSCOR has emerged as the biggest confectionery company after the col-
lapse of its major competitor Lobels which faced operational challenges at
the height of hyperinflation and economic stagnation.

In its financial statements, INNSCOR reported a 44% growth in operating

profit to US$68,5 million after a 21% revenue growth from 2011 to US$627,1
million.

The group's bakeries and fast foods division in Zimbabwe and across the
continent recorded a 53% growth in bakery volumes in the period under
review. Customer counts in its fast foods operations grew 11% after 13
counters were added to the store network across Zimbabwe in the period
under review - eight in Harare, three in Marondera and two in Mutare.

(Extracted : Zimbabwe Independent October 26, 2012)

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1. Show how INNSCOR can use Porter's competition model to fight

competition in its market. (15 marks)
2. Explain competitive strategies that can be adopted by INNSCOR to
remain a market leader in the market. (10 marks)

10.5.4 Zimbabwe United Passenger Company (ZUPCO), a

sad story of things gone wrong
There was a time when it used to be the only reliable passenger transporter.
In fact, ZUPCO was the Alpha and Omega in the public transport business.
Its services stretched to every part of the country, leaving both urban and
rural commuters satisfied. The mention of the name ZUPCO during its hey-
day conjured various images in the minds of many people. Some imagined
well-dressed conductors issuing tickets to passengers on board. Then there
were the ticket issuers stationed at bus termini as well as inspectors com-
monly referred to as ticket checkers.

The company had a policy that allowed families of its employees and senior
citizens to travel free of charge. But two decades down the line, the ZUPCO
empire is crumbling.

While the company is still operational, there are no signs of its re-awakening.
The parastatal is saddled with debts and has a depleted fleet. Critics say poor
management and corruption have brought ZUPCO to near collapse. A 77-
year-old former driver, speaking on condition of anonymity, blamed corrup-
tion for not only the near-collapse of ZUPCO but also the company's failure
to pay him his severance package."What pains me is that you dedicate your-
self to work but at the end of the day you are left without benefits. "Having
worked for the company for many years, they should at least have given us a
package to go home with. We will forever regret having worked with so
much passion," said the former employee who has been trying to force the
company to pay his dues. The company has retrenched nearly 400 employ-
ees since 1999, citing viability problems. ZUPCO, which used to boast of a
running fleet of over 800 buses, is now understood to be operating less than
200 buses. While blame has been placed on poor management, some ob-
servers believe the entry of private commuter omnibus operators into the
transport sector affected ZUPCO operations. Commuter omnibus operators
have crowded out ZUPCO in urban routes while luxury coaches have stiff-
ened competition on long-distance routes.

On the other hand, many people have been importing second-hand vehicles,
reducing the number of commuters. Observers say ZUPCO should have

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moved with the times and diversified its operations or purchased new vehi-
cles.

Appearing before a Parliamentary Portfolio Committee on Local Govern-

ment last week, the Minister of Local Government, Urban and Rural Devel-
opment, Dr Ignatius Chombo, said Government would move in to save the
parastatal. He, however, acknowledged that times had changed and there
was stiff competition in the transport sector. Dr Chombo said plans were
under way as agreed with ZUPCO for retrenchees to be paid their packages.
"Government financial support is still being awaited to pay off the arrears so
that the members enjoy their pension benefits on retirement," he said. "ZUPCO
had a defined pension benefit fund for its employees and this was affected by
the dollarisation of the economy in 2009. The arrears of US$1,7 million is
beyond ZUPCO's financial capacity hence a decision was made to suspend
the fund in December 2010. "Meanwhile, monthly payment plans have been
agreed with ZUPCO retrenches to pay their retrenchment packages."Minister
Chombo said the company was engaged in several court battles after being
taken before the courts for failing to honour certain obligations.

He said such lawsuits had seen the parastatal losing a lot of money engaging
lawyers.

"There have been many lawsuits against the company. In defending those
cases, the company has to outsource legal services since we do not have an
internal legal advisor," said Dr Chombo

The portfolio committee members also raised concern that some of the board
members at ZUPCO had overstayed. As part of its turnaround strategy, Min-
ister Chombo has approved the company's 2011 to 2013 three-year strate-
gic plan which focuses on recapitalisation of the company through acquisition
of at least 100 buses per year. ZUPCO has since bought 100 buses which
are meant to service rural routes where there is less competition because of
poor roads.

ZUPCO, once the pride of Zimbabwean roads, is undoubtedly facing a tough

time and has lost credibility with the travelling public.

(Extracted from Herald 10 Novemeber 2012)

1. You are a business consultant and you have been hired by ZUPCO
Advisory Board to develop a strategic marketing plan for the com-
pany. (25marks)

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10.5.5 Delta launches Chibuku Super

Business Reporter

DELTA Corporation, Zimbabwe's largest company in terms of market capi-

talisation, has moved in to further entrench its blue chip status by announcing
the launch of a new beverage. According to the listed firm, a new offering to
the popular Chibuku franchise has been unveiled and is set to add momentum
to the traditional beer segment which already contributes close to 60 percent
of the brewer's annual volumes. The new opaque beer, Chibuku Super, is a
shelf stable, constant Alcohol by Volume product and is set to be introduced
to the market, featuring bold and innovative new packaging in an embossed
PET bottle, Delta said in a statement.

The new product features a screw cap which is a first for any locally made
beer.

Together with a distinct, unique and carbonated taste profile and significantly
extended shelf life, exceeding 21 days, the new beverage is set to be a game
changer. "We are excited about Chibuku Super.

"This new product demonstrates our commitment to manufacturing and mar-

keting only the best in class products and to ensuring that we add to our
consumers' enjoyment of life by making available popular brands in new and
exciting formats," said Delta Beverages executive director for marketing Mr
Max Karombo. The launch of Chibuku Super in Zimbabwe comes hot on the
heels of a bold and ambitious goal by London Stock Exchange-listed beer
giant SAB Miller to expand its portfolio across Africa by driving the roll out of
Chibuku across the continent.

The global brewer is this year looking to seed and expand the product in
other parts of Africa after spreading it as far afield as Ghana and Uganda.
SAB Miller's Zambia unit piloted Chibuku Super last year, and has been
unable to meet market demand for the product.

Delta Beverages is an affiliate of the global SAB operation.

"The best thing about Chibuku Super is not just that it provides superior value
for the consumer, but the customer also benefits. "The product's unique shelf
life enhances the ability of retailers to stock the product with confidence.

"Additionally, we have worked our prices to ensure that the margin on the
product is attractive to the trade," said Mr Irimayi Muzorewa, channel execu-
tive at Delta Beverages.

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The new product is supplied from a brand new plant constructed just outside
Harare at a cost of over US$6 million.

The new line, designed in Germany, includes an online blow moulder, a

pasteuriser and a shrink wrapping machine which will all be a first for opaque
beer making not only in Zimbabwe, but across Africa.
1. Identify and explain the marketing strategies being used by Delta Bev-
erages. (10marks)
2. Advise Delta Beverages on how it can come up with a new product
which would succeed on the market. (15marks)

10.5.6 EasyJet
EasyJet is a low fare airline that operates a number of routes within the Euro-
pean market. Haji Ioannou, the owner of EasyJet, founded the airline based
on the belief that reduced prices would lead to more people flying. EasyJet's
prices are low, for instance a return flight from Luton to Amsterdam would
cost between £70 and £130. Flights with an airline offering a full customer
service package could cost around £315 upwards.

The organisation's main base is at Luton airport from where flights to Euro-
pean destinations such as Amsterdam, Geneva, Nice, Barcelona, Palma and
Athens are available. The airline also flies UK domestic routes from Luton to
Edinburgh, Glasgow, Belfast and Liverpool. Liverpool allows the company
to gain access into the lucrative north of England market and is becoming a
growing centre of activity for EasyJet. Flights can now be taken from Liver-
pool to Nice, Amsterdam and Belfast.

Luton airport is around 30 minutes by road from north London and only 15
minutes from London's main orbital motorway, the M25. The airport is 10
minutes away from Luton railway station from where a 27-minute rail con-
nection to London is available. A shuttle bus to the station is available every
10 minutes. A return rail journey for EasyJet passengers is available at around
£8 (sterling). Liverpool airport also has good motorway connections.

Connecting flights are not part of Easy-Jet's product offering. The airline merely
carries passengers to and from single destinations. This allows the airline to
eliminate costly ticketing processes as well as intermediaries such as travel
agents. The company also operates a paperless office policy and non-ticket
flights. Simply by ringing the company's telephone number or using the com-
pany's internet site customers can book a seat directly on their credit card. In
autumn 1998, 40 per cent of bookings for a major promotion in The Times

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newspaper were via the internet. Although a confirmation of the booking will
be sent if requested, customers merely have to produce identification at the
airport and quote the booking reference number to be given a boarding pass
for their flight.

Easy-Jet flights are 'free seating'. Passengers are not allocated a specific seat
when they check- in, instead they are given a boarding card that carries a
priority number. The first person to check in gets boarding card No. 1, the
next passenger boarding card No. 2 and so on. Customers are then asked to
board according to the order in which they checked in, occupying whichever
seat they wish. The result is that passengers board the plane faster and tend to
sit down faster than when they have to search for an allocated seat, as is the
case in the more traditional airline operations. The faster passengers board an
aircraft the quicker the plane can take off and the less time it spends on the
tarmac. This results in reduced airport fees.

The fact that Easy-Jet is not hindered by connections to other flights allows it
to operate out of cheaper secondary airports such as Luton and Liverpool,
rather than larger airports such as Heathrow or Manchester. Easy-Jet also
exploits the lack of competition for time slots at Luton and Liverpool to keep
the length of time its aircraft are on the tarmac to a minimum. EasyJet's aircraft
are therefore airborne longer, creating more hours of revenue-earning per
aircraft than companies operating out of larger and busier airports.

Premium priced airlines offer business class seats, which take up more room
on an aircraft, and will normally operate with 109 seats on a Boeing 737-
300. These airlines also require additional cabin crew in order to provide the
level of service business class passengers' demand. EasyJet operates without
offering business class seats, which allows it to create 148 passenger places
on a Boeing 737-300. Catering consists of at trolley from which cabin staff
will sell drinks and a limited range of snacks to passengers. The only 'freebie'
on the flight is a copy of the airline's in-flight magazine called Easy rider, which
is printed on recycled paper. Cabin staff wears orange polo shirts and black
jeans, and have a more relaxed attitude and are more casual than traditional
airlines. They appear equally as safety conscious as staff on other airlines.

Easy-Jet's telephone number is promoted widely. In bright orange, it also

dominates the sides of the aircraft, where it has almost become part of the
Easy-Jet corporate image. The organisation's approach to advertising has
been described as 'a guerrilla promotional approach', distinguished by at-
tacks on the airline establishment and a series of PR stunts. Press and maga-
zine advertising is widespread. Sales promotional activity has included joint

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promotions in national UK news-papers such as The Times and The Inde-

pendent. The airline has also been the focus of a documentary series on UK
television. The owner, Haji Ioannou, has been featured in many business arti-
cles in the press, particularly for his high profile campaign against the launch
by British Airways of its own low-cost airline operation called 'GO'.

Easy-Jet has also started targeting companies that wish to keep travel budg-
ets under control. Easy-Jet emphasizes that they do not offer a loyalty scheme
where business customers can build up loyalty points and gain free flights.
The suggestion is that although executives may like this perk the executive's
company could be saving hundreds of pounds per trip by sending their staff
on Easy-Jet flights. The organisation's latest plan is to develop a family of
companies with a common theme, beginning with the launch of a chain of
cyber cafe´s. The branding for this venture is 'easy everything'. The company
has taken the decision to use Easy-Jet's trademark bright orange colour as a
prominent feature of the cafés. Tony Anderson, who will oversee this new
development, is quoted as saying that with these cafés 'We are targeting Joe
Public, not the middle classes'

Extract from: Graeme, Drummond, John, Ensor, and Ruth, Ashford, (2001)
1. Identify the core capabilities of Easy-Jet that can be used to grow the
family of companies that Haji Ioannou envisages. Try to use the value
chain as part of this analysis. (15marks)
2. EasyJet has decided to develop a group of companies beginning with
the cyber café concept. Determine the issues that need to be consid-
ered when making decisions on the organisation's branding strategy,
for the group as a whole and for the 'easy café' concept in particular.
(10marks)

10.5.7 Ecoprods
Ever since environmental pollution came on to the political and business agen-
das, firms have been steered, voluntarily or otherwise, towards 'green' or
'eco' products. Indeed, it has now become part of the appeal of products that
they are environmentally friendly and the 'eco' label is as familiar to the con-
sumer as any brand label. Non-reusable batteries are an example of where
environmentally friendly chemical constituents have been used to replace the
undesirable mercury content which polluted the environment when batteries
were disposed of. However, these days, defining exactly what is or what is
not an 'eco' product has become increasingly more difficult and boundaries
are becoming blurred.

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A firm called Ecoprods has produced a prototype battery charger that does
not require a mains source for its power. In fact, the product is essentially a
solar car battery booster. The charger uses the latest type of solar cells to
trickle charge a car battery while the car is left standing for long periods of
time. It simply sits on the dashboard and plugs into the cigarette lighter socket.
Even on dull or cloudy days it can convert enough energy from available
sunlight to keep the battery charge satisfactorily topped up. When one is
away on holiday it is an ideal way to ensure that the battery is well charged.

Ecoprods needs to assess the market for such a product. In particular, it is

keen to assess the potential market size and the likely price that it should
charge. In addition, it needs to identify the best way of seeking to distribute
the product, should the market seem large enough, and to establish what is
needed in the way of promotional expenditure.
1. How would you undertake a market analysis for this product? (15marks)
2. What do you consider to be the main problems or difficulties in under-
taking such a market analysis? (10 marks)

10.5.8 Singapore Stan

Stan runs an antiques and curios shop in Singapore. Most of his clientele are
visitors who take away relics or copies as souvenirs of their visit. They want
something which seems to be genuinely oriental in nature to remind them of
their visit to the Far East. Stan's shop is not far from the city centre in a
shopping mall. It is easily accessible and many passers-by gaze at the various
artefacts he has on show.

Stan did a degree in England where he took computer science as his principal
subject. He is a proficient programmer and an expert in both software and
hardware. However, Stan's first love was antiques and curios and following a
five-year spell with a large multi-national computer company with large of-
fices in Kuala Lumpur after he returned with his degree from England, he
decided to return home to his native Singapore and develop a small business
of his own specialising in antiques and curios. That was six months ago and in
the meantime the business has started to develop but it has not really taken off
in a big way. Stan can just about make ends meet but still lives at home with
his parents in their small suburban flat.

Stan's interest in antiques and curios goes back to his childhood when he read
books that were given to him by an uncle and which contained many pictures
of such items. It is a passion he shares with his girlfriend May. She helps from
time to time in the shop while Stan is out looking for new items in the suburbs

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of Singapore or further afield in Kuala Lumpur. He also has contacts in Hong

Kong and Shanghai-the latter being the place from where his parents origi-
nated. The suppliers in both these places regularly ship him items that he has
ordered after perusing their 'lists'. The lists are sent out monthly along with
photographs or sometimes sketches of the items concerned. Stan and May
hope to marry in the near future but money is something of a problem and a
place of their own hard to even think about. In Singapore living accommoda-
tion is at premium prices.

May went to secretarial college in Singapore and has good secretarial quali-
fications. She worked for a bank for three years before deciding to give this
up to help Stan run his business. The business has therefore, to provide in-
comes for both Stan and May.

Extracted From: Tonny Proctor, (2000) Strategic Marketing

1. What are the business's core competencies? Are they the same as those
possessed by Stan and May? (10marks)
2. How can Stan develop a sustainable competitive advantage for his busi-
ness? (15marks)

10.5.9 Home Baker

Making cakes and other similar pastimes are a regular domestic occupation
in many homes. However, home baking of bread was for many years consid-
ered a bit old-fashioned and a time-consuming chore which did not make a
great deal of sense given the amount of off-the-shelf bread that could be
bought. Home baking of bread on a regular basis was dead many years be-
fore the arrival of convenience shopping-at least in western developed coun-
tries. However, everything has its revival in due course it seems. With the turn
of the 21st Century, an interest in home baking may once again be just around
the corner.

Easy to use, even if you have never baked before, the Home Baker enables
even the absolute novice to produce perfect loaves of bread. The producers
of Home Baker claim that nothing could be more gratifying to people than
adding basic ingredients to the stylish, attractive bread-making machine, walk-
ing away and returning later to a loaf of fragrant, just-baked bread.

The programmable Home Baker can be set up to 13 hours in advance and

has 6 different bread settings for all types of loaf and even mixes dough for
pizza and pitta bread. There are also a wealth of other features which include
crust colour control, fruit and nut bread capability, easy removable basket

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and other important features. The Home Baker can make loaves up to 680g
(1.51b) and includes a fitted mains plug and a bread-making recipe book.

The firm intends to introduce the product into the UK later in the year and has
plans to move into West European markets early next spring. Key questions
concern market segmentation, market targeting and strategic positioning of
the product.

Extracted From: Tonny Proctor, (2000) Strategic Marketing

1. How should this product be marketed? (5marks)
2. How should the firm segment the market-international and domestic?
(10marks)
3. What are likely to be the market targets of interest? (5marks)
4. How should the company position itself towards identified target mar-
kets? (5marks)

10.5.10 Eau de Nuit

Distributing and promoting soft drinks is largely achieved through fairly tradi-
tional methods. Promotion is often in magazines and directed towards se-
lected target audiences (usually younger people) although billboard advertis-
ing close to schools and colleges is also used. Distribution follows the classi-
cal route of wholesaler to retailer with many soft drinks these days being sold
direct to large supermarket chains which buy in bulk. The latter prefer on the
whole to stock branded labels rather than have their own private label drinks.
There are also vending machine operators who buy direct and distribute through
thousands of vending machines strategically located in sports centres, col-
leges, universities and other sites which attract large numbers of young peo-
ple.

Traditionally, Colette Soft Drinks has followed the methods outlined above.
However, in recent times it has taken an innovative approach. Six months
after launching a fizzy drink called Eau de Nuit, Colette Soft Drinks allowed
shops and supermarkets to stock the product. Shop owners expressed sur-
prise saying: 'It's really strange-the kids know all about Eau de Nuit, but
we've never heard of it. Now it's flying off the shelves by itself.' Colette's
marketing strategy for Eau de Nuit might seem highly unusual. For the first six
months it did no advertising and restricted distribution to a handful of popular
clubs.

Getting the products stocked in these venues required a strategy all of its
own. Colette recruited people off the street to be its sales people. They tended

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to be scruffy, but knew the music, so the clubs took them seriously. Having
convinced venues such as France's Ministry of Sound to stock Eau de Nuit,
the idea was that its reputation would spread by word of mouth. Ten months
after the launch, Eau de Nuit is now being advertised and distribution includes
supermarkets.

Colette effectively has two marketing budgets. One is the mass market, but to
maintain credibility it has to nurture its original people. Credibility is the most
important thing. It is important to gain this sort of credibility as a growing
number of consumers are both wary of large companies and extremely so-
phisticated judges of marketing.

A senior market researcher working for a company specialising in youth mar-

kets commented that at one time firms used to just put an ad on television next
to a particular programme or in a particular magazine. Now there are maga-
zines for everything and no one can be sure that they have reached the audi-
ence. Because of all this there is a move to alternative ways of promotion and
distribution and to alternative agencies.

Extract from: Graeme, Drummond, John, Ensor, and Ruth, Ashford, (2001)
1. Do you think that the marketing mix strategy employed here could be
applied equally as well to other products? Why or why not? (25marks)

10.5.11 Remote applications

People are getting lazier-or is it that they need more time to relax? Or is it
simply that manufacturers think that people are getting lazier? Or think that
people need more time to relax? It may just simply be part of the convenience
culture that has grown up over the past 40 years. First, there was remote
controlled television-switching the TV receiver controls on/ off/over from a
distance. Next the same principle was applied to video recorders. Cameras,
too, began to appear which could be operated from a distance. No longer
was there any need to ask a passer-by to photograph one when travelling
alone or needing to be photographed with another person. The new device
enabled one to set up the camera so that it would point at the spot where you
were going to take your picture, then on returning to the spot, at the flick of a
button, one could then photograph oneself. No longer was there any need to
rush back to the spot for a timer on the camera to perform the same function.
Remote control devices have taken different forms and operated in different
ways. Sensors on outdoor lights can pick up the presence of people nearby
and automatically switch themselves on to illuminate possible intruders to the

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premises. Garage doors can be made to open automatically in response to

flashes from car headlights-and so on.

Founded in 1993, Remote Applications defines its business as that of im-

proving convenience in the home. Essentially an electronics-based company,
it has invented a device which enables the user to convert any appliance to
remote control. The device itself consists of two parts-an adapter that one
plugs into any mains power socket or light fitting and a remote control device
that fits into the palm of the hand. Activating the latter enables one to switch
an appliance on or off at a distance of up to 25m.

The equipment enables one to turn appliances on or off from the comfort of
one's armchair or to boil a kettle before one gets up. It enables one to switch
on the greenhouse heater from the comfort of one's kitchen in the winter and
a myriad of other similar actions it is preferable to do from a distance. Indeed
the applications are virtually endless.

The handheld controllers use powerful radio signals that transmit their power
even through walls and ceilings. Each one is pre-programmed with security
codes so that it will not interfere with other remote controlled appliances or
devices. The controllers are also pre-fitted with a 12V battery for immediate
usage. Two types of adaptor are supplied include one for mains plug sockets
and the other for bayonet bulb light fittings. The adaptors are controlled in a
choice of three ways, either by the remote handset, by an instant-fit surface
mounted on/off switch or via a wall-mounted dimmer switch.

The producer, based in Taiwan, is looking for a marketing strategy to intro-

duce the devices into European markets. Key decisions relate to pricing,
promotion and distribution.

Extract from: Graeme, Drummond, John, Ensor, and Ruth, Ashford, (2001)
1. How should the company set about marketing its products? (5marks)
2. What steps do you think the firm should take prior to launching such a
product? (10marks)
3. Do you think that there really is a world-wide market for this product?
Why or why not? (5marks)
4. What would you see as being the major application for such a prod-
uct? (5marks)

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Unit 10 Case Studies

10.6 Summary
In this unit we have included a number of case studies for practice. In your
practice try to apply relevant marketing theories and models you have learnt
in this module.

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Reference
Drummond, G., Ensor, J. and Ashford, R. (2001) Strategic Marketing: Plan-
ning and Control, (Second Edition), Oxford: Butterworth, Heinemann.
Proctor, T. (2000) Strategic Marketing, An Introduction, London: Routledge.

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