Marketing and Customer Value

What does the term ‘marketing’ mean? Answer to this question is not uniform. Different
people think of marketing with different viewpoints. Production of goods or service is marketing
in the view point of producers. Similarly, selling of goods or services is marketing in the view
point of distributors or sellers. Many people think of marketing as selling and advertising. It is no
wonder because it attracts customers by promising value of product and delivers higher level of
satisfaction to them.
Marketing creates and delivers living standard of consumers. It is a system of activities
designed to plan, price, promote, and distributes wants-satisfying goods and services to the
benefits of the consumers. It is concerned with the people and the activities involved in the flow
of goods or services from producers to consumers. There are two objectives of marketing. They
are: (i) to attract customers by promising superior value of goods and (ii) to keep and grow
current customers by delivering higher level of satisfaction.

Marketing creates value in goods through the creation form, place, time and ownership
utilities. The concept of marketing can be derived into (i) old and (ii) modern concept. According
to the old concept, marketing is understood as telling and selling. But modern concept of
marketing does not agree with this concept. According to the modern concept, marketing is
understood as satisfying customers’ needs. This means the modern concept does not accept that
marketing is to earn as much profit as can be by selling goods or services through exaggeration
of advertisement and influencing customers. The modern concept of marketing gives first
priority to customers’ satisfaction. It considers the profit as the gift of customers’ satisfaction.

This is the age of marketing. It is universal. Every organization needs marketing to

survive and to grow in this neck-to-neck competitive environment. Marketing helps to produce
goods or services by identifying wants and needs of customers. So, marketing should at first
identify wants of customers and produce goods or services accordingly.

In conclusion, marketing is the activity of providing goods or services to the customers in

order to achieve organizational goals. It is total system of business activities designed to plan,
price, promote, and distribute valuable goods or services. It is a social and managerial process by
which individuals and groups obtain what they need and want through creating and exchanging
value with others. Satisfying customers’ needs helps to achieve organizational objectives, and
facilities exchange are the main characteristics of marketing. Marketing deals with customers.
Different activities like, planning, production, product development, packaging, labeling,
advertising etc, are performed to satisfy the needs of customers.
 Customer value is the difference between the values the customer receives from owning
and using a product and the costs of buying the product. Value is a combination of quality,
service, and price (QSP). Marketers sell different types of values attached with the product. For
instance, a beauty saloon catering to women sells youth, attractiveness and confidence value to
its customers.

Customers buy products and services that have the higher delivered value. Customer
Delivered Value (CDV) is the difference between total customer value and the total customer
costs. Therefore,

Total customer value – total customer costs = Customer delivered value

Total Customer Value (TCV)

The TCV is the composite of all the benefits a customer expects from a product/service
offer. There are four types of value a consumer receives from a product/service offer.

 Product Value: Delivered through product attributes and benefits including product
quality, functions, designs, packaging, and price.
 Service Value: Delivered through services attached with the product such as warranty,
delivery, installation, training etc.
 Personnel Value: Delivered through expertise, experience, and good behavior of
salespersons.
 Image Value: Delivered through brand image and company image. Enhance the
ownership value of the product and service.

Total Customer Costs (TCC)

The TCC is the composite of all the costs incurred by a customer in evaluating, obtaining,
using, and disposing the product/service offer. A consumer normally incurs the following four
types of costs.

 Monetary Costs: Money spent on buying the product or service represented by the price.
 Time Cost: Time spent on searching, evaluating and buying the product/service.
 Energy Cost: Energy spent on searching, evaluating and buying the product/service.
 Psychic Cost: Psychological frustrations and dissatisfaction from the product usually
reflected during post-purchase situations.
Customer normally evaluate the total expected value and the total expected costs of
different product/service offer of competing companies in the marketplace before coming to a
buying decision. Thus customers’ choice is normally guided by the value maximization
principle. This principle, however, may not apply in some organizational purchase in which the
buyer is guided by personal motivations (corruption). In such situations, the buyer (buying
group) may buy a product with higher total cost and lower total value.

The CDV concept is very important in marketing because a marketer can increase
customer satisfaction by either increasing the TCV or by decreasing the TCC.

Value chain and Delivery process

An organization can create strategic advantage by managing its value chain. A value
chain is a set of inter- linked value –creating activities performed by an organization. These
activities begin with inputs, go through processing, and continue up to output marketed to
customers. Value chain plays a central role in improving cost efficiency, quality, and customer
responsiveness.

Value chain analysis is helpful in understanding how value is created or lost. It examines the
organization in the context of a chain of value creating activities. It describes activities within
and around an organization which together create a product or service. It identifies separate
activities performed to produce, market, deliver and support a product. It is tool to analyze cost
competitiveness and value creation.
Prof. Michael porter developed the value chain concept identifies two types of activities
for an organization:

Firm Infrastructure

Human Resource Management Profit

Support
Activities Technology Development
Procurement

Inbound
Primary Outbound Marketing Services
Logistics Operation Logistics and Sales
Activities Margin

a) Primary Activities

They are directly to the creation or delivery of the product to the customer. They
consist of five sub-activities:
 i) Inbound Logistics: Receiving and storing raw materials; material handling, stock
control, material transport.
ii) Operations: Converting raw materials into finished products; manufacturing,
packaging, assembling & testing.
iii) Outbound Logistics: Order processing and physical distribution; packaging,
collect, store and distribute products to customers.
iv) Marketing and Sales: pricing, Promotion and selling products to satisfy customer
needs.
v) Service: Installation, repairs, spares and training enhance or maintain value of
product.

b) Support Activities

They are provided to sustain the primary activities. They consist of four sub- activities:

i) Procurement: Activities related to processes for purchasing inputs.

ii) Technology Development: Activities related to acquiring new technologies and
research and development (R&D) for innovation.
iii) Human Resource Management: Activities related to acquisition, Development,
utilization and maintenance of human resources.
iv) Firm Infrastructure: Activities related to infrastructure building, such as strategic
planning, quality control, accounting, finance, information management, organization
design.
Organizations should ensure efficient and effective operation of primary value chain
activities to earn profit. They should establish linkages among value- creating activities. Costs
and performance in each value creating activity should be examined. The aim should be to
perform activities better than competitors. Activities of strengths provide strategic advantage.

HOLISTIC MARKETING CONCEPT AND CUSTOMER VALUE

Holistic marketing is a business marketing philosophy which considers business and all
its parts as one single entity and gives a shared purpose to every activity and person related to
that business.

A business is just like a human body. It has different parts, but it’s only able to function properly
when all those parts work together towards the same objective. Holistic marketing
concept enforces this interrelatedness and believes that a broad and integrated perspective is
essential to attain best results. This philosophy has the following features:

 A Common Goal

Holistic marketing concept believes that the business and all its parts should focus towards one
single goal which is a great customer experience.
  Aligned Activities

All of the services, processes, communication and other business activities should be directed
towards that common goal.

 Integrated Activities

All activities should be designed and integrated in such a way so as to create a unified, consistent
and seamless customer experience.

Components of Holistic marketing concept

Holistic marketing focuses on marketing strategies designed to market the brand to every person
related to it, be it employees, existing customers or potential customers, and communicating it in
a unified manner while keeping in mind the societal responsibility of the business.

1. Relationship Marketing

The relationship marketing aspect of holistic marketing philosophy focuses on a long-term

customer relationship and engagement rather than short-term goals like customer acquisition and
individual sales. This strategy focuses on targeting marketing activities on existing customers to
create a strong, emotional, and everlasting customer connection. These connections further help
the business in getting repeated sales, free word of mouth marketing and more leads.

2. Integrated Marketing

Integrated marketing is an approach to create a unified and seamless experience for the consumer
to interact with the brand by designing and directing all communication (advertising, sales
promotion, direct marketing, public relations, and digital marketing) in such a way so that all
work together as a unified force and centres around a strong and focused brand image.

3. Internal Marketing

There are two types of customers to every business: internal and external. While focusing on
external customers should be a top priority for every business, internal customers should not be
left unnoticed as these internal customers (employees) play a vital role in marketing the brand
and products to the external customers of the business.

Internal Marketing treats employees and staffs as internal customers who must be convinced of a
company’s vision and worth just as aggressively as external customers. It also involves crafting
processes which make them understand their role in the marketing process.

4. Socially responsible marketing

The socially responsible marketing aspect of the holistic marketing concept involves a broader
concern of the society at large. It requires the business to follow certain business ethics and
focuses on partnerships with philanthropic and community organizations. A business is
considered as a part of the society and is required to repay the same. Socially responsible
marketing encourage a positive impact on company’s stakeholders.

Value flows within and across markets that are dynamic and competitive. Companies
need a well-defined strategy for value exploration. Developing such a strategy requires an
understanding of the relationships and interactions among three spaces; i.e. the customer's
cognitive space reflects existing and latent needs and includes dimensions such as the need for
participation, stability, freedom, and change. The company's competency space can be described
in terms of breadth broad versus focused scope of business; and depth physical versus knowledge
based capabilities. The collaborator's resource space involves horizontal partnerships, where
companies choose partners based on their ability to exploit related market opportunities, and
vertical partnerships, where companies choose partners based on their ability to serve their value
creation.

To exploit a value opportunity, the company needs value-creation skills. Marketers need
to identify new customer benefits from the customer's view, utilize core competencies from its
business domain and select and manage business partners from its collaborative networks.
Marketers must understand what the customer thinks about and wants to craft new customer
benefits. Marketers must also observe who the customer admires, who they interact with and
who influences them. Business realignment may be necessary to maximize core competencies.

Delivery value often means substantial investment in infrastructure and capabilities. The
company must become proficient at customer relationship management, internal resources
management, and business partnership management. Customer relationship management allows
the company to discover who its customers are, how they behave, and what they need or want. It
also enables the company to respond appropriately, coherently, and quickly to different customer
opportunities. To respond effectively, the company requires internal resources management to
integrate major business processes like order processing, general ledger, payroll, and production
within a single family of software modules. Finally, business partnership management allows the
company to handle complex relationships with all its business associates.

Corporate and Division Strategic Planning

Marketing plays a critical role in corporate strategic planning within successful companies.
Market-oriented strategic planning is the managerial process of developing and maintaining a
viable fit among the organization's objectives, skills, and resources and its changing market
opportunities. The aim of strategic planning is to shape the company's businesses and products so
that they yield target profits and growth and keep the company healthy despite any unexpected
threats that may arise.

Strategic planning calls for action in three key areas. The first area is managing a company's
businesses as an investment portfolio. The second area involves assessing each business's
strength by considering the market's growth rate and the company's position and fit in that
market. And the third area is the development of strategy, a game plan for achieving long-term
objectives.

Corporate headquarters starts the strategic planning process by preparing statements of mission,
policy, strategy, and goals, establishing the framework within which the divisions and business
units will prepare their plans. Some corporations allow their business units a great deal of
freedom in setting sales and profit goals and strategies. Others set goals for their business units
but let them develop their own strategies. Still others set the goals and get involved heavily in the
individual business unit strategies. Regardless of the degree of involvement, all strategic plans
are based on the corporate mission.

1. Mission Statement or Defining the Corporate mission

Mission statement includes the mission of an organization which it needs to achieve through
careful marketing research by carefully analyzing the needs and wants of what customer wants
and providing him with the same. They have some characteristics such as a good mission
statement should be: -
Firstly, it should be limited to few goals. Secondly, it should be such that there should
enough individual discretion to be acted upon the company’s major rules and policies. Thirdly, it
should be defining the competitive spheres(Industry like one industry or, Products and
applications, Competence like the kind of use of technology being used or if it is having the
capacity to use it, market segment, Vertical like distribution channels and geographical) in which
the company would be operating. Fourthly, it should be take a long term view and lastly, it
should short, memorable and meaningful.

2. Establishing SBUs

It talks about how market oriented definitions are stronger than product oriented definitions due
to various factors. It tells us that if as a company you are giving the definition which is making u
a company operating in a particular product line in a particular segment basically a product
oriented definition but if we use a market oriented definition it helps us in diversification in the
same segment and in product lines. E.g. IBM redefined itself from a hardware and software
manufacturer to a builder of networks. Each SBU has several characteristics: -
 If it is a single business or a collection of businesses it can be planned separately
from the business.
 It has own set of competitors
 One manger is responsible for the strategic planning and profit performance,
which controls most of the factors affecting profit.

3. Assigning resources to SBU’s

It basically focuses on the investing decisions or to allocate corporate resources. It basically

focuses on the working of BCG Matrix Model.

4. Assessing Growth opportunities

It means adding, downsizing or terminating the older businesses. It focuses on filing the gap
between future desired sales and projected sales by adding new businesses. It tells us that lowest
curve of the gap is expected sales over the period and highest curve depicts the sales over the
same period and how fast company will grow.

Establishment and Resources Allocation to SBUs

SBU is established by big companies, with diversified businesses. Each SBU has full authority
to work set its own objectives and work independently. Each SBU has its own market and
competitors. A company can establish SBUs to focus on targeted markets and judiciously assigns
resources to each SBU as per its requirements. Assigning resources to each SBU is an important
task to identify the marketing opportunities to beat the competitions. SBU model, BCG model,
and GE model are generally used to identify and grabs the market opportunities. For example
Chaudhary groups have different SBUs such as Beer, Noodles, Cement, LG.

The Boston Consulting Groups (BCG), a management consulting group developed and
popularized the growth share matrix. The BCG approach is based on the two factors those are
product's growth rate and its relative market share. BCG model integrate all SBUs and their
relative size and product into single matrix. The SBUs performance is evaluated in terms at
market growth and market share so as to find out attractive opportunity of each SBU and
determine resources need of individual unit. It can be clarified from the following figure.

In GE model, market attractiveness is measured through size of market, profit margin, inflation,
technology, economies of scale, seasonality and intensity of competitions. Likewise competitive
positions are measured through market share, market growth rate, quantity of goods, per unit
cost, situation of distribution, promotional activities, production efficiency, customer's service,
amount of quantity to be sold, research and development and popularity of brand. In GE model
there is matrix having & cells which are plotted each SBU in terms of different levels of market
attractiveness and competitive position which are shown in the following
figure:
Market Attractiveness
Competitive Position

High Medium Low

1 2 3
High
Invest Invest Build/grow
4 5 6
Medium
Invest Build/grow Harvest
7 8 9
Low
Build/grow Harvest Divest

Marketing innovation
A marketing innovation is the implementation of a new marketing method (marketing idea or
strategy) that differs significantly from the previous marketing method used by the enterprise
and that has not been previously used by the enterprise. A requirement for a marketing
innovation is that it involves significant changes in the product design or packaging, product
placement, product promotion or pricing. Seasonal, regular and other routine changes in
marketing methods are not considered marketing innovations.

It aims to investigate the development of ‘marketing innovation’ defined as the implementation

of new marketing practices involving significant changes in the design, distribution, promotion
or pricing of a product or service. We conduct a systematic review to provide conceptual,
methodological and thematic guidance for scholars interested in studying marketing innovation.
Our findings suggest while marketing innovation is often merged with the dominant
technological focus underpinning product or service innovation, there is a growing trend to
consider the innovation potential offered by the development of new distribution channels,
branding strategies, communication types or pricing mechanisms. Digitisation, a key driver for
marketing innovation, enables new communication methods, branding strategies, offering
designs, and transaction settings. There is a growing trend to focus on co creation, service-
dominant logic and user community perspectives.

Innovation is one of the most important issues in business today, as it is fundamental for
sustainable business success. Innovation leads to improved consumer lives, through better
quality products and services and lower prices, and to improved business performance, through
transforming old and creating new markets. Hence, it is an important topic for strategic
marketing. By connecting companies with their customers and markets, marketing provides the
key to stay competitive; this is nowadays of particular importance because of emerging
disruptive new technologies and rapidly changing customer needs. Companies that are not
adapting and innovating lose sales and profitability to innovating competitors and might not even
survive in their markets.

Innovation is a broad topic, and a variety of disciplines address various aspects of innovation.
Marketing as a discipline, and especially strategic marketing, is well positioned to participate in
the understanding and management of innovation within firms and markets, because a primary
goal of innovation is to develop new and modified products, services, and processes for their
customers. The fundamental trigger for innovation is to identify and satisfy customer needs
better than competitors. Strategic marketing is at the heart of innovation activities by linking
internal and external stakeholders for the development of new products, services, and processes.
Strategic marketing innovation management involves the creation of novelty and utility, two
crucial factors. An innovation is, almost by definition, novel; at least some new element must be
incorporated. However, having a good idea is not enough; it needs to be implemented well in
practice before meriting the name innovation. As a prospective strategic marketing manager, you
need to understand the importance of innovation, the role of marketing for a company’s
innovation, the innovation process steps, the innovation performance of your company and
comprehend the tools and techniques (e.g., for scenario development, ideation, prototyping)
available to marketing to improve it.

Business Unit Strategic Planning

All Markets are divergent. Hence strategies need to be customized according to the distinctive
needs of each market. In order to create tailored strategies, a company is divided into business
units. Business units are allotted on the basis of the products that the company sells. Budget
allocation is decided upon by the management after the company defines its SBUs. An SBU is
assessed on the basis of its value. The value of an SBU is based on the potential scope of its
growth. Presented below, is the ideal strategic planning process in a business unit.

Step 1 – Business Mission

The strategic planning process is based on the mission derived by the business (obtained from
bigger companies or corporate missions). Managers, employees and often customers collectively
develop a clear cut and reflective mission statement. This helps the business acquire a sense of
purpose, direction and opportunity. Specific missions must be defined by each business unit
within the company’s wider mission.

Step 2 – SWOT Analysis

SWOT stands for the all-inclusive analysis of a company’s Strength, Weakness, Opportunities
and Threats.
Internal Environment
Strengths and weaknesses are micro-level or internal aspects of an organization. These can be
mastered and needful changes can be brought about with appropriate strategies. Strengths are the
characteristics that help achieve an organization's objectives. Weaknesses are all those
characteristics that can prevent the organization from achieving its objectives. Example:
Customers, Suppliers, Competition, Market-cost structure, Distribution system, Technology,
Market stability and Intermediaries.

External Environment
Opportunities and threats are macro-level or external aspects of an organization. These cannot be
changed or controlled. Opportunities work in favour of an organizations business. Threats may
unfavorably affect an organization's business performance. Example: Economic environment,
Demographic environment, Technological advancement, the legal and political environment,
Socio-cultural environment and Global/International environment.

Step 3 – Goal Formulation

The development of certain goals for the planning period is called the Goal Formulation.
Specific objectives pertaining to magnitude and time are described by managers with the help of
goals. The objectives include Profitability, Growth of Sales, Improvement of market shares,
Containing risk, Innovation and Reputation.

Step 4: Strategic Formulation

Marketing strategy constitutes of three parts i.e. Business Strategy, Technology Strategy and
Sourcing Strategy. Goals refer to what the business wants to achieve. Strategy refers to the game
plan for achieving the said goals. Porter’s Generic Strategies are-

1. Overall Cost Leadership

In order to get lower prices than its competitors and winning the market, businesses lower their
production and distribution cost. This is called Overall Cost Leadership.

2. Differentiation
Businesses establish high performance in customer benefit areas that hold a lot of importance.
For example, the firm seeks quality leadership.

3. Focus
One or more narrow market segments are focused on by businesses. Marshall Amplification was
founded by the drummer and drum shop owner Jim Marshall. It is a British designing and
manufacturing company. It deals with music amplifiers, speaker cabinets, brands of personal
headphones and earphones. Marshall’s guitar amplifiers are very famous around the world. Their
signature sound was conceived by Marshall after guitarist Pete Townshend visited Marshall’s
shop and complained about the guitar amplifiers in the market than not having the right sound or
louder volume. Marshall Amplification is identified by sizzling distortion and “crunch,” This
new sound and volume received a lot of publicity and was sought by many guitarists.

Step 5: Program Formulation and Implementation

Poor implementation can severely harm a good marketing strategy. One of the seven aspects of
successful business practice is Strategy, says Mckinsey and Company. McKinsey’s 7-S model
for business success is the accumulation and framing of all seven aspects of business success. In
the 1980s, successful business consultants Robert H. Waterman, Jr. and Tom Peters developed a
model. According to the model, the seven elements need to be mutually reinforced and aligned in
order for the organization to perform well.

According to The McKinsey 7S model, the presence of these elements helps a company
successfully implement strategies. The characterized and interdependent ‘hard’ and ‘soft’ aspects
that make up this model are-
Hard Elements
 Strategy
 Structure
 Systems
It is easy to spot or define. It can be directly influenced by management
Soft elements
 Shared values
 Skills
 Style
 Staff
Harder to spot or identify. They are difficult to influence by the management but more affected
by culture as compared to “hard” elements.
Step 6: Feedback and Control
Results of new developments in the marketing environment need to be tracked and monitored by
companies after SBU implements strategies. Companies can review and revise their
implementation, strategies and purpose in case the environment changes and the company is able
to count it. Enthusiasm to evaluate the changing environment and to embrace new goals and
behaviors is the key to organizational health.

Mission and SWOT analysis

Mission
It is the broad sense of purpose of the organization or the reason for the existence of an
organization. Top-level management develops mission. Mission defines the fundamental
unique purpose that differentiates an organization from other organizations of similar type. It
also consists of the company’s philosophy about how it does business and treats its
 employees. It states the reason & priorities. It projects image of the organization. It reflects
long term commitment of the organization. It is also known as purpose of the organization.
Following are the examples of mission statements of reputed companies:
 British airways seeks to be “the world’s favorite airplane”
 Nokia speaks of “Connecting people”
 DHL “Deliver your promise”

SWOT Analysis
SWOT is an acronym used to describe the particular strengths, weakness, opportunities
and threats that are strategic factors for a company. During the analysis of various alternatives,
SWOT plays great role for appropriate evaluation of each alternative. Among the many tools,
SWOT is an important tool for evaluation.

SWOT analysis is a systematic identification of internal strengths and weakness of a

business and external opportunities and threats facing the business. This analysis helps to
formulate the strategies that reflect the best match between them. The best matching may be the
potential strategic alternative among the various alternatives. It is based on the logic that an
effective strategy maximizes a business strengths and opportunities but at the same time
minimizes its weaknesses and threats. The objective of SWOT analysis is to provide a
framework to reflect organizational capabilities to avail opportunities or to overcome threats
presented by the environment. The SWOT matrix is an important matching tool that helps
managers develop and analyze strategies. The SWOT matrix is also called TOWS matrix.

a. Strength (S): Strength is the basic capabilities of the organization in which it can be used to
gain competitive advantages. It is a distinct competence of an organization which gives the
competitive advantage. During the strategic alternative analysis, some of the factors related
to the strengths of an organization need to be analyzed with respect to each alternative:
 Well developed strategy
 Strong financial condition
 Human resource competencies
 Strong brand name/image/reputation
 Strong advertising
 Broad market coverage
b. Weaknesses (W): It is the basic limitation or constraint of the organization which creates
competitive disadvantages. It is the deficiency in resource, skills, capabilities and knowledge
which negatively affect the performance of an organization. Following are some of the
examples of weaknesses.
  Weak marketing plan
 No clear strategic direction
 Weak financial position
 Inadequate human resources
 Obsolete technology
 Loss of brand name
 Raising manufacturing cost etc.
c. Opportunities (O): It is the favorable conditions in the organization’s external environment
which enables its strength in its position. It provides competitive advantages to the firm
exploiting organization’s strength in relation to its competitors. Examples of the opportunities
of an organization are:
 Expanding new geographical areas/new market segment
 Diversify the business
 Acquisition of rivals
 Alliance or joint venture
 Expand core business
 Exploit new technologies
 Serving additional customer groups
d. Threats (T): It is an unfavorable condition of the organization’s external environment which
causes risk for or damage to the organization’s positions. The examples of the threats of an
organization are:

 Growing power of customers and suppliers

 Keen competition
 Change in consumer taste, fashion, likes etc.
 Rise of new or substitute product
 Increase in industry rivalry
 Raising labor costs
 Attack on core business etc.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
 g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future
plans can be chalked out.

The SWOT Matrix

The SWOT analysis is also called TWOS matrix. It is an important matching tool that
helps manager to develop 4 types of strategies i.e. SO (strength-Opportunities) Strategies, WO
(Weaknesses-Opportunities) strategies, ST (Strength-Threats) Strategies, and WT (Weakness-
Threats) Strategies. Matching key external and internal factors is the most difficult part of
developing a SWOT matrix and required and there is no one best of matches. The following
figure shows SWOT matrix.

Internal
aspects Strengths (S) Weaknesses (W)

External
aspects

Opportunities (O) SO WO

Threats (T) ST WT

1. SO Strategies uses a firm’s internal strengths to take advantage of external opportunities. All
managers would like their organizational to begin a position in which internal strengths can
be used to take advantages of external trends and events.
2. WO Strategies aim at improving internal weakness by taking advantage of external
opportunities. Sometimes key external opportunities exist, but a firm has internal weakness
that prevents it from exploiting those opportunities. For e.g. there may be high demand for
electronic devices to control the amount and timing of fuel injection in automatic engines
(opportunities), but a certain auto parts manufacturer may be lack the technology required for
producing these devices (weakness). One possible WO strategy would be to acquire this
technology by forming a joint venture with a firm having competency in these areas. An
alternative WO strategy would be to hire and train people with the required technical
capabilities.

3. ST Strategies use a firm’s strength to avoid reducing the impact of external threats. This
doesn’t mean that a strong organization should always meet threats in the external
 environment. However, when an excellent firm (strength) couldn’t complete with the alliance
firm. Rival firms that copy ideas innovations and patented products are a major threat in
many industries. This is still a major problem for U.S. firms selling products in china.

4. WT Strategies are defensive tactics directed at reducing internal weakness and avoiding
external threats. AN organization faced with numerous external threats and internal weakness
may indeed be in precarious (insecure) position. In fact, such a firm has to fight for its
survival, merge, retrench, declare bankruptcy or choose liquidation. There are eight steps
involved in constructing a SWOT matrix.