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PriceHigh Medium Low
Quality
High
1- Premium
(Bose)
2- High value 3- Penetration
(Amul)
Medium
4- Overcharging
(Pricey Hotels )
5- Medium value 6- Good value
Low
7- Skimming
(Reliance Mobile)
8- False economy 9- Economy
(Nirma)
PRICE QUALITY RELATIONSHIP
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Pricing strategies for New Products
1. Skimming Pricing
2. Penetration Pricing
Price Strategies for Established Products
1. Maintaining the Price2. Reducing the Price
3. Increasing the Price
Price-Flexibility Strategy
1. One-Price Strategy
2. Flexible-Pricing Strategy1. By market,
2. By product,
3. By timing,
4. By technology
Product Mix - Pricing Strategy1. Product-line pricing,
2. Optional-feature pricing,
3. Captive-product pricing,
4. Two-part pricing,
5. By-product pricing,
6. Product-bundling pricing.
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PRICE DISCOUNTS AND ALLOWANCES
1. Cash Discount
2. Quantity Discount
3. Functional Discount
4. Seasonal Discount5. Allowance
PROMOTIONAL PRICING
1. Loss-leader pricing
2. Special-event pricing
3. Cash rebates4. Low-interest financing
5. Longer payment terms
6. Warranties and service contracts
7. Psychological discounting
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DEALING WITH COMPETITION
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Competitive Strategies for Market Leaders.
Expanding the Total Market
NEW CUSTOMERS
MORE USAGE
Defending Market Share
POSITION DEFENSE
FLANK DEFENSE
PREEMPTIVE DEFENSE
COUNTEROFFENSIVE DEFENSE
MOBILE DEFENSECONTRACTION DEFENSE
Expanding Market Share
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Other Competitive Strategies
Market-Challenger Strategies
DEFINING THE STRATEGIC OBJECTIVE AND OPPONENT(S)
-It can attack the market leader
-It can attack firms of its own size that are not doing the job
and are underfinanced.-It can attack small local and regional firms
CHOOSING A GENERAL ATTACK STRATEGY
- Frontal Attack
- Flank Attack
- Encirclement Attack
- Bypass Attack- Guerrilla Warfare
CHOOSING A SPECIFIC ATTACK STRATEGY
- Price discount.
- Lower price goods.
- Value-priced goods and services
- Prestige goods- Product proliferation.
- Product innovation.
- Improved services
- Distribution innovation.
- Manufacturing-cost reduction.
- Intensive advertising promotion.
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1) Counterfeiter
2) Cloner
3) Im i tato r
4) Adap ter
Because the follower is often a major target of attack by challengers, it
must keep its manufacturing costs low and its product quality and
services high. It must also enter new markets as they open up. The
follower has to define a growth path, but one that does not invite
competitive retaliation.
Four broad strategies can be distinguished:
Market-Follower Strategies
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Nichers have three tasks:
Creating niches,
1) Expanding niches, and2) Protecting niches.
Niching carries a major risk in that the market niche might dry up or be
attacked. The company is then stuck with highly specialized resources
that may not have high-value alternative uses.
Because niches can weaken, the firm must continually create new ones.
The firm should "stick to its niching" but not necessarily to its niche. That
is why multiple nichingis preferable to single niching. By developing
strength in two or more niches, the company increases its chances forsurvival.
Firms entering a market should aim at a niche initially rather than the whole
market.
Market-Nicher Strategies
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CONSUMER-ORIENTED SALES PROMOTION TECHNIQUES
Sampling
Door-to-door,
Direct-mail,
In-store, and
On-package approaches.
Couponing
Premiums
Free Premiums
Self-Liquidating Premiums
Contests and Sweepstakes
Refunds and Rebates
Bonus Packs
Price-Off Deals
Frequency Programs
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TRADE-ORIENTED SALES PROMOTIONS TECHNIQUES
1) Contests and incentives,
2) Trade allowances,
Buying allowances,
Promotional or display allowances, and
Slotting allowances.
3) Displays and point-of-purchase materials,
4) Sales training programs
5) Trade shows, and
6) Co-op advertising.
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ADVERTISING STRATEGY
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SETTING THE OBJECTIVES
Informative advertising:Aims to create brand awareness and knowledge of new
products or new features of existing products.
Persuasive advertising: Aims to create liking, preference, conviction, and
purchase of a product or service
Reminder advertising: Aims to stimulate repeat purchase of products and
services.
Reinforcement advertising:Aims to convince current purchasers that they made
the right choice. Automobile ads often depict satisfied customers enjoying specialfeatures of their new car.
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THERE ARE FIVE SPECIFIC FACTORS TO CONSIDER WHEN SETTING THE
ADVERTISING BUDGET:
1. Stage in the produc t l if e cycle- New products typically receive large advertisingbudgets to build awareness and to gain consumer trial. Established brands usually
are supported with lower advertising budgets as a ratio to sales.
2. Market share and con sum er base- High-market-share brands usually require less
advertising expenditure as a percentage of sales to maintain share.
3. Competi t ion and c lut ter - In a market with a large number of competitors and high
advertising spending, a brand must advertise more heavily to be heard.
4. Adver t is ing frequency- The number of repetitions needed to put across the brand's
message to consumers has an important impact on the advertising budget.
5. Product subst i tu tabi l i ty - Brands in less-well-differentiated or commodity-likeproduct classes require heavy advertising to establish a differential image.
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DEVELOPING THE ADVERTISING CAMPAIGN
In designing and evaluating an ad campaign, it is important to distinguish the
message strategyor positioning of an ad (what the ad attempts to conveyabout the brand) from its creative strategy (how the ad expresses the brand
claims) and who should say (message source)
Advertisers go through three steps:
1) Message generation and evaluation, (MessageStrategy )
2) Creative development and execution, (Creative Strategy)
3) Message source
4) Legal & social issues.
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CREATIVE STRATEGY
Communications effectiveness depends on how a message is being expressed as
well as the content of the message itself.
Creative strategies can be broadly classified as involving either "informational" or
"transformational" appeals. These two general categories each encompass several
different specific creative approaches.
Informational Appeals
An informational appealelaborates on product or service attributes or benefits.
Examples in advertising are
Hovland's research at Yale has shed much light on informational appeals and their
relation to such issues as:
Conclusion drawing,
One-versus two-sided arguments, and
Order of argument presentation.
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Transformational Appeals
A transformational appealelaborates on a non-product-related benefit or image.
1. Negative Emotions
2. Positive Emotions
3. Comparison
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MESSAGE SOURCE
Three factors that underlie source credibility are expertise, trustworthiness, and
likability of the source
Expertiseis the specialized knowledge the communicator possesses to back the
claim.
Trustworthiness is related to how objective and honest the source is perceived
to be. Friends are trusted more than strangers or salespeople, and people who
are not paid to endorse a product are viewed as more trustworthy than people
who are paid.
Likabilitydescribes the source's attractiveness. Qualities like candor, humor, and
naturalness make a source more likable.
The most highly credible source would be a person who scores high on all three
dimensions.
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DECIDING ON THE MEDIA
After choosing the message, the advertiser's next task is to choose media to carry
it. The steps here are deciding on
1) Desired reach, frequency, and impact
2) Choosing among major media types
3) Selecting specific media vehicles
4) Deciding on media timing; and
5) Deciding on geographical media allocation.
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Evaluating Advertising Effectiveness
Good planning and control of advertising depend on measures of advertising
effectiveness.
Most advertisers try to measure the communication effect of an adthat is, itspotential effect on awareness, knowledge, or preference. They would also like to
measure the ad's sales effect.
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PRODUCT STRATEGIES
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PRODUCT-OVERLAP STRATEGY
The product-overlap strategy refers to a situation where a company decides to
compete against its own brand.
There are alternative ways in which the product-overlap strategy may beoperationalized. Principal among them are having
1) Competing brands,
2) Doing private labeling, and
3) Dealing with original-equipment manufacturers.
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PRODUCT-SCOPE STRATEGY
The product-scope strategy deals with the perspective of the product mix of a
company (i.e. the number of product lines and items in each line that the
company may offer).
The three variants of product-scope strategy that will be discussed in this
section are
1)Single-product strategy,
2)Multiple-products strategy, and
3)System-of-products strategy
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PRODUCT-DESIGN STRATEGY
A business unit may offer a standard or a custom-designed product to each individual
customer.
Standard Products:Offering standard products leads to two benefits. First, standardproducts are more amenable to the experience effect than are customized products;
consequently, they yield cost benefits. Second, standard products can be
merchandised nationally much more efficiently.
Customized Produc ts :Customized products are sold on the basis of the quality of
the finished product, that is, on the extent to which the product meets the customers
specifications. The producer usually works closely with the customer, reviewing the
progress of the product until completion. Unlike standard products, price is not a
factor for customized products. A customer expects to pay a premium for a
customized product.
Standard Produ cts w i th Mod i f icat ions
The strategy of modifying standard products represents a compromise between
the two strategies already discussed. With this strategy, a customer may be given
the option to specify a limited number of desired modifications to a standard
product.
PRODUCT ELIMINATION STRATEGY
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PRODUCT-ELIMINATION STRATEGY
Marketers have believed for a long time that sick products should be eliminated.
It is only in recent years that this belief has become a matter of strategy.
The three alternatives in the product-elimination strategy are
1) Harvesting,
2) Line simplification, and
3) Total-line divestment.
Harvest ing:Harvesting refers to getting the most from a product while it lasts. It is
a controlled divestment whereby the business unit seeks to get the most cashflow it can from the product. The harvesting strategy is usually applied to a
product or business whose sales volume or market share is slowly declining.
Line Simpl i f icat ion:Line-simplification strategy refers to a situation where a
product line is trimmed to a manageable size by pruning the number and variety
of products or services offered. It is hoped that the simplification effort will
restore the health of the line.
Total-Line Divestment :Divestment is a situation of reverse acquisition.
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NEW-PRODUCT STRATEGY
New-product development is an essential activity for companies seeking
growth.
By adopting the new-product strategy as their posture, companies are better
able to sustain competitive pressures on their existing products and make
headway.
The term new productis used in different senses. For our purposes, the new
product strategy will be split into three alternatives:
(a)Product improvement/modification,
(b)Product imitation, and
(c)Product innovation.
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DIVERSIFICATION STRATEGY
Diversification refers to seeking unfamiliar products or markets or both in the
pursuit of growth. Essentially, there are three different forms of diversification a
company may pursue:
1)Concentric diversification,
2)Horizontal diversification, and
3)Conglomerate diversification.
Diversification Technology required to
make the new product
Customer
Concentric Old New
Horizontal New Old
Conglomerate New New
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PORTERS FIVE FORCES MODEL
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PORTERS 5 FORCES AND PROFIT
Force Profitability will be
higher if:
Profitability will be
lower if:
Bargaining power of
suppliers
Weak suppliers Strong suppliers
Bargaining power of
buyers
Weak buyers Strong buyers
Threat of new
entrants
High entry barriers Low entry barriers
Threat of substitutes Few possiblesubstitutes Many possiblesubstitutes
Competitive rivalry Little rivalry Intense rivalry
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BCG AND GE MATRIX
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The product lifecycle approach determines the life status of different
products and whether the company has enough viable products to
provide desired growth in the future.
If the company lacks new products with which to generate growth in
coming years, investments may be made in new products.
If growth is hurt by the early maturity of promising products, the
strategic effort may be directed toward extension of their life cycles.
PRODUCT LIFE CYCLE
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EXHIBIT B
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EXHIBIT B
EXHIBIT C
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EXHIBIT C
EXHIBIT D
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EXHIBIT D
High Low
Low
High
EXHIBIT E
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EXHIBIT E
High Low
Low
High
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48
The Industry Attractiveness-BusinessPosition Matrix
Bus
inesss
competitiveposition
High
Low
Medium
Industry attractivenessHigh Medium Low
1 1 2
1 2 3
2 3 3
1 Invest/grow
2 Selective
investment/ maintain
position3 Harvest/divest
Variables that might be used to evaluate:
Businesss competitive positionSize
Growth
Relative share
Customer loyalty
Margins
Distribution
Technology
Marketing skills
Patents
Industry attract ivenessSize
Growth
Price levels
Competitive
intensity
Profitability
Technological
sophistication
Government
regulations
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DISTRIBUTION STRATEGIES
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I. Channel -Str uc tu re Str at egy
Direct
Indirect
II. Di st ri but ion -Scope St rategy
Exclusive
Selective
Intensive
I II Mult i ple-Channel Strategy
Complementary
Competitive
IV. Chann el-Con trol Strategy
V. Con fl ict- Management Strategy
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IDENTIFYING MARKET SEGMENTS
AND
TARGETS
Bases for Segmenting Consumer Markets
Geographic Segmentation
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Geographic Segmentation
Urban and rural
Demographic Segmentation
AGE AND LIFE-CYCLE STAGE
LIFE STAGE
GENDER
INCOME
GENERATION
SOCIAL CLASS
Psychographic Segmentation
Behavioral Segmentation
DECISION ROLES
Init iato r, Influ encer, Decid er, Buyer
BEHAVIORAL VARIABLES
Occasions
BenefitsUser Status
Usage Rate
Buyer-Readiness Stage
Loyalty Status
Attitude
THE CONVERSION MODEL
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Bases for Segmenting Business Markets
Business markets can be segmented with some of the same variables
used in consumer market segmentation, such as geography, benefitssought, and usage rate, but business marketers also use other variables
Demographic
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Indust ry :Which industries should we serve?
Company size:What size companies should we serve?
Locat ion:What geographical areas should we serve?
Operating Variables
Technology:What customer technologies should we focus on?
User or non user status: Should we serve heavy users, medium users, light users,
or nonusers?
Purchasing Approaches
Purchasing -func t ion organizat ion: Should we serve companies with highly
centralized or decentralized purchasing organizations?
Power structure:Should we serve companies that are engineering dominated,
financially dominated, and so on?Nature of exist ing relat ion ships: Should we serve companies with which we have
strong relationships or simply go after the most desirable companies?
General purc hase po l ic ies: Should we serve companies that prefer leasing?
Service contracts? Systems purchases? Sealed bidding?
Purchasing cr i ter ia:Should we serve companies that are seeking quality?Service? Price?
Selecting the Market Segments
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Selecting the Market Segments
After evaluating different segments, the company can consider five
patterns of target market selection.
Single segment concentration
Selective specialization
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Selective specialization
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Product specialization
M k t S i li ti
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Market Specialization
Full market coverage
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g
Segment- by- segment invasion plan
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A company would be wise to enter one segment at a time.
Competitors must not know to what segment(s) the firm will move
next
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DIFFERENTIATION
Product Differentiation
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Brands can be differentiated on the basis of a number of different product or service
Dimensions:
Product form,
Features,
Performance,
Conformance,
Durability,
Reliability,
Reparability, Style, and
Design,
Service dimensions as
Ordering ease,
Delivery, Installation,
Customer training,
Customer consulting, and
Maintenance and repair.
Product differentiation is based on - Tangible product attributes.
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1) Ingredient and formula
2) Functional Features
3) Differentiation based on Additional features
.
4) Differentiation on Packaging
5) Differentiation through product design/Styling
6) Differentiation on product quality/ Technology
7) Differentiation on customer care and service
Product differentiation is based on - Intangible product attributes.
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1) Prestige/ Status
2) Sentiments
3) Beliefs
Image Differentiation
Marlboro's "macho cowboy" image has struck a responsive chord with much of
the cigarette-smoking public. Wine and liquor companies also work hard to
develop distinctive images for their brands.
Identity and image need to be distinguished. Identityis the way a company aims
to identify or position itself or its product. Image is the way the public
perceives the company or its products.
Personnel Differentiation
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1. McDonald's people are courteous,
2. IBM people are professional, and Disney people are upbeat.
3. The sales forces of such companies as General Electric, Cisco, Frito-Lay,
Northwestern Mutual Life, and Pfizer enjoy an excellent reputation.4. L&T, the engineering firm, recruits engineers with excellent qualification & claims
superiority on executing projects.
5. Singapore Airlines enjoys an excellent reputation in large part because of its flight
attendants.
Better-trained personnel exhibit six characteristics:
1) Competence: They possess the required skill and knowledge
2) Courtesy. They are friendly, respectful, and considerate
3) Credibility. They are trustworthy
4) Reliability. They perform the service consistently and accurately
5) Responsiveness: They respond quickly to customers' requests and problems
6) Communication: They make an effort to understand the customer and
communicate clearly
Channel Differentiation
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Companies can achieve competitive advantage through the way they design their
distribution channels' coverage, expertise, andperformance.
Caterpillar's success in the construction-equipment industry is based partly on
superior channel development. Its dealers are found in more locations than
competitors' dealers, and they are typically better trained and perform more reliably.
Catterpillar , the global leader in earth moving equipment, made a mark through its
distribution efficiency and top class maintenance service.
Dell in computers and Avon in cosmetics distinguish themselves by developing and
managing high-quality direct-marketing channels
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POSITIONING
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A number of positioning strategies might be employed in developing a promotional
program.
Positioning by
Product attributes,
Price/quality,
Use,
Product class,
Users, and Competitor.
Positioning by cultural symbols.
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PORTERS GENERIC STRATEGY
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Generic Strategy Framework
Cost leadership
Ryan Air, Walmart,, Dell
computers, DeccanAirways
Differentiation
McDonalds, BMW,
Apple, Nike, Mercedes
Cost focus
South West Airlines
Differentiation focus
Ferrari, Rolls Royce
StrategicScope
Broad
Narrow
Low cost Differentiation
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MARKETING STRATEGY
Corporate Strategy
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At the corporate level, managers must coordinate the activities of
multiple business units.
Decisions about the organization's scope and resource deployments
across its divisions or businesses are the primary focus of the
corporate strategy. The essential question at this level are
1) What business(es) are we in?
2) What business(es) should we be in? and
3) What portion of our total resources should we devote to each of these
businesses to achieve the organization's overall goals and objectives?
Thus, top-level managers at IBM decided to pursue future growth primarily
h h h d l f W b b d i d f h h
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through the development of Web-based services and software rather than
computer hardware.
They shifted substantial corporate resourcesincluding R&D expenditures,marketing and advertising budgets, and vast numbers of salespeopleinto
the corporation's service and software businesses to support the new
strategic direction.
Attempts to develop and maintain distinctive competencies at the corporate
level focus on
1) Generating superior human, financial, and technological resources.
2) Designing effective organizational structures and processes.
3) Seeking synergy among the firm's various businesses.
Synergy can provide a major competitive advantage for firms where related
businesses share R&D investments, product or production technologies,
distribution channels, a common sales-force, and/or promotional themes
as in the case of IBM.
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Strategic
Planning
Gap
Figure illustrates the strategic-planning gap for a major manufacturer of
blank compact disks called Musicale (name disguised).
The lowest curve projects the expected sales over the next five years from
the current business portfolio. The highest curve describes desired sales
over the same period. Evidently, the company wants to grow much faster
than its current businesses will permit. How can it fill the strategic-planning
gap?
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Market Penetration Strategies
Increase market share Increase product usage
Increase frequency of use
Increase quantity used
New application
Product development strategies
Product Improvement
Product line extension
New product for the same
markets
Market development strategies
Expand Markets for existing
products
Geographic expansion
Target new segment
Diversification Strategies
Vertical Integration
Forward integration
Backward integration
Horizontal integration
Diversification into related business
( Concentric diversification)
Diversification into unrelated business
( Conglomerate diversification)
Current Products New Products
Current
Markets
New
Markets
Integrative
Growth strategies
Business-Level Strategy
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How a business unit competes within its industry is the critical focus of
business-level strategy. What distinctive competencies can give the business
unit a competitive sustainable advantage? And which of those competenciesbest match the needs and wants of the customers in the business's target
segment(s)?
For example, a business with low-cost sources of supply and efficient,
modern plants might adopt a low-cost competitive strategy. One with a strong
marketing department and a competent sales force may compete by offering
superior customer service.
Another important issue a business-level strategy must address is
appropriate scope: how many and which market segments to compete in,
and the overall breadth of product offerings and marketing programs toappeal to these segments.
Finally, synergy should be sought across product-markets and across
functional departments within the business.
Business Unit Strategic Planning
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The Business Mission
SWOT Analysis
Goal Formulation
Strategic Formulation
Program Formulation and Implementation
Feedback and Control
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Marketing Strategy
The primary focus of marketing strategy is to effectively allocate and
coordinate marketing resources and activities to accomplish the firm'sobjectives within a specific product-market.
Therefore, the critical issue concerning the scope of a marketing strategy is
specifying the target market(s) for a particular product or product line. Next,
firms seek competitive advantage and synergy through a well-integratedprogram of marketing mix elements (primarily the 4 Ps of product, price,
place, promotion) tailored to the needs and wants of potential customers in
that target market.
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BENCHMARKING
Firms Use Certain Tools in Diagnosing and Building CA
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(Competitive advantage )
Two useful tools in identifying and building competitive advantage are:
(i) Benchmarking
(ii) Value chain analysis
Benchmark ing
Benchmarking can be described as the process of improving one'sperformance by locating benchmarks/ standards in other firms and replicating
them in one's own organization.
It is a learning process, by which a firm seeks to identify best practices that
produce superior results in other firms, and to replicate them to enhance its own
competitive advantage.
McKinsey & Co views benchmarking as a skill, an attitude and a practice that
ensures excellence, instead of mere improvement.
Benchmarking has larger scope than inter-firm comparison
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Benchmarking is larger than inter-firm comparison.
First, benchmarking does not stop with comparison. It helps the firm secure a
model for emulation.
Second, in benchmarking, companies go a step beyond inter-firm comparison and
trace the best practices across industries and across countries, gathering still
higher standards for emulation.
Third, unlike with inter-firm comparison, with benchmarking, firms encourage theirinternal departments to benchmark against one another and upgrade their
performance.
Analyzing other players and locating the best practices is the first task in
benchmarking. The firm then identifies and quantifies the performance gap .The
gap between its own performance and the benchmark. And, then, it bridges the
gap. This externally oriented approach makes people in the firm aware of the
distance they have to travel in achieving excellence. It has an eye-opening effect
on them.
Types of benchmarking
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Firms resort to four different types of benchmarking:
1) Internal,
2) Functional,
3) Competitive
4) Generic.
The distinction among them lies essentially in the scope of comparison.
Internal benchmarking means comparisons within the organization, typically,
between related divisions, site-to-site and department-to-department
comparisons.
Functional benchmarking refers to comparison of the firm's performance in a
specific functional area with other firms.
Competitive benchmarking is the comparison of a company's performanceagainst the best in the same industry, i.e. against direct competitors.
Generic benchmarking refers to comparison across companies and industries on
the universal level; here, the firm's performance in a universal work process
(example: billing) is compared with that of the best anywhere in the world, in
any industry.
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