West, Ford, & Ibrahim

Strategic Marketing, 3rd edition

Chapter 4: Strategic marketing

decisions, choices, and mistakes
 Learning Objectives

➢ To define ‘strategic choice’

➢ To outline strategic decisions taken at the corporate,

SBU and functional levels

➢ To review the strategic marketing decisions including

products to offer, markets to target and competitive
position strategies

➢ To review the analytical models and frameworks that

can be used by organisations to make their strategic
choices for the future
 Strategic choice involves generating a well-
justified set of interrelated strategic alternatives
and choose from them the ones that will
contribute to the achievement of the corporate
overall goals and strategic objectives
 Where do we want to be?
Strategic Decisions
▪ Strategic decisions at corporate level
➢ Mission statement,
➢ Directional strategy (Growth, Stability, Retrenchment)
➢ Resource allocation

▪ Strategic decisions at SBU level

➢ Choosing Generic Strategy; cost leadership,
differentiation & focus

▪ Marketing-related strategic decisions

➢ Products to offer
➢ Market segments to target
➢ Positioning strategy
➢ Competitive stance to take
• Corporate Level
 Defining the Business Purpose or Mission

• Business mission answers the question: Why a

company exists?
• The mission statement is the organization’s
purpose, what it wants to accomplish in the larger
environment.
• Hence, a clear thoughtful mission statement
provides a shared sense of purpose, direction to
the company and its employees. Furthermore, it
helps the company come up with the right
strategies to fulfill the mission.

A presentation by Varqa Shamsi Bahar

 Components of a Mission

• Strategic intent: signifies the vision of where the

organization wants to be in the foreseeable
future.
• Company Values: signifies the company’s ethical
and moral principles in pursuing their business
operations. It is what creates an organizational
culture.

A presentation by Varqa Shamsi Bahar

 Corporate Level: Mission Statement

Google’s mission is to provide data

Google’s mission is to organize the world’s

information and make it universally accessible
and useful
Corporate Level: Directional strategy

• Growth strategies: expand the corporation’s

activities
• Stability strategies: no change to the existing
activities
• Retrenchment strategies: reduce the
corporation’s level of activities
 Directional (grand) strategies

Growth Strategies Stability Strategies Retrenchment strategies

Concentration Pause/Proceed with Turnaround

Caution Captive Company
−Vertical Growth
No Change Sell-Out/Divestment
−Horizontal Growth
Profit Bankruptcy/Liquidation
Diversification
−Concentric
−Conglomerate
 Growth strategies

Concentration:
• Vertical integration is the act of expanding into new
operations for the purpose of decreasing a firm's
reliability on other firms in the process of production
and distribution.
• Horizontal integration is the act of integrating other
infrastructures, assets and companies of the same
industry or in the same level of production.
 Growth strategies

Diversification
• Concentric diversification involves adding new
products or services that are related to your current
offerings -- either because they appeal to the same
market or because they can be offered without much
investment in new resources (or both.)
• Conglomerate: In business, a conglomerate is a
company involved in multiple lines of business that
have little relationship to one another.
 Growth strategies: Advantages
• Concentric diversity aims for synergy
• Concentric diversification can also provide a gainful
use for excess capacity
• With conglomerate diversification, the advantage is
the diversification itself -- spreading the market risk
across more sectors
 Growth strategies: Disadvantages

• With conglomerate diversity, there's no guarantee that the

businesses will be a good fit.
• Dangers of concentric diversity include line overextension --
diluting the value of your brand by trying to do too much.
• With both types of diversification, there is always the possibility
that the diversification will just be a poor investment -- you'll
misread the market and end up offering something that
customers don't want (at least from you.)
 Stability strategies

Pause/Proceed with Caution

No Change
Profit
 Retrenchment strategies: Turnaround

• Turnaround: This strategy is recommended when despite the

industry having high appeal, a company actually has trouble
coping up with business
• This strategy emphasizes on improving efficiency and
operational implementation
• The company makes efforts aimed at reducing costs, by means
of job cuts and spending on things that are considered less
necessary
 Retrenchment strategies: Captive company

• Captive company: Some of the activities of certain

parts of the company that are less attractive from a
business point of view, are reduced. The tied up
resources are moved to other functions that are more
attractive
Retrenchment strategies: Divestment and
Liquidation

• Sell out/ divestment

• Bankruptcy/ liquidation
 #3 Resource allocation: BCG
matrix
Corporate
level
Star Businesses Question Mark Businesses

?
gh
Hi

Movement of c
Market growth

Desired
movement of
Cow Businesses Dog Businesses
business
over time
Lo
w

High Low
Market share
 BCG strategies

• Stars: Build and grow

• Hold/harvest: Cash cows
• Investment: Children problem/ Question
• Divestment: Dogs
 General electric model
Business Position
Strong Medium Weak

High
Industry Attractiveness

Medium

Low

Most attractive: Investment for Growth Least attractive: Harvesting/Divesting Medium attractiveness: Selectivity
• SBU Level
SBU Level: Generic competitive strategy

• Generic strategy can be viewed as building

defences against the competitive forces or
finding a position in the market where the
forces are the weakest
 Porter’s generic strategies

COMPETITIVE ADVANTAGE
Uniqueness perceived Low cost
by customer position

Cost
STRATEGIC TARGET

Industry Differentiation
Leadership
-wide

Specific Differentiation Cost focus

segment focus
 Generic competitive strategies

• Cost leadership
• Differentiation
• Cost focus
• Focused differentiation
 Generic competitive strategies: cost
leadership
• Low cost competitive strategy aimed at
broad mass market.
• Requires aggressive construction of efficient-
scale facilities, vigorous pursuit of cost
reduction, tight cost and overhead control,
and cost minimization in R&D, service, sales
force advertising.
• Cost leadership is not the same as setting
low prices
• Defence against rivals
• Greater bargaining power with suppliers
• Barrier to entry
 Generic competitive strategies:
Differentiation
• Involves the creation of a significantly
differentiated offering, for which the
company charges a premium.
Associated with design, brand image,
technology, dealer network, or customer
service.
• Brand loyalty lowers customers’
sensitivity to price, and so it’s a viable
strategy for earning above average
returns
• Buyers’ loyalty serves as entry barrier
Generic competitive strategies: Cost focus

• Cost focus: low-cost strategy that

focuses on a particular buyer
group or geographic market and
attempts to serve only this niche,
to the exclusion of others. The
company seeks cost advantage in
its target segment. Company that
focuses its efforts can serve its
narrow strategic target more
efficiently than can its competitors
 Generic competitive strategies

• Focused differentiation:
concentrates on a particular buyer
group, product line group, or
geographic market. Target
segments have buyers with
unusual needs or else the
production and delivery system
that best serves the target
segment must differ from that of
other industry segments. A
company that focuses its efforts
can serve its narrow strategic
target more effectively than
competitors
Bowman's strategy clock
Bowman's strategy clock

Maids
• Functional Level
Functional Level: Strategic decisions of
products to offer and markets to target

Diversification

Ansoff’s product/market matrix

• You are a manufacturer of pens. Your team and you decide that
it’s time for your company to grow. Four of your teammates
propose four different growth strategies as follows:
– Teammate 1 says, ‘Let’s start manufacturing diaries’
– Teammate 2 says, ‘We should improve the distribution system so
that the pens reach customers more easily. This will lead to more
purchase and help us grow’
– Teammate 3 says ‘Why don’t we introduce a color pencil line
beside the pen line? Customers who buy pens would love to buy
color pencils’
– Teammate 4 says, ‘We should definitely start selling our pens in Sri
Lanka. They demand a lot of pens each year!’
• What kind of strategies are each of your teammates referring to?
Competitive position tactics
Competitive tactics for market leader

• Offensive tactics:
– Expand total market: new users, new uses, more usage
– Expanding market share: heavier advertising, improved
distribution, price incentives and new products
• Defensive tactics:
– Protect the current market share
Defensive tactics: Protect Market share

• Position defence: involves occupying the most desirable market

space in the minds of the consumers, making the brand almost
impregnable.

• Flanking defence: aimed at capturing market segments that are

not being well-served by the firm's competitors. Flanking
compels the threatened competitor to either allocate resources
to the segments being attacked (and thus dilute the competitor's
marketing efforts) or to lose them to the attacker.

• Pre-emptive defence: the leading firm can be aggressive and

strike competitors before they can make any move against it
Defensive tactics: Protect Market share

• Counter-offensive defence: This involves that the market leader

will attack the attacker in its main territories so that the attacker
will have to put back some resources for the attacked territories
and will have to divert its attention from launching attack on the
market leader. This may involve significantly lowering the prices
of the product or aggressive marketing communications or
flooding the market with the products.
• Mobile defence: the leader extends itself to new markets that
can serve as future bases for defence or offence
• Contraction defence: when resources are spread too thinly, firm
opts to withdraw from those segments in which it is most
vulnerable or that which has least potential. Then it concentrates
resources in other segments believed to be more valuable
Competitive position tactics
 Competitive tactics for market challenger

• Frontal attack: challenger opposes competitor

directly using its own weapons and trying not to
expose its weak points
• Flanking attack: challenger focuses on
competitor’s weaker flanks or gaps in the
competitor’s market coverage
• Encirclement attack: challenger encircles
competitor’s position in terms of products or
markets or both. It attacks rivals in as many ways
as possible by stretching product lines
 Competitive tactics for market challenger

• Bypass attacks: the challenger chooses to diversify

into unrelated products, moving into new markets,
technologies to replace existing products
• Guerrilla attack: smaller companies with relatively
limited resource base employs this
Example of guerrilla marketing
Example of guerrilla marketing
Competitive position tactics
Competitive position tactics