ALM 4103

STRATEGIC MANAGEMENT
Course Outline
 Module 1        The ABC of Management
 Module 2        Nature of Strategic Management
 Module 3       The Business Vision and Mission
 Module 4       Review 1: Strategic Marketing (STP)
 Module 5       Review 2: Strategic Operations (TQM)
 Module 6       Review 3: Strategic HR
MARKETING DEFINITION

Marketing is defined by the American

Marketing Association as “the activity, set of
institutions, and processes for creating,
communicating, delivering, and
exchanging, offerings that have value for
customers, clients, partners, and society at
large.”
 Creating.
 The process of collaborating with suppliers and
customers to create offerings that have value.
 Marketing creates those goods and services
that the company offers at a price to its
customers or clients. That entire bundle
consisting of the tangible good, the intangible
service, and the price is the company’s offering.
 Communicating.
 Broadly, describing those offerings, as well as
learning from customers.
 learning from customers what it is they want and
like.
 Sometimes communicating means educating
potential customers about the value of an offering,
 and sometimes it means simply making customers
aware of where they can find a product.
 Communicating also means that customers get a
chance to tell the company what they think
 Delivering.
 Getting those offerings to the consumer in a way that
optimizes value.
 Delivering an offering that has value is much more than
simply getting the product into the hands of the user;
 it is also making sure that the user understands how to
get the most out of the product and is taken care of if he
or she requires service later.
 Value is delivered in part through a company’s supply
chain.
 Logistics, or the actual transportation and storage of

materials and products, is the primary component of

supply chain management.
 Exchanging.
 Trading value for those offerings.
 However, if you were to fly from Manila to
Palawan, you could “pay” for your airline
tickets using frequent-flier miles. You could
also use Accor points to “pay” for your hotel,
and cash back points on your Discover card
to pay for meals. None of these transactions
would actually require cash
 You will recall that the essence of the
marketing concept is the idea of placing
customer needs at the center of the
organization’s decision-making.
At the heart of the marketing concept is a
process of STP. This starts with trying to
understand the market by segmenting it.
 Marketers we need to adopt an approach
that considers such factors as, increased
competition, better-informed and-educated
customers and, most importantly, changing
patterns of demand.
STP is used to;
Segment; determine which kinds of customers
exist, then
Target; select which ones we are best off
trying to serve and, finally,
Position; implement our segmentation by
optimizing our products/services for that
segment and
communicating that we have made the choice
to distinguish ourselves that way.
The Process of STP (Segmenting, Targeting, Positioning)
 Generically, there are three approaches to
marketing and this reflects into the STP needs of
each strategy.
 1. Undifferentiated strategy, all consumers are
treated equally and the company makes no
effort to satisfy particular groups. This usually
only works for commodities where the product
is standard and where one competitor really
can’t offer much more any other. Here there is
little to no need for segmentation.
 Generically, there are three approaches to
marketing and this reflects into the STP needs of
each strategy.
 2. Concentrated strategy, one firm chooses to
focus on one of several segments that exist
while leaving other segments to competitors.
All low cost or ‘budget’ airlines follow a
concentrated strategy. They therefore need to
understand the particular segment they are
operating in depth but not the whole market.
 Generically, there are three approaches to
marketing and this reflects into the STP needs of
each strategy.
 3. Differentiated strategy: They offer a variety
of classes and tickets, geared to convenience,
prestige, etc. in an effort to capture as much
of the disparate needs of travelers as they
can. They need to understand the whole
market and to be able to segment it on
differing customer needs.
SEGMENTATION
 Market segmentation can be defined as the
process of breaking down the total market for a
product or service into distinct sub-groups or
segments where each segment may conceivably
represent a separate target market to be reached
with a distinctive marketing mix.
Segmentation and the subsequent strategies of
targeting and positioning start by recognizing that
increasingly, within the total demand/market for a
product, specific tastes, needs and demand may differ.
It breaks down the total market for a product or service
into individual clusters of customers, or segments.
 Common kinds of variables can be used for
segmentation.
   Geographic variables refer to location and include
region of the world, continent or
country,East/West/North/South/Central/Coastal/Upland
etc., country size, area size & type; urban, rural, semi-
urban, town, village, city and importantly climate, Hot,
Cold, Humid, Arid, Rainy
   Demographic variables essentially refer to personal
statistics such as income, age, gender, education,
occupation, ethnicity, religion, nationality/race, language
and family size.
   Psychographic variables take this a step farther, to
segment on lifestyle, attitudes, personality and values.
 Common kinds of variables can be used for
segmentation.
 Another basis for segmentation is behaviour. Some consumers
are “brand loyal”, they tend to stick with their preferred brands
even when a competing one is on sale. Some consumers are
“heavy” users while others are “light” users; classic examples
for this are smoking and alcoholic drinks. Buying status, buying
role, user type are other common behavioral segmentation
variables.
   Segmentation by usage occasion is similar to behaviour but
focuses on when the product is used, e.g. Wedding dresses.
  Segmentation on benefits sought, is a special form of
behavioral segmentation essentially bypassing demographic
explanatory variables, e.g. soap powder on better whitening, or
non-run of colors.
 Effective segmentation is achieved when customers sharing
similar patterns of demand are grouped together and where
each group or segment differs in the pattern of demand from
other segments in the market. Theoretically, the base(s) used
for segmentation should lead to segments that are:
 1. Measurable/identifiable Here, the base(s) used
should preferably lead to ease of identification in
terms of who is in each segment. It should also be
capable of measurement in terms of the potential
customers in each segment.
 2. Accessible Here, the base(s) used should ideally
lead to the company being able to reach selected
market targets with their individual marketing efforts.
 Effective segmentation is achieved when customers sharing similar
patterns of demand are grouped together and where each group or
segment differs in the pattern of demand from other segments in the
market. Theoretically, the base(s) used for segmentation should lead to
segments that are:
 3. Meaningful The base(s) used must lead to
segments which have different preferences or needs
and show clear variations in market behavior and
response to individually designed marketing mixes.
 4. Substantial The base(s) used should lead to
segments which are sufficiently large to be
economically and practically worthwhile serving as
discrete market targets with a distinctive marketing
mix.
TARGETING
Targeting
Inthe next step, we decide to target one or more segments. Our choice should
generally depend on several factors
First, what is the existing level of competition
and how good at serving customer needs are
they? The greater the numbers and better they
are able to meet customer needs the more
difficult it will be for another business to also be a
success.
  Secondly, how large is the segment, and how
can we expect it to grow? (Note that a downside
to a large, rapidly growing segment is that it tends
to attract competition).
Targeting
Inthe next step, we decide to target one or more segments. Our choice
should generally depend on several factors
Thirdly, do we have strengths as a company
that will help us appeal particularly to one group
of consumers? Firms may already have an
established reputation.
Fourthly, are we able to actual communicate
with the segment?
 While McDonald’s has a great reputation for fast, consistent quality, family friendly food,
it would be difficult to convince consumers that McDonald’s now offers gourmet food.
Thus, McDonalds would probably be better off targeting families in search of consistent
quality food in nice, clean restaurants. This is the first important lesson in targeting –
most firms cannot meet ALL market needs.
 Target marketing is thus defined as the
identification of the market segments that
are identified as being the most likely
purchasers of a company’s products.
Specifically, the advantages of target
marketing are:
 Marketing opportunities and unfilled ‘gaps’ in
a market may be more accurately appraised
and identified.
 Market and product appeals through
manipulation of the marketing mix can be
more delicately tuned to the needs of the
potential customer.
 Marketing effort can be concentrated on the
market segment(s) which offer the greatest
potential for the company to achieve its goals
- be they goals to maximize profit potential or
to secure the best long-term position for the
product or any other appropriate goal.
POSITIONING
Positioning
After segmentation and market targeting, the
next important step in developing an effective
marketing strategy is product positioning.
Product positioning refers to the way in
which an organization sets itself apart in the
market and how its products and services
are perceived by the target market as a
whole; this incorporates the concept of all
stakeholders of the company.
 To compete successfully in a target market,
an organization must have a form of
differential advantage.
 Taking Porter’s work we know that this has to
take one of three formats – cost leadership,
differentiation or focus
 Positioning is about the communication of the
overall value proposition such that it creates
and maintains this clearly to customers,
thus creating a distinctive and ideally
unique, place in the market for the
organization.
 To be effective, the basic value proposition offered
by an organization must be something that is
relevant to the target market, it must be
differentiated from the competition and it must be
sustainable and communicated clearly to that
market.
 Indeed differentiation at product, brand or corporate
level, is now regarded as a key element of
establishing a sustainable market position. The
differentiating variable may be actual - based on the
physical attributes and features of the product, or
perceived - based on the image of the product or the
supplier; as is the case with many services.
Positioning and Perception
The concept of positioning has two dimensions:
  What the organization wishes to achieve
(how it wants its products to be viewed by
consumers). This will involve deciding where
the organization wants to compete and how it
sets about competing.
  What consumers actually believe about a
particular product or service
Perceptual Mapping
In understanding product positioning, it is
important to remember that what is being
positioned is not simply the product itself but
rather the total product offering
It must also, through marketing research,
establish which features are considered to be
important by consumers. This provides the
basic information for a positioning strategy.
Rationale behind perceptual mapping
  Perceptual mapping plots the dimensions of
the total product offering which are significant to
the customer.
  The closer the positioning of two brands on
the map, the more likely they are to compete.
  The closer the brand is to the ideal position,
the more likely it is to be preferred.
  Gaps in the market can be identified that
represent potential market niches.
To summarize, here are the steps in Product
Positioning:
  Define market segments
  Determine which segments to target
  Understand targeted customers' needs /expectations /priorities
  Develop (or modify) product/service to address these needs
  Evaluate perceived positioning of competitors' products/
services/ brands
  Select positioning bases (criteria) for product/service vis-a-vis
targeted customers' needs and competitors' position in the market
  Communicate the selected positioning/ image/ proposition to
the targeted customer.