CHAPTER 13 - OVERVIEW OF MARKETING

STRATEGIES

PRACTICAL QUESTIONS AND ANSWERS

Q1. Why strategy is considered most important in an organisation for its long
term survival & growth?
Answer
Strategy is important because the resources available to achieve the desired
goals are usually limited. Strategy generally involves setting goals, determining
actions to achieve the goals, and mobilizing resources to execute the actions. A
strategy describes how the ends (goals) will be achieved by the means
(resources). Strategy can be intended or can emerge as a pattern of activity as
the organization adapts to its environment or competes. Future of business is
always changing and it is always different. And even the mightiest company is
in trouble if it has not worked on the future. Being surprised by what happens is
a risk that even the largest and richest company cannot afford, and may not
survive. Hence strategy is important for all organisations for its existence and
longevity.

Q2. How different strategic business unit (sbu) influence marketing decisions?
Answer.
Business units typically incorporate a number of distinct product-markets. A
given entry’s marketing manager monitors and evaluates the product’s
environmental situation and develops a marketing program suited to it.
However, the manager’s freedom to design such a program may be constrained
by the business unit’s competitive strategy. This is because different strategies
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focus on different objectives and seek to gain and maintain a competitive
advantage in different ways. As a result, different functions within the strategic
business unit (SBU) and different activities within a given functional area, such
as marketing—are critical for the success of different strategies. There are,
therefore, different key success factors inherent in the various generic business
strategies. This constrains the individual marketing manager’s freedom of action
in two basic ways.

First, because varying functions within the business unit are more important
under different strategies, they receive different proportions of the SBU’s total
resources. Thus, The SBU’s strategy influences the amount of resources
committed to marketing and ultimately the budget available to an individual
marketing manager within the business unit.

Second, the SBU’s choice of strategy influences both the kind of market and
competitive situation that individual product-market entries are likely to face
and the objectives they are asked to attain. Both constraints have implications
for the design of marketing programs for individual products within a SBU.

Q3. Discuss relevance of product, price, distribution and promotion policies

( 4p) in marketing strategy.

Answer

The 4Ps namely product, Price, Place and promotion are important in
marketing strategy as they are basics of marketing.

Product Policies

One set of marketing policies defines the nature of the products the business
will concentrate on offering to its target markets. These policies concern the
breadth or diversity of product lines, their level of technical sophistication, and
the target level of product quality relative to competitors. Because prospector
businesses rely heavily on the continuing development of unique new products
and the penetration of new markets as their primary competitive strategy,
policies encouraging broader and more technically advanced product lines than
those of competitors should be positively related to performance on the critical
dimension of share growth

Pricing Policies

Success in offering low prices relative to those of competitors should be

positively related to the performance of low-cost defender businesses—for low
price is the primary competitive weapon of such a strategy. However, such a
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policy is inconsistent with both differentiated defender and prospector
strategies. The higher costs involved in differentiating a business’s products on
either a quality or service basis require higher prices to maintain profitability.
Differentiation also provides customers with additional value for which higher
prices can be charged. Similarly, the costs and benefits of new product and
market development by prospector businesses require and justify relatively high
prices. Thus, differentiated defenders and prospectors seldom adhere to a policy
of low competitive prices.

Distribution Policies

Some observers argue that prospector businesses should show a greater degree
of forward vertical integration than defender businesses. The rationale for this
view is that the prospector’s focus on new product and market development
requires superior market intelligence and frequent reeducation and motivation
of distribution channel members. This can best be accomplished through tight
control of company-owned channels. However, these arguments seem
inconsistent with the prospector’s need for flexibility in constructing new
channels to distribute new products and reach new markets. Attempting to
maintain tight control over the behavior of channel members is a more
appropriate policy for defenders who are trying to maintain strong positions in
established markets. This is particularly true for defenders who rely on good
customer service to differentiate themselves from competitors. Thus, it seems
more likely that a relatively high degree of forward vertical integration is found
among defender businesses, particularly differentiated defenders, whereas
prospectors rely more heavily on independent channel members—such as
manufacturer’s representatives or wholesale distributors—to distribute their
products.

Promotion Policies

Because prospectors focus on new products where success is uncertain and sales
volumes are small in the short run, they are likely to devote a larger percentage
of sales to trade promotions than are defender businesses. Prospectors rely on
trade promotion tools such as slotting allowances, quantity discounts, liberal
credit terms, and other incentives to induce cooperation and support from their
independent channel members.

Extensive marketing communications also play an important role in the

successful implementation of both prospector and differentiated defender
strategies. The form of that communication, however, may differ under the two
strategies. Because prospectors must constantly work to generate awareness,
stimulate trial, and build primary demand for new and unfamiliar products, high

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advertising and sales promotion expenditures are likely to bear a positive
relationship to the new product and share-growth success of such businesses.
Finally, low-cost defenders appeal to their customers primarily on price. Thus,
high expenditures on advertising, sales promotion, or the sales force would
detract from their basic strategy and might have a negative impact on their ROI.
Consequently, such businesses are likely to make relatively low expenditures as
a percentage of sales on those promotional activities.

Q4. If newly emerging technology demands that a mature product category

undergo an innovative redesign even though the defender sbu does not have
extensive r&d and product development capabilities. What it should do ?

Answer
If a business unit is focused on a single product category or technological
domain—the ideal solution might be for the whole SBU to change its strategy in
response to shifting industry circumstances. As the product category matures,
for instance, the SBU might switch from a prospector to an analyzer strategy
and ultimately to one of the defender strategies. The problem is the effective
implementation of different business strategies requires not only different
functional competencies and resources, but also different organizational
structures, decision-making and coordination processes reward systems, and
even personnel. Because such internal structures and processes are hard to
change quickly, it can be very difficult for an entire SBU to make a successful
transition from one basic strategy to another
The marketer should develop a marketing strategy that makes the most sense in
light of a detailed analysis of the available customer and competitive
information and present a strong case for the resources necessary to implement
the plan. If those resources are not available within the business unit or if the
marketing strategy is inconsistent with the SBU’s objectives or competitive
strategy, top management faces a choice of moving the product to a more
benign unit of the firm or rejecting the recommended strategy. If the strategy is
rejected, the marketer will likely have to make compromises to the strategy to
make it fit better with the competitive thrust of the SBU, even though an
attractive opportunity may be lost.

Q5 compare and contrast the prospector and low-cost defender business

strategies discussed in this chapter on each of the following strategic
dimensions: a. Scope. B. Objectives. C. Deployment of resources. D. Sources of
synergy.
Answer

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Dimensions Low-Cost differentiated Prospector Analyzer
Defender Defender

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• Scope; Mature/stable/w Mature/stable/w Broad/dynam Mixture of
ell defined ell defined ic domains; defender
domain; mature domain; mature technology and
technology and technology and and customer prospector
customer customer segments not strategies
segment segments well
established
Goals and Very Little Little Extensive Mixture of
objectives defender
and
prospector
strategies
Adaptabilit Very little Little High Mixture of
y (new defender
product and
success) prospector
strategies
Effectivene Low Low High Mixture of
ss (increase defender
in market and
share) prospector
strategies
Efficiency High High Low Mixture of
(ROI) defender
and
prospector
strategies
Resource Generate excess Generate excess Need cash for Need cash
deployment cash (cash cows) cash (cash cows) product for product
development developme
(question nt but less
marks or so than do
stars) prospectors
Synergy Need to seek Need to seek Danger in Danger in
operating operating sharing sharing
synergies to synergies to operating operating
achieve achieve facilities and facilities
efficiencies efficiencies programs— and
better to share programs—
technology/ better to
marketing share
skills technology/

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 marketing
skills