A marketing strategy is a process that can
allow an organization to concentrate its limited resources on the greatest
opportunities to increase sales and achieve a sustainable competitive advantage.
A marketing strategy should be centered on the key concept that customer
satisfaction is the main goal. Marketing strategy is most effective when it is an
integral component of corporate strategy, defining how the organization will
successfully engage customers, prospects, and competitors in the market arena.
As the customer constitutes the source of a company's revenue, marketing
strategy is closely linked with sales. A key component of marketing strategy is
often to keep marketing in line with a company's overarching mission statement.
Importance of marketing strategy
A marketing strategy can serve as the foundation of a marketing plan. A
marketing plan contains a set of specific actions required to successfully
implement a marketing strategy. For example: "Use a low cost product to attract
consumers. Once our organization, via our low cost product, has established a
relationship with consumers, our organization will sell additional, higher-margin
products and services that enhance the consumer's interaction with the low-cost
product or service."
A strategy consists of a well thought out series of
tactics to make a marketing plan more effective. Marketing strategies serve as the
fundamental underpinning of marketing plans designed to fill market needs and
reach marketing objectives. Plans and objectives are generally tested for
A marketing strategy often integrates an organization's marketing goals, policies,
and action sequences (tactics) into a cohesive whole. Similarly, the various
strands of the strategy, which might include advertising, channel marketing,
internet marketing, promotion and public relations, can be orchestrated. Many
companies cascade a strategy throughout an organization, by creating strategy
tactics that then become strategy goals for the next level or group. Each one
group is expected to take that strategy goal and develop a set of tactics to achieve
that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are dynamic and interactive. They are partially planned and
Tools of marketing strategy
B C G MATRIX
The BCG matrix is a chart that had been created by Bruce Henderson for the
Boston Consulting Group in 1970 to help corporations with analyzing their
business units or product lines. This helps the company allocate resources and is
used as an analytical tool in brand marketing, product management, strategic
management, and portfolio analysis.
To use the chart, analysts plot a scatter graph to rank the business units (or
products) on the basis of their relative market shares and growth rates.
* Cash cows are units with high market share in a slow-growing industry.
These units typically generate cash in excess of the amount of cash needed to
maintain the business. They are regarded as staid and boring, in a "mature"
market, and every corporation would be thrilled to own as many as possible. They
are to be "milked" continuously with as little investment as possible, since such
investment would be wasted in an industry with low growth.
* Dogs, or more charitably called pets, are units with low market share in a
mature, slow-growing industry. These units typically "break even", generating
barely enough cash to maintain the business's market share. Though owning a
break-even unit provides the social benefit of providing jobs and possible
synergies that assist other business units, from an accounting point of view such a
unit is worthless, not generating cash for the company. They depress a profitable
company's return on assets ratio, used by many investors to judge how well a
company is being managed. Dogs, it is thought, should be sold off.
* Question marks are growing rapidly and thus consume large amounts
of cash, but because they have low market shares they do not generate much
cash. The result is large net cash consumption. A question mark has the potential
to gain market share and become a star, and eventually a cash cow when the
market growth slows. If the question mark does not succeed in becoming the
market leader, then after perhaps years of cash consumption it will degenerate
into a dog when the market growth declines. Question marks must be analyzed
carefully in order to determine whether they are worth the investment required
to grow market share.
* Stars are units with a high market share in a fast-growing industry. The
hope is that stars become the next cash cows. Sustaining the business unit's
market leadership may require extra cash, but this is worthwhile if that's what it
takes for the unit to remain a leader. When growth slows, stars become cash
cows if they have been able to maintain their category leadership, or they move
from brief stardom to dogdom.
As a particular industry matures and its growth slows, all business units become
either cash cows or dogs. The natural cycle for most business units is that they
start as question marks, and then turn into stars. Eventually the market stops
growing thus the business unit becomes a cash cow. At the end of the cycle the
cash cow turns into a dog.
G E MATRIX
The GE matrix is an alternative technique used in brand marketing and product
management to help a company decide what products to add to its product
portfolio, and which market opportunities are worthy of continued investment.
Also known as the 'Directional Policy Matrix,' the GE multi-factor model was first
developed by General Electric in the 1970s.
Conceptually, the GE Matrix is similar to the Boston Box as it is plotted on a two-
dimensional grid. In most versions of the matrix:
* The Y-Axis comprises industry attractiveness measures, such as Market
Profitability, Fit with Core Skills etc. and
* The X-Axis comprises business strength measures, such as Price, Service
Each product, brand, service, or potential product is mapped as a pie chart onto
this industry attractiveness/business strength space. The diameter of each pie
chart is proportional to the Volume or Revenue accruing to each opportunity, and
the solid slice of each pie represents the share of the market enjoyed by the
The planning company should invest in opportunities that appear to the top left
of the matrix. The rationale is that the planning company should invest in
segments that are both attractive and in which it has established some measure
of competitive advantage. Opportunities appearing in the bottom right of the
matrix are both unattractive to the planning company and in which it is
competitively weak. At best, these are candidates for cash management; at worst
candidates for divestment. Opportunities appearing 'in between' these extremes
pose more of a problem, and the planning company has to make a strategic
decision whether to 'redouble its efforts' in the hopes of achieving market
leadership, manage them for cash, or cut its losses and divest.
The General Electric Business Screen was originally developed to help marketing
managers overcome the problems that are commonly associated with the Boston
Matrix (BCG), such as the problems with the lack of credible business information,
the fact that BCG deals primarily with commodities not brands or Strategic
Business Units (SBU's), and that cash flow if often a more reliable indicator of
position as opposed to market growth/share.
The GE Business Screen introduces a three by three matrix, which now includes a
medium category. It utilizes industry attractiveness as a more inclusive measure
than BCG's market growth and substitute’s competitive position for the original's
A large corporation may have many Small business units( SBU's), which essentially
operate under the same strategic umbrella, but are distinctive and individual. A
loose example would refer to Microsoft, with SBU's for operating systems,
business software, consumer software and mobile and Internet technologies.
Growth/share are replaced by competitive position and market attractiveness.
The point is that successful SBU's will go and do well in attractive markets
because they add value that customers will pay for. So weak companies do badly
for the opposite reasons. To help break down decision-making further, you then
consider a number of sub-criteria:
For market attractiveness:
* Size of market.
* Market rate of growth.
* The nature of competition and its diversity.
* Profit margin.
* Impact of technology, the law, and energy efficiency.
* Environmental impact.
. . . and for competitive position:
* Market share.
* Management profile.
* R & D.
* Quality of products and services.
* Branding and promotions success.
* Place (or distribution).
* Cost reduction.
At this stage the marketing manager adapts the list above to the needs of his
strategy. The GE matrix has 5 steps:
* One - Identify your products, brands, experiences, solutions, or SBU's.
* Two - Answer the question, what makes this market so attractive?
* Three - Decide on the factors that position the business on the GE matrix.
* Four - Determine the best ways to measure attractiveness and business
* Five - Finally rank each SBU as either low, medium or high for business
strength, or low, medium and high in relation
To market attractiveness.
Now follow the usual words of caution that go with all boxes, models and
matrices. Yes the GE matrix is superior to the Boston Matrix since it uses several
dimensions, as opposed to BCG's two. However, problems or limitations include:
* There is no research to prove that there is a relationship between market
attractiveness and business position.
* The interrelationships between SBU's, products, brands, experiences or
solutions are not taken into account.
* This approach does require extensive data gathering.
* Scoring is personal and subjective.
* There is no hard and fast rule on how to weight elements.
* The GE matrix offers a broad strategy and does not indicate how best to
To portray alternative corporate growth strategies, Igor Ansoff presented a matrix
that focused on the firm's present and potential products and markets
(customers). By considering ways to grow via existing products and new products,
and in existing markets and new markets, there are four possible product-market
Ansoff's matrix provides four different growth strategies:
Market Penetration - the firm seeks to achieve growth with existing products
in their current market segments, aiming to increase its market share.
Market Development - the firm seeks growth by targeting its existing products
to new market segments.
Product Development - the firms develops new products targeted to its
existing market segments.
Diversification - the firm grows by diversifying into new businesses by
developing new products for new markets.
The market penetration strategy is the least risky since it leverages many of the
firm's existing resources and capabilities. In a growing market, simply maintaining
market share will result in growth, and there may exist opportunities to increase
market share if competitors reach capacity limits. However, market penetration
has limits, and once the market approaches saturation another strategy must be
pursued if the firm is to continue to grow.
Market development options include the pursuit of additional market segments
or geographical regions. The development of new markets for the product may be
a good strategy if the firm's core competencies are related more to the specific
product than to its experience with a specific market segment. Because the firm is
expanding into a new market, a market development strategy typically has more
risk than a market penetration strategy.
A product development strategy may be appropriate if the firm's strengths are
related to its specific customers rather than to the specific product itself. In this
situation, it can leverage its strengths by developing a new product targeted to its
existing customers. Similar to the case of new market development, new product
development carries more risk than simply attempting to increase market share.
Diversification is the most risky of the four growth strategies since it requires both
product and market development and may be outside the core competencies of
the firm. In fact, this quadrant of the matrix has been referred to by some as the
"suicide cell". However, diversification may be a reasonable choice if the high risk
is compensated by the chance of a high rate of return. Other advantages of
diversification include the potential to gain a foothold in an attractive industry
and the reduction of overall business portfolio risk.
In business and economics, gap analysis is a business resource assessment tool
enabling a company to compare its actual performance with its potential
performance. At its core are two questions:
Where are we?
Where do we want to be?
Why are we here?
How did I get stuck doing this?
If a company or organization, such as a state juvenile justice agency, is under-
utilizing its current resources or is forgoing investment in capital or technology,
then it may be producing or performing at a level below its potential. This concept
is similar to the base case of being below one's production possibilities frontier.
This goal of the gap analysis is to see how long one person can collect a paycheck
for doing next-to-nothing. It is also a useful exercise for tying the patience of your
superiors and determining how catastrophic one's failure must be to get fired
from state government. It can also be used to identify the gap between the
optimized allocation and integration of the inputs, and the current level of
allocation. This helps provide the company with insight into areas which could be
The gap analysis process involves determining, documenting and approving the
variance between business requirements and current capabilities. Gap analysis
naturally flows from benchmarking and other assessments. Once the general
expectation of performance in the industry is understood, it is possible to
compare that expectation with the level of performance at which the company
currently functions. This comparison becomes the gap analysis. Such analysis can
be performed at the strategic or operational level of an organization. Analysts
may need to "telework" or take several sick days to endure the lengthy process of
data collection. Having the know-how to use Microsoft Excel is essential to this
'Gap analysis' is a formal study of what a business is doing currently and where it
wants to go in the future. It can be conducted, in different perspectives, as
1. Organization (e.g., human resources)
2. Business direction
3. Business processes
4. Information technology
Gap analysis provides a foundation for measuring investment of time, money and
human resources required to achieve a particular outcome (e.g. to turn the salary
payment process from paper-based to paperless with the use of a system).
The need for new products or additions to existing lines may have emerged from
portfolio analyses, in particular from the use of the Boston Consulting Group
Growth-share matrix, or the need will have emerged from the regular process of
following trends in the requirements of consumers. At some point a gap will have
emerged between what the existing products offer the consumer and what the
consumer demands. That gap has to be filled if the organization is to survive and
To identify a gap in the market, the technique of gap analysis can be used. Thus
an examination of what profits are forecasted for the organization as a whole
compared with where the organization (in particular its shareholders) 'wants'
those profits to be represents what is called the 'planning gap': this shows what is
needed of new activities in general and of new products in particular.