Principles of Marketing Chapter 2 (Part 2)

Chapter 2- slide 1
Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
Chapter 2 (2nd
part)

Chapter 2- slide 2
Companywide Strategic Planning
Strategic planning is the process of
developing and maintaining a strategic
fit between the organization’s goals and
capabilities and its changing marketing
opportunities
Strategic Planning

Chapter 2- slide 3
Business
objectives
• Build profitable
customer
relationships
• Invest in
research
• Improve profits
Marketing
objectives
• Increase
market share
• Create local
partnerships
• Increase
promotion
Setting Company Objectives and Goals

Chapter 2- slide 4
https://mnordan.com/2013/02/28/the-very-curious-hybrid-boom/

Chapter 2- slide 5

Chapter 2- slide 6

Chapter 2- slide 7
The business portfolio is the collection of
businesses and products that make up the
company
Portfolio analysis is a major activity in
strategic planning whereby management
evaluates the products and businesses that
make up the company
Designing the Business Portfolio

Chapter 2- slide 8
Strategic business unit (SBU) is a unit of the
company that has a separate mission and
objectives that can be planned separately
from other company businesses
• Company division
• Product line within a division
• Single product or brand
Analyzing the Current Business Portfolio

Chapter 2- slide 9
P&G

Chapter 2- slide 10
Identify key businesses (strategic
business units, or SBUs) that make
up the company
Assess the attractiveness of its
various SBUs
Decide how much support each
SBU deserves
Analyzing the Current Business Portfolio

Chapter 2- slide 11
Product/market expansion grid is a tool
for identifying company growth
opportunities through market
penetration, market development,
product development, or diversification
Developing Strategies for Growth and
Downsizing

Chapter 2- slide 12
• The Product Market Expansion Grid, also
called the Ansoff Matrix, is a tool used to
develop business growth strategies by
examining the relationship between new
and existing products, new and existing
markets, and the risk associated with each
possible relationship. The matrix aids
growth plans through the introduction of
existing or new products, in existing or
new markets.

Chapter 2- slide 13
• The matrix is designed so that as a
company plots it’s new and existing
products and markets, the amount of
risk associated with that strategy
corresponds with its position on the grid.
Developing a strategy with existing
products and markets is low in risk, but
with new products and markets risk
increases.

Chapter 2- slide 14
Developing Strategies for Growth and Downsizing
Product/Market Expansion Grid Strategies

Chapter 2- slide 15
Market penetration is a growth strategy
increasing sales to current market
segments without changing the product
Market development is a growth strategy
that identifies and develops new market
segments for current products
Developing Strategies
for Growth and Downsizing

Chapter 2- slide 16
Product development is a growth
strategy that offers new or modified
products to existing market segments
Diversification is a growth strategy for
starting up or acquiring businesses
outside the company’s current products
and markets
Developing Strategies
for Growth and Downsizing

Chapter 2- slide 17
Aim
Risks
Contents
How is it
Achieved
When to
use it
Examples
Market Penetration
Increase a share in the current market with current products and secure dominance
In a growing market, or change an existing market by driving out competition.
There are minimal risks in market penetration. Market penetration is the strategy involving
the least risk out of the four. However because risk is low, so is success.
Penetration includes an increase of existing goods to an already existing market. You are essentially
selling more of the same thing to the same people. Difficult if market is saturated.
Success is achieved through multiple things. Increased sales to customers, attract customers from
rivals, gaining market share at the expense of rivals and encouraging non buyers to buy.
There are certain times to use it. Some are, when the market is NOT saturated, when there is growth in the
market, competitors share in the market is falling and increased volumes lead to economies of scale.
An example of market penetration is when Tesco increased its share of the grocery
business during its competitors struggles.

Chapter 2- slide 18

Chapter 2- slide 19

Chapter 2- slide 20

Chapter 2- slide 21
Market Development
Aim
Risks
Contents
How is it
Achieved
When to
use it
Examples
An example of Market Development is when Tesco expanded into the convenience store
market.
Moderate risks come with Market Development. There is also a lack of familiarity with
customers, but the product stays familiar.
Market Development is best used when untapped markets are beckoning, the firm has
excess capacity and there are attractive channels to access a new market.
Selling the same product to a newer, expanding customer base or entering new markets
with the same base. Basically gaining new customers with the same product.
This will include changes to many different aspects of a firm, such as marketing strategies,
new distribution channels, a different pricing policy and many others.
The aim of market development is basically to expand the market and customer base of a
firm or company.

Chapter 2- slide 22

Chapter 2- slide 23
• VEON (formerly VimpelCom Ltd.) is
a multinational telecommunication
services company headquartered
in Amsterdam, the Netherlands. It
predominantly operates services in the
regions of Asia, Africa and Europe. It is
the sixth largest mobile network
operator in the world by number of
subscribers [3]
with 214 million
customers.

Chapter 2- slide 24
Product Development
Aim
Risks
Contents
How is it
Achieved
When to use
it
Examples
Two examples are Tesco expanding petrol sales and the development of financial
services.
The aim of Product Development is to create new products for an already existing market.
The creation of new products is usually quite costly and there are moderate risk levels
associated. Probably the biggest risk is will this new product be successful.
Companies usually utilize product development when they have strong Resource and
Development capabilities, the market is growing and there is rapid change.
This could be new products to replace current older ones, new innovative products,
product improvements or product line extensions.
What makes Product Development easiest, is a strong Research and Development
program, also known as R&D. Without this, it is very risky and has a lower success rate.

Chapter 2- slide 25

Chapter 2- slide 26

Chapter 2- slide 27
Market Diversification
Aim
Risks
Contents
How is it
Achieved
When to use
it
Examples
For Scottish Banks, selling insurance in England, could be seen as expanding its market
with new products to new customers.
The aim of this is to successfully sell new products to a new market, which means new
products for new customers.
Market Diversification is the riskiest of the four strategies because you’re dealing with two
unknowns here; a new market and new customers.
Market diversification, like product development is best used when your firm have good
R&D capabilities for the least risk possible.
It is achieved by putting new products into a new market to new customers.
There are two main types of Market Diversification. Related and Unrelated. Related stays within
confines of the industry but beyond the present market. Unrelated is a growth in products and markets
that are completely new.

Chapter 2- slide 28
• A concentric diversification strategy lets a
firm to add similar products to an already
established business.
- Concentric diversification strategies are
rampant in the food production industry. For
example, a ketchup manufacturer starts
producing salsa, using its current production
facilities.
Concentric diversification

Chapter 2- slide 29
• Horizontal diversification allow a firm to start
exploring other zones in terms of product
manufacturing. Companies depend on current
market share of loyal customers in this
strategy.
- When a clothing company starts selling shoes.
Horizontal diversification

Chapter 2- slide 30
• In conglomerate diversification strategies, companies will look
to enter a previously untapped market. This is often done using
mergers and acquisitions. The market can be completely
unrelated market compare to the market they are in right now.
• Moving into a new industry is highly dangerous, due to
unfamiliarity with the new industry. Brand loyalty may also be
reduced when quality is not managed.
- A chemical company started manufacturing motorcycle.
Conglomerate diversification

Chapter 2- slide 31

Chapter 2- slide 32

Chapter 2- slide 33
Other Examples

Chapter 2- slide 34

Chapter 2- slide 35
• While the grid is useful for understanding how to
think of business growth options, it stops short of
explaining what actions you should take. Once
you have identified your position on the grid,
what your internal capabilities are and how much
risk you can take on, the next stop is to conduct
market research. Adding in proper market
research will transform this from a theory to
information you can take action on.
How to Use the Product Market
Expansion Grid

Chapter 2- slide 36
• To make the most of the Product Market
Expansion Grid, you’ll need to understand
where your best opportunities are given
your current position, the amount of
resources you can expend, and how
much risk your company is capable of
carrying.

Chapter 2- slide 37
Market Planning

Chapter 2- slide 38
SWOT Analysis
Goal of SWOT: To match company’s strengths to attractive opportunities in
the environment, while simultaneously overcoming weaknesses & minimizing
threats.

Chapter 2- slide 39
• A SWOT analysis helps a company to
consider current and future possibilities that
can affect its strategy. Equipped with this
analysis, the company will be prepared to
adjust its marketing strategy if you hit a bump
on the road.
The company’s goal for each step is to:
1. Double-down on your strengths
2. Turn your weaknesses into strengths
3. Create a plan to act on opportunities
4. Set up measures for mitigating threats

Principles of Marketing Chapter 2 (Part 2)

Recommended

Recommended

More Related Content

Similar to Principles of Marketing Chapter 2 (Part 2)

Similar to Principles of Marketing Chapter 2 (Part 2) (20)

Recently uploaded

Recently uploaded (20)

Principles of Marketing Chapter 2 (Part 2)