What is strategy


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What is strategy

  1. 1. What is strategy?• "Strategy is the direction and scope of an organization over the long-term:• Which achieves advantage for the organisation through its configuration of resources within a challenging environment,• To meet the needs of markets and to fulfill stakeholder expectations".
  2. 2. In other words, strategy is about:• Where is the business trying to get to in the long-term (direction)• Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)• How can the business perform better than the competition in those markets? (advantage)?• What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?• What external, environmental factors affect the businesses ability to compete? (environment)?• What are the values and expectations of those who have power in and around the business? (stakeholders)
  3. 3. LEVELS OF STRATEGY• Organizations have to formulate strategies at three major levels:• Corporate,• Business and• Functional.
  4. 4. Corporate Strategy• Determines the business or businesses in which the firm will or should compete and how it will fundamentally conduct the business or businesses.• Corporate strategy answers these questions:• Does the organization have a strategic advantage?• Does the company want to compete or find a niche?• Does the company seek to concentrate on one product or product line, or on multiple products or products line?• Will the corporation be innovative?• Does the company want or need to grow, stabilize, reduce its investment, turn company fortunes around, or defend itself against a takeover?
  5. 5. Business (SBU) Strategy:• Answers the question, how do we compete in this business?• Once the organization has determined what business it wants to be in and how it will conduct each business that is once it has formulated its corporate strategy, then it must determine how it will compete each business- its business strategy.
  6. 6. Functional level strategies• Supports other strategies and answers the question,• How do we obtain the most effective and efficient use of our resources? – Economic Functional strategies • Marketing • Operations-production or service generation • Finance • Human Resource management • Information Systems/Research and Development/Other significant areas
  7. 7. Organizational level Role of marketing Formal nameCorporate Provide customer & Corporate marketing competitive perspective for corporate strategic planningBusiness unit Assist in the Strategic marketing development of strategic perspective of the business unit to direct its future courseProduct/market Formulate &implement Marketing management marketing programs
  8. 8. Marketing StrategyUniversity Assessment MMS(Marketing) SEM-III
  9. 9. SYLLABUS• Marketing strategy – Overview• Pillars of Marketing – STPD strategies• Market situation strategy - Leaders, challengers, followers, nichers• Competition analysis – Porters 5 forces model for competitive environment, Benchmarking exercise, understanding competitive moves and postures• Sustainable competitive advantage – Porters generic strategies• Portfolio models – BCG and GE McKinsey matrix• New product strategies – Innovation, Market entry, Product line extension• Communications strategy – Managing communications mix for products, brands• Advertising and sales promotion strategy - campaigns• Brand building – FMCG, Consumer durables & Services cases• Distribution strategy – Designing of channel systems, Managing multichannel systems• Pricing strategy – Value pricing, Optimisation of pricing• Marketing Planning - Introduction, growth and mature markets, Pruning of products
  10. 10. Reference Books• Marketing Strategy –Boyd, Walker & Larreche• Marketing Strategy- Stephen Schnaars• Strategic Market Management- David Aaker• Strategic marketing texts & cases –Cravens
  11. 11. Marketing Strategy – An Overview
  12. 12. • A marketing strategy serves as the foundation of a marketing plan.• A marketing plan consists of a list of specific actions required to successfully implement a specific marketing strategy.• A strategy is different from tactics .a marketing plan has no foundation without a sound marketing strategy.• Marketing strategies serves as the fundamental underpinning of marketing plans designed to reach marketing objectives.• It is important for these objectives have measurable results.
  13. 13. • A good marketing strategy should integrate an organization’s marketing goals, policies and action sequences into cohesive whole.• The objective of a marketing strategy is to provide a foundation from which a tactical plan is developed.• This allows organization to carry out its mission effectively &efficiently.
  14. 14. Any organization requires strategy:• When resources are finite• When there is uncertainty about competitive strengths & behavior• When commitment of resources is irreversible• When decisions must be coordinated between far-flung places & over time,• When there is uncertainty about control of the initiative
  15. 15. • Marketing strategy deals essentially with the interplay of three forces known as the strategic three C’s –• The customer,• The competition, &• The corporation.
  16. 16. • All three C’s are dynamic, living creatures with own objectives to pursue.• Based on the interplay of the strategic three C’s formation of marketing strategy requires three decisions:• Where to compete – definition of market• How to compete -in terms of product either new product or existing• When to compete- timing of market entry either first in market or waiting for primary demand to be established
  17. 17. • Marketing strategies focus on ways in which the corporation can differentiate itself effectively from its competitors, capitalizing on its distinctive strengths to deliver better value to its customers.
  18. 18. Marketing strategy- Definition• A strategy that integrates an organizations marketing goals into a cohesive whole. Ideally drawn from market research, it focuses on the ideal product mix to achieve maximum profit potential.• The marketing strategy is set out in a marketing plan.
  19. 19. Types of Marketing Strategy• One of the most important concepts of the marketing planning process is the need to develop a cohesive marketing strategy that guides tactical programs for the marketing decision areas.• In marketing there are two levels to strategy formulation:• General Marketing Strategies• Decision Area Strategies
  20. 20. General Marketing Strategies• These set the direction for all marketing efforts by describing, in general terms, how marketing will achieve its objectives. There are many different General Marketing Strategies, though most can be viewed as falling into one of the following categories:• Market Expansion• Market Share Growth• Niche Market• Status Quo• Market Exit
  21. 21. Market Expansion Grow Sales with Existing Market ProductsExpansion Grow Sales with New Products
  22. 22. Market Expansion• With this strategy marketer’s look to grow overall sales in one of two ways:• Grow Sales with Existing Products – With this approach the marketer seeks to actively increase the overall sales of products the company currently markets.• This can be accomplished by:• Getting existing customers to buy more• Getting potential customers to buy (i.e., those who have yet to buy)• Selling current products in new markets.
  23. 23. • Grow Sales with New Products – With this approach the marketer seeks to achieve objectives through the introduction of new products. This can be accomplished by:• Introducing updated versions or refinements to existing products• Introducing products that are extensions of current products• Introducing new products not previously marketed.
  24. 24. Market Share Growth• This strategy looks to increase the marketer’s overall percentage or share of market.• In many cases this can only be accomplished by taking sales away from competitors.• Consequently, this strategy often relies on aggressive marketing tactics.
  25. 25. Niche Market• This strategy looks to obtain a commanding position within a certain segment of the overall market.• Usually the niche market is much smaller in terms of total customers and sales volume than the overall market.• Ideally this strategy looks to have the product viewed as being different from companies targeting the larger market.
  26. 26. Status Quo• This strategy looks to maintain the marketers current position in the market, such as maintaining the same level of market share.
  27. 27. Market Exit• This strategy looks to remove the product from the organization’s product mix. This can be accomplished by:• Selling the product to another organization• Eliminating the product the companys product offerings
  28. 28. Decision Area Strategies• These are used to achieve the General Marketing Strategies by guiding the decisions within important marketing areas (product, pricing, distribution, promotion, targ et marketing). For example, a General Marketing Strategy that centers on entering a new market with new products may be supported by
  29. 29. Decision Area Strategies that include:• Target Market Strategy – employ segmenting techniques• Product Strategy – develop new product line• Pricing Strategy – create price programs that offer lower pricing versus competitors• Distribution Strategy – use methods to gain access to important distribution partners that service the target market• Promotion Strategy – create a plan that can quickly build awareness of the product
  30. 30. • Achieving the Decision Area Strategies is accomplished through the development of detailed Tactical Programs for each area.• For instance, to meet the Pricing Strategy that lowers cost versus competitors’ products, the marketer may employ such tactics as: quantity discounts, trade-in allowances or sales volume incentives to distributors.
  31. 31. SYLLABUS• Marketing strategy – Overview• Pillars of Marketing – STPD strategies• Market situation strategy - Leaders, challengers, followers, nichers• Competition analysis – Porters 5 forces model for competitive environment, Benchmarking exercise, understanding competitive moves and postures• Sustainable competitive advantage – Porters generic strategies• Portfolio models – BCG and GE McKinsey matrix• New product strategies – Innovation, Market entry, Product line extension• Communications strategy – Managing communications mix for products, brands• Advertising and sales promotion strategy - campaigns• Brand building – FMCG, Consumer durables & Services cases• Distribution strategy – Designing of channel systems, Managing multichannel systems• Pricing strategy – Value pricing, Optimisation of pricing• Marketing Planning - Introduction, growth and mature markets, Pruning of products
  32. 32. Contents:• Section 1 : Market Scope Strategy• Section 2 : Market Entry Strategy• Section 3 : Product Strategy• Section 4 : Promotion Strategy• Section 5 : Distribution Strategy• Section 6 : Pricing Strategy
  33. 33. Section 1 Market Scope Strategy• Single Market Strategy• Multi Market Strategy• Total Market Strategy
  34. 34. Single Market Strategy MARKET Multi Market SCOPE StrategySTRATEGY Total Market Strategy
  35. 35. Single Market Strategy• Concentration of efforts in a single segment.• Requirements:• Serve the market wholeheartedly despite initial difficulties• Avoid competition with established firms.
  36. 36. Multi Market Strategy• Serving several distinct markets.• Requirements:• Careful selection of segments to serve• Avoid confrontation with companies serving entire market.
  37. 37. Total Market Strategy• Serving the entire spectrum of the market by selling differentiated products to different segments in the market.• Requirements:• Employ different combinations of price, product, promotion, and distribution strategies in different segments• Top management commitment to embrace entire market• Strong financial position.
  38. 38. Section 2 Market Entry Strategy• First In Strategy• Early Entry Strategy• Laggard Entry Strategy
  39. 39. Market Entry StrategyFirst In Early Entry Laggard EntryStrategy Strategy Strategy
  40. 40. First In Strategy• Entering the market before all others.• Requirements:• Willingness and ability to take risks• Technological competence• Strive to stay ahead• Heavy promotion• Create primary demand• Carefully evaluate strengths
  41. 41. Early Entry Strategy• Entering the market in quick succession after the leader.• Requirements:• Superior marketing strategy• Ample resources• Strong commitment to challenge market leader.
  42. 42. Laggard Entry Strategy• Entering the market toward tail end of growth phase or during maturity phase. Two modes of entry are feasible:• Imitator - Entering market with me-too product (b) Initiator• Initiator - Entering market with unconventional marketing strategies.• Requirements-Imitator• Market research ability• Production capability .• Requirements-Initiator• Market research ability,• Ability to generate creative marketing strategies
  43. 43. Section 3 Product Strategy• Product Positioning Strategy• Product Repositioning Strategy• Product Scope Strategy• Product Design Strategy• New Product Strategy
  44. 44. Product Strategy Product ProductPositioning Product Product Repositioning Scope Design New Product Strategy Strategy Strategy Strategy Strategy
  45. 45. Product Positioning Strategy• Placing a brand in that part of the market where it will have a favorable reception compared with competing brands.• Requirements:• Successful management of a single brand requires positioning the brand in the market so that it can stand competition from the toughest rival and maintaining its unique position by creating the aura of a distinctive product.
  46. 46. Product Positioning Strategy• Successful management of multiple brands requires careful positioning in the market so that multiple brands do not compete with nor cannibalize each other
  47. 47. Product Repositioning Strategy• Reviewing the current positioning of the product and its marketing mix and seeking a new position for it that seems more appropriate.
  48. 48. Product Repositioning Strategy• Requirements:• If this strategy is directed toward existing customers , repositioning is sought through promotion of more varied uses of the product• If the business unit wants to reach new users , this strategy requires that the product be presented with a different twist to the people who have not been favorably inclined toward it.• In doing so, care should be taken to see that, in the process of enticing new customers, current ones are not alienated
  49. 49. Product Repositioning Strategy• If this strategy aims at presenting new uses of the product , it requires searching for latent uses of the product, if any.• Although all products may not have latent uses, there are products that may be used for purposes not originally intended.
  50. 50. Product Scope Strategy• The product-scope strategy deals with the perspectives of the product mix of a company.• The company may adopt a single- product strategy, a multiple- product strategy, or a system-of- products strategy.
  51. 51. Product Scope Strategy• Requirements:• Single product company must stay up-to-date on the product and even become the technology leader to avoid obsolescence• Multiple products Must complement one another in a portfolio of products• System of products : company must have a close understanding of customer needs and uses of the products
  52. 52. Product Design Strategy• The product-design strategy deals with the degree of standardization of a product.• The company has a choice among the following strategic options:• Standard product,• Customized product, and• Standard product with modifications.
  53. 53. Product Design Strategy• Objectives:• Standard product to increase economies of scale of the company• Customized product : to compete against mass producers of standardized products through product-design flexibility• Standard product with modifications : to combine the benefits of the two previous strategies.
  54. 54. New Product Strategy• A set of operations that introduces within the business-• A product new to its previous line of products on the market ,• A product that provides a new type of satisfaction.• Three alternatives emerge from the above :• Product improvement/modification ,• Product imitation , and• Product innovation.
  55. 55. New Product Strategy• Requirements:• A new-product strategy is difficult to implement if a new product development system does not exist within a company
  56. 56. New Product Strategy• Five components of this system should be assessed:• Corporate aspirations toward new products• Organizational openness to creativity• Environmental favor toward creativity• Screening method for new ideas, and• Evaluation process.
  57. 57. Section 4 Promotion Strategy• Promotion Mix Strategy• Media Selection Strategy• Advertising Copy Strategy
  58. 58. Promotion Mix StrategyPromotion Media Selection Strategy Strategy Advertising Copy Strategy
  59. 59. Promotion Mix Strategy• Determination of a judicious mix of different types of promotion.• Requirements :• Product factors:• Nature of product• Durable versus nondurable• Perceived risk• Typical purchase amount
  60. 60. Promotion Mix Strategy Customers Marketing mixMarket factors Budget factors factors factors
  61. 61. Promotion Mix Strategy• Market factors:• Position in the life cycle,• Market share,• Industry concentra-tion,• Intensity of competition, and• Demand perspectives• Customers factors:• Household versus business customers,• Number of customers,and• Concentration of customers
  62. 62. Promotion Mix Strategy• Budget factors:• Financial resources of the organization and• Traditional promotional perspectives• Marketing mix factors:• Relative price/relative quality,• Distribution strategy,• Brand lifecycle, and• Geographic scope of the market
  63. 63. Media Selection Strategy• Choosing the channels (newspapers, magazines, television, radio, outd oor advertising, transit advertising, and direct mail) through which messages concerning a product/service are transmitted to the targets.
  64. 64. Media Selection Strategy• Requirements:• Relate media- selection objectives to product/market objectives• Media chosen should have a unique way of promoting the business• Media should be measure- minded not only in frequency, in timing, and in reaching the target audience but also in evaluating the quality of the audience
  65. 65. Media Selection Strategy• Base media selection on factual not artificial grounds,• Media plan should be optimistic in that it takes advantage of the lessons learned from experience• Seek information on customer profiles and audience characteristics.
  66. 66. Advertising Copy Strategy• Designing the content of an advertisement.• Objective:• To transmit a particular product/service message to a particular target.
  67. 67. Advertising Copy Strategy• Requirements:• Eliminate "noise" for a clear transmission of message• Consider importance of :• Source credibility• Balance of argument• Message repetition• Rational versus emotional appeals• Humor appeals• Presentation of models eyes in pictorial ads• Comparison advertising.
  68. 68. Section 5 Distribution Strategy• Distribution Scope Strategy• Multiple Channel Strategy
  69. 69. DistributionDistribution Scope Strategy Strategy Multiple Channel Strategy
  70. 70. Distribution Scope Strategy• Establishing the scope of distribution, that is, the target customers.• Choices are –• Exclusive distribution (one retailer is granted sole rights in serving a given area),• Intensive distribution (a product is made available at all possible retail outlets), and• Selective distribution (many but not all retail outlets in a given area distribute a product).
  71. 71. Exclusive distribution Distribution IntensiveScope Strategy distribution Selective distribution
  72. 72. Distribution Scope Strategy• Requirements: Assessment of :• Customer buying habits gross margin/ turnover rate• Capability of dealer to provide service carry full product line• Product styling
  73. 73. Multiple Channel Strategy• Employing two or more different channels for distribution of goods and services.• Multiple-channel distribution is of two basic types :• Complementary (each channel handles a different non-competing product or market segment) and• Competitive (two different and competing channels sell the same product).
  74. 74. Multiple Channel Strategy• Requirements:• Market segmentation,• Cost/benefit analysis.• Use of complementary channels prompted by• Geographic considerations,• Volume of business,• Need to distribute non-competing items, and• Saturation of traditional distribution channels.• Use of competitive channels can be a response to environmental changes.
  75. 75. Section 6 Pricing Strategy• Pricing Strategies for New Products• Pricing Strategies for Established Products• Price Flexibility Strategy• Price Leadership Strategy
  76. 76. Pricing Strategy Pricing Pricing Strategies for Price Price FlexibilityStrategies for Established Strategy LeadershipNew Products Products Strategy
  77. 77. Pricing for New Products• Skimming Pricing Strategy• Penetration Pricing Strategy
  78. 78. Skimming Pricing StrategyPricing for New Products Penetration Pricing Strategy
  79. 79. Skimming Pricing Strategy• Setting a relatively high price during the initial stage of a products life.• Objectives:• To serve customers who are not price conscious while the market is at the upper end of the demand curve and competition has not yet entered the market
  80. 80. Skimming Pricing Strategy• To recover a significant portion of promotional and research and development costs through a high margin
  81. 81. Skimming Pricing Strategy• Requirements:• Heavy promotional expenditure to introduce product, educate consumers, and induce early buying• Relatively inelastic demand at the upper end of the demand curve• Lack of direct competition and substitutes.
  82. 82. Penetration Pricing Strategy• Setting a relatively low price during the initial stages of a products life.• Objective:• To discourage competition from entering the market by quickly taking a large market share and by gaining a cost advantage through realizing economies of scale
  83. 83. Penetration Pricing Strategy• Requirements:• Product must appeal to a market large enough to support the cost advantage• Demand must be highly elastic in order for the firm to guard its cost advantage.
  84. 84. Pricing for Established Products• Maintaining the Price• Reducing the Price• Increasing the Price
  85. 85. Maintaining the PricePricing forEstablished Reducing the Products Price Increasing the Price
  86. 86. Maintaining the Price• Objectives:• To maintain position in the marketplace (i.e., market share, profitability, etc.)• To enhance public image.
  87. 87. Maintaining the Price• Requirements:• Firms served market is not significantly affected by changes in the environment• Uncertainty exists concerning the need for or result of a price change• Firms public image could be enhanced by responding to government requests or public opinion to maintain price.
  88. 88. Reducing the Price• Objectives:• To act defensively and cut price to meet the competition• To act offensively and attempt to beat the competition• To respond to a customer need created by a change in the environment.
  89. 89. Reducing the Price• Requirements:• Firm must be financially and competitively strong to fight in a price war if that becomes necessary• Must have a good understanding of the demand function of its product
  90. 90. Increasing the Price• Objectives:• To maintain profitability during an inflationary period• To take advantage of product differences, real or perceived• To segment the current served market.
  91. 91. Increasing the Price• Requirements:• Relatively low price elasticity but relatively high elasticity with respect to some other factor such as quality or distribution,• Reinforcement from other ingredients of the marketing mix
  92. 92. Pricing Flexibility Strategy• One Price Strategy• Flexible Pricing Strategy
  93. 93. One Price Strategy• Charging the same price to all customers under similar conditions and for the same quantities.• Objectives:• To simplify pricing decisions• To maintain goodwill among customers
  94. 94. One Price Strategy• Requirements:• Detailed analysis of the firms position and cost structure as compared with the rest of the industry• Information concerning the cost variability of offering the same price to everyone
  95. 95. One Price Strategy• Knowledge of the economies of scale available to the firm• Information on competitive prices; information on the price that customers are ready to pay
  96. 96. Flexible Pricing Strategy• Charging different prices to different customers for the same product and quantity.• Objective:• To maximize short-term profits and build traffic by allowing upward and downward adjustments in price depending on competitive conditions and how much the customer is willing to pay for the product.
  97. 97. Flexible Pricing Strategy• Requirements:• Have the information needed to implement the strategy.• Usually this strategy is implemented in one of four ways:• By market• By product• By timing• By technology
  98. 98. Flexible Pricing Strategy• Other requirements include :• A customer-value analysis of the product,• An emphasis on profit margin rather than just volume, and• A record of competitive reactions to price moves in the past.
  99. 99. Price Leadership Strategy• This strategy is used by the leading firm in an industry in making major pricing moves, which are followed by other firms in the industry.
  100. 100. Price Leadership Strategy• Objective:• To gain control of pricing decisions within an industry in order to support the leading firms own marketing strategy (i.e., create barriers to entry, increase profit margin, etc.).
  101. 101. Price Leadership Strategy• Requirements:• An oligopolistic situation• An industry in which all firms are affected by the same price variables (i.e., cost, competition, demand),• An industry in which all firms have common pricing objectives
  102. 102. Warfare based Strategies• This scheme draws parallels between marketing strategies and military strategies.• There are many types of marketing warfare strategies, but they can be grouped into:• Offensive Marketing Warfare Strategies• Defensive Marketing Warfare Strategies• Flanking Marketing Warfare Strategies• Guerrilla Marketing Warfare Strategies
  103. 103. COMPETITIVE MARKETING STRATEGIES• Developed from customer’s point of view rather than competitors.• They have roots of Military strategy. The aim of military strategies is to exert well over the enemy.• Kotler has identified-• Five offensive and• Five defensive competitive strategies named after military terms.
  105. 105. FIVE OFFENSIVE STRATEGIES• Frontal attack• Flank attack• Encirclement attack• Bypass attack• Guerrilla Warfare
  106. 106. FIVE OFFENSIVE STRATEGIES (General attack strategy for challenger).• Frontal attack: attacking strengths rather than weaknesses. In a pure frontal attack, the attacker matches its opponent’s product, advertising, price and distribution. Example: Razor-blade manufacturer in Brazil attacked Gillette the market leader.• Flank attack: You are engaging in competitors market where they are weak or no presence at all. Flanking is in the best tradition of modern marketing, which holds that the purpose of marketing is to discover needs and satisfy them.
  107. 107. • Encirclement attack: This is an attempt to capture a wide slice of the enemy’s territory through a blitz. It involves launching a grand offensive on several fronts. Example: Seiko Company who has 400 watch types and 2300 models worldwide.• Bypass attack: No confrontation with competitors but moving into new uncontested markets and product. This is most indirect assault strategy.• Diversifying into unrelated products• Diversifying into new geographical markets• Guerrilla Warfare: small attack in different market segment. Intermittent attacks to harass and demoralize the opponent. They use both conventional and unconventional means of attack.
  108. 108. FIVE DEFENSIVE STRATEGIES• Position defense• Mobile defense• Flank position defense• Preemptive defense• Counteroffensive defense
  109. 109. FIVE DEFENSIVE STRATEGIES (Leader defending market share)• Position defense: retaining market share. Coca Cola• Mobile defense: It spreads through market broadening and market diversification.• Flank position defense: In this position you should occupy position of potential feature. Create position for counterattack.• Preemptive defense: Take the imitative and move the first into the market. Attack before the enemy starts its offense.• Counteroffensive defense: If the competitors reduce their price you should do this.