This sub-chapter will introduce concepts of strategies in the view of well-known scholars and practicioners. We aim to provide an overview of approaches so that we can choose the best and most convenient for the company being analysed in the second part of this work..
There are many overall strategies which can be used as a generall guideline within the strategy development process. Authors diversify not only in their classification, but also in pointing out which of the factors most influence the choice of a strategy. For this reason a simple two-way chosing pattern as well as multi-way one can appear. As a basis Kotler´s point of view will be described first as we want to build on his classification, however, none of the other authors will be omitted.
Kotler sees as the basic three strategies the following: strategy based on lifecycle of a product and based on lifecycle of a market, and strategy of differentiation. His description of lifecycle of a product or an entire market leads to strategies that can be applied on anything the company provides to its customers, be it product, services, promotion or channels, and will be discussed later on in chapter 3.3.
TAB. 11 Characteristics of Product Lifecycle and Corresponding Marketing Targets
Resource: addapted according to Kotler, P. Marketing Management, p. 303 ff Kotler´s differentiation strategy is best to be shown on his Four-positions-model discerning companies as: Market Leaders, Market Challengers, Market Followers and Market Nichers. For each position individually can a number of strategies be offered. (see TAB. 12) Both attack and defense is usually based on innovations, reaching and keeping low cost or a better ratio of value and price. However, a common feature for all is the effort of differenciating itself from competitors.
TAB. 12 Kotler´s Model on Four Positions in a Market
Resource: addapted from Kotler, P. Principles of Marketing, p. 532-535 Hamel and Prahalad suggest application of two basic strategies, where the decision factor is a ratio of availability of resources and of market needs. Ansoff, on the other hand, understands as an acceptable strategy only the one with orientation towards expansion – in increasing either the amount of product units sold or percentage of market share taken. (TAB. 13) Solomon, Marshall and Stuart describe the process of chosing a target strategy as comparing target markets and product offer. This division will be described later on.
TAB. 13 Ansoff´s Matrix
Resource: Wikipedia, Ansoff´s Matrix
TAB. 14 Basic Strategic Question: Assimilation or Expansion
Orientation on environment – „assimilation“
Orientation on resources – „expansion“
Main idea of the strategy
Competitive advantage through…
Smaller firms survive if…
Risks are reduced through...
Strategical conformity of market possibilities and company´s resources
…right positioning, differentiation imposed by market needs
… differentiation based on qualifications complying with or creating market needs
…they change „rules of game“
Zdroj: Hamel, G. and Prahalad, C.K. Competing for the future, p. 65
Other strategies arise from analytical approach as indicated in chapter 3.1. Here we speak of Porter´s Generic Strategies, all of which however will be discussed as a part of Kotler´s classification (cost focus or leadership and differentiation focus or leadership), GE Matrix where the suggested strategies are: invest, grow, earn, harvest or divest, or of Boston Matrix very narrowly concentrated on products with strategies support, keep and milk or get rid of. Also if we wanted to mentioned the strategies designed in terms of Strategic Gap Analysis, we would repeat diversification, product or market development and market penetration. One more though deserves to be published – the Strategy Bowman´s Clock – at least briefly. Not because it would bring a completely new invention, but because it concentrates on value delivered to a customer which arguably makes the basis for today´s marketing.
FIG. 7 Bowman´s Strategic Options
Resource: Bowman, C. and Faulkner, D. Competitive and Corporate Strategy, p.214 FIG. 7 shows ratio of perceived added value and price and explains the circumstances in which a certain strategy should be employed. Going from southwest we discern completely different approaches. Number one represents segment specific strategy of low price and low added value, while number two represents risk of price war together with need to become cost leader in the segment. Hybrid solution means to connect together low costs with investment into differentiation. There are two ways possible in differentiation – either with a price premium (to be understood as perceived added value which also brings money) or without it (to be understood as perceived added value bringing not directly money, but market share benefits. Slightly divergent meaning has focussed differentiation - perceived added value is implicitly expected by customers because of e.g. good fame. Turning further to east we achieve a standard strategy – higher margins with perceived added value high enough. Then there are only number seven feasibly managed in monopoly situation, and number eight when the customers are not motivated to buy your goods and you loose your market share. Company should be aware of the feeling it evokes in its customers and either comply with this idea or fight it.
In conclusion to this chapter we would like to point out that general strategies offered above can be easily applied upon any specific situation of any company. We will therefore not use all mentioned, but will choose in accordance with company´s objectives which also need to be designated.
Targeting is a process of choosing the right segment. In this chapter we would like to show what setting objectives depends on and state some examples. In order to target efficiently objectives must be clearly designed. They should answer questions concerning benefits which the objective is connected with, nature of change that should be implemented, its location and time period. In marketing, objectives are often built using the SMART acronym. All objectives must be according to this principle: Specific, Measurable, Achievable, Realistic and Time Specific. It is conventionally assumed that marketing objectives will be designed to maximize volume or profit by creating demand or renewing existing demand.
A profitable target market must fulfil some criteria which must establish whether this group of target customers is able to bring profit and how high it can be. Typical questions concern the verification of expectation and demands of potential customers. Based on the segmentation the group should show similar features. Another question is if each individual in target group is in the future profitable enough to invest into. Marketers should also consider whether there are channels to address such a target market. (Kotler, p.205 ff)
- encourage the exit of marginal firms from the industry
- maintain price leadership
- use price to make the product „visible“
- desensitize customers to price
- obtain and maintain the loyalty of distributors and customers
- be perceived as „fair“ by customers and potential customers
- avoid government investigation or intervention
- enhance the image of the firm (brand, product)
- get competitive advantage
Resource: : Wikipedia, Marketing Objectives According to most authors (De Pelsmacker, Geuens, Van de Bergh 2003, Kotler 2000, Solomon, Marshall, Stuart 2006) targeting strategies are based upon the market sector chosen, or better on the amount of them, as we briefly mentioned in chapter 3.2. Solomon et al. see the main factors in comparison of customer segment and product offer. Slightly more detailed is Kotler´s and De Pelsmacker´s description. Concentrated marketing in Solomon´s view is to be called „concentrattion on one segment“, differentiated marketing can require a strategy of „selective specialisation“, „product specialisation“ or „market specialisation“. Companies should carefully take into account how to organise their approach since a well know truth is that differentiated marketing breeds higher total profit. We should however also pay attention to increased cost in the fields of promotion, production, delivery, product modifions or administration30. (Kotler, p.276)
Thanks to this chapter we will be able to suggest objectives that will represent the milestone of marketing strategy application process. As already mentioned in one of the previous chapters, generally described facts can and certainly will be applied on the concrete company.