West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 4

ChapterSummaries
Chapter4StrategicMarketingDecisions,ChoicesandMistakes

Introduction
The primary thrust of this chapter is to discuss in more detail the second stage/area of the Strategic
MarketingManagementprocess(SMM),thatis,strategicchoiceanddecisions.Strategicchoiceinvolves
understanding the underlying bases guiding future strategy, and generating strategic options for
evaluation and selecting from among them (Johnson and Scholes, 2005). Drawing upon the strategic
analysisundertakenpreviously,managerswillhavetoidentifyandassessthealternativewaysinwhich
theirorganisationcanuseitsspecificstrengthstocapitaliseonopportunitiesorminimisethreats,and
investinavailableopportunitiestoovercomeitsweaknesses.Thekeytaskistogenerateawelljustified
set of strategic alternatives and choose the ones that will contribute to the achievement of the
organisationsoverallgoalsandobjectives.

HierarchyofStrategicChoiceandDecisions
Havinganalysedtheorganisationsmarketingenvironmentandidentifiedtheexternalopportunitiesand
threats,andinternalstrengthsandweaknesses,strategicmanagersatdifferentorganisationallevelsare
requiredtotranslatetheoutcomeofsuchanalysisintoanumberofalternativesandchoosefromthem
the most appropriate options. Strategic decisions at the corporate level involve developing a mission
statement, deciding on a directional strategy, and allocating resources. At the SBU level, strategic
managershavetochooseagenericstrategy(costleadership,differentiation,focus)forthefirmbased
ontheuniquecompetitiveadvantagesithas.Strategicchoiceanddecisionstakenatthefunctionallevel
are related to the various functional areas within the organisation (i.e., marketing, finance, R&D,
production,etc.).Withinthemarketingarea,strategistsshouldconsidersuchdecisionsasproductsto
offer,marketsegment(s)totarget,andmarketpositionstrategies.

StrategicChoiceandDecisionsattheCorporateLevel
DefiningtheCorporateMission
Themissionstatementofanorganisationisadescriptionoftheuniquepurposeoftheorganisationand
whatdistinguishesitfromothercompaniesandtheboundariesofitsoperations.Itdefinestheprimary
direction of the organisation and forms the key foundations upon which objectives and strategies are
based. The development of a mission statement is a vital point in strategy development since it
representsavisionofwhattheorganisationisorshouldattempttobecome.Themissionstatementis
importantfrombothaninternalandanexternalpointofview.Insidethecompany,itservesasafocal
pointforindividualstoidentifytheorganisationsdirectionandensureunanimityofpurposewithinthe
firm,therebyfacilitatingtheemergenceofafirmculture.Outsidethecompany,themissionstatement
contributes to the creation of firm identity, i.e., how the company wants to be perceived in the
marketplacebyitscustomers,competitorsandgeneralpublic(WilsonandGilligan,2005).

OXFORD H i g h e r
Oxford University Press, 2010. All rights reserved.

Education

West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 4

ChoosingtheDirectionalStrategy
Wheelen and Hunger (2004) noted that a corporations directional strategy is composed of three
generaldirectionalorientations,typicallycalledgrandstrategies:
- growthstrategiesexpandthecorporationsactivities
- stabilitystrategiesmakenochangetothecorporationsexistingactivities
- retrenchmentstrategiesreducethecorporationslevelofactivities

Havingidentifiedthegeneraldirectionalorientationofthecorporation(Growth,forexample),strategic
managerscanthenchooseoneormorespecificsubstrategiessuchasconcentrationordiversification.
Theymightdecidetoconcentratetheireffortsononeproductlineorcompeteinonemarketonly,or
diversify into other market segments or even different industries. Corporate managers may select
stabilityratherthangrowthasadirectionalstrategybymakingnochangestothecorporationscurrent
activities.Thecorporatemanagermaychoosetopursuearetrenchmentstrategyiftheorganisationhas
a weak competitive position in one or more of its markets resulting in less acceptable profits. This
situationputspressureonthecompanytoimproveitsperformancebyeliminatingthoseproductlines
orSBUsthataredraggingdowntheoverallperformanceofthecompany.

AllocatingResourcesbetweentheSBUs
Largecorporationswithmultipleproductsand/orstrategicbusinessunitsmustdecidedhowtoallocate
theirresources(financial,human,time,andotherresources)betweenSBUstoensuretheorganisations
overallsuccess.Oneofthemostfrequentlyusedtechniquesforallocatingresourcesisportfolioanalysis,
which has had a colourful history in the business literature since 1960s. Portfolio analysis relates
attractivenessandcompetitivenessindicatorstoinformstrategicdecisionsbysuggestingabalancedmix
ofproductsandbusinessesthatwillensuregrowthandprofitperformanceinthelongterm.Portfolio
analysistakestwoforms:(a)productportfolioanalysis,and(b)businessportfolioanalysis.Someofthe
portfolioanalysismodelsareoutlinedbelow.
BostonConsultingGroup(BCG)matrix,whichfocusesonmarketshareandmarketgrowth.
General Electrics (GE) business screen, which places the SBUs in the nine cells matrix using the
attractivenessoftheindustryandthepositionofbusiness.
Shell directional matrix, which uses two dimensions: prospects for section profitability and firms
competitivecapabilities.
Abell and Hammonds model, which is an expansion of the GE model and Shell directional matrix,
evaluatesSBUsusingtwodimensions:businesspositionandmarketattractiveness.

Itshouldbenotedherethatportfolioanalysishasgainedawideadoptioninpracticebecauseitoffers
some advantages. However, this method has been subject to a number of criticisms because of its
limitations(WilsonandGilligan,2005).
Itisgenerallytoosimplisticintheirstructure.
Its practical value is based on developing an appropriate definition of the industry and market
segmentsinwhichanSBUcompetes.
Itsuggestsastandardstrategyforeachcompetitiveposition.
Itusessubjectivejudgmentsoftopmanagement.
Itisnotalwaysclearhowtodefineindustryattractive.

OXFORD H i g h e r
Oxford University Press, 2010. All rights reserved.

Education

West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 4

StrategicChoiceandDecisionsatSBULevel
An SBU is a single business or interrelated businesses that can plan separately from the rest of the
corporation. An SBU competes in specific industrial sector or marketplace and has a manager who is
responsible for the strategic planning and profit performance of the SBU, and who controls factors
affectingprofit.ThekeystrategicdecisiontakenattheSBUlevelistheselectionofagenericcompetitive
strategy.
IdentifyingaGenericCompetitiveStrategy
Agenericstrategyspecifiesthefundamentalapproachtothecompetitiveadvantageafirmispursuing
andprovidesthecontextforthedecisionstobetakenineachfunctionalarea.Anappropriateselection
and formulation of a generic competitive strategy will best position the companys offerings against
competitors offerings and give the company the strongest possible competitive advantage within its
industry. In the strategy literature, different typologies of generic strategy have been suggested
(UtterbackandAbernathy,1975;MilesandSnow,1978;Porter,1980).However,Porterstypologyisstill
theonethathasreceivedwideacceptanceandappreciationfrombothacademiciansandpractitioners.
Therefore,Portersgenericstrategytypology(lowcost,differentiationandfocus)formthebackdropto
thediscussionineverychapterinthisbook.Porter(1980)suggestedthatacompanymustpursueonly
one of the generic strategies, otherwise it will stuck in the middle with no competitive advantage. It
shouldbenotedthatPorterstypologyhasbeensubjecttoseveralcriticismsfortheconceptitselfand
itsapplication.

StrategicChoiceandDecisionsatFunctionalLevel
Thedevelopmentofthefunctionalstrategiesandthecoordinationbetweenthemplayamajorrolein
creating and sustaining a firms competitive advantage. The key strategic decisions taken within the
marketing department include: marketing objectives to support corporate strategy, products to offer,
marketsegmentstotarget,andmarketpositionstrategies.

SettingtheMarketingObjectives
Most companies will have a mixture of marketing objectives including sales growth, market share,
innovativeness,customersatisfaction,reputation,andbrandloyalty.Itisthepursuitofthesemarketing
objectives that should provide the framework both for planning and control processes. Although
marketing is viewed in this book as an orientation that guides an organisations overall activities, this
doesnotdenythatmarketingisadistinctfunction.Atthefunctionallevel,themajortaskofmarketing
managers is to influence the level, timing, and character of demand in a way that will help the
organisation in achieving its longterm strategic objectives. The marketing manager at the functional
level must be particularly concerned with the development of the organisations positioning strategy
andthemarketingmixprogrammes.Thedevelopmentofmarketingstrategyandtheidentificationofits
objectiveshavebeenextensivelydiscussedinthemarketingliterature(seechapter2).Otherstrategic
decisionsandobjectivesofotherfunctionalareas(e.g.,production,finance,R&D,etc.)arealsooutlined
inthischapter.

OXFORD H i g h e r
Oxford University Press, 2010. All rights reserved.

Education

West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 4

DecidingonProductstoOfferandMarketstoTarget
In order to support the organisational goals and achieve the marketing objectives in particular,
marketingmanagershavetotakeanumberoffundamentaldecisionsconcerningproduct/stoofferand
marketsegment/stotarget.Ansoffs2X2matrixisausefulframeworkthatisfrequentlyusedtoguide
the marketing managers in making such strategic decisions. This matrix illustrates the four possible
options available to any organisation in relation to product/market strategy. It should be noted here
that the choice between the four strategic options will be influenced by a number of external and
internalfactors.Externalfactorsincludethestateofcompetitioninthemarketandthecriticalsuccess
factors in the industry, while internal factors include the product life cycle and the range of the
companysproductofferings.

DecidingoncompetitivetacticsformarketingstrategyImplementation
A tactic is a specific operating action specifying how, when and where a strategy is to be
implemented.Comparedtostrategies,tacticsarenarrowerinscopeandshorterintimehorizon.Tactics
maythereforebeviewed asabridgebetweenstrategyformulationandimplementation.Someofthe
tacticsavailabletoorganisationsarethosedealingwithtimingwhenandmarketpositionhow.Asfor
timing tactic, a company might decide to move earlier or later than its competitors in the market to
produce and sell a new product, new design, or new model. The three tactics of first mover, late
moverandearlyfollowerrepresentthetimingtacticsthatacompanyhastoselectfrominordertoact
or react against its competitors. The selection of timing tactics depends primarily on the companys
resources,capabilities,andstrategicobjectivesinthemarket.Asforcompetitivepositiontactics,several
tacticscanbechosenandpursuedbyanorganisationbasedonitspositioninthemarket.Marketleader
organisationswillpursuedifferentsetofcompetitivetacticsthanthoseusedbythemarketchallengers,
marketfollowers,ornichers.Thesetacticsarediscussedingreaterdetailsinthischapter.

StrategicMistakesandOrganisationalFailure
Mistakes and failure are fact of life that most organisations cannot escape. Cannon and Edmondson
(2005) defined failure, in organisations or elsewhere, as the deviation from expected and desired
results.Takingastrategicchoiceperspective,onemightarguethatorganisationalfailureisaproductof
repeated strategic mistakes and unsuccessful interactions between the firms management and its
externalenvironment.Ifstrategyisdefinedasameansthathelpstomarshalandallocateorganisations
resources based on anticipated changes in the environment, failing to evaluate the environment
properly represents the most fundamental strategic mistake managers can make. Inaccurate or
improperevaluationoftheenvironmentinwhichtheorganisationoperatesmightleadtopoorstrategy
formulation and implementation. There is no doubt that economic, social, and technological
environments do change and these changes sometimes punish firms that fail to adapt/adjust their
strategiesaccordingly.Althoughexternalforcesoutsidethefirmcan,tosomeextent,influencehowthe
turnaround outcome strategic success or failure eventually unfolds, these forces are mediated by
strategicmanoeuvringwithinthefirm.Topreventstrategicmistakesandfailurerecurring,ortoinitiate
corrective actions to minimise the damage incurred while navigating through failure, Sheppard and
Chowdhury(2005)producedalistofwhattodointheformofstrategicadvicedirectedtomanagersin
ordertoavoidstrategyandorganisationalfailure.

OXFORD H i g h e r
Oxford University Press, 2010. All rights reserved.

Education

West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 4

Conclusion
Drawinguponthestrategicanalysisoftheorganisationsinternalandexternalenvironment,managers
havetoevaluateseveralstrategicalternativesavailabletothemandmakestrategicdecisionsthatwill
define the future direction of their organisation. The key task is to generate a welljustified set of
strategic choices and select from them the ones that will strengthen the future position of the
organisationinthemarket(s)inwhichithaselectedtocompete.

Summary
Thischapterhasdiscussedinmoredetailthesecondstage/areaofthestrategicmarketingmanagement
process (SMM), namely strategic choice and decisions. Strategic managers, at this stage, aim to
understandtheunderlyingbasesguidingfuturestrategy,generatingstrategicoptionsandselectingfrom
amongthem.Theywillhavetousetheorganisationsstrengthstocapitaliseonexternalopportunities
and/or minimise threats, and invest in available opportunities to overcome the organisations major
weaknesses.

OXFORD H i g h e r
Oxford University Press, 2010. All rights reserved.

Education