UNIT – 1

INTRODUCTION

CORPORATE STRATEGY & MARKETING STRATEGY

Corporate level strategy is concerned with the strategic decisions a business makes that affect the
entire organization. Financial performance, mergers and acquisitions, human resource
management and the allocation of resources are considered part of corporate level strategy.
The Grand Strategies  involves the decision of choosing the long term plans from the set of
available alternatives. The Grand Strategies are also called as Master Strategies or Corporate
Strategies.

The grand strategies are concerned with the decisions about the allocation and transfer of
resources from one business to the other and managing the business portfolio efficiently, such
that the overall objective of the organization is achieved. In doing so, a set of alternatives are
available to the firm and to decide which one to choose, the grand strategies help to find an
answer to it.

There are four grand strategic alternatives that can be followed by the organization to realize its
long-term objectives:
CORPORATE STRATEGY

Stability strategy Expansion strategy Retrenchment strategy

Combination strategy

I. STABILITY STRATEGY

The Stability Strategy is adopted when the organization attempts to maintain its current position
and focuses only on the incremental improvement by merely changing one or more of its
business operations in the perspective of customer groups, customer functions and technology
alternatives, either individually or collectively.
The stability strategy is adopted by the firms that are risk averse, usually the small scale
businesses or if the market conditions are not favorable, and the firm is satisfied with its
performance, then it will not make any significant changes in its business operations. Stability
Strategies could be of three types:

 No-Change Strategy
 Profit Strategy
 Pause/Proceed with Caution Strategy

 No-Change Strategy

The No-Change Strategy, as the name itself suggests, is the stability strategy followed when an
organization aims at maintaining the present business definition. Simply, the decision of not
doing anything new and continuing with the existing business operations and the practices
referred to as a no-change strategy.

 Profit Strategy

The Profit Strategy is followed when an organization aims to maintain the profit by whatever
means possible. Due to lower profitability, the firm may cut costs, reduce investments, raise
prices, increase productivity or adopt any methods to overcome the temporary difficulties. The
profit strategy can be followed when the problems are temporary or short-lived and will go away
with time. The problems could be the economic recession or inflation, industry downturn, worst
market conditions, competitive pressure, government policies and the like. 
  Pause/Proceed with Caution Strategy

The Pause/Proceed with Caution Strategy is well understood by the name itself, is a stability
strategy followed when an organization wait and look at the market conditions before launching
the full-fledged grand strategy. Also, the firm that has intensely followed the expansion strategy
would wait till the time the new strategies seeps down the organizational levels and look at the
changes in the organizational structure before taking the next step.

II. EXPANSION STRATEGY

The Expansion Strategy is adopted by an organization when it attempts to achieve a high

growth as compared to its past achievements. In other words, when a firm aims to grow
considerably by broadening the scope of one of its business operations in the perspective of
customer groups, customer functions and technology alternatives, either individually or jointly,
then it follows the Expansion Strategy.

The reasons for the expansion could be survival, higher profits, increased prestige, economies of
scale, larger market share, social benefits, etc. The expansion strategy is adopted by those firms
who have managers with a high degree of achievement and recognition. Their aim is to grow,
irrespective of the risk and the hurdles coming in the way.

The firm can follow either of the five expansion strategies to accomplish its objectives:

EXPANSION
STRATEGY

Concentration Integration Diversification Cooperation Internationalization

  Expansion through Concentration

The Expansion through Concentration is the first level form of Expansion Grand strategy that
involves the investment of resources in the product line, catering to the needs of the identified
market with the help of proven and tested technology.
Simply, the strategy followed when an organization coincides its resources into one or more of
its businesses in the context of customer needs, functions and technology alternatives, either
individually or collectively, is called as expansion through concentration.
The organization may follow any of the ways to practice Expansion through concentration:
 Market penetration strategy: The firm focusing intensely on the existing market with its
present product.
 Market Development type of concentration: Attracting new customers for the existing
product.
 Product Development type of Concentration: Introducing new products in the existing
market.
 Expansion through Diversification

The Expansion through Diversification is followed when an organization aims at changing the

business definition, i.e. either developing a new product or expanding into a new market, either
individually or jointly. A firm adopts the expansion through diversification strategy, to prepare
itself to overcome the economic downturns.

Generally, the diversification is made to set off the losses of one business with the profits of the
other; that may have got affected due to the adverse market conditions.

There are mainly two types of diversification strategies undertaken by the organization:

 Concentric Diversification: When an organization acquires or develops a new product

or service that are closely related to the organization’s existing range of products and
services is called as a concentric diversification. For example, the shoe manufacturing
company may acquire the leather manufacturing company with a view to entering into
the new consumer markets and escalate sales.
  Conglomerate Diversification: When an organization expands itself into different areas,
whether related or unrelated to its core business is called as a conglomerate
diversification. Simply, conglomerate diversification is when the firm acquires or
develops the product and services that may or may not be related to the existing range of
product and services.
 Expansion through Integration

The Expansion through Integration means combining one or more present operation of the

business with no change in the customer groups. This combination can be done through a value
chain. The value chain comprises of interlinked activities performed by an organization right
from the procurement of raw materials to the marketing of finished goods. Thus, a firm may
move up or down the value chain to focus more comprehensively on the needs of the existing
customers.

The expansion through integration widens the scope of the business and thus considered as the
grand expansion strategy. There are two ways of integration:

INTEGRATION

Vertical Horizontal

Forward Backward

 Vertical integration: The vertical integration is of two types: forward and backward.

When an organization moves close to the ultimate customers, i.e. facilitate the sale of the
finished goods is said to have made a forward integration.

Example, the manufacturing firm open up its retail outlet. Whereas, if the organization
retreats to the source of raw materials, is said to have made a backward integration.
 Example, the shoe company manufactures its own raw material such as leather through
its subsidiary firm.

 Horizontal Integration: A firm is said to have made a horizontal integration when it

takes over the same kind of product with similar marketing and production levels.
Example, the pharmaceutical company takes over its rival pharmaceutical company.

 Expansion through Cooperation

The Expansion through Cooperation is a strategy followed when an organization enters into a

mutual agreement with the competitor to carry out the business operations and compete with one
another at the same time, with the objective to expand the market potential.

The expansion through cooperation can be done by following any of the strategies as explained
below:
 Merger: The merger is the combination of two or more firms wherein one acquires the
assets and liabilities of the other in the exchange of cash or shares, or both the
organizations get dissolved, and a new organization came into the existence. The firm
that acquires another is said to have made an acquisition, whereas, for the other firm that
gets acquired, it is a merger.
 Takeover: Takeover strategy is the other method of expansion through cooperation. In
this, one firm acquires the other in such a way, that it becomes responsible for all the
acquired firm’s operations.
 Joint Venture: Under the joint venture, both the firms agree to combine and carry out
the business operations jointly. The joint venture is generally done, to capitalize the
strengths of both the firms. The joint ventures are usually temporary; that lasts till the
particular task is accomplished.
 Strategic Alliance: Under this strategy of expansion through cooperation, the firms unite
or combine to perform a set of business operations, but function independently and
pursue the individualized goals. Generally, the strategic alliance is formed to capitalize
on the expertise in technology or manpower of either of the firm.
  Expansion through Internationalization

The Expansion through Internationalization is the strategy followed by an organization when

it aims to expand beyond the national market. The need for the Expansion through
Internationalization arises when an organization has explored all the potential to expand
domestically and look for the expansion opportunities beyond the national boundaries.

The expansion through internationalization could be done by adopting either of the following
strategies:

 International Strategy: The firms adopt an international strategy to create value by

offering those products and services to the foreign markets where these are not available.
This can be done, by practicing a tight control over the operations in the overseas and
providing the standardized products with little or no differentiation.
 Multidomestic Strategy: Under this strategy, the multi-domestic firms offer the
customized products and services that match the local conditions operating in the foreign
markets. Obviously, this could be a costly affair because the research and development,
production and marketing are to be done keeping in mind the local conditions prevailing
in different countries.
 Global Strategy: The global firms rely on low-cost structure and offer those products
and services to the selected foreign markets in which they have the expertise. Thus, a
standardized product or service is offered to the selected countries around the world.
  Transnational Strategy: Under this strategy, the firms adopt the combined approach of
multi-domestic and global strategy. The firms rely on both the low-cost structure and the
local responsiveness i.e. according to the local conditions. Thus, a firm offers its
standardized products and services and at the same time makes sure that it is in line with
the local conditions prevailing in the country, where it is operating.

III. RETRENCHMENT STRATEGY

The Retrenchment Strategy is adopted when an organization aims at reducing its one or more
business operations with the view to cut expenses and reach to a more stable financial position.
In other words, the strategy followed, when a firm decides to eliminate its activities through a
considerable reduction in its business operations, in the perspective of customer groups,
customer functions and technology alternatives, either individually or collectively is called as
Retrenchment Strategy. The firm can either restructure its business operations or discontinue it,
so as to revitalize its financial position. There are three types of Retrenchment Strategies:

Turnaround
Strategy

RETRENCHMENT
STRATEGY Divestment
Strategy

Liquidation
Strategy
 Turnaround Strategy

The Turnaround Strategy is a retrenchment strategy followed by an organization when it feels

that the decision made earlier is wrong and needs to be undone before it damages the profitability
of the company. Simply, turnaround strategy is backing out or retreating from the decision
wrongly made earlier and transforming from a loss making company to a profit making
company.

 Divestment Strategy
 The Divestment Strategy is another form of retrenchment that includes the downsizing of the
scope of the business. The firm is said to have followed the divestment strategy, when it sells or
liquidates a portion of a business or one or more of its strategic business units or a major
division, with the objective to revive its financial position.

 Liquidation Strategy

The Liquidation Strategy is the most unpleasant strategy adopted by the organization that
includes selling off its assets and the final closure or winding up of the business operations. It is
the most crucial and the last resort to retrenchment since it involves serious consequences such
as a sense of failure, loss of future opportunities, spoiled market image, loss of employment for
employees, etc.

The firm adopting the liquidation strategy may find it difficult to sell its assets because of the
non-availability of buyers and also may not get adequate compensation for most of its assets. The
following are the indicators that necessitate a firm to follow this strategy:

 Failure of corporate strategy

 Continuous losses
 Obsolete technology
 Outdated products/processes
 Business becoming unprofitable
 Poor management
 Lack of integration between the divisions

IV. COMBINATION STRATEGY

The Combination Strategy means making the use of other grand strategies (stability, expansion
or retrenchment) simultaneously. Simply, the combination of any grand strategy used by an
organization in different businesses at the same time or in the same business at different times
with an aim to improve its efficiency is called as a combination strategy. The Combination
strategy can be followed either simultaneously or in the sequence.
MARKETING STRATEGY

Marketing strategy is a process that can allow an organisation to concentrate its limited resources
on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Marketing strategy is a strategy that integrates an organization’s 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.

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
of marketing plans designed to reach marketing objectives. A good marketing strategy should
integrate on organizations 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 organisation to carry out its mission effectively & efficiently.

Marketing strategy deals essentially with the interplay of three forces as the strategic three C’s:

 The Customer
 The Competition
 The Corporation
All three C’s are dynamic, living creatures with own objectives to pursue. Based on the interplay
of the strategic 3C’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
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.
ELEMENTS OF MARKETING STRATEGY
If we were to design marketing strategy as an environment, then we will find that the 7 elements
shown in the diagram are the ones which make a huge difference in marketing strategy. Each of
these elements is dynamic in nature on their own. Naturally, when one element changes, then all
the others will also change.  Each of the 7 key elements of marketing strategy, have their own
depending variables which define that element.

Hence, strategy decisions are always difficult and are left to the most experienced people in the
organization. The key elements of marketing strategy are divided in two parts. One is the internal
environment and the other is the external environment.

A. INTERNAL ENVIRONMENT
The internal environment (environment which the company can control) consists of customers,
corporation and competition. These are entities which the company can control and at least
influence.  And hence these three entities form a triangle, each influencing the other.
1) Customers – The reason why marketing is evolving and the reason we need so many
strategies in place is the Customer. The purchase habits, decisions are completely different are
also a customer. Any strategy considers customers as the starting point of the strategy and then
moves forward. Hence, strategies generally start with segmentation, targeting and
positioning and then move forward.

2) Corporation – By corporation, we mean the internal strengths and weaknesses of the
company. SWOT analysis is a strong analysis tool of corporations to determine what the
corporate is capable of, and what cannot be achieved by the corporate. To design a strategy, the
corporate needs to conduct its own internal analysis and then take the right decisions.

3) Competition – The competition influences both corporation as well as customers. In fact,

competition can become one of the contributors to external environment, specifically
technological environment. Tackling competition is one of the biggest challenges in the internal
environment – a challenge which consumes maximum time of the company and involves
maximum resources to be spent. Branding and marketing activities take place partially because
of ever increasing fear of competition.
 B. EXTERNAL ENVIRONMENT

The external environment (environment which the company cannot control) consists of

the PEST environment. This environment influences the decision making of the internal
environment. However, each entity of the internal environment cannot influence the external
environment. Although customers have the most power, the technology, political, economical or
social aspects can change at any time due to any incidence. And hence, to survive the external
environment, the internal environment has to adjust very fast.

1) Political environment – Many things influence the political environment of a country. Level
of control over policies, business friendliness, political structure as well as various other factors
help build the political and legal environment of a country. Places like Syria, Iraq and Iran are
not places where businesses will find the political environment conducive.

2) Technological environment – Where is Nokia? The technological environment changes so

fast, that companies that do not adapt, fail. Hence, technology is a prominent element of
marketing strategy.

3) Social environment – McDonalds keeps changing its menu in each new country it enters.
This is because of the social environment. Countries like US and UK are beef friendly whereas
in places like India it is mostly banned & people don’t go to beef serving hotels and restaurants.
So the social environment is different in different places.  Based on the social environment, the
strategy also differs.

4) Economic environment –  If you wanted to launch a premium product, then the economical
environment of a country matters a lot. Many brands are still present only in developed
countries, and not even in developing countries. This is because of the low GDP of developing
and under developed countries, which will not give the desired margins to a premium established
brand. Hence, while designing a strategy, you need to target the right economic market to enter.
Even FMCG’s consider the economy of a market before entering that market, although FMCG
products are known to be the most penetrative.
MARKETING STRATEGY PROCESS

1. Understand Your Customer: Develop a clear picture of your target customer using market
research and analysis. Understand their pain points and the benefits of your solution.
2. Analyze the Market:  Some basic market research should allow you to find market data
such as total available market, market growth (historical numbers and projections), market
trends, etc.
3. Analyze the Competition : Ask yourself what other choices your target customers have to
solve their pain point. Research and assess the strengths and weaknesses of each.
4. Research Distribution Channels : What is the best way to deliver your product or service to
your target customers? This will impact your sales strategy and your financials, as well as
your marketing mix.
5. Define Your Marketing Mix:   Product, Price, Place and Promotion.
6. Analyze the Financials:  Put together your marketing budget and evaluate projected
marketing ROI, customer acquisition costs, etc.
7. Review and Revise:  Continuously evaluate the effectiveness of your marketing strategy,
and revise or extend as needed.
HIERARCHY OF STRATEGIES

Hierarchy of strategies describes a layout and relations of corporate strategy and sub-strategies of

the organization. Individual strategies are arranged hierarchically and logically consistent at the
level of vision, mission, goals and metrics.

I. CORPORATE LEVEL STRATEGY

Corporate level strategy fundamentally is concerned with the selection of businesses in which the
company should compete and with the development and coordination of that portfolio of
businesses. Corporate level strategy is concerned with:

 Reach - defining the issues that are corporate responsibilities; these might include
identifying the overall goals of the corporation, the types of businesses in which the
corporation should be involved, and the way in which businesses will be integrated and
managed.
 Competitive Contact - defining where in the corporation competition is to be localized.
Take the case of insurance: In the mid-1990's, Aetna as a corporation was clearly
 identified with its commercial and property casualty insurance products. The
conglomerate Textron was not. For Textron, competition in the insurance markets took
place specifically at the business unit level, through its subsidiary, Paul Revere. (Textron
divested itself of The Paul Revere Corporation in 1997.)
 Managing Activities and Business Interrelationships  -  Corporate strategy seeks to
develop synergies by sharing and coordinating staff and other resources across business
units, investing financial resources across business units, and using business units to
complement other corporate business activities. Igor Ansoff introduced the concept of
synergy to corporate strategy.
 Management Practices - Corporations decide how business units are to be governed:
through direct corporate intervention (centralization) or through more or less autonomous
government (decentralization) that relies on persuasion and rewards.

Corporations are responsible for creating value through their businesses. They do so by
managing their portfolio of businesses, ensuring that the businesses are successful over the long-
term, developing business units, and sometimes ensuring that each business is compatible with
others in the portfolio.

II. BUSINESS LEVEL STRATEGY

A strategic business unit may be a division, product line, or other profit center that can be
planned independently from the other business units of the firm.

At the business unit level, the strategic issues are less about the coordination of operating units
and more about developing and sustaining a competitive advantage for the goods and services
that are produced. At the business level, the strategy formulation phase deals with:

 Positioning the business against rivals

 Anticipating changes in demand and technologies and adjusting the strategy to
accommodate them
 Influencing the nature of competition through strategic actions such as vertical
integration and through political actions such as lobbying.
Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that
can be implemented at the business unit level to create a competitive advantage and defend
against the adverse effects of the five forces.

III. FUNCTIONAL LEVEL STRATEGY

The functional level of the organization is the level of the operating divisions and departments.
The strategic issues at the functional level are related to business processes and the value chain.
Functional level strategies in marketing, finance, operations, human resources, and R&D involve
the development and coordination of resources through which business unit level strategies can
be executed efficiently and effectively.

Functional units of an organization are involved in higher level strategies by providing input into
the business unit level and corporate level strategy, such as providing information on resources
and capabilities on which the higher level strategies can be based. Once the higher-level strategy
is developed, the functional units translate it into discrete action-plans that each department or
division must accomplish for the strategy to succeed.
VISION

A Vision Statement describes the desired future position of the company. Vision statement
provides direction and inspiration for organizational goal setting. Vision is where you see
yourself at the end of the horizon or milestone therein. It is a single statement dream  or
aspiration. Vision is a symbol, and a cause to which we want to bond the stakeholders, (mostly
employees and sometime share-holders). As they say, the people work best, when they are
working for a cause, than for a goal. Vision provides them that cause.
Vision is long-term statement and typically generic & grand. Therefore a vision statement does
not change unless the company is getting into a totally different kind of business.
Vision should never carry the 'how' part . For example ' To be the most admired brand in
Aviation Industry' is a fine vision statement, which can be spoiled by extending it to' To be the
most admired brand in the Aviation Industry by providing world-class in-flight services'. The
reason for not including 'how' is that 'how' may keep on changing with time.

MISSION

A Mission Statement defines the company's business, its objectives and its approach to reach
those objectives. Mission relates an organization to society. The mission statements stage the
role that organization plays in society. It is one of the popular philosophical issue which is being
looked into business mangers since last two decades.

Mission means the purpose  or reason for the organization’s existence or a mission provides the
basis of  awareness of a sense of purpose, the competitive environment, degree to which the
firm’s mission fits its capabilities and the opportunities which the government offers. The above
definition reveals the following:

(i)  It is the essential purpose of organization.

(ii) It answers “why the organization is in existence”.

(iii) It is the basis of awareness of a sense of purpose.

(iv) It fits its capabilities and the opportunities which government offers.
EX: TOYOTA

Vision
-Toyota aims to achieve long-term, stable growth economy, the local communities it serves, and
its stakeholders.

Mission
-Toyota seeks to create a more prosperous society through automotive manufacturing.

We translate these advanced technologies into value for our customers through our professional
solutions, services and consulting businesses worldwide.

TYPES OF MISSION STATEMENT

 Customer-oriented missions: Customer-oriented missions define organization’s

purpose in terms of meeting customer needs or providing solutions for them. They
provide more flexibility than product-oriented missions and can be easily adapted to
changing environment. For example, Nokia’s statement “connecting people” is customer-
oriented. It does not focus on mobile phones or smart phones only. It provides a solution
to customer needs and could easily have worked 50 years ago, and will continue to work
in the future. It also gives more strategic flexibility for the company. In Nokia’s case, it
may start providing VoIP software to allow calls to be made over the internet and its
mission would still be valid.
 Product-oriented missions: Product-oriented missions focus on what products or
services to serve rather than what solutions to provide for customers. These statements
provide less flexibility for the company because most products have short life cycle and
offer limited market expansion. The company that defines its business as “providing best
health insurance products” may struggle to grow to other insurance product categories.
MARKETING ORIENTATION
The orientation used by marketing oriented companies which heavily focuses on customer
demands is called as marketing orientation. Marketing oriented companies work according to the
needs or wants of the targeted customers to desire and fulfill their needs and this is the primary
business motivator of these companies.

 In this strategy, companies always try to develop new products and improve its existing products
or services as per the customer’s needs. Companies with especially strong marketing orientation
may even detect consumer needs before the general market is aware of them by continuous
surveys and feedback reports. Sometimes companies seek the help from Lead Research Users
which can identify the need prior to normal people.  In short we can say that these companies are
cutting-edge innovators that always try to give customers what they want faster than their
competitors.

Companies with a marketing orientation are commonly called customer-centric as they work for
the customer needs. These companies continuously conduct market research and are highly
responsive to customers’ feedback.

Most successful businesses take a market-orientated approach. Now a days companies know that
customers have become more knowledgeable and require more variety with better quality so now
the companies are market oriented instead of product oriented.

Marketing orientation is the act of a company taking strategic steps to understand the specific
wants and needs of its customers and to tailor its products, services and corporate image toward
matching those customer-focused ideologies. While a well-researched and implemented
approach to market orientation can help a company gain a stronghold on its target market and
strengthen its brand identity, there are several instances where a company's approach to market
orientation can hurt, rather than help, its mission. To compete in the market, businesses need to
be more sensitive and more responsive to their customers’ needs otherwise they will lose sales to
their rival.
ELEMENTS OF MARKETING ORIENTATION

TOOLS OF MARKETING ORIENTATION

 Market Research
 Market Testing
 Customer Focus

FOUR STAGES OF MARKETING ORIENTATION

Marketing orientation is a strategy employed by a business to better position itself to meet
customers’ needs. Each of the four stages involved in this process allows the business to evaluate
the needs of its customers both in the present and in the future. Additionally, these stages
highlight the various methods of market research and the many ways to distribute the
information to customers.

Stage One: Initiation

The initiation phase includes the identification of the problem that the business faces. For
example, this may include competition from outside companies, major losses in revenue or
structural inefficiencies. After the upper management of the business determines what the
problem is, the business will then prepare a plan to institute the necessary changes. This plan will
generally include the values and goals of the company and methods to achieve the goals.

Stage Two: Reconstitution

The reconstitution phase of the market-orientation process is the presentation of the plan defined
and developed in the first stage of this process. This requires presenting and explaining the plan
and its new values to the entire company, usually at the same time. After this presentation, the
organization needs to follow up and ensure that everyone within the organization is on board and
ready to implement the new plan. Sometimes, when employees cannot accept the new values and
plan, the business will need to replace these employees with newer employees who will work
toward the shared goal.

Stage Three: Institutionalization

The institutionalization phase puts into practice everything developed in stage one and presented
in stage two. Institutionalization involves aligning various areas of the business to implement the
plan effectively. This step commonly involves orienting training, creating an employee-rewards
system, and realigning the structure of power within the organization to foster the new values
and, ultimately, meet the customers’ needs within the market. Institutionalization essentially
represents the transformation phase of market orientation.

Stage Four: Maintenance

The final stage, maintenance, involves maintaining the changes that a company previously
implemented. Because market orientation involves altering company culture, at least to some
extent, it is necessary to make sure that the new culture remains in effect to continue meeting the
needs of the market and the customers. This includes everything from new hiring practices, to
making sure prospective employees can work within the confines of the new company culture, to
keeping the new values front and center for older employees.

ADVANTAGES OF MARKETING ORIENTATION

 More Focused Production

By making customer needs a primary focus, companies will more likely develop products that
match up with the needs of the customers. This means customers will experience more
satisfaction with the product, which ultimately increases the likelihood of repeat purchases and
brand loyalty. With an ongoing customer focus, companies can also make adjustments over time
and will look to the market to guide product improvements and upgrades.
  Concentrated Strategy

By adopting the marketing concept, companies have all functions aligned with the strategic
vision of meeting the needs of customers. This helps define the role of employees more clearly.
Marketers must perform diligent research to uncover needs and convey messages that explain
benefits. Production should focus on fine-tuning products to meet the needs of customers.
Support and service should have openness to customer feedback to report back to production and
research. Company leadership must set the tone by making customers the priority.

 Marketing Advantages

When companies have a good understanding of what the market needs or wants, they have better
ability to market effectively to them. Marketers research the market well to understand not only
what is needed, but how to convey messages that clarify how their products align with those
needs. Familiarity with the market allows marketers to build emotionally impacting appeals into
ads and generate more business.

 Long-Term Profitability

Consistently understanding and delivering what the marketplace wants leads to long-term
profitability. Companies can turn one-time buyers into repeat customers, with an ultimate goal of
developing many loyal customers. Loyal customers buy more frequently and in larger volumes.
They are also less susceptible to competition and more willing to pay higher prices. All of these
business benefits mean the company has much better ability to remain viable and successful as
long as it retains the marketing concept.

DISADVANTAGES OF MARKETING ORIENTATION

 Risk of Under estimating the Market

A successful approach to market orientation involves a systematic approach to researching

customer behavior. Missing the mark in this process creates a system where a company is using
ineffective data in its approach to reaching out to customers. Working with wrong data is often
worse than working with no data at all.
  Risk of Under estimating the Customer

A global marketplace has increased competitiveness across all consumer brands. The Internet has
created a system whereby consumers can easily comparison shop, read peer reviews and access
consumer reports at the click of the button. To effectively market to this new, highly informed
consumer, an approach to market orientation must be flexible and must be quickly altered to
meet the ever-changing thought processes and demands.

 Challenges of Quickly Responding to Market Changes

Markets that rapidly change have just as great an impact on a company's market orientation
strategy as educated consumers. New players entering or exiting the market, advances to existing
products and an ever-changing cost of raw materials, products and services all impact market
orientation. Following an established market orientation and failing to take new external factors
into consideration can put a company at a disadvantage.

 Dealing with Corporate Perceptions

Understanding what the customer wants and needs is not enough to guarantee a market share in
today's economic environment. Branding and corporate perception has grown to be just as
important in the minds of consumers as price and quality. Building a marketing orientation
concept around price and service alone puts a company at a disadvantage. All factors related to
corporate perception must be calculated to ensure a solid, functioning and effective approach to
market orientation.

IMPORTANCE OF MARKET ORIENTATION FOR EMERGING FIRMS

An emerging company is one that has achieved some success in terms of revenue growth, but
now is poised to grow even faster because its products and services are gaining market
acceptance or because the company is in a rapidly growing industry. Having a market orientation
increases the chances the management team will be able to take advantage of these opportunities
and stay ahead of competitors that may also be emerging. Newly formed small businesses might
find short-term success with a sales-oriented approach to marketing, but a more product-oriented
strategy can increase the likelihood of long-term success.
  Sales Orientation

A business with a sales orientation focuses on enticing customers with a variety of benefits
beyond the actual product. Discounts, buy-one-get-one-free, sweepstakes, rebates and sales can
lead to short-term revenue increases, but can send a message that your product or service isn’t
worth its full price. For example, new magazines often make the mistake of offering advertisers
free color with the purchase of a full-page ad

 Market Orientation

Firms that use a market, or product orientation, focus on driving revenue and sales by creating
something the marketplace needs or wants, rather than trying to “put lipstick on a pig.” Using the
magazine example, a product-oriented publication focuses on building a circulation consisting of
its target advertisers’ customers and creating editorial that engages those readers.

 Market Research

Market orientation starts with market research. Small businesses must know more than one
demographic characteristic of their customer. For example, knowing that your customers are
women may not help you understand why they are buying from you. The age, income level and
marital status of your primary target customer will help you discover the reason they need or
want your product or service. This will help you create or improve your product, rather than
using a generic, female-focused advertising campaign.

CHARACTERISTICS OF MARKETING ORIENTATION

 Customer needs are first priority and understanding these needs is a constant concern
 Marketing research are on-going activity assigned a very high priority
 Customer's Perceptions of Organization are known
 Frequent reviews are made of strengths and weaknesses relative to competitors
 The value of long-term planning is fully appricated
 The scope of business activitives is broadly set and change is seen as inevitable
 Interdepartment cooperation is valued and encouraged - team effort.
 Cooperation with complementary organazations is seen as being worthwhile
 Measurement and evaluation of marketing activities are done frequently
 STARTEGIC BUSINESS UNIT

Strategic Business Unit (SBU) implies an independently managed division of a large company,
having its own vision, mission and objectives, whose planning is done separately from other
businesses of the company. The vision, mission and objectives of the division are both distinct
from the parent enterprise and elemental to the long-term performance of the enterprise.

Simply put, an SBU is a cluster of associated businesses which are responsible for its combined
planning treatment, i.e. the company engaged in a diversified range of businesses, categorises its
multitude of businesses into a few separate divisions, in a scientific way. The task may include
analysis and bifurcation of a variety of businesses. It can be a business division, a product line of
the division or even a specific product/brand, targeting a particular group of customers or a
geographical location.

CHARACTERISTICS OF SBU

 Separate business or a grouping of similar businesses, offering scope for autonomous

planning.
 Own set of competitors.
 A manager who is accountable for strategic planning, profitability and performance of the
division.

A strategic business unit is specially formed to target a particular market segment, which
requires expertise in production or management, not present in the parent company.

SBU STRUCTURE
The structure of SBU consist of operating units; wherein the units serve as an autonomous
business. The top corporate officer assigns the responsibility of the business to the managers, for
the regular operations and business unit strategy. So, the corporate officer is accountable for the
formulation and implementation of the comprehensive strategy and administers the SBU by way
of strategic and financial controls.

In this way, the structure combines related divisions of business into the strategic business unit
and the senior executive is empowered for taking decisions for each unit. The senior executive
works under the supervision of a chief executive officer.

There are three levels in a strategic business unit, wherein the corporate headquarters remain

at the top, SBU’s in the middle and divisions clustered by similarity, within each SBU, remain at
the bottom. Hence, the divisions within the SBU are associated with each other, and the SBU
groups are independent of each other. From the strategic viewpoint, each SBU is an independent
business.

A single strategic business unit is considered as a profit centre and governed by the corporate

officers. It stresses over strategic planning instead of operational control so that the separate
divisions of the SBU can respond as fast as they can, to the changing business environment.

FEATURES OF SBU

The main features of strategic business units are:

 They are present in the organizational structure

  They are organizational units without separate legal personality
 They utilize "product-market" strategy
 Type of activity performed by them is of crucial and decisive importance for the whole
company
 Functional and decision-making autonomy include: laboratory testing, production
preparation, production, finance, accounting and marketing
 SBU has divisional structure, which is determined by the size of
production, technology and research activities, financial and accounting processes,
and marketing activities.

ADVANTAGES OF SBU’s

There are several advantages of strategic business units in an organization.

 Responsibility – One of the first role of strategic business units is to assign responsibility
and more importantly outsource responsibility to others. With this, the top management has
an overview of work being done in each individual unit and they do not have to get
involved in day to day activities for these strategic business units.
 Accountability – When handling multiple brands or products, it is easier if there are
separate business units which are accountable for the success or failure of the business or
product. By making these business units accountable, the company can directly take a call
when hard decisions are to be taken.
 Accountancy – Profit and loss and balance sheets will look more prettier and more
manageable if the statements are prepared separately for separate strategic business units.
This makes the accountancy more transparent and at the same time, when companies have
to make investment decision than this accountancy will come in use for the company.
 Strategy – Companies like Nestle have 4 different strategic units. One SBU like Maggi
deals in Food products, another deals in Dairy products like Nestle milkmaid, the third
SBU deals in Chocolate products like Kitkat so on and so forth. Thus, in the above
example, it is very simple to change strategy for each business unit because the strategy for
each is independent of the other.
  Independence – The managers of the strategic business units get more independence to
manage their own unit which gives them the opportunity to be more creative and
innovative and empowers them for making decisions. The best thing that can happen for
SBU’s are fast decision making which is possible only when these SBU’s are given
independence to work by themselves.
 Funds allocation – The last but not the least advantage of strategic business units are that
funds allocation becomes simpler for the parent company. Depending on the performance
of the SBU, funds allocation can be done on priority.

DISADVANTAGES OF SBU’s

 Difficulty with contact with higher level of management,

 May cause of internal tension due to difficult access to internal and external sources of
funding,
 May be the cause of the unclear situation with regard to the management activities.
 UNIT – 2

STRATEGY FORMULATION

Strategy formulation refers to the process of choosing the most appropriate course of action for
the realization of organizational goals and objectives and thereby achieving the organizational
vision. 

The process of strategy formulation basically involves six main steps. Though these steps do not
follow a rigid chronological order, however they are very rational and can be easily followed in
this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to

set the long-term objectives of the organization. It is known that strategy is generally a
medium for realization of organizational objectives. Objectives stress the state of being
there whereas Strategy stresses upon the process of reaching there. Strategy includes both
the fixation of objectives as well the medium to be used to realize those objectives. While
fixing the organizational objectives, it is essential that the factors which influence the
selection of objectives must be analyzed before the selection of objectives. Once the
objectives and the factors influencing strategic decisions have been determined, it is easy
to take strategic decisions.
2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a
review of the organizations competitive position. It is essential to conduct a qualitative
and quantitative review of an organizations existing product line. The purpose of such a
review is to make sure that the factors important for competitive success in the market
can be discovered so that the management can identify their own strengths and
weaknesses as well as their competitors’ strengths and weaknesses.
3. Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. The idea behind this
 is to compare with long term customers, so as to evaluate the contribution that might be
made by various product zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by
each department or division or product category within the organization is identified and
accordingly strategic planning is done for each sub-unit. This requires a careful analysis
of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the
gap between the planned or desired performance. A critical evaluation of the
organizations past performance, present condition and the desired future conditions must
be done by the organization. This critical evaluation identifies the degree of gap that
persists between the actual reality and the long-term aspirations of the organization. An
attempt is made by the organization to estimate its probable future condition if the current
trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of
action is actually chosen after considering organizational goals, organizational strengths,
potential and limitations as well as the external opportunities.

STRATEGY FORMULATION

It is the process of determining appropriate courses of action for achieving organizational
objectives and thereby accomplishing organizational purpose. Managers formulate strategies that
reflect environmental analysis, lead to fulfillment of organizational mission, and result in
reaching organizational objectives.

STRATEGY FORMULATION TOOLS

 Critical question analysis

 SWOT analysis
 Business portfolio analysis
 Porters model for industry analysis

These 4 strategy development tools are related but distinct. Managers should use the tools or
combination of tools that seems most appropriate for them and  their organizations.
 A. CRITICAL QUESTION ANALYSIS:

The 4 critical questions to be answered here are:

1. What are the purposes and objectives of the Organization?

2. Where is the Organization presently going?

3. In what kind of environment does the organization now exist?

4. What can be done to better achieve organizational objectives in the future?

B. SWOT ANALYSIS:

SWOT Analysis is a strategic development tool that matches internal organizational strengths
and weaknesses with external opportunities and threats. SWOT is an acronym for the
organization’s Strengths, Weakness, Opportunities and Threats. It is based on the assumption
that if managers carefully review such strengths, weaknesses, opportunities and threats, a useful
strategy for ensuring organizational success will become evident to them.

C. BUSINESS PORTFOLIO ANALYSIS:

Business Portfolio Analysis is an organizational strategy formulation technique that is based on

the philosophy that Organizations should develop strategy much as they handle investment
portfolios. In the way, in which the sound financial investments should be supported and
unsound ones discarded, sound organizational activities should be emphasized and unsound ones
deemphasized.

Business Portfoilo tools are:

1. The BCG Growth Share Matrix by Boston Consulting Group.

2. GE Multifactor Portfolio Matrix by General Electric Company.

 BCG Growth-Share Matrix:

The Boston Consulting Group, a leading consulting firm, developed and popularized a portfoilo
analysis tools that helps managers develop organizational strategy based on market share of
businesses and the growth of markets in which businesses exist.

The 1st step in using this model is identifying the organization’s strategic business units (SBUs).
A Strategic business Unit is a significant organization segment that is analysed to develop
organizational strategy aimed at generating future business or revenue.

After identifying the SBUs, the next step is to categorize each SBU within one of the 4 Matrix
Quadrants:

1. STARS – Star SBUs have a high share of a high growth market and typically need large
amounts of cash to support their rapid and significant growth. Stars also generate large
amounts of cash for the organization and are usually segments in which management can
make additional investments and earn attractive returns.

2. CASH COWS: SBUs that are Cash Cows have a large share of a market that is growing
only slightly. Naturally, these SBUs provide the organization with large amounts of Cash,
but since their market is not growing significantly, the cash is generally used to meet the
financial demands of the organization in other areas, such as the expansion of a STAR
SBU.

3. QUESTION MARKS: These category of SBUs have a small share of a high growth
market. These are “question marks” because it is uncertain whether management should
invest more cash in them to gain a larger share of the market or deemphasize or eliminate
them. Management will choose the 1st option when it believes it can turn the question
mark into a star, and the 2nd option when it thinks that future investments would be
fruitless.

4. DOGS : SBUs that are dogs have a relatively small share of a low-growth market. They
may barely support themselves; in some cases, they actually drain off cash resources
generated by other SBUs. These are the SBUs which are likely to be shortlisted for
deemphasize or elimination.

 GE Multifactor Portfolio Matrix:

GE Multifactor Portfolio Matrix is a tools that helps managers develop organizational strategy
that is based primarily on market attractiveness and business strengths.

The GE Multifactor Portfolio was deliberately designed to be more complete than the BCG
Growth Share Matrix. Each of the organization’s SBUs are plotted on a 2 dimensional matrix
of Industry Attractiveness and Business Strength.

 While portfolio models are useful frameworks and reference points, no model is yet designed
that will deal with all the various dynamics involved in an organization and an industry and the
changing environment. Hence Portfolio models should never be applied in a mechanistic fashion
and sound managerial judgement and experience is to be applied along with.

D. PORTERS MODEL FOR INDUSTRY ANALYSIS:

Perhaps the best known tool for formulating strategy is the model developed by Michael E.
Porter, an internationally acclaimed strategic management expert. Essentially, Porter’s model
outlines the primary forces that determine competitiveness within an industry and illustrates how
those forces are related. The model suggests that in order to develop effective organizational
strategies, managers must understand and react to those forces within an industry that determine
an organization’s level of competitiveness within that industry.

According to these model, competitiveness within an industry is determined by the following

factors:

1. New Entrants or New Companies within the Industry

2. Substitute Products or Services – for goods or services that the companies within the
industry produce/provide.

3. Supplier’s Ability to control issues like costs of material/ inputs that industry companies
use to manufacture their products or provide their services.

4. Competition level among the firms in the industry.

According to the model, buyers, product substitutes, supplier and potential new companies
within an Industry all contribute to the level or rivalry among industry firms.
TREND PROJECTION METHOD

The Trend Projection Method is the most classical method of business forecasting, which is
concerned with the movement of variables through time. This method requires a long time-series
data. The trend projection method is based on the assumption that the factors liable for the past
trends in the variables to be projected shall continue to play their role in the future in the same
manner and to the same extent as they did in the past while determining the variable’s magnitude
and direction.

In predicting demand for a product, the trend projection method is applied to the long time-series
data. A long-standing firm can obtain such data from its departments (such as sales) and the
books of accounts. While the new firms can obtain data from the old firms operating in the same
industry. Trend analysis is based on the premise that economic performance follows an
established pattern and that historical data can be used to predict future business activity. Trend
analysis techniques involve characterizing the historical pattern of an economic variable and then
projecting its future path based on past experience.

DELPHI TECHNIQUE

A systematic forecasting method that involves structured interaction among a group of experts
on a subject. The Delphi Technique typically includes at least two rounds of experts answering
questions and giving justification for their answers, providing the opportunity between rounds
for changes and revisions. The multiple rounds, which are stopped after a pre-defined criterion is
reached, enable the group of experts to arrive at a consensus forecast on the subject being
discussed.

STEPS OF DELPHI METHOD

(i) The problem is identified and a set of questions are built relating to the problem so that the
answers to these questions would generate solutions to the problem. These questions are
consolidated in the form of a questionnaire.
(ii) Experts in the problem area are identified and contacted. The questionnaire is sent to each
member who anonymously and independently answers the questions and sends it back to the
central coordinator.

(iii) The results of this questionnaire are compiled and analyzed and on the basis of the responses
received, a second questionnaire is developed, which is mailed back to participating members.

(iv) The members are asked again to comment, suggest and answer the questions, possibly
generating new ideas and solutions.

(v) The responses to this second questionnaire are complied and analyzed and if a consensus has
not been reached, then a third questionnaire is developed, pinpointing the issue and unresolved
areas of concern.

(vi) The above process is repeated until a consensus is obtained. Then the final report is
prepared.

PLANNING SCENARIOS
Scenario planning, also called scenario thinking or scenario analysis, is a strategic
planning method that some organizations use to make flexible long-term plans. Scenario
planning (sometimes called “scenario and contingency planning”) is a structured way for
organisations to think about the future. A group of executives sets out to develop a small number
of scenarios. Scenario planning draws on a wide range of disciplines and interests, including
economics, psychology, politics and demographics.

Scenario planning is making assumptions on what the future is going to be and how your
business environment will change overtime in light of that future. More precisely, Scenario
planning is identifying a specific set of uncertainties, different “realities” of what might happen
in the future of your business. It sounds simple, and possibly not worth the trouble or specific
effort, however, building this set of assumptions is probably the best thing you can ever do to
help guide your organization in the long term.

For example, Farmers use scenarios to predict whether the harvest will be good or bad,
depending on the weather. It helps them forecast their sales but also their future investments.  
Military institutions use scenario planning in their operations to cope with any unlikely
situations, anticipating the consequences of every event. In this case, scenario planning can mean
the difference between life and death.  Scenario planning might not have such dire consequences
in your organization, but if not done, you risk opening the door to increased costs, increased
risks, and missed opportunities.

Scenario planning offers the following benefits:

 Provides an analytical framework and process for understanding complex issues and
responding to change
 Facilitates consensus building by giving communities the capacity to participate actively
in planning
 Includes tools and techniques to assess the impact of transportation and other public
policy choices on a community
 Allows the opportunity to recognize the impact of tradeoffs among competing goals
 Yields an enhanced decision making framework
 Helps ensure improved management of increasingly limited resources

STEPS IN SCENARIO PLANNING

Scenario Planning is essentially a process of establishing the possible consequences of a decision
to be taken by the organisation by evaluating the various possible scenarios and factors affecting
the decision. It is essentially a strategic planning process that enables businesses to develop long
term flexible plans.

a) Research the driving forces.

 Define the major sources of change that affect the future, whether those forces are predictable or
not. Some of the relatively predictable elements are local demographics, trends in local land use,
levels of congestion, and mode split. Less predictable are macro elements such as the global
economy, future availability of funding for infrastructure, global environmental conditions, and
technological innovation. Many other driving forces are uncertain, but narrowing them down will
help advance a scenario planning process.
 b) Determine patterns of interaction. 

Consider how the driving forces could combine to determine future conditions. To determine
these patterns of interaction between driving forces, planners can develop a matrix that identifies
the driving forces as a pair of opposites with a potential positive or negative outcome. For
example, if the economy is a driving force, it can be labeled as having either no growth or fast
growth. By determining the interaction of each driving force, scenarios can be created.

c) Create scenarios

When generating scenarios, planners should think through the implications of different strategies
in different future environments. The goal is to bring life to the scenarios so that community
stakeholders can easily recognize and connect the various components. Planners creating stories
based on the interaction of driving forces and how those drivers affect local factors might
develop scenarios that challenge existing thought patterns.

d) Analyze the implications

Ultimately, scenario planning is a technique for improving decision making, not only about
transportation but also about land use, public investment, and environmental policies. The
scenarios enable planners to explore the shape and nature of transportation in a variety of
circumstances, using a range of tools. They can present scenarios visually by employing various
software tools, such as geographic information systems. The use of visual information to show
the interactions in each scenario can help the public and decision makers understand the
consequences of potential actions and the potential impacts of various scenarios.

e) Evaluate scenarios

Planners can measure the scenarios against one another by comparing indicators relating to land
use, transportation, demographics, environment, economics, technology, and other driving
forces. During large regional public meetings, graphic simulations of alternative scenarios can
stimulate understanding and decision making among stakeholders. Through this process, the
community can formulate reasoned responses and enhance its ability to respond to change.

f) Monitor indicators

Scenario planning is an ongoing process. As the future unfolds, planners need to assess and
compare real growth patterns to the selected scenarios and devise new scenarios, make new
decisions, or create policies to address changing conditions.

ANALYTICAL TOOLS
 BCG Matrix
 PESTLE Analysis
 SWOT Analysis
 Balanced scorecard
 VRIO Analysis
 Porter’s five force model
a) BCG Matrix
The Boston Consulting Group Matrix is developed by Bruce Henderson of the Boston
Consulting Group in the early 1970’s. The Boston Consulting group’s product portfolio
matrix (BCG) is designed to help with long-term strategic planning, to help a business
consider growth opportunities by reviewing its portfolio of products to decide where to
invest, to discontinue or develop products. It's also known as the Growth/Share Matrix. The
Matrix is divided into 4 quadrants derived on market growth and relative market share, as
shown in the diagram below.

 Stars- Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge
investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this
cell are attractive as they are located in a robust industry and these business units are
highly competitive in the industry. If successful, a star will become a cash cow when the
industry matures.
 Cash Cows- Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and generate cash that
can be utilized for investment in other business units. These SBU’s are the corporation’s
key source of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When cash cows loose
their appeal and move towards deterioration, then a retrenchment policy may be pursued.
 Question Marks- Question marks represent business units having low relative market
share and located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the venture can be
viable. Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If the firm
thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the
company tries to enter a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge investment is made, then
they have potential of becoming stars.
 Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share,
these business units face cost disadvantages. Generally retrenchment strategies are
adopted because these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim,
it should be liquidated if there is fewer prospects for it to gain market share. Number of
dogs should be avoided and minimized in an organization.

b) PESTLE Analysis

PESTEL analysis is one important tool that executives can rely on to organize factors within
the general environment and to identify how these factors influence industries and the firms
within them.
 Political:
The political segment centers on the role of governments in shaping business. This
segment includes elements such as tax policies, changes in trade restrictions and
tariffs and the stability of governments.
 Economic:
The economic segment conditions within which organizations operate. It includes
elements such as interest rates, inflation rates, GDP, unemployment rates, levels of
disposable income and the general growth or decline of the economy.
  Social:
Social factors include trends in demographics such as population size, age, and ethnic
mix as well as cultural trends such as attitudes towards obesity and consumer
activism.
 Technological:
The technological segment centers on improvements in products & services that are
provided by science. Relevant factors include for eg, changes in the rate of new
product development, increases in automation and advancements in service industry
delivery.
 Legal:
Legal factors are sometimes considered similar to political factors. But it affects how
companies operate costs, facilitate business, and handle product demands. For
example, some firms require several patents to ensure competition don’t copy their
products. But this section also includes consumer laws, health and safety laws, and
more.
 Environmental:
These factors include all those that influence or are determined by the surrounding
environment. This aspect of the PESTLE is crucial for certain industries particularly
for example tourism, farming, agriculture etc. Factors of a business environmental
analysis include but are not limited to climate, weather, geographical location, global
changes in climate, environmental offsets etc.
c) SWOT Analysis

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses,
opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and
threats are external factors. A strength is a positive internal factor. A weakness is a negative
internal factor. An opportunity is a positive external factor. A threat is a negative external factor.
We should aim to turn our weaknesses into strengths, and our threats into opportunities. Then
finally, SWOT will give managers options to match internal strengths with external
opportunities. The outcome should be an increase in ‘value’ for customers – which hopefully
will improve our competitive advantage. The four factors in SWOT analysis are:

 Strengths - Strengths are the qualities that enable us to accomplish the organization’s
mission. These are the basis on which continued success can be made and
continued/sustained.

Strengths can be either tangible or intangible. These are what you are well-versed in or
what you have expertise in, the traits and qualities your employees possess (individually
and as a team) and the distinct features that give your organization its consistency.

Strengths are the beneficial aspects of the organization or the capabilities of an

organization, which includes human competencies, process capabilities, financial
resources, products and services, customer goodwill and brand loyalty. Examples of
organizational strengths are huge financial resources, broad product line, no debt,
committed employees, etc.

 Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential. These weaknesses deteriorate influences on the
organizational success and growth. Weaknesses are the factors which do not meet the
standards we feel they should meet.

Weaknesses in an organization may be depreciating machinery, insufficient research and

development facilities, narrow product range, poor decision-making, etc. Weaknesses are
controllable. They must be minimized and eliminated. For instance - to overcome
obsolete machinery, new machinery can be purchased. Other examples of organizational
weaknesses are huge debts, high employee turnover, complex decision making process,
narrow product range, large wastage of raw materials, etc.

 Opportunities - Opportunities are presented by the environment within which our

organization operates. These arise when an organization can take benefit of conditions in
its environment to plan and execute strategies that enable it to become more profitable.
Organizations can gain competitive advantage by making use of opportunities.
 Organization should be careful and recognize the opportunities and grasp them whenever
they arise. Selecting the targets that will best serve the clients while getting desired
results is a difficult task. Opportunities may arise from market, competition,
industry/government and technology. Increasing demand for telecommunications
accompanied by deregulation is a great opportunity for new firms to enter telecom sector
and compete with existing firms for revenue.

 Threats - Threats arise when conditions in external environment jeopardize the reliability
and profitability of the organization’s business. They compound the vulnerability when
they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the
stability and survival can be at stake. Examples of threats are - unrest among employees;
ever changing technology; increasing competition leading to excess capacity, price wars
and reducing industry profits; etc.

Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it
involves a great subjective element. It is best when used as a guide, and not as a prescription.
Successful businesses build on their strengths, correct their weakness and protect against internal
weaknesses and external threats. They also keep a watch on their overall business environment
and recognize and exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future
plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firm’s resources and
capabilities with the competitive environment in which the firm operates.

SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view
circumstances as very simple because of which the organizations might overlook certain key
strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses,
opportunities and threats might be very subjective as there is great degree of uncertainty in
market. SWOT Analysis does stress upon the significance of these four aspects, but it does not
tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management. These
include-

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to
import restrictions; etc.
Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc

IV. BALANCED SCORECARD

The balanced scorecard was first introduced by accounting academic Dr. Robert Kaplan and
business executive and theorist Dr. David Norton. It was first published in 1992 in a Harvard
Business Review article. A balanced scorecard is a performance metric used in strategic
management to identify and improve various internal functions of a business and their resulting
external outcomes. It is used to measure and provide feedback to organizations. Data collection
is crucial to providing quantitative results, as the information gathered is interpreted by managers
and executives, and used to make better decisions for the organization.

Purpose Behind the Balanced Scorecard

The balanced scorecard is used to reinforce good behaviors in an organization by isolating four
separate areas that need to be analyzed. These four areas, also called legs, involve learning and
growth, business processes, customers, and finance. The balanced scorecard is used to attain
objectives, measurements, initiatives and goals that result from these four primary functions of a
business. Companies can easily identify factors hindering company performance and outline
strategic changes tracked by future scorecards. With the balanced scorecard, they look at the
company as a whole when viewing company objectives. An organization may use the balanced
scorecard to implement strategy mapping to see where value is added within an organization. A
company also utilizes the balanced scorecard to develop strategic initiatives and strategy
objectives.

The Four Legs of the Balanced Scorecard

Information is collected and analyzed from four aspects of a business.

 Learning and growth: are analyzed through the investigation of training and knowledge
resources. This first leg handles how well information is captured and how effectively
employees utilize the information to convert it to a competitive advantage over the
industry.

 Business processes: are evaluated by investigating how well products are manufactured.
Operational management is analyzed to track any gaps, delays, bottlenecks, shortages or
waste.

 Customer perspectives: are collected to gauge customer satisfaction with quality, price
and availability of products or services. Customers provide feedback regarding if their
needs are being met with current products.

 Financial data: such as sales, expenditures and income are used to understand financial
performance. These financial metrics may include dollar amounts, financial ratios, budget
variances or income targets.
These four legs encompass the vision and strategy of an organization and require active
management to analyze the data collected. Therefore, the balanced scorecard is often referred to
as a management tool, not a measurement tool.

Balance scorecard implementation

Implementing the Balanced Scorecard system company-wide should be the key to the successful
realisation of the strategic plan/vision.

A Balanced Scorecard should result in:

 Improved processes
 Motivated/educated employees
 Enhanced information systems
 Monitored progress
 Greater customer satisfaction
 Increased financial usage

STRUCTURE OF BALANCE SCORECARD

There are many software packages on the market that claim to support the usage of Balanced
Scorecard system. For any software to work effectively it should be:

 Compliant with your current technology platform

 Always accessible to everyone – everywhere
 Easy to understand/update/communicate

V. VRIO
The tool was originally developed by Barney, J. B. (1991) in his work ‘Firm Resources and
Sustained Competitive Advantage’, where the author identified four attributes that firm’s
resources must possess in order to become a source of sustained competitive
advantage. According to him, the resources must be valuable, rare, imperfectly imitable and non-
substitutable. His original framework was called VRIN. In 1995, in his later work ‘Looking
Inside for Competitive Advantage’ Barney has introduced VRIO framework, which was the
improvement of VRIN model.
It is the tool used to analyze firm’s internal resources and capabilities to find out if they can be a
source of sustained competitive advantage. In order to understand the sources of competitive
advantage firms are using many tools to analyze their external (Porter’s 5 Forces, PEST analysis)
and internal (Value Chain analysis, BCG Matrix) environments. One of such tools that analyze
firm’s internal resources is VRIO analysis. The tool was originally developed by Barney, J. B.
(1991) in his work ‘Firm Resources and Sustained Competitive Advantage’, where the author
identified four attributes that firm’s resources must possess in order to become a source of
sustained competitive advantage. According to him, the resources must be valuable, rare,
imperfectly imitable and non-substitutable.

Valuable
A resource adds value by enabling a firm to exploit opportunities or defend against threats, then
a resource is considered valuable. Resources are also valuable if they help organizations to
increase the perceived customer value. This is done by increasing differentiation and decreasing
the price of the product. The resources that cannot meet this condition, lead to competitive
disadvantage. It is important to continually review the value of the resources because constantly
changing internal or external conditions can make them less valuable or useless at all.
Rareness
Resources that can only be acquired by one or very few companies are considered rare. Rare and
valuable resources grant temporary competitive advantage. On the other hand, the situation when
more than few companies have the same resource or uses the capability in the similar way, leads
to competitive parity. This is because firms can use identical resources to implement the same
strategies and no organization can achieve superior performance.
Imitability
A resource is costly to imitate if other organizations that does not imitate, buy or substitute it at a
reasonable price. Imitation can occur in two ways: by directly imitating (duplicating) the
resource or providing the comparable product/service (substituting). A firm that has valuable,
rare and costly to imitate resources can (but not necessarily will) achieve sustained competitive
advantage
Organization
The resources itself do not confer any advantage for a company if it’s not organized to capture
the value from them. A firm must organize its management systems, processes, policies,
organizational structure and culture to be able to fully realize the potential of its valuable, rare
and costly to imitate resources and capabilities. Only then the companies can achieve sustained
competitive advantage.

VI. PORTERS MODEL

Michael Porter (Harvard Business School Management Researcher) designed various vital
frameworks for developing an organization’s strategy. One of the most renowned among
managers making strategic decisions is the five competitive forces model that determines
industry structure. According to Porter, the nature of competition in any industry is personified in
the following five forces:

i. Threat of new potential entrants

ii. Threat of substitute product/services
iii. Bargaining power of suppliers
iv. Bargaining power of buyers
v. Rivalry among current competitors
The five forces mentioned above are very significant from point of view of strategy formulation.
The potential of these forces differs from industry to industry. These forces jointly determine the
profitability of industry because they shape the prices which can be charged, the costs which can
be borne, and the investment required to compete in the industry. Before making strategic
decisions, the managers should use the five forces framework to determine the competitive
structure of industry.

The power of Porter’s five forces varies from industry to industry. Whatever be the industry,
these five forces influence the profitability as they affect the prices, the costs, and the capital
investment essential for survival and competition in industry. This five forces model also help in
making strategic decisions as it is used by the managers to determine industry’s competitive
structure.

Porter ignored, however, a sixth significant factor- complementaries. This term refers to the
reliance that develops between the companies whose products work is in combination with each
other. Strong complementors might have a strong positive effect on the industry. Also, the five
forces model overlooks the role of innovation as well as the significance of individual firm
differences. It presents a stagnant view of competition.

Understanding the Tool

Five Forces Analysis assumes that there are five important forces that determine competitive

 Risk of entry by potential competitors: Potential competitors refer to the firms which

are not currently competing in the industry but have the potential to do so if given a
choice. Entry of new players increases the industry capacity, begins a competition for
market share and lowers the current costs. The threat of entry by potential competitors is
partially a function of extent of barriers to entry. The various barriers to entry are-

 Economies of scale
 Brand loyalty
 Government Regulation
 Customer Switching Costs
  Absolute Cost Advantage
 Ease in distribution
 Strong Capital base
 Rivalry among current competitors: Rivalry refers to the competitive struggle for
market share between firms in an industry. Extreme rivalry among established firms
poses a strong threat to profitability. The strength of rivalry among established firms
within an industry is a function of following factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
 Growth Rate of industry
 Demand conditions
 Bargaining Power of Buyers: Buyers refer to the customers who finally consume the
product or the firms who distribute the industry’s product to the final consumers.
Bargaining power of buyers refer to the potential of buyers to bargain down the prices
charged by the firms in the industry or to increase the firms cost in the industry by
demanding better quality and service of product. Strong buyers can extract profits out of
an industry by lowering the prices and increasing the costs. They purchase in large
quantities. They have full information about the product and the market. They emphasize
upon quality products. They pose credible threat of backward integration. In this way,
they are regarded as a threat.
 Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the
industry. Bargaining power of the suppliers refer to the potential of the suppliers to
increase the prices of inputs( labour, raw materials, services, etc) or the costs of industry
in other ways. Strong suppliers can extract profits out of an industry by increasing costs
of firms in the industry. Suppliers products have a few substitutes. Strong suppliers’
products are unique. They have high switching cost. Their product is an important input
 to buyer’s product. They pose credible threat of forward integration. Buyers are not
significant to strong suppliers. In this way, they are regarded as a threat.
 Threat of Substitute products: Substitute products refer to the products having ability
of satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the
potential returns of an industry by putting a setting a limit on the price that firms can
charge for their product in an industry. Lesser the number of close substitutes a product
has, greater is the opportunity for the firms in industry to raise their product prices and
earn greater profits (other things being equal).

This model helps marketers and business managers to look at the ‘balance of power’ in a market
between different types of organisations, and to analyse the attractiveness and potential
profitability of an industry sector. It’s a strategic tool designed to give a global overview, rather
than a detailed business analysis technique. It helps review the strengths of a market position,
based on five key forces.

VALUE CHAIN

Value is the total amount that the buyers are willing to pay for the firms product. The difference
between total value & the total cost of the performance of the firms activities provides the
margin. Value chain means a set of activities in which firm operates for a specific industry for
deliver valuable produt & services for the market. This concept was introduced by Michael
Porter in 1985.

According to Porter value chain is divided into 2 categories:

 Primary activities: It includes operations, out bound logistics, marketing & sales.
 Secondary activities: includes procurement, HRM, technology development &
infrastructure.
 Primary activities:
 Operations: it means transformation of inputs into final product form. Eg: Production,
assembly, packaging.
  Outbound logistics: includes collecting, storing & distributing of products to the
buyers. Eg: warehousing of finished goods.
 Marketing & sales: identification of customer needs & generation of sales. Eg:
advertisement, distribution & promotion.
 Secondary activities:
 HRM: includes recruitment, T &D, compensation.
 Technology development: these activities intended to improve the product & process
can occur in many parts of the firm.
 Procurement: it involves purchasing of inputs such as raw materials, equipments &
even labour.
 Infrastructure: these activities such as organisation structure, control system &
company culture are categorized under firms infrastructure.
In a business unit the product will be pass through an order & in each activity product gains
value. Focusing on the value-creating activities could give the company many advantages. For
example, the ability to charge higher prices; lower cost of manufacture; better brand image,
faster response to threats or opportunities.

USES OF VALUE CHAIN

 Value chain is a tool for systematically examining the activities of a firm & how they are
interact with one another & affect each others cost & performance.
 The firms gain competitive advantage by performing these activities better or a lower cost
than competitor.
 Present opportunity for integration
 Helps to stay out of “ No Profit Zone”

PORTFOLIO MODELS

The two composite values for industry attractiveness and competitive position are plotted for
each strategic business unit (SBU) in a COMPANY’S PORTFOLIO.

BCG Matrix
The Boston Consulting Group Matrix is developed by Bruce Henderson of the Boston
Consulting Group in the early 1970’s. The Boston Consulting group’s product portfolio
matrix (BCG) is designed to help with long-term strategic planning, to help a business
consider growth opportunities by reviewing its portfolio of products to decide where to
invest, to discontinue or develop products. It's also known as the Growth/Share Matrix. The
Matrix is divided into 4 quadrants derived on market growth and relative market share, as
shown in the diagram below.

 Stars- Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge
investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this
cell are attractive as they are located in a robust industry and these business units are
highly competitive in the industry. If successful, a star will become a cash cow when the
industry matures.
 Cash Cows- Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and generate cash that
can be utilized for investment in other business units. These SBU’s are the corporation’s
key source of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When cash cows loose
their appeal and move towards deterioration, then a retrenchment policy may be pursued.
 Question Marks- Question marks represent business units having low relative market
share and located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the venture can be
 viable. Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If the firm
thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the
company tries to enter a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge investment is made, then
they have potential of becoming stars.
 Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share,
these business units face cost disadvantages. Generally retrenchment strategies are
adopted because these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim,
it should be liquidated if there is fewer prospects for it to gain market share. Number of
dogs should be avoided and minimized in an organization.

GE McKinsey Matrix

It is a strategy tool that offers a systematic approach for the multi business corporation to
prioritize its investments among its business units. It is a framework that evaluates business
portfolio, provides further strategic implications and helps to prioritize the investment needed for
each business unit (BU). The Matrix was pioneered by General Electric Co., with the aid of
Boston Consulting Group and McKinsey & Co. This matrix was developed in 1970s by the
General Electric Company with the assistance of the consulting firm, McKinsey & Co, USA.
This is also called GE multifactor portfolio matrix.
The GE matrix has been developed to overcome the obvious limitations of BCG matrix. This
matrix consists of nine cells (3X3) based on two key variables:

i) Business strength
ii) Industry attractiveness
The horizontal axis represents business strength and the vertical axis represent industry
attractiveness.
The business strength is measured by considering such factors as:

 Relative market share

 Profit margins
 Ability to compete on price and quality
 Knowledge of customer and market
 Competitive strengths and weaknesses
 Technological capacity
 Caliber of management
Industry attractiveness is measured considering such factors as :

 Market size and growth rate

 Industry profit margin
 Competitive intensity
 Economies of scale
 Technology
 Social, environmental, legal and human aspects
The nine cells of the GE matrix represent various degrees of industry attractiveness (high,
medium or low) and business strength (strong, average and weak). After plotting each product
line or business unit on the nine cell matrix, strategic choices are made depending on their
position in the matrix. GE matrix is also called “Stoplight” strategy matrix because the three
zones are like green, yellow and red of traffic lights.

1) Green indicates invest/expand – if the product falls in green zone, the business strength is
strong and industry is at least medium in attractiveness, the strategic decision should be
to expand, to invest and to grow.
2) Yellow indicates select/earn – if the product falls in yellow zone, the business strength is
low but industry attractiveness is high, it needs caution and managerial discretion for
making the strategic choice
3) Red indicates harvest/divest – if the product falls in the red zone, the business strength is
average or weak and attractiveness is also low or medium, the appropriate strategy should
be divestment.
Advantages –
 1) It used 9 cells instead of 4 cells of BCG
2) It considers many variables and does not lead to simplistic conclusions
3) High/medium/low and strong/average/low classification enables a finer distinction among
business portfolio
4) It uses multiple factors to assess industry attractiveness and business strength, which
allow users to select criteria appropriate to their situation
Limitations –

1) It can get quite complicated and cumbersome with the increase in businesses
2) Though industry attractiveness and business strength appear to be objective, they are in
reality subjective judgements that may vary from one person to another
3) It cannot effectively depict the position of new business units in developing industry
4) It only provides broad strategic prescriptions rather than specifics of business policy

BENCHMARKING

MEANING

Benchmarking is a systematic process for identifying and implementing best or better practices.

Benchmarking uses best practices as the standard for evaluating activity performance. Within an
organisation, different units (for example, different plant sites) that perform the same activities
are compared. The unit with the best performance for a given activity sets the standard. Other
units then have a target to meet or exceed. Further, the best practices unit can share information
with other units on how it has achieved its superior results. Although bench marking can focus
on anything of interest, it typically deals with target costs for a product, service or operation,
customer satisfaction, quality, inventory levels, inventory turnover, cycle time and productivity.
In the beginning, bench marking was used on studying competitors. However, now-a-days bench
marking is widely used for all activities arid services

DEFINITION

Benchmarking is the continuous process of measuring one’s own product, services and activities
against the best level of performance. These best levels of performance may be found either
inside one’s own organisation or in other competing organisations or in organisations having
similar processes.

TYPES OF BENCHMARKING

The different types of benchmarking are:

(i) Product Benchmarking (Reverse Engineering):
It is an age old practice of product oriented reverse engineering. Every organization buys its
rival’s products and tears down to find out how the features and performances etc., compare with
its products. This could be the starting point for improvement.

(ii) Competitive Benchmarking:

Corporate benchmarking has moved beyond product-oriented comparisons to include
comparisons of process with those of competitors. In this type, the process studies may include
marketing, finance, HR, R&D etc.,

(iii) Process Benchmarking:

This is the activity of measuring discrete performance and functionality against organization
through performance in excellent analogous business processes.
(iv) Internal Benchmarking:
It is an application of process benchmarking, within an organization by comparing the
performance of similar business units or business processes.

(v) Strategic Benchmarking:

It differs from operational benchmarking in its scope. It helps to develop a vision of the changed
organizations. It will develop core competencies that will help sustained competitive advantage.

(vi) Global Benchmarking:

It is extension of Strategic Benchmarking to include benchmarking partners on a global scale,
e.g., Ford Co. of USA benchmarked its Accounts Payable functions with that of Mazda in Japan
and found to its surprise that the entire function was managed by 5 persons as against 500 in
Ford.

ELEMENTS OF BENCHMARKING
Benchmarking, to be effective and to lead to successful performance has to reflect the following
elements:
 Overall Impact on Customer Satisfaction:
Benchmarking is about external focus and it is essential that all exercises seek to enhance the
delivery of quality levels to the end customer.

 The Extent of Contribution to Raising Competitive Standards:

Benchmarking is a strategic competitive tool and as such it seeks to achieve standards of
performance in the market place and to raise the internal standards of effectiveness, making them
more competitive.

 Opportunity to Create the Learning Organisation:

Benchmarking makes organisations seek to establish standards way beyond meeting basic
requirements and to work towards a continuous surge for new ideas, new methods and new ways
of working.
 Inspirations from Best-in-Class Companies:
Benchmarking gives organizations the impetus and the desire to follow those organisations
which are top of the league and which pioneer new change and new innovations.

 Strengthening Weaker Processes:

Benchmarking helps organisations focus on weaknesses and strengthen them. It also enables
them to protect areas of strength and ensure that they sustain high levels of competitiveness.

 Enhancing Knowledge Pool:

Benchmarking is a practice which encourages individuals to learn continuously and to ensure
that their knowledge, skills and areas of expertise are never obsolete.

 Bringing in State-of-the-Art Practices:

Benchmarking, if introduced in a direct fashion, will always ensure that organisations are not
lagging behind and they are always pioneering the latest practices that the market demands.

 Keeping the Organisation Externally Focused:

Benchmarking reminds people to focus continuously and constantly on the end customer and on
market demands, and as such, it changes the culture from internal focus to an external one.

 Extending Employees’ Creative Contributions:

Benchmarking encourages people to work smarter rather than harder, through constantly asking
questions related to the practices, their jobs and tasks and to ask why the outputs are lower or
higher than those of competitors and other organisations.

STEPS IN BENCHMARKING

In any benchmarking process, it is essential to follow a systematic and structured approach. Four
phases are involved in a normal benchmarking process:

 Planning
 Analysis
 Integration
 Action
And in the four phases are 10 practical steps.

 Planning Phase

Being the initial phase, this is a most important phase. Any mistakes, errors or incompleteness in
this phase generally affects the rest of the phases. Sufficient time and attention has to be devoted
during the phase to ensure that planning becomes as error-free as possible, and hence makes the
rest of the phases more effective and efficient.

Step 1: Identify Opportunities and Prioritize (What to Benchmark):

The involvement of top management in this particular step is crucial. Top management must
decide which processes are critical to the success of the company. This should be the top down
approach of selecting the projects from the processes. Once a shortlist of processes to be
benchmarked is ready, the processes need to be prioritized as per a predetermined set of criteria
to fulfill the requirements of all customers, especially the end customer.
Step 2: Deciding the Benchmarking Organization (Whom to Benchmark):

The next step in the process is to decide the organization whose processes will serve as the
benchmark. Several organizations should be selected for study. Information on their processes
should be gathered from various sources and the most suitable organization selected. It is always
important to ensure that more detailed information about the selected organization will be
accessible and that comparison with the organization’s process will be relevant and useful.

Step 3: Studying the Superior Process:

This step is perhaps the most important, most difficult and most time consuming activity in the
total process of information collection. Many times the information on processes and procedures
followed at another company are confidential, and it is not always easy to gather authentic
information, even after making a planned and approved visit at another organization. The
preparation for collecting necessary information has to be planned in such a way that either one
visit or a proper authentic data collection source can provide all the details, within a reasonable
time period.
The following questions can be asked to review the planning phase of a benchmarking effort:
  What are the key business processes?
 Where exactly are the greatest improvement potentials?
 What are the functions where improvements are most essential?
 Has a level of benchmarking been decided? Etc…

 Analysis Phase

This phase, comprised of two steps, involves the analysis of all the information and data
collected in the Planning phase. All the people closest to the process selected for benchmarking
should be deeply involved in this phase.

Step 4: Finding Reasons and Devising Improved Processes:

The project team should find out the reasons for better results from the benchmarked processes.
This has to be done after the information from the best-in-class organization has been collected
and analyzed. Based on the analysis, an improved process should be developed.
Step 5: Goal Setting for Improved Processes:

The project team’s next step is to set goals for the improvement of the company’s existing
process. These goals probably should, be stretch goals that will result in a process even better
than the other organization’s best-in-class process.
The review points for this phase are:

 Do the project team’s members have both analytical skills and creativity and innovation?
 Have the reasons for better performance been brainstormed?
 Have the process definition documents for both companies been compared? Etc….

 Integration Phase

This phase also comprises two steps. This phase is a connector between the earlier two stages,
planning and analysis, and the final phase, action. This phase moves forward only if the results
of earlier phases have been accepted by management. This phase also secures the commitment of
the management on the recommended action plan.

Step 6: Communicate Findings and Gain Acceptance:

 The proposals for the improved processes should be presented to senior management and the
head of the departments to gain approval of the proposed changes. Unless total approval and
commitment is secured, there will be hindrance in the implementation of the actions plans.

Step 7: Establish New Functional Goals 

When the proposed revisions to the processes are accepted, the acceptance of the revised
functional goals is the next big logical step.
The questions to be asked in this phase are:

 Has it been decided to whom findings are to be communicated?

 Have finding been communicated to senior management so that its approval can be
obtained for the implementation of the recommendations?
 Have all suppliers of the inputs to the process been informed? Etc…..
 Action Phase

The last phase in the process has three steps. This phase is where the improvement parts have
been taken into consideration. Ultimate benefit to a company from benchmarking is judged by
how well this particular phase has been carried out.

Step 8: Develop Action Plan for Implementation:

After the improved process is accepted by all concerned or likely to be affected by it, a detailed
action plan is drawn with all key activities taken as inputs. The detailed action plan should carry
the important things like a time line, individuals responsible for carrying out the tasks, any short-
fall in the completion of tasks and what stretch targets are taken to compensate the short-falls.
Those responsible should be committed enough to ensure that the tasks and assignments are
completed on time.

Step 9: Implement Specific Actions and Monitor Progress

While those who must complete assignments on schedule have a responsibility, so does senior
management. They must be committed enough to ensure proper coordination of various
activities, monitor the progress of implementation of the plan and work as a barrier-remover in
the implementation process. When the revised process is in place, a complete report has to be
prepared, showing the benefits of the revised process compared with the expectations at the time
of approval of the proposed revision of the process.

Step 10: Keep the Process Continuous

The successful completion of one project can lead to an important milestone for the organization.
The next step would be bringing in additional and more ambitious projects and benchmarking
with the best approach. While carrying out the total activities, a mechanism or a system has to be
built in to review the performance of the improved process periodically to ensure that the
benefits are retained. The process has to be a continuous one and should move at a constant
speed and should never be neglected.
The review points for this phase are:

 Has the team developed an action plan to implement the changes proposed?
 Has the team written down the changes required for implementing the new process and
work practices?
 Have the tasks and assignments been made to the right people in the organization?
Etc…..
ADVANTAGES OF BENCHMARKING

There are several advantages of benchmarking. Most of the common benefits of the
benchmarking help to improve the productivity of the company.
 Implements creative ideas: One of the common type of benchmarking where in which
all the beneficial aspects of the company are creatively implemented for the overall
development of the company. The benchmarking process helps the company find out
their key features and after finding out the key features of their company, that company
compares it with another company to complete the picture. And if there are any filling to
be needed, then the company starts implementing creative ideas for the company.
 Increased competitions: Most of the time while doing business and while running a
successful company, that company faces some strong competition from the rest of the
companies. And that competition helps the current company to maintain their position
even better in terms of their success rate of the company. Therefore, as per the statement
of benchmarking process it definitely increases healthy competition among different
companies.
 Developing improvement: It is clear about benchmarking that it deals with those
findings of the company and another company which helps them find their position in the
business market. And if there are any chances or space available for improvement in the
company activities, then the company needs to develop those improvements in the
company for the growth of the company in its own terms.
 Identifies essential activities: One of the best possible advantage of the benchmarking is
that it can help all the companies to identify their own essential activities that can
improve the profits of the company. Therefore, after benchmarking it is very much
important for all the companies to be identified in the list of companies, which is in a run
and where it can deliver the victory of their company effectively.
 Quality of work: Because of benchmarking once the company identifies their strengths
and weakness compared with the rest of the company, then it is quite clear that all the
aspects of the company need to be improved at a time to time basis. And finally the
company can deliver some sort of ways which can deliver quality in their working order.
Therefore, benchmarking makes things clear and creates some sort of awareness among
the company working environment.
  Increased performance: As it is explained earlier that the benchmarking process,
identifies all the features and elements of the company which can lead them towards its
success. And eventually, it also provides essential signals regarding the need and wants
of the company. Once the company finds out about the actual requirements of the
company, then it can increase its work performance as per the comparison aspects.

DISADVANTAGES OF BENCHMARKING

As the company can receive some sort of benefits from these benchmarking processes, then it is
quite obvious that the company can be covered with some of the disadvantages as well. And
those disadvantages are as follows.

 Stabilized standards: Most of the company compares their working environment with

another company which is earning quite well in the similar field of work. After finding
out the reason for the improved success rates, the company can incorporate those ideas of
that company to improve their productivity. And eventually they stabilize their standard
to that one aspect, without its course of action.
 Insufficient information: Sometimes it happens that while comparing the aspects of
different companies, the information acquiring company can be left behind with their
information gathering techniques. And that is why it can face tremendous loss in their
business because of insufficient information about the company. Therefore, it is very
essential for all the companies that they need to be sure of their information about that
another company.
 Decreased results: Most of the time when a company sets its standard and try to improve
that standard by implementing some new and creative ideas, then at that time the
company need to look at those companies which are doing quite good in their similar
type of business. And analyze the actual problem in their company. Once the company
finds out the actual reason, then they need to research well about the element that whether
it is feasible for the company or not.
 Lack of customer satisfaction: Most probably during the benchmarking process the
company finds out those outputs which can need to be improved and developed for the
 sake of the overall growth of the company. Hence, for that the company needs to look
into the matters which can increase their productivity along with their customer
satisfaction. Therefore, instead of incorporating the ideas that another company used in
their company, it can check for its feasibility in their own company.
 Lack of understanding: As most of the companies keep an eye on their competition
instead of their own growth, it is quite clear for all the company that such type of
obsession with another company can not lead the company anywhere. Therefore, it is
advisable for all the companies that they need to understand the need for benchmarking in
their company instead of spying on another company.
 Increased dependency: Most of the companies thinks that benchmarking helps them
improve their company position as it helped those successful companies to be in the top.
But most of the companies forgets that those companies which made themselves to that
top position have earned their hard work. Therefore, instead of depending on the ideas
which made that company successful, they can build their own network to make them
independent for the better future.

PIMS ( Profit Impact of Marketing Strategy ) MODEL

Profit Impact of Marketing Strategy or PIMS is an ongoing study of strategies that drive
business profitability, cash flows, and revenues and help companies gaining and sustaining
competitive advantage in the industry. It is a comprehensive, long term study of the performance
of SBU in thousands of companies in all major industries.

The PIMS project began at General Electric in the mid 1960’s. it was continued at Harvard
University in the early’s 1970’s, then was taken over by the Strategic Planning Institute (SPI) in
1975. Since then SPI researchers and consultants have continued working on the development
and application of PIMS data.

PIMS seeks to address some of the basic things in a comprehensive way. The things which it
seeks to address are that of the company’s strategy and what is its future operations will likely
be. It addresses how the profit is driven in a company and what is its profit rate. It also suggests
how the companies can improve its strategies in order to stay competitively ahead in the market.
According to the Strategic Planning Institute , the PIMS database is a “collection of statistically
documented experiences drawn from thousands of businesses, designed to help understand what
kinds of strategies work best in what kind of business environments.”

Eg: of database includes quality, pricing, vertical integration, innovation, advertising etc.

PIMS COMPETITIVE STRATEGY PARADIGM

Market structure Strategy & tactics Performance

 Market  Pricing  Profitability

differentiation  R & D spending (ROS,ROI,etc)
 Market growth  New product  Growth
rate introduction  Cash flow
 Entry conditions  Change in  Value enhancement
 Unionization relative quality  Stock (share) price
 Capital intensity and variety of
 Purchase amount products/services
 Marketing
expenses
Competitive position  Distribution
channels
 Relative perceived  Relative vertical
quality integration
 
 Relative market  Workforce
share productivity
 Relative capital
intensity
 Relative cost

MICHAEL PORTER’S FIVE FORCE COMPETITION MODEL

Michael Porter (Harvard Business School Management Researcher) designed various vital
frameworks for developing an organization’s strategy. One of the most renowned among
managers making strategic decisions is the five competitive forces model that determines
industry structure. According to Porter, the nature of competition in any industry is personified in
the following five forces:
 Threat of new potential entrants
  Threat of substitute product/services
 Bargaining power of suppliers
 Bargaining power of buyers
 Rivalry among current competitors

The five forces mentioned above are very significant from point of view of strategy formulation.
The potential of these forces differs from industry to industry. These forces jointly determine the
profitability of industry because they shape the prices which can be charged, the costs which can
be borne, and the investment required to compete in the industry. Before making strategic
decisions, the managers should use the five forces framework to determine the competitive
structure of industry.

 Risk of entry by potential competitors: 

Potential competitors refer to the firms which are not currently competing in the industry
but have the potential to do so if given a choice. Entry of new players increases the
industry capacity, begins a competition for market share and lowers the current costs. The
threat of entry by potential competitors is partially a function of extent of barriers to
entry. The various barriers to entry are-
  Economies of scale
 Brand loyalty
 Government Regulation
 Customer Switching Costs
 Absolute Cost Advantage
 Ease in distribution
 Strong Capital base

 Rivalry among current competitors: 

Rivalry refers to the competitive struggle for market share between firms in an industry.
Extreme rivalry among established firms poses a strong threat to profitability. The
strength of rivalry among established firms within an industry is a function of following
factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
 Growth Rate of industry
 Demand conditions

 Bargaining Power of Buyers: 

Buyers refer to the customers who finally consume the product or the firms who
distribute the industry’s product to the final consumers. Bargaining power of buyers refer
to the potential of buyers to bargain down the prices charged by the firms in the industry
or to increase the firms cost in the industry by demanding better quality and service of
product. Strong buyers can extract profits out of an industry by lowering the prices and
increasing the costs. They purchase in large quantities. They have full information about
the product and the market. They emphasize upon quality products. They pose credible
threat of backward integration. In this way, they are regarded as a threat.
  Bargaining Power of Suppliers: 

Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the
suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw
materials, services, etc) or the costs of industry in other ways. Strong suppliers can
extract profits out of an industry by increasing costs of firms in the industry. Suppliers
products have a few substitutes. Strong suppliers’ products are unique. They have high
switching cost. Their product is an important input to buyer’s product. They pose credible
threat of forward integration. Buyers are not significant to strong suppliers. In this way,
they are regarded as a threat.

 Threat of Substitute products: 

Substitute products refer to the products having ability of satisfying customers needs
effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry
by putting a setting a limit on the price that firms can charge for their product in an
industry. Lesser the number of close substitutes a product has, greater is the opportunity
for the firms in industry to raise their product prices and earn greater profits (other things
being equal).

PORTER’S GENERIC COMPETITIVE STRATEGIES

A firm's relative position within its industry determines whether a firm's profitability is above or
below the industry average. The fundamental basis of above average profitability in the long run
is sustainable competitive advantage. There are two basic types of competitive advantage a firm
can possess: low cost or differentiation. The two basic types of competitive advantage combined
with the scope of activities for which a firm seeks to achieve them, lead to three generic
strategies for achieving above average performance in an industry: cost leadership,
differentiation, and focus. The focus strategy has two variants, cost focus and differentiation
focus.
 
a) Cost Leadership:

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the
pursuit of economies of scale, proprietary technology, preferential access to raw materials and
other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm
can achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average. For eg: Whirlpool has
successfully used a low-cost leadership strategy to build competitive advantage.
b) Differentiation:
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that
are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price. For eg: Mercedes & BMW have successfully pursued
differentiation strategies.
c) Focus:
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others. For eg: Pepsico, by successfully adopting the
focus strategy since 1997, pepsico has emerged as the 2nd largest consumer packaged goods
company.
The focus strategy has two variants.
 In cost focus a firm seeks a cost advantage in its target segment
 Differentiation focus a firm seeks differentiation in its target segment.
Both variants of the focus strategy rest on differences between a focuser's target segment and
other segments in the industry. The target segments must either have buyers with unusual needs
or else the production and delivery system that best serves the target segment must differ from
that of other industry segments. Cost focus exploits differences in cost behaviour in some
segments, while differentiation focus exploits the special needs of buyers in certain segments.
d) Competitive Advantage:
A competitive advantage is one gained over competitors by offering consumers better value. You
increase value by lowering prices or increasing benefits and services to justify the higher price.
Differentiation and cost leadership strategies search for competitive advantage on a broad scale,
while focus strategies work in a narrow market. Sometimes, businesses look for a combination
strategy to please customers looking for multiple factors such as quality, style, convenience and
price.

e) Cost Leadership Strategy

To practice cost leadership, organizations compete for the largest number of customers through
price. Cost leadership works well when the goods or services are standardized. That way, the
company can sell generic acceptable goods at the lowest prices. They can minimize costs to the
company in order to minimize costs to the customer without decreasing profits. A company
either sells its goods at average industry prices to earn higher profits than its competitors or it
sells at below-industry prices, trying to profit by gaining the market share. Wal-Mart is an
example of a company with a cost leadership strategy.

f) Differentiation Strategy
Differentiation strategy calls for a company to provide a product or service with distinctive
qualities valued by customers. You draw customers because you set yourself apart from the
competition. To succeed at this strategy, your business should have access to leading scientific
research (or perform this research); a highly skilled and creative product development team; a
strong sales and marketing team; and a corporate reputation for quality and innovation. Apple,
for example, uses differentiation strategy.
 g) Focus Strategy
Focus strategy is just what it sounds like: concentrate on a particular customer, product line,
geographical area, market niche, etc. The idea is to serve a limited group of customers better than
your competitors who serve a broader range of customers. A focus strategy works well for small
but aggressive businesses. Specifically, companies that do not have the ability or resources to
engage in a nationwide marketing effort will benefit from a focus strategy. Focus can be based
on cost or differentiation strategy. It involves focusing the cost leadership or differentiation on a
small scale. The idea is to make your company stand out within a specific market sector.

h) Integrated Cost Leadership-Differentiation Strategy

Companies that integrate strategies rather than relying on a single generic strategy are able to
adapt quickly and learn new technologies. The products produced under the integrated cost
leadership-differentiation strategy are less distinctive than differentiators and costs are not as low
as the cost-leader, but they combine the advantages of both approaches. A somewhat distinctive
product that is mid-range-priced can be a bigger draw to customers than a cheap generic product
or an expensive special one.

VALUE CREATION

Value creation means performing activities that increase value to customers and also to the
shareholders.

The performance of actions that increase the worth of goods, services or even a business. Many
business operators now focus on value creation both in the context of creating better value for
customers purchasing its products and services, as well as for shareholders in the business who
want to see their stake appreciate in value.

SOURCES OF VALUE CREATION

There are four sources or models which create values:

 Ansoff’s Product Market Matrix

 BCG Matrix Model
  Industry/Product Life Cycle
1. ANSOFF’S PRODUCT MATRIX

The Ansoff Matrix was developed by H. Igor Ansoff and first published in the Harvard Business
Review in 1957. Ansoff’s product/market growth matrix suggests that a business’ attempts to
grow depend on whether it markets new or existing products in new or existing markets. The
output from the Ansoff product/market matrix is a series of suggested growth strategies which
set the direction for the business strategy. These are described below:

 Market penetration

Market penetration is the name given to a growth strategy where the business focuses on selling
existing products into existing markets.

Market penetration seeks to achieve four main objectives:

i. Maintain or increase the market share of current products – this can be achieved by a
combination of competitive pricing strategies, advertising, sales promotion and perhaps
more resources dedicated to personal selling
ii. Secure dominance of growth markets
iii. Restructure a mature market by driving out competitors; this would require a much more
aggressive promotional campaign, supported by a pricing strategy designed to make the
market unattractive for competitors
iv. Increase usage by existing customers – for example by introducing loyalty schemes

A market penetration marketing strategy is very much about “business as usual”. The business is
focusing on markets and products it knows well. It is likely to have good information on
competitors and on customer needs. It is unlikely, therefore, that this strategy will require much
investment in new market research.

 Market development

Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets.
There are many possible ways of approaching this strategy, including:

i. New geographical markets; for example exporting the product to a new country
ii. New product dimensions or packaging: for example
iii. New distribution channels (e.g. moving from selling via retail to selling using e-
commerce and mail order)
iv. Different pricing policies to attract different customers or create new market segments

Market development is a more risky strategy than market penetration because of the targeting of
new markets.

 Product development

Product development is the name given to a growth strategy where a business aims to introduce
new products into existing markets. This strategy may require the development of new
competencies and requires the business to develop modified products which can appeal to
existing markets.

A strategy of product development is particularly suitable for a business where the product needs
to be differentiated in order to remain competitive. A successful product development strategy
places the marketing emphasis on:

i. Research & development and innovation

ii. Detailed insights into customer needs (and how they change)
iii. Being first to market

 Diversification

Diversification is the name given to the growth strategy where a business markets new products
in new markets.

This is an inherently more risk strategy because the business is moving into markets in which it
has little or no experience.
For a business to adopt a diversification strategy, therefore, it must have a clear idea about what
it expects to gain from the strategy and an honest assessment of the risks. However, for the right
balance between risk and reward, a marketing strategy of diversification can be highly
rewarding.
2. BCG Matrix
The Boston Consulting Group Matrix is developed by Bruce Henderson of the Boston
Consulting Group in the early 1970’s. The Boston Consulting group’s product portfolio
matrix (BCG) is designed to help with long-term strategic planning, to help a business
consider growth opportunities by reviewing its portfolio of products to decide where to
invest, to discontinue or develop products. It's also known as the Growth/Share Matrix. The
Matrix is divided into 4 quadrants derived on market growth and relative market share, as
shown in the diagram below.

 Stars- Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge
investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this
cell are attractive as they are located in a robust industry and these business units are
highly competitive in the industry. If successful, a star will become a cash cow when the
industry matures.
 Cash Cows- Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and generate cash that
 can be utilized for investment in other business units. These SBU’s are the corporation’s
key source of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When cash cows loose
their appeal and move towards deterioration, then a retrenchment policy may be pursued.
 Question Marks- Question marks represent business units having low relative market
share and located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the venture can be
viable. Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If the firm
thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the
company tries to enter a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge investment is made, then
they have potential of becoming stars.
 Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share,
these business units face cost disadvantages. Generally retrenchment strategies are
adopted because these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim,
it should be liquidated if there is fewer prospects for it to gain market share. Number of
dogs should be avoided and minimized in an organization.

3. PRODUCT LIFE CYCLE

The product life cycle describes the period of time over which an item is developed,
brought to market and eventually removed from the market. The cycle is broken into four
stages:
 Introduction,
 Growth,
 Maturity
 Decline.
 The idea of the product life cycle is used in marketing to decide when it is appropriate to
advertise, reduce prices, explore new markets or create new packaging.

The product life cycle has 4 very clearly defined stages, each with its own characteristics that
mean different things for business that are trying to manage the life cycle of their particular
products.

Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales are
low, although they will be increasing. On the other hand, the cost of things like research and
development, consumer testing, and the marketing needed to launch the product can be very
high, especially if it’s a competitive sector.

Growth Stage – The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production, the
profit margins, as well as the overall amount of profit, will increase. This makes it possible for
businesses to invest more money in the promotional activity to maximize the potential of this
growth stage.

Maturity Stage – During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the most
competitive time for most products and businesses need to invest wisely in any marketing they
undertake. They also need to consider any product modifications or improvements to the
production process which might give them a competitive advantage.

Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s
known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e.
all the customers who will buy the product have already purchased it), or because the consumers
are switching to a different type of product. While this decline may be inevitable, it may still be
possible for companies to make some profit by switching to less-expensive production methods
and cheaper markets.
4 C’s OF STRATEGY

The 4Cs (Clarity, Credibility, Consistency, Competitiveness) is most often used in marketing
communications and was created by David Jobber and John Fahy in their book ‘Foundations of
Marketing’ (2009). Once a business has segmented its marketing and identified the target
audience, the next stage is to position the business. To successfully achieve this, the 4Cs is a
useful tool to create a positioning statement or to build an online value proposition.
SWOT ANALYSIS

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses,
opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and
threats are external factors. A strength is a positive internal factor. A weakness is a negative
internal factor. An opportunity is a positive external factor. A threat is a negative external factor.
We should aim to turn our weaknesses into strengths, and our threats into opportunities. Then
finally, SWOT will give managers options to match internal strengths with external
opportunities. The outcome should be an increase in ‘value’ for customers – which hopefully
will improve our competitive advantage. The four factors in SWOT analysis are:

 Strengths - Strengths are the qualities that enable us to accomplish the organization’s
mission. These are the basis on which continued success can be made and
continued/sustained.

Strengths can be either tangible or intangible. These are what you are well-versed in or
what you have expertise in, the traits and qualities your employees possess (individually
and as a team) and the distinct features that give your organization its consistency.

Strengths are the beneficial aspects of the organization or the capabilities of an

organization, which includes human competencies, process capabilities, financial
resources, products and services, customer goodwill and brand loyalty. Examples of
organizational strengths are huge financial resources, broad product line, no debt,
committed employees, etc.

 Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our
mission and achieving our full potential. These weaknesses deteriorate influences on the
organizational success and growth. Weaknesses are the factors which do not meet the
standards we feel they should meet.

Weaknesses in an organization may be depreciating machinery, insufficient research and

development facilities, narrow product range, poor decision-making, etc. Weaknesses are
 controllable. They must be minimized and eliminated. For instance - to overcome
obsolete machinery, new machinery can be purchased. Other examples of organizational
weaknesses are huge debts, high employee turnover, complex decision making process,
narrow product range, large wastage of raw materials, etc.

 Opportunities - Opportunities are presented by the environment within which our

organization operates. These arise when an organization can take benefit of conditions in
its environment to plan and execute strategies that enable it to become more profitable.
Organizations can gain competitive advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp them whenever
they arise. Selecting the targets that will best serve the clients while getting desired
results is a difficult task. Opportunities may arise from market, competition,
industry/government and technology. Increasing demand for telecommunications
accompanied by deregulation is a great opportunity for new firms to enter telecom sector
and compete with existing firms for revenue.

 Threats - Threats arise when conditions in external environment jeopardize the reliability
and profitability of the organization’s business. They compound the vulnerability when
they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the
stability and survival can be at stake. Examples of threats are - unrest among employees;
ever changing technology; increasing competition leading to excess capacity, price wars
and reducing industry profits; etc.

Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it
involves a great subjective element. It is best when used as a guide, and not as a prescription.
Successful businesses build on their strengths, correct their weakness and protect against internal
weaknesses and external threats. They also keep a watch on their overall business environment
and recognize and exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner-

 i. It is a source of information for strategic planning.
j. Builds organization’s strengths.
k. Reverse its weaknesses.
l. Maximize its response to opportunities.
m. Overcome organization’s threats.
n. It helps in identifying core competencies of the firm.
o. It helps in setting of objectives for strategic planning.
p. It helps in knowing past, present and future so that by using past and current data, future
plans can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and
capabilities with the competitive environment in which the firm operates.

SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view
circumstances as very simple because of which the organizations might overlook certain key
strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses,
opportunities and threats might be very subjective as there is great degree of uncertainty in
market. SWOT Analysis does stress upon the significance of these four aspects, but it does not
tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management. These
include-

f. Price increase;
g. Inputs/raw materials;
h. Government legislation;
i. Economic environment;
j. Searching a new market for the product which is not having overseas market due to
import restrictions; etc.

Internal limitations may include-

e. Insufficient research and development facilities;

f. Faulty products due to poor quality control;
g. Poor industrial relations;
h. Lack of skilled and efficient labour; etc
GAP ANALYSIS

Gap analysis is technique for determining the steps to be taken in moving from current state to
desired future state. The results of this analysis help identify the errors in resource allocation and
what steps need to be taken further to help improve performance through better utilization of the
input resources.

Gap= Current Performance- Desired Performance

The current performance is extrapolated back and compared with the desired performance level
to get the results.

It is formal study of what business is doing currently and where it wants to go in the future.
Analysis of gaps is a very effective technique for guiding the planning team in looking for
corporate strategies to achieve targeted levels of corporate performance. This kind of analysis is
a very simple procedure. The difference between the two sets of results is the ‘gap’ to be closed
by changes to strategies. A simple version of gap analysis is depicted in this diagram:
 

 
A gap analysis can also be used to analyze gaps in processes and the gulf between the existing
outcome and the desired outcome. This step process can be illustrated by the example below:

 Identify the existing process: fishing by using fishing rods

 Identify the existing outcome: we can manage to catch 20 fish per day
 Identify the desired outcome: we want to catch 100 fish per day
 Identify and document the gap: it is a difference of 80 fish
 Identify the process to achieve the desired outcome: we can use an alternative method
such as using a fishing net
 Develop the means to fill the gap: acquire and use a fishing net
 Develop and prioritize Requirements to bridge the gap[1]

A gap analysis can also be used to compare one process to others performed elsewhere, which
are often identified through benchmarking. In this usage, one compares each process side-by-side
and step-by-step and then notes the differences. One then analyzes each deviation to determine if
there is any benefit to changing to the alternate process. The results of this analysis (in the
context of the benefits and detriments of changing processes) may support the maintenance of
the current process, the wholesale adoption of an alternate process, or a fusion of different
aspects of each process.

 SERVQUAL

The SERVQUAL Model is an empiric model by Zeithaml, Parasuraman and Berry to

compare service quality performance with customer service quality needs. It is used to do
a gap analysis of an organization's service quality performance against the service quality
needs of its customers. That's why it's also called the GAP model.

COMPETITIVE ANALYSIS

A competitive analysis is the analysis of your competitors and how your business compares. By
evaluating the strengths and weaknesses of your competition, you can begin to formulate how to
give your company an advantage. Such an assessment is usually part of a company’s business or
marketing plan, and provides context for growth plans.

PORTERS 5 FORCES MODEL OF COMPETITION

Michael Porter (Harvard Business School Management Researcher) designed various vital
frameworks for developing an organization’s strategy. One of the most renowned among
managers making strategic decisions is the five competitive forces model that determines
industry structure. According to Porter, the nature of competition in any industry is personified in
the following five forces:
 Threat of new potential entrants
 Threat of substitute product/services
 Bargaining power of suppliers
 Bargaining power of buyers
 Rivalry among current competitors

The five forces mentioned above are very significant from point of view of strategy formulation.
The potential of these forces differs from industry to industry. These forces jointly determine the
profitability of industry because they shape the prices which can be charged, the costs which can
be borne, and the investment required to compete in the industry. Before making strategic
decisions, the managers should use the five forces framework to determine the competitive
structure of industry.

 Risk of entry by potential competitors: 

Potential competitors refer to the firms which are not currently competing in the industry
but have the potential to do so if given a choice. Entry of new players increases the
industry capacity, begins a competition for market share and lowers the current costs. The
threat of entry by potential competitors is partially a function of extent of barriers to
entry. The various barriers to entry are-
 Economies of scale
 Brand loyalty
 Government Regulation
 Customer Switching Costs
 Absolute Cost Advantage
 Ease in distribution
 Strong Capital base

 Rivalry among current competitors: 

Rivalry refers to the competitive struggle for market share between firms in an industry.
Extreme rivalry among established firms poses a strong threat to profitability. The
strength of rivalry among established firms within an industry is a function of following
factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
  Growth Rate of industry
 Demand conditions

 Bargaining Power of Buyers: 

Buyers refer to the customers who finally consume the product or the firms who
distribute the industry’s product to the final consumers. Bargaining power of buyers refer
to the potential of buyers to bargain down the prices charged by the firms in the industry
or to increase the firms cost in the industry by demanding better quality and service of
product. Strong buyers can extract profits out of an industry by lowering the prices and
increasing the costs. They purchase in large quantities. They have full information about
the product and the market. They emphasize upon quality products. They pose credible
threat of backward integration. In this way, they are regarded as a threat.

 Bargaining Power of Suppliers: 

Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the
suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw
materials, services, etc) or the costs of industry in other ways. Strong suppliers can
extract profits out of an industry by increasing costs of firms in the industry. Suppliers
products have a few substitutes. Strong suppliers’ products are unique. They have high
switching cost. Their product is an important input to buyer’s product. They pose credible
threat of forward integration. Buyers are not significant to strong suppliers. In this way,
they are regarded as a threat.

 Threat of Substitute products: 

Substitute products refer to the products having ability of satisfying customers needs
effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry
by putting a setting a limit on the price that firms can charge for their product in an
industry. Lesser the number of close substitutes a product has, greater is the opportunity
for the firms in industry to raise their product prices and earn greater profits (other things
being equal).
BCG MATRIX
The Boston Consulting Group Matrix is developed by Bruce Henderson of the Boston
Consulting Group in the early 1970’s. The Boston Consulting group’s product portfolio
matrix (BCG) is designed to help with long-term strategic planning, to help a business
consider growth opportunities by reviewing its portfolio of products to decide where to
invest, to discontinue or develop products. It's also known as the Growth/Share Matrix. The
Matrix is divided into 4 quadrants derived on market growth and relative market share, as
shown in the diagram below.

 Stars- Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge
investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this
cell are attractive as they are located in a robust industry and these business units are
highly competitive in the industry. If successful, a star will become a cash cow when the
industry matures.
 Cash Cows- Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and generate cash that
can be utilized for investment in other business units. These SBU’s are the corporation’s
key source of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When cash cows loose
their appeal and move towards deterioration, then a retrenchment policy may be pursued.
  Question Marks- Question marks represent business units having low relative market
share and located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the venture can be
viable. Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If the firm
thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the
company tries to enter a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge investment is made, then
they have potential of becoming stars.
 Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share,
these business units face cost disadvantages. Generally retrenchment strategies are
adopted because these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim,
it should be liquidated if there is fewer prospects for it to gain market share. Number of
dogs should be avoided and minimized in an organization.

MC KINSEY 7-S FRAMEWORK

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the
introduction, the model has been widely used by academics and practitioners and remains one of
the most popular strategic planning tools. It is a tool that analyzes firm’s organizational design
by looking at 7 key internal elements: strategy, structure, systems, shared values, style, staff and
skills, in order to identify if they are effectively aligned and allow organization to achieve its
objectives. The model can be applied to many situations and is a valuable tool when
organizational design is at question. The most common uses of the framework are:

 To facilitate organizational change.

 To help implement new strategy.
  To identify how each area may change in a future.
 To facilitate the merger of organizations.

Understanding the tool

Below you can find the McKinsey model, which represents the connections between seven areas
and divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes
interconnectedness of the elements.

Hard S

 Strategy
 Structure 
 Systems

Soft S

 Skills
 Staff
 Style
 Shared Values 
A. Strategy
It  is a plan developed by a firm to achieve sustained competitive advantage and
successfully compete in the market. In general, a sound strategy is the one that’s clearly
 articulated, is long-term, helps to achieve competitive advantage and is reinforced by
strong vision, mission and values. But it’s hard to tell if such strategy is well-aligned with
other elements when analyzed alone.
B. Structure 
It represents the way business divisions and units are organized and includes the
information of who is accountable to whom. In other words, structure is the
organizational chart of the firm. It is also one of the most visible and easy to change
elements of the framework.
C. Systems
They  are the processes and procedures of the company, which reveal business’ daily
activities and how decisions are made. Systems are the area of the firm that determines
how business is done and it should be the main focus for managers during organizational
change.
D. Skills 
They are the abilities that firm’s employees perform very well. They also include
capabilities and competences. During organizational change, the question often arises of
what skills the company will really need to reinforce its new strategy or new structure.
E. Staff 
The element is concerned with what type and how many employees an organization will
need and how they will be recruited, trained, motivated and rewarded.
F. Style 
This represents the way the company is managed by top-level managers, how they
interact, what actions do they take and their symbolic value. In other words, it is the
management style of company’s leaders.
G. Shared Values 
They are at the core of McKinsey 7s model. They are the norms and standards that guide
employee behavior and company actions and thus, are the foundation of every
organization.
 UNIT - 3

MARKETING STRATEGY IMPLEMENTATION

Marketing strategy implementation requires a purposeful tactical marketing plan aligned with the
core business growth strategies. One of the things that makes Chief Outsiders unique among
strategic marketing consulting firms is that we implement the programs we recommend.
Implementation needs a broad perspective, which is one key advantage of working with a
seasoned executive from outside. Consider the following potential components:

 Go-To-Market Strategy

 New Product Launch Strategy

 Channel Conflict Management

 Return on Marketing Investment

 Comparison of Strategic Marketing Service Providers

1. Go to Market Strategy & Implementation

Whether you’re taking a new product to market or implementing the annual marketing plan, your
“go-to-market strategy” defines how you’ll be reaching into the marketplace. It includes a very
specific targeting plan for your decision makers and key influencers, the messages for each, and
the channels you’ll reach them through. The challenge is typically keeping the plan and
programs simple and manageable. Simplicity is a challenge because of the appeal of the many
vehicles and media to reach your targets. Manageability is a challenge because you need to able
to hold each program element accountable. Chief Outsiders’ advice for mid-sized companies is
to keep the number of initiatives small, but varied, managing to an optimal mix of impact and
return on investment.

2. New Product Launch Strategy & Implementation

Launching new products can be challenging for businesses that don't have frequent product
releases to develop true expertise in the discipline. Developing a strategy for product launches
requires knowledge of the target customers, the channels for reaching them, the competitive and
overall market environment, and an up-to-date, working knowledge of effective marketing and
communications tactics. The strategy should be driven by a set of goals which may include sales
volume (revenue or units), trial, and adoption or satisfaction metrics (usage, or net promoter
score), and market preparation goals (training, merchandising). Not surprisingly, there are
tremendous variances depending on the products and markets served. The key discipline for
success is alignment (internally within your company, and externally throughout your market
ecosystem), which is driven by clarity and frequency of communications.

3. Channel Conflict Management

Channels help companies bring products into the marketplace where purchase decisions are
made. Channel partners are companies made up of people who typically have competing
priorities and make decisions based on two dimensions:

 Where can they make the most money

 How easy it will be to accomplish

Developing, supporting and encouraging good channel behavior includes creating opportunities,
as well as training, arming and incentivizing channel sales teams, including keeping a level
playing field. Every channel partner should be motivated by opportunity and not discouraged by
competing inefficiently with other company channels. While many companies consider channel
partners as largely passive players in the distribution of their goods, the truth is that channel
partners make a significant investment in time – which is continuously being reprioritized based
upon current opportunities. Managing channel conflict is usually as simple as being intentional
and strategic, recognizing and respecting each channel and channel partner’s role and needs. The
most classic channel conflict is where in-house company sales teams or online offerings compete
directly (same territories, same target companies, same products) with the company’s channel
partners. Even in these situations, the business can reduce or eliminate conflict by competing
fairly and openly, not creating undue advantage with discounting or add-ons.
4. Return on Marketing Investment

There are two primary categories of measurement in marketing: One for reporting and
accountability to executive management and the other for operational management. The
marketing executive must demonstrate to her peers that she is rigorously and continuously
bringing value to the company. Senior executives are less interested in “brand oriented” goals
(e.g., preference) or leading indicators (leads), and much more driven by fiscal success (CPG
companies being a noted exception).

INTEGRATED MARKETING STRATEGY

Integrated Marketing is an approach to creating a unified and seamless experience for consumers
to interact with the brand/enterprise; it attempts to meld all aspects of marketing communication
such as advertising, sales promotion, public relations, direct marketing, and social media,
through their respective mix of tactics, methods, channels, media, and activities, so that all work
together as a unified force. It is a process designed to ensure that all messaging and
communications strategies are consistent across all channels and are centered on the customer.

Integrated marketing strategies take advantage of a combination of communication tools and

media to spread a message. By combining various tools, marketers are able to ensure that their
audience is reached and can leverage the various tools in ways that are most effective. Integrated
marketing draws upon the power of traditional advertising and public relations efforts, as well as
the use of new, online communication tools that include social media.

CHANNELS OF DISTRIBUTION

A distribution channel is a chain of businesses or intermediaries through which a good or service

passes until it reaches the end consumer. It can include wholesalers, retailers, distributors and
even the internet itself. Channels are broken into direct and indirect forms, with a "direct"
channel allowing the consumer to buy the good from the manufacturer, and an "indirect" channel
allowing the consumer to buy the good from a wholesaler or retailer.

TYPES OF CHANELS OF DISTRIBUTION

Different types of channel of distribution are as follows:

Manufacturers and consumers are two major components of the market. Intermediaries perform
the duty of eliminating the distance between the two. There is no standardised level which proves
that the distance between the two is eliminated.

Based on necessity the help of one or more intermediaries could be taken and even this is
possible that there happens to be no intermediary. Their description is as follows:

1. Zero Level Channels:

When the manufacturer instead of selling the goods to the intermediary sells it directly to the
consumer then this is known as Zero Level Channel. Retail outlets, mail order selling, internet
selling and selling.

2. One Level Channel:

In this method an intermediary is used. Here a manufacturer sells the goods directly to the
retailer instead of selling it to agents or wholesalers. This method is used for expensive watches
and other like products. This method is also useful for selling FMCG (Fast Moving Consumer
Goods). This channel is clarified in the following diagram:

3. Two Level Channel:

In this method a manufacturer sells the material to a wholesaler, the wholesaler to the retailer and
then the retailer to the consumer. Here, the wholesaler after purchasing the material in large
quantity from the manufacturer sells it in small quantity to the retailer.
 Then the retailers make the products available to the consumers. This medium is mainly used to
sell soap, tea, salt, cigarette, sugar, ghee etc. This channel is more clarified in the following
diagram:

PRODUCER WHOLSALER RETAILER CONSUMER

4. Three Level Channel:

Under this one more level is added to Two Level Channel in the form of agent. An agent
facilitates to reduce the distance between the manufacturer and the wholesaler. Some big
companies who cannot directly contact the wholesaler, they take the help of agents. Such
companies appoint their agents in every region and sell the material to them.

Then the agents sell the material to the wholesalers, the wholesaler to the retailer and in the end
the retailer sells the material to the consumers.

MANUFACTURER WHOLESALER JOBBER RETAILER CONSUMER

FACTORS GOVERNING THE CHOICE OF CHANNELS OF DISTRIBUTION

 Products factor
 Product nature
 Technical nature: Simple or Complex
 The length of product line
 The market position: market position of manufacturer
 Market factors:
 The existing market structure
 The nature of purchase deliberations
 Availability channel
 Competitors channels
 Institutional factors:
 Financial ability of channel members
  The promotional ability of channel members
 The post sale service ability
 Unit factors:
 The companies financial position
 The extent to market control desired
 The company reputation
 The company marketing policies.
 Environmental factors

MARKETING MIX

Marketing mix is about putting the right product or a combination thereof at the right time, in the
right place and at the right price. The 4Ps make up a typical marketing mix - Price, Product,
Promotion and Place. However, nowadays, the marketing mix increasingly includes several other
Ps like Packaging, Positioning, People and even Politics as vital mix elements.

a) Product: 

A product is an item that is built or produced to satisfy the needs of a certain group of people.
The product can be intangible or tangible as it can be in the form of services or goods.
Product features that have influence on public such as quantity, quality, size, shape, colour,
etc.

b) Price:

It refers to the value that is put for a product. Too much product price and too low price
affect the buying behaviour of the customers. Price is a very important component of
the marketing mix definition. The pricing strategies include:

 Skimming strategies: A price skimming strategy focuses on maximizing profits by

charging a high price for early adopters of a new product, then gradually lowering the
price to attract thriftier consumers. 
 Penetration strategies: Penetration pricing occurs when a company launches a low-
priced product with the goal of securing market share. 
c) Place:
Place represents the location where a product can be purchased. It is often referred to as
the distribution channel. It can include any physical store as well as virtual stores on the
Internet. It is necessary to position and distribute the product in a place that is accessible
to potential buyers.
Distribution strategies:
 Intensive distribution: to broader the market share and to increase the profit by
making the existing product more effective and by introducing new and various
sets of products inorder to increase the market share too.
 Exclusive distribution: only certain retailers are given the option of carrying a
product in its store.
 Selective distribution: Lies between intensive and exclusive distribution. This
basically using more than one, but lesser than all intermediaries who carry the
company’s products.
 Franchising: practice of the right to use a firm’s business model and brand for a
prescribed period of time.
d) Promotion:
This refers to all the activities undertaken to make the product or service known to the
user and trade. This can include advertising, word of mouth, press reports, incentives,
commissions and awards to the trade. It can also include consumer schemes, direct
marketing, contests and prizes.
e) People:
All companies are reliant on the people who run them from front line Sales staff to the
Managing Director. Having the right people is essential because they are as much a part
of your business offering as the products/services you are offering.
f) Process:
The delivery of your service is usually done with the customer present so how the service
is delivered is once again part of what the consumer is paying for.

g) Physical evidence:
 Almost all services include some physical elements even if the bulk of what the consumer
is paying for is intangible. For example a hair salon would provide their client with a
completed hairdo and an insurance company would give their customers some form of
printed material. 

SEGMENTATION

Segmentation means to divide the marketplace into parts, or segments, which are definable,
accessible, actionable, and profitable and have a growth potential. Segmentation refers to the
process of creating small segments within a broad market to select the right target market for
various brands. Market segmentation helps the marketers to devise and implement relevant
strategies to promote their products amongst the target market. Market segmentation is the
process of dividing an entire market up into different customer segments. In other words,
dividing a market into distinct needs, characteristics or behaviour who might require separate
products or marketing mix is called market segmentation.

TYPES OF MARKET SEGMENTATION

I. Geographic Segmentation:
Dividing a market into different geographical units such as nations, states, regions, cities
or neighborhood is called geographic segmentation. A company may decide to operate in
one or a few geographical areas or to operate in all areas but pay attention to geographical
differences in needs and wants.
II. Demographic Segmentation:
The demographic segmentation divides the market into groups based on demographic
variables such as age, gender, family size, family life cycle, occupation, education,
religion, race, income and nationality. They are the most popular basis for segmenting
consumer groups because:
 Consumer needs, wants & usage rates often very closely with demographic
variables.
 Demographic variables are easier to measure than most other types of variable.
III. Psychographic Segmentation:
Dividing a market into different groups based on social class, lifestyle, or personality
characteristics is called psychographic segmentation. The individual’s attitude, interest,
value help the marketers to classify them into small groups.
IV. Behavioural Segmentation:
Dividing a market into groups based on consumer knowledge, attitude, use or response of
a product is called behavioural segmentation. It includes:
 Occasional segmentation:
Dividing the market into groups according to occasions when buyers get the idea
to buy, actually make their purchase or use the purchased item is called occasional
segmentation.
 Benefit segmentation:
Dividing the market into groups according to the different benefit that consumers
seek from the product is called benefit segmentation.
 Users, status segmentation:
Markets can be segmented into groups of non-users, ex-users, potential users, first
time users and regular users of the product.
 Usage rate:
Markets can be segmented into light, medium and heavy product users.
 Loyalty status:
A market can also be segmented by consumer loyalty. Consumer can be loyal to
brands, stores and companies. Buyers can be divided into groups according to
their degree of loyalty. Some consumers are completely loyal, others some what
loyal and others show no loyal.

STEPS IN MARKET SEGMENTATION

1. Identify the target market

The first and foremost step is to identify the target market. The marketers must be very
clear about who all should be included in a common segment. Make sure the individuals
have something in common. A male and a female can’t be included in one segment as
they have different needs and expectations.

A Garnier men’s deodorant would obviously not sell if the company uses a female model
to create awareness.

2. Identify expectations of Target Audience

Once the target market is decided, it is essential to find out the needs of the target
audience. The product must meet the expectations of the individuals. The marketer must

Marketing professionals or individuals exposed to sun rays for a long duration need
something which would protect their skin from the harmful effects of sun rays. Keeping
this in mind, many organizations came with the concept of sunscreen lotions and creams
with a sun protection factor especially for men.

3. Create Subgroups

The organizations should ensure their target market is well defined. Create subgroups
within groups for effective results.

Cosmetics for females now come in various categories.

 Creams and Lotions for girls between 20-25 years would focus more on fairness.
 Creams and lotions for girls between 25 to 35 years promise to reduce the signs of
ageing.

4. Review the needs of the target audience

 It is essential for the marketer to review the needs and preferences of individuals
belonging to each segment and sub-segment. The consumers of a particular segment must
respond to similar fluctuations in the market and similar marketing strategies.\

5. Name your market Segment

Give an appropriate name to each segment. It makes implementation of strategies easier.

A kids section can have various segments namely new born, infants, toddlers and so on.

6. Marketing Strategies

Devise relevant strategies to promote brands amongst each segment. Remember you can’t
afford to have same strategies for all the segments. Make sure there is a connect between
the product and the target audience.

A model promoting a sunscreen lotion has to be shown roaming or working in sun for the
desired impact.

7. Review the behavior

Review the behavior of the target audience frequently. It is not necessary individuals
would have the same requirement (demand) all through the year. Demands vary,
perceptions change and interests differ. A detailed study of the target audience is
essential.

8. Size of the Target Market

It is essential to know the target market size. Collect necessary data for the same. It helps
in sales planning and forecasting.

EFFECTIVE SEGMENTATION CRITERIA

Market segments must rate favourably on 5 key criteria:

 Measurable: The size, purchasing power and characteristics of the segment can be measures.
 Substantial: a segment should be the largest possible homogeneous groups and profitable
enough to serve.
 Accessible: the segments can be effectively reached and served.
 Differentiable: the segments are conceptually distinguishable and respond differently to
different marketing mix element and programs.
 Actionable: effective programs can be formulated for attracting and serving the segment.\

ADVANTAGES OF SEGMENTATION

 Focus of the Company

Segmentation is an effective method to increase the focus of a firm on market segments. If
you have better focus, obviously you will have better business. 
 Increase in competitiveness
Naturally, once your focus increases, your competitiveness in that market segment will
increase. If you are focusing on youngsters, your brand recall and equity with youngsters will
be very high. Your market share might increase and the chances of a new competitor entering
might be low. The brand loyalty will definitely increase.
 Market expansion
Segmentation plays a crucial role in expansion. Geographic segmentation is one type of
segmentation where expansion is immediately possible. If you have your market strategy on
the basis of geography, then once you are catering to a particular territory, you can
immediately expand to a nearby territory. In the same way, if you are targeting customers
based on their demography (Ex –  reebok targets fitness enthusiasts) then you can expand in
similar products (Ex –  reebok expanding with its fitness range of clothes and accessories).
 Customer retention
By using segmentation, Customer retention can be encouraged through the life cycle of a
customer. The best example of this is the Automobile and the Airlines segment. 
 Have better communication
One of the factors of marketing mix which is absolutely dependent on STP is Promotions or
communications. The communications of a company needs to be spot on for its TARGET
market. Thus if you need a target market, you need segmentation. Communication cannot be
possible without knowing your target market.
 Increases profitability
Segmentation increases competitiveness, brand recall, brand equity, customer retention,
communications. Thus if it is affecting so many factors of your business, then definitely it
affects the profitability of the firm.

DISADVANTAGES OF SEGMENTATION

 Segments are too small –  If the chosen segment is too small then you will not have the
proper turnover which in turn will affect the total margins and the viability of the business.

 Consumers are misinterpreted –  The right product to the wrong customers. What if your
market research says that your customers want a new soap and you come out with a new
facial cream. The concept is same, cleanliness. But the concept is completely different.
 Costing is not taken into consideration –  Targeting a segment is ok but you also need to
know how much you will have to spend to target a particular segment. If it is a Sec A
segment and you do not have the budget to be present in the places the the Sec A customer
visits, then your segmentation strategy is a failure.
 There are too many brands –  Along with segmentation, you also need to check out the
competition offered in the same segment from other products. Getting into a segment already
saturated will mean higher costs and lesser profit margins.
 Consumer are confused –  If the consumer himself doesn’t know whether he will be
interested in a particular product or not, than that’s a sign that you need to get out of that
segment / product.
 Product is completely new –  If a product is completely new than there is no market
research to base your segmentation on. You need to market it to the masses and as
acceptance increases, only then will you be able to focus on one particular segment.

TARGETING

Targeting or target marketing then entails deciding which potential customer segments the
company will focus on. Market is segmented using certain bases, like income, place, education,
age, and life cycle, and so on. Out of them, a few segments are selected to serve them. Thus,
evaluating and selecting some market segments can be said as market targeting. Target market is
the end consumer to which the company wants to sell its end products too. Target marketing
involves breaking down the entire market into various segments and planning marketing
strategies accordingly for each segment to increase the market share. 

METHODS FOR MARKET TARGETING

Company may opt for any one of the following strategies for market targeting based on the
situations:
1. Single Segment Concentration:
It is the simplest case. The company selects only a single segment as target market and offers a
single product. Here, product is one; segment is one. For example, a company may select only
higher income segment to serve from various segments based on income, such as poor,
middleclass, elite class, etc. All the product items produced by the company are meant for only a
single segment.

Single segment offers some merits like:

(1) Company can gain strong knowledge of segment’s needs and can achieve a strong market
position in the segment.

(2) Company can specialize its production, distribution, and promotion.

(3) Company, by capturing leadership in the segment, can earn higher return on its investment.

It suffers from following demerits like:

(1) Competitor may invade the segment and can shake company’s position.

(2) Company has to pay high costs for change in fashion, habit, and attitude. Company may not
survive as risk cannot be diversified.

Mostly, company prefers to operate in more segments. Serving more segments minimizes the
degree of risk.

2. Selective Specialization:
In this option, the company selects a number of segments. A company selects several segments
and sells different products to each of the segments. Here, company selects many segments to
serve them with many products. All such segments are attractive and appropriate with firm’s
objectives and resources.

There may be little or no synergy among the segments. Every segment is capable to promise the
profits. This multi-segment coverage strategy has the advantage of diversifying the firm’s risk.
Firm can earn money from other segments if one or two segments seem unattractive. For
example, a company may concentrate on all the income groups to serve.

3. Product Specialization:
In this alternative, a company makes a specific product, which can be sold to several segments.
Here, product is one, but segments are many. Company offers different models and varieties to
meet needs of different segments. The major benefit is that the company can build a strong
reputation in the specific product area. But, the risk is that product may be replaced by an
entirely new technology. Many ready-made garment companies prefer this strategy.

4. Market Specialization:
This strategy consists of serving many needs of a particular segment. Here, products are many
but the segment is one. The firm can gain a strong reputation by specializing in serving the
specific segment. Company provides all new products that the group can feasibly use. But,
reduced size of market, reduced purchase capacity of the segment, or the entry of competitors
with superior products range may affect the company’s position.

5. Full Market Coverage:

In this strategy, a company attempts to serve all the customer groups with all the products they
need. Here, all the needs of all the segments are served. Only very large firm with overall
capacity can undertake a full market coverage strategy.

Types of Target Marketing Strategies

1. Undifferentiated Marketing
It’s a mass-market philosophy based strategy that comes in handy when you know that putting
forward a common product for all customers’ types. It won’t affect the popularity of your
product but can, definitely, let you overcome the costs needed for setting up a separate marketing
mix for each target market. Under such conditions, a brand starts developing a strategy that
covers up the whole market and is totally free from segmentation.

2. Multi-Segmented or Differentiated Marketing

Differentiated marketing picks up the pace right there from where the undifferentiated marketing
leaves you. One of the most sought after strategies that can bring the effectiveness of your brand
back to life by letting you plan your marketing mix while keeping the segmentation of the market
in your mind.

3. Concentrated Targeting

Serving up all the segments of the target market is not necessary, most of the times. For the
purpose, the company puts its research about the segment to its advantage and establishes a
marketing mix, which is focused on that particular segment. It is a fact that concentrating the
efforts and resources on a particular segment proves to be more fruitful than investing in a wide
niche.

4. Customized Marketing

Such target marketing strategies take the segmentation at a more refined level, the individual
level. Companies at such level study the behavior patterns of their potential customers and devise
a separate solution for each of the customers. The companies deal face to face with their
customers and serve them with what the customer needs. The most common type of businesses
that make use of this strategy is often research firms, advertising, architects and many others.
This marketing leads to an even closer relationship with the segments as compared to focused
targeting.

Benefits of a Broad Target Market

 More Total Customers

One of the simplest but most important benefits of a broad market is the ability to target a larger
number of total prospects with a marketing campaign. The more total customers you reach out
to, the higher your likelihood of making a sizable number of sales. Additionally, you can rely on
the size of your target market to benefit you in future product and service offerings.

 Media Flexibility
A key reason companies identify target markets is to decide what media to use for message
delivery. With a broader target market, you may have to invest in more media types, but this also
increases your flexibility. You can use various options, such as television, radio and billboards,
which reach a large number of people. With a niche audience, these media would often not be
worth the investment. However, they offer volume benefits in trying to appeal to a large market.

 Higher Revenue and Cash Flow

Naturally, a larger target market increases your revenue and cash flow potential. If you have
100,000 customers in a market, it is reasonable to assume you would create more sales than with
a 10,000-customer market, assuming other factors were equal. Strong revenue and cash flow also
enables more investment in marketing research and new product development. This, in turn,
further increases opportunities to attract customers and generate more sales. Plus, when you sell
more goods, you can buy in larger volumes from suppliers, often leading to discounts.

 Larger Safety Net

A larger target market also increases the safety for a company if it misses the market on a
product launch. You can still expect to sell through a sizable amount of products with an
established brand and market. On the contrary, a niche business may go under if it invests in a
specialized product line that flops. Companies with broad markets can usually expect a product
to appeal to some customers if it is of good quality and offers benefits desired by some people.

Disadvantages of Targeting Marketing

Target marketing means selecting a market segment and directing your marketing efforts toward
that segment. 

 The Wrong Target

When you focus exclusively on a target market, you must be sure it works for your product or
service. When you choose one market segment, you exclude others. The ones you exclude could
offer you many sales, maybe even more sales, than the one you chose. Remain aware of this
potential disadvantage when you focus on a target market, and be prepared to change your tactics
if you find you need more sales.

 Small Market Share

The target market you choose may not be large enough to support your business. One
characteristic of target markets -- their well-defined, limited scope -- can work against you if that
segment does not contain enough customers. Capturing 100 percent of a small market can still
leave you with low sales.

 Ethical Problems
Some businesses receive criticism for targeting certain market segments. For example, outlets
who sell lottery tickets in disadvantaged neighborhoods can come under fire for the appearance
of taking advantage of desperate people with a promise of riches that isn’t likely to come true.
Similar problems could arise for a business selling firearms in a notoriously violent
neighborhood. Look at your target marketing to make sure it will not engender potentially
harmful publicity.

 Sharing a Market with Competitors

Before selecting a target market, you should examine the competition in that market. You may
not be the first one to notice the advantages of a market segment. If that segment is saturated
with companies marketing to it, choosing that target market could hinder your sales rather than
help them. Look for target markets that can bear additional marketing and support the kind of
sales you need.

POSITIONING

Positioning defines where your product (item or service) stands in relation to others offering
similar products and services in the marketplace as well as the mind of the consumer. A good
positioning makes a product unique and makes the users consider using it as a distinct benefit to
them. 

PROCESS OF POSITIONING

 Analyse the consumer’s perceptions in relation to competitor’s

 Identify competitor’s position
  Find out the consumer preferences
 Select the position for the product
 Monitor the positioning strategy

TYPES OF POSITIONING

 Functional positioning: resolve problems provide benefit to customers.

 Symbolic positioning: it address self image enhancement, ego identification,
 Experiential positioning: provide sensory & cognitive stimulation.

APPROACHES TO POSITIONING

 Positioning against a competitor approach: The positioning can be made with an

explicit & implicit frame of reference of 1 or more competitors.
 Positioning within a product class approach: It includes product class associations. Eg:
Nescafe Bru positioned itself as instant coffee.
 Positioning according to customers benefit approach: it includes the segmentation done
for the product characteristics. Eg: Toothpaste with whitening etc.
 Positioning for use or applications approach : eg: Johnson & Johnson range of baby
products.
 Positioning along price quality approach: it includes various price quality categories of
the products. Eg: Maruti Suzuki- Maruti 800-A segment etc.
 Positioning for a product users approach: positioning a product keeping in mind a
specific user on a class of users. Eg: Lakme- its targeting fashion- conscious women.
 Positioning by cultural symbols approach: many companies use cultural symbols to
differentiate their brands from their competitors.

FUNCTIONS/ BENEFITS OF POSITIONING

 To face competition
 To increase different type of customers
 To meet expectation of buyers
 To design promotional strategy
 Customer loyalty & goodwill
 To introduce new product
CATEGORIES OF POSITIONING

 By product attribute
A product attribute is a specific feature or benefit of the product. Positioning in this way
focuses on one or two of the product’s best features/benefits, relative to the competitive
offerings.

 By user
This positioning approach highlights the user (the ideal or representative target consumer)
and suggests that the product is the ideal solution for that type of person and may even
contribute to their social self-identity.

 By product class
This positioning strategy tends to take a leadership position in the overall market. Statements
with the general message of “we are the best in our field” are common.

 Against competition
With this approach the firm would directly compare (or sometimes just imply), a comparison
against certain well-known competitors (but not generally not the whole product class as above).

 By use/application
With this approach, the product/brand is positioned in terms of how it is used in the market
by consumers, indicating that the product is the best solution for that particular task/use.

 By quality or value
Some firms will position products based on relative high quality, or based on the claim that
they represent significant value.

PRODUCT LIFE CYCLE

The product life cycle describes the period of time over which an item is developed, brought to
market and eventually removed from the market. The cycle is broken into four stages:
 Introduction,
 Growth,
  Maturity
 Decline.
The idea of the product life cycle is used in marketing to decide when it is appropriate to
advertise, reduce prices, explore new markets or create new packaging. The product life cycle
has 4 very clearly defined stages, each with its own characteristics that mean different things for
business that are trying to manage the life cycle of their particular products.

Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales are
low, although they will be increasing. On the other hand, the cost of things like research and
development, consumer testing, and the marketing needed to launch the product can be very
high, especially if it’s a competitive sector.

Growth Stage – The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production, the
profit margins, as well as the overall amount of profit, will increase. This makes it possible for
businesses to invest more money in the promotional activity to maximize the potential of this
growth stage.

Maturity Stage – During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the most
competitive time for most products and businesses need to invest wisely in any marketing they
undertake. They also need to consider any product modifications or improvements to the
production process which might give them a competitive advantage.

Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s
known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e.
all the customers who will buy the product have already purchased it), or because the consumers
are switching to a different type of product. While this decline may be inevitable, it may still be
possible for companies to make some profit by switching to less-expensive production methods
and cheaper markets.
Impact of the Product Life Cycle on Marketing Strategy

Strategies for the Different Stages of the Product Life Cycle

Introduction

The need for immediate profit is not a pressure. The product is promoted to create awareness and
develop a market for the product. The impact on the marketing mix and strategy is as follows:
 Product branding and quality level is established and intellectual property protection,
such as patents and trademarks are obtained.
 Pricing may be low penetration to build market share rapidly or high skim pricing to
recover development costs.
 Distribution is selective until consumers show acceptance of the product.
 Promotion is aimed at innovators and early adopters. Marketing communicationsseeks to
build product awareness and educate potential consumers about the product.
Growth

Competitors are attracted into the market with very similar offerings. In the growth stage, the
firm seeks to build brand preference and increase market share.

 Product quality is maintained and additional features and support services may be added.

 Pricing is maintained as the firm enjoys increasing demand with little competition.

 Distribution channels are added as demand increases and customers accept the product.

  Promotion is aimed at a broader audience.

Maturity

Those products that survive the earlier stages tend to spend longest in this phase. At maturity, the
strong growth in sales diminishes. Competition may appear with similar products. The primary
objective at this point is to defend market share while maximizing profit.

 Product features may be enhanced to differentiate the product from that of competitors.

 Pricing may be lower because of the new competition.

 Distribution becomes more intensive, and incentives may be offered to encourage

preference over competing products.

 Promotion emphasizes product differentiation.

Decline

At this point, there is a downturn in the market. For example, more innovative products are
introduced or consumer tastes have changed. There is intense pricecutting, and many more
products are withdrawn from the market. Profits can be improved by reducing marketing
spending and cost cutting.

As sales decline, the firm has several options:

 Maintain the product, possibly rejuvenating it by adding new features and finding new
uses.

 Harvest the product–reduce costs and continue to offer it, possibly to a loyal niche
segment.

 Discontinue the product, liquidating remaining inventory or selling it to another firm that

is willing to continue the product.

By imaginatively repositioning their products, companies can change how customers mentally

categorize them. They can rescue products struggling in the maturity phase of their life cycles
and get them back to the growth phase. And in some cases, they might be able take their new
products forward straight into the growth phase.
THE EFFECT OF MARKETING STRATEGIES ON PRODUCT LIFE CYCLE

The effect of marketing strategy on Product Life Cycle (Plc) is adopted in order to forecast the
activities involving the strategy in the stages in the Product Life Cycle (Plc).
Its successful accomplishment requires analysis of the data from the past decision in the present,
and evaluation of the future.
However, the company’s position and differentiation strategy must change the product, market
and competitors changes over the Product Life Cycle (Plc).
To say that a product has Life Cycle (LC) is to assert four things:
1.          Product have a limited life
2.          A product sales pass through a distinct stage, each posing different challenges,
opportunities and problem to the seller.
3.          Profit rise and fall at different stages of the Product Life Cycle (Plc).
4.          Product requires different marketing financial, manufacturing, purchasing and human
resource strategy in each Life Cycle (LC) stage.
Most Product Life Cycle (Plc) curves are portrayed as lock-shaped.  This curve is typically
divided into four stages:  Introduction, growth, maturity and decline.
In the functional units of the telecommunication industry, the responsibility of ensuring that the
product stayed long in the market depends on the efficiency of the marketing unit in the firm;
which will also look at the ways at which product are developed i.e. the right product for a target
market that will come in either physical goods or service or a blend of both; though reaching the
target market, which is concerned with getting the right product to the target market place as a
product is not much good to the customer it is not available when and where it is wanted.
VALUE – BASED PLANNING

Values Based Planning helps a company (or an individual) develop strategic and tactical plans
that are consistent with the values of the organization, and helps the company operate consistent
with those values. Learn more about values based planning here.

When a company truly lives by a common set of values, employees feel more comfortable
expressing their thoughts and ideas and contributing their creativity. They can function based on
their own internal compasses, rather than having to refer to a rulebook and be monitored by
bosses. On the flip side, if more companies do not take a more deliberate approach to
establishing values-based cultures.

SHAREHOLDER VALUE

Shareholder value is a business term, sometimes phrased as shareholder value maximization or

as the shareholder value model, which implies that the ultimate measure of a company's success
is the extent to which it enriches shareholders. It became popular during the 1980s, and is
particularly associated with former CEO of General Electric, Jack Welch.

Shareholder value is the value enjoyed by a shareholder by possessing shares of a company. It is

the value delivered by the company to the shareholder.  Increasing the shareholder value is of
prime importance for the management of a company. So the management must have the interests
of shareholders in mind while making decisions. The higher the shareholder value, the better it is
for the company and management.

For this to happen, management must exercise efficient decision making so as to earn/increase
profits, thereby increasing shareholder value. On the other hand, faulty decision making using
unfair tactics might damage shareholder value.
 UNIT – 4

SPECIFIC STRATEGIC INITIATIVES

STRATEGIC INITIATIVES

Strategic initiatives are the means through which a vision is translated into practice. Strategic
initiatives are collections of finite-duration discretionary projects and programs, outside of the
organization's day-to-day operational activities, that are designed to help the organization
achieve its targeted performance.

What are the key characteristics of effective strategic initiatives?

For many organizations, the process of determining which of your initiatives are strategic and
which are operational can be challenging.  In order to clarify the differences between these two
types of projects, it is critical that an organization go through a process of clearly defining basic
information for all ongoing and proposed initiatives. 

Strategic Initiatives focus on change

The Balanced Scorecard can be broken down into four basic components: Perspectives,
Objectives, Measures (also known as “KPIs” in some organizations), and Initiatives.  Objectives
state a clearly defined direction or outcome for an organization.  An example of a Learning and
Growth Objective might say something like, “Align Incentives and Rewards with Employee
Roles for Increased Employee Satisfaction.” 

While objectives tends to be broad, initiatives tend to more specifically outline of how you are
going to accomplish an objective.  If an objective is where you are going, then the initiative is
how you are going to get there. 
 Strategic Initiatives are the action projects that are needed to help the organization be successful
with its strategy. Strategic Initiative are tied to Strategic Objectives, are of significant importance
to the whole organization, and are far reaching. Strategic Initiatives make strategy actionable.

The number of Strategic Initiatives varies for each organization. Typically, at the enterprise-wide
level (called Tier 1), the number of priority Strategic Initiatives numbers between 8 and
15 projects.

Once selected (based on some prioritization scheme), Strategic Initiatives need to be turned into
risk-managed projects, and tracked to ensure that the projects are meeting requirements. We
recommend tracking schedule adherence, cost (resources) against budget, scope, and risk.

NEW PRODUCT DEVELOPMENT & INTRODUCTION

Developing and successfully launching new products is an important part of a small business
growth strategy. New products provide additional sources of revenue by enabling the business to
sell more to existing customers, attract new customers or enter into new markets. However,
product development can be a costly, time-consuming activity. It, therefore, carries risk as well
as reward. To succeed, businesses must follow a structured development and launch process.

New Product Development

New product development is a task taken by the company to introduce newer products in the
market. Regularly there will arise a need in the business for new product development. Your
existing products may be technologically outdated, you have different segments to target or you
want to cannibalize an existing product. In such cases, New product development is the answer
for the company.

New Product Introduction (NPI) is the series of steps products pass through in order to get a
released product design from prototype to the marketplace. A good new product
introduction plan is the foundation of any successful product launch and often helps boost sales
and encourage company growth down the road.

There are 7 stages of new product development and they are as follows.

a) Idea generation

In this you are basically involved in the systematic search for new product Ideas. A company has
to generate many ideas in order to find one that is worth pursuing. The Major sources of new
product ideas include internal sources, customers, competitors, distributors and suppliers.

b) Idea Screening

The second step in New product development is Idea screening. The purpose of idea generation
is to create a large pool of ideas. The purpose of this stage is to pare these down to those that are
genuinely worth pursuing. Companies have different methods for doing this from product review
committees to formal market research. It is helpful at this stage to have a checklist that can be
used to rate each idea based on the factors required for successfully launching the product in the
marketplace and their relative importance.

c) Concept Development and Testing

The third step in New product development is Concept Development and Testing. An attractive
idea has to be developed into a Product concept. As opposed to a product idea that is an idea for
a product that the company can see itself marketing to customers, a product concept is a detailed
version of the idea stated in meaningful consumer terms.
This is different again from a product image, which is the consumers’ perception of an actual or
potential product. Once the concepts are developed, these need to be tested with consumers
either symbolically or physically. For some concept tests, a word or a picture may be sufficient,
however, a physical presentation will increase the reliability of the concept test.

d) Marketing Strategy Development

This is the next step in new product development. The strategy statement consists of three parts:
the first part describes the target market, the planned product positioning and the sales, market
share and profit goals for the first few years.

e) Product Development

Here, R&D or engineering develops the product concept into a physical product. This step calls
for a large investment. It will show whether the product idea can be developed into a full-
fledged workable product.

f) Test Marketing

If the product passes the functional tests, the next step is test marketing: the stage at which the
product and the marketing program are introduced to a more realistic market settings. Test
marketing gives the marketer an opportunity to tweak the marketing mix before the going into
the expense of a product launch.

g) Commercialization

The final step in new product development is Commercialization. Introducing the product to the
market – it will face high costs for manufacturing and advertising and promotion. The company
will have to decide on the timing of the launch (seasonality) and the location (whether regional,
national or international). This depends a lot on the ability of the company to bear risk and the
reach of its distribution network.
Different strategies by FMCG for marketing brands

All the brands in the world are backed up by a story. We are aware of some stories of the stories.
Every brand has an importance, standing, vital signs color, attitude, and misc attributes.
Marketing & Advertising is also an integral part for brand promotion as we say in local lingo "
Jo Dikhta hai Woh bikta hai" .

Brands are made competitive via following strategies:

1. Multibrand Strategy 

´Marketing of two or more similar and competing products by the same firm. A company often
nurtures a number of brands in the same category. There are various motives for doing this. ´The
main rationale behind this strategy is to capture as much of the market share as possible by trying
to cover as many segments as possible, as it is not possible for one brand to cater to the entire
market. This also enables the company to lock up more distributer shelf space.

2. Product Flanking

Refers to the introduction of different combinations of products at different prices, to cover as

many market segments as possible. It is basically offering the same product in different sizes and
price combinations to tap diverse market opportunities.

The idea behind this concept is to flank the core product by offering different variations of size
and price so that the consumer finds some brand to choose from. Shampoos in small sachets and
premium detergents (Tide, Aeriel etc.) in small pouches are examples of this strategy

3. Brand Extension

Companies make brand extensions in the hope that the extensions will be able to ride on the
equity of successful brands, and that the new brand  will stand in its own right in the course of
time.A well respected brand name gives the new product instant recognition and easier
acceptance.
It enables the company to enter new product categories more easily. For eg: Lifebuoy Plus &
Lifebuoy liquid.

4. Building Product Line

Some companies add related new product lines to give the consumer all the products he/she
would like to buy under one umbrella. For e.g: Unilever has added product lines one after
another starting from Lifebuoy, Lux, & Dove.

5. New Product Development

A company can add new products through the acquisition of other companies or by devoting
one’s own efforts on new product development.

With the help of new products a company can enter a growing market for the first time, and
supplement its existing product lines.

6.Innovations in Core Products

The life of a product is short in FMCG market

Marketers continually try to introduce new brands to offer something new and meet the changing
requirements of customer.

It is prudent for a marketer to innovate from time to time both by technological expertise as well
as from the consumer’s or dealer’s feedback.

7. Extending the product life cycle

Economic conditions change, competitors launch new assaults, and the products encounters new
types of buyers and new requirements are situations in which a FMCG company try to extend the
PLC.

In the mature stage of the PLC, some companies abandon their weaker products. They prefer to
concentrate their resources on their more profitable products and quickly develop new products.
8. Expanding markets by usage

´A company usually expands the market for its brand in two ways, either to increase the number
of customers or by encouraging more consumption per intake.

The usage rate of the consumers can be increased in 3 ways :

1)It may try to educate or persuade customers to use the product more frequently.

2)The Company can try to induce users to consume more of the product on each occasion.

3) The company can try to discover new product uses and convince customers to use the product
in more varied ways.

9. Wide Distribution Network

A very simple way of increasing FMCG company’s market share is by developing a strong
distribution network, preferably in terms of more locations. An extensive distribution system can
be developed over time, or the company may acquire another company which has an extensive
distribution network. Coca-Cola and PepsiCo’s wide distribution network systems have made
them market leaders.

RURAL MARKETING

It is the process of developing, pricing, promoting & distributing rural specific goods & services
leading to desired exchange with rural customers to satisfy their needs & wants & also to achieve
organizational objectives. The role of rural marketing in Indian economy has always played an
influential role in the lives of people.

DEFINITION

Rural marketing is similar to simply marketing. Rural marketing differs only in terms of buyers.
Here, target market consist of customers living in rural areas.

4 A’s IN RURAL MARKETING

  Awareness: it should reach the customers mindset. It should contain some message to the
audience through TV, radio etc.

 Availability: reach the customers, available to all the customers.

 Affordability: the product should match the needs of the customers. Affordability may
focus on buying capacity of the customers.

 Acceptability: they should feel that the product satisfies all the needs of the customers.

India’s Rural Market for consumer products and services is growing at an accelerated pace. An
urban marketer interested to tap these marketing opportunities in rural India needs to develop a
deeper understanding of the rural marketing ecology. Further, a marketer requires better insights
on the logic of organizing marketing efforts in rural areas considering these rural specificities. 
Therefore it is essential to clearly format the rural marketing tasks looking at the complexities in
India’s rural milieu. The dynamics of rural consumer behaviour, their cultural context,
distribution problems, all need to be deciphered in its multifarious dimensions for sustaining 
high performance by marketers. Marketing organizations involved in marketing to rural India
with their products and services must understand and introduce strategies, which are compatible
and effective, in all stages of the rural marketing intervention cycle. The programme is cast in the
background of these facets pertaining to rural marketing.

OBJECTIVES

 Sensitise participants on the nuances of rural marketing environment

 Develop capabilities for clearly identifying, complex, real life rural marketing problems
in a holistic perspective

 Identify and assess rural market potential for products and services

 Equip participants with mindset and skill set to help them develop appropriate marketing
mix strategies for products and services in different stages of their life cycle.

STAGES
1. Rural to rural: it is a process which include selling of agricultural products, tools, cattles.
Carts to another village in its proximity.

2. Rural to urban: rural product sell in urban market. This may or maynot be direc but mostly
there are middlemen, government, corporate.

3. Urban to rural: selling the product & service by urban marketers in rural areas. These
products mostly include pesticides, FMCG products etc.

CHALLENGES IN RURAL MARKET

 Standard of living

 Low literacy levels

 Low percapita income

 Transportation

 Ineffective distribution channels

 Lack of communication system

 UNIT – 5

MARKETING STRATEGY EVALUATION

How to Evaluate a Market Strategy

Every firm has something that it calls a market strategy. Unfortunately, many market strategies
are ineffective and almost guarantee failure. Market strategies that really work always have the
following characteristics:

1. They are strategic rather than tactical.

This sounds simple, but it's a point that many people find confusing. Strategies define goals to be
achieved while tactics define the actions you'll take to achieve those goals. Example:

Strategy: "Double sales revenue in the Midwest territory."

Tactic: "Hire three more salespeople in the Midwest territory."
2. They are measurable rather than vague.
You can't manage what you can't measure. If your goals are vague, you have no idea whether
your tactics are achieving them. Example:

Measurable: "Double sales revenue in the Midwest territory."

Vague: "Achieve industry and thought leadership."
3. They are "actionable" rather than contingent.
A strategic goal should be achievable through the tactics that support it, rather than dependent
upon uncontrollable outside forces. Example:

Actionable: "Double sales revenue in the Midwest territory.

Contingent: "Increase our publicly-held stock price by 50%."
4. They are clearly articulated.
The more difficult it is for employees to understand a strategy, the less likely they are to be able
to help achieve it. Example:

Clear: "Double sales revenue in the Midwest territory."

Unclear: "Focus both externally and internally (customer's customer and internal alignment
necessary to respond), with internal collaboration with common focus/goals by stakeholders
accountable for ultimate business results oriented, optimized and coordinated outputs, aligned
around the sales cycle."
5. They are achievable rather than inspirational.
There's nothing wrong with having an inspirational vision of what your firm's about but a vision
is not the same as a strategy.

Achievable: "Double sales revenue in the Midwest territory."

Inspirational: "Make a difference and change the world."
6. They have a business plan behind them.
A strategy is just hot air unless there's a tactical plan for achieving each strategic goal. For
example, if your strategy is (wait for it...) to double sales in the Midwest territory, your business
plan would probably include retraining existing personnel, hiring new salespeople, investing in
better lead generation methods, and so forth. If the plan's not there, the strategy isn't real.

7. They don't change much.

It's always smart to notice what's working (i.e. moving you towards your strategic goal) and
what's not, and equally smart to quickly adjust your tactics, make corrections, and try new
approaches.

What's not so smart is making frequent changes in strategic direction. Such changes upend
everything and productive work grinds to a halt as everyone tries to rethink what they're doing in
order to fit it into the new strategy.

Because of this, changes in strategy should be undertaken only when it's clear that achieving a
strategic goal is either impossible or no longer desirable.
MARKETING AUDIT

The Marketing Audit refers to the comprehensive, systematic, analysis, evaluation and the

interpretation of the business marketing environment, both internal and external, its goals,
objectives, strategies, principles to ascertain the areas of problem and opportunities and to
recommend a plan of action to enhance the firm’s marketing performance.

The marketing audit is generally conducted by a third person, not a member of an organization.

The firm conducting the Marketing Audit should keep the following points in mind:

The Audit should be Comprehensive, i.e. it should cover all the areas of marketing where the
problem persists and do not take a single marketing problem under the consideration.

The Audit should be Systematic, i.e. an orderly analysis and evaluation of firm’s micro & macro
environment, marketing principles, objectives, strategies and other operations that directly or
indirectly influences the firm’s marketing performance.

The audit should be Independent; the marketing audit can be conducted in six ways: self-audit,
audit from across, audit from above, company auditing office, company task-force audit, and
outsider audit. The best audit is the outsider audit; wherein the auditor is the external party to an
organization who works independently and is not partial to anyone.

The audit should be Periodical; generally, the companies conduct the marketing audit when
some problem arises in the marketing operations. But it is recommended to have a regular
marketing audit so that that problem can be rectified at its source.

COMPONENTS / TYPE/ AREAS OF MARKETING AUDIT

There are no fixed guidelines regarding the scope, areas or types of marketing audit. In other
words, the scope of marketing audit is not fixed. It changes from company to company. Each
company can make its own marketing audit plan. However, the scope of marketing audit must
include the following areas or types:
 Marketing Environment Audit.
  Marketing Strategy Audit.
 Marketing Organization Audit.
 Marketing Systems Audit.
 Marketing Productivity Audit.
 Marketing Function Audit.
Now let's discuss each main area or type of marketing audit.

1. Marketing Environment Audit

Marketing Environment Audit consists of the external environment of company. It includes

natural environment, economic environment, political environment, demographic environment,
etc. The marketing audit analyses the marketing consumer, competitors, suppliers, so on. This
audit helps the company to make marketing strategies.

2. Marketing Strategy Audit

Marketing Strategy Audit is a critical analysis of marketing objectives and strategies. It finds out
whether the company's marketing objectives are clear and proper. It also examines the marketing
strategies of the company. This audit is done to find out the utility of the marketing strategies.

3. Marketing Organization Audit

Marketing Organization Audit is a systematic study of the company's organizational resources

like manpower, organization, structure, employee training and development, Research and
Development facilities, motivation, communication and working relations.

4. Marketing Systems Audit

Marketing Systems Audit finds out the company's ability of collecting and analyzing data. It
looks for the company's ability to plan and control the marketing activities. It also studies the
company's marketing information system, planning and control system, etc.

5. Marketing Productivity Audit

 Marketing Productivity Audit finds out the profitability of the company's products. It examines
the markets. It also examines the measure to improve cost-effectiveness.

6. Marketing Function Audit

Marketing Function Audit is a complete study of marketing functions in relation to the product,
price, promotion and place of distribution. So, it is an audit of the marketing mix (4 P's) of the
company.

CHARACTERISTICS OF MARKETING AUDIT

The salient features or characteristics of marketing audit are as follows:

 Marketing audit is a comprehensive study of all marketing activities.

 It is a systematic-process that follows a step-by-step procedure.
 It is a periodic activity and must be conducted regularly.
 It is conducted by an independent person who is not from company.
 It is a critical review of marketing activities of company.
 It is an evaluation of marketing activities of company.
 It finds out marketing opportunities and weaknesses of company.
 It is a preventative and curative marketing medicine.

Now let's briefly discuss or explain each characteristic of marketing audit.

1. Comprehensive study
Marketing audit is a comprehensive or complete study of all the marketing activities of company.
It studies the marketing environment, marketing objective, marketing plans, policies and
strategies, etc.

2. Systematic process
Marketing audit is a systematic process. It follows a step-by-step procedure.
1. It studies marketing environment.
2. It studies the internal marketing system.
3. It examines the marketing activities.
4. It finds out the problems.
5. It makes an action plan to remove the problems.
The main aim of marketing audit is to improve the effectiveness of marketing.
3. Periodic activity
A company must conduct a marketing audit regularly or periodically. It must conduct the
marketing audit even if it has no problems. This is because it helps the company to analyze the
post performance and to make future marketing strategies.
A company must not conduct a marketing audit only if it has problems or when it suffers a loss.
It must be a compulsory and not an optional activity.
Marketing audit is like a postmortem of failure.
4. Independently conducted
Marketing audit is independent. That is, it is conducted by an autonomous person. It is not
conducted by a person who is working in the marketing department. Mostly, it is conducted by
an outside agency.
5. Critical review of marketing activities
Marketing audit is a critical review of marketing activities of the company. It finds out the
defects, deficiencies, problems and weakness in company's marketing activities. It also gives
suggestions about how to remove these defects or deficiencies.
6. Evaluates marketing activities
Marketing audit is an explanation or evaluation of marketing activities of company. It evaluates
company's objective, plans, policies, programs, etc.
7. Finds out opportunities and weaknesses
Marketing audit finds out the marketing opportunities and weakness of the company. It helps the
company to take advantage of the marketing objectives. It also helps the company to remove all
its weakness.
8. Preventative and curative marketing medicine
Marketing audit is a preventative and curative marketing medicine. It prevents marketing
problems. It also cures (solves) marketing problems.

METHODS OF MARKET AUDIT

 Outside auditor
In this method, the company can appoint an outside auditor to conduct a marketing audit. An
outside-auditor must be professional, a consultant or an agency.
Outside auditors conduct marketing audits for many companies. They have enough skills and
experience. 
 Task force audit
In ‘Task Force Audit’ method, the company appoints a team of its own executives for conducting
a marketing audit. These executives are highly experienced. They conduct the marketing audit
independently. They submit their report to the top level of management.

 Self audit
In ‘Self Audit’ method, the company appoints the marketing manager to conduct a marketing
audit. Here, the marketing manager has to conduct a marketing audit himself. This is called self-
audit. 
 Audit from above
In ‘Audit From Above’ method, the company appoints a senior executive to conduct a marketing
audit. This executive is mostly a director or a person who has complete knowledge about
marketing. This is a type of internal audit.

MARKETING PERFORMANCE MEASUREMENT

Marketing performance measurement (MPM), or marketing performance management, is the

systematic management of marketing resources and processes to achieve measurable gain in
return on investment and efficiency, while maintaining quality in customer experience.[1]

Marketing performance management is a central facet of the marketing operations function

within marketing departments.

Marketing performance management relies on a set of measurable performance standards, a

pointed focus on outcomes, and clear lines of accountability (i.e. roles and consequences).
Measurement management is based on six success factors:

 Alignment

Alignment of marketing activities and investments to business outcomes occurs when a

marketing organization establishes a direct connection between marketing activities, investments
and business outcomes. Alignment begins with customer insights, to ensure that the marketing
performance management approach will be rewarded by the marketplace.

 Accountability

Accountability is the monitoring and measurement of the achievement a person, group, or

organization makes to deliver specific, defined results relating to the enterprise’s objectives. This
requires selecting the right metrics, integrating performance targets, and producing actionable
reports.

 Analytics

Analytics seeks to identify patterns in data by organizing it and applying mathematical and
statistical tests. This foster fact-based, data-driven customer, product, market and performance
decisions and develop models to support scenario analysis and predict potential outcomes.

Marketing analytics is used to create models to understand, monitor, and predict customer
behavior, such as likelihood to defect or predisposition to purchase. It can help managers
quantify performance, make and optimize channel and mix decisions, or understand the impact
of a campaign on a sales list.

 Automation

Automation of marketing processes reduces manual labor, errors, and inconsistency. It enables
timely, personalized messaging to customers, prospects, and other stakeholders.

Automation provides infrastructure for marketing performance management. It spans marketing

resource management, campaign automation, business intelligence, data management, reporting
platforms, and scenario analysis tools.

 Alliances

Alliances are arrangements between companies to create additional value together. Distributors,
resellers, marketing agencies, and other companies may co-develop, co-promote, and/or co-
deliver various parts of the marketing mix (product, price, promotion, placement).

 Assessment
Assessment is the evaluation of strengths, weaknesses, and opportunities in marketing
performance management. Assessment is typically conducted by benchmarking other
organizations or comparing performance to a standard. Ideally, assessment is supported by a
culture of genuine concern, dedication, and willingness among management and employees to
continually improve performance.

MARKETING STRATEGY FORMULATION

To run a successful business, you must first get the word about about your products and services.
Successful marketing requires a winning strategy. Understanding marketing strategy formulation
lets you properly evaluate your organization's marketing needs. You can then gear your
marketing strategies to achieve maximum effectiveness.

DEFINITION

Marketing strategy formulation is the process of defining an organization's marketing goals and
objectives. This allows formulators to create a guide. They examine the market and in doing so,
use that information to determine what marketing approaches will be best at reaching clients and
enticing them to seek out the business' services.