1.

1 Which role should the marketing managers play in helping to formulate business-level (SBU) strategies in
a large diversified firm such as General Motors?

In a good answer to this question most of the following items should have been covered.

Scope
 Business domain - ‘Which product-markets should we be in within this business or industry?’
 Business development strategy
 Concentric diversification (new products for existing customers or new customers for existing products).

Goals and objectives

Objectives aggregated across product-market entries in the business unit:
 Sales growth
 New product or market growth
 Profitability
 ROI.

Allocation of resources
 Allocation among product-market entries in the business unit
 Allocation across functional departments.

Sources of competitive advantage

 Advantage comes primarily through competitive strategy—a business unit’s competencies relative to
competitors in its industry.

Sources of synergy
 Shared resources (including favourable customer image) or functional competencies across product
markets within an industry

1.2 What kinds of information are marketers best able to provide as a basis for planning?
 Target market definition
 Product-line depth and breadth
 Branding policies
 Product-market development plans
 Line extension and product elimination plans
 Marketing mix information for specific products
 Positioning, segmentation and tactical information.

1.3 Which issues or elements of business-level strategy can such information help to resolve?
 What, where and to whom to sell
 How to compete: position, segment, price.

2. Compare the prospector and low-cost defender business strategies discussed in this chapter on each of
the following strategic dimensions: a. scope; b. objectives; c. deployment of resources; d. sources of
synergy.

Answers should include elements such as:

Prospector
a. Operates within a broad product-market domain that undergoes periodic redefinition.
b. Objectives reflect its values of being a ‘first mover’ in new product and market areas, even if not all these efforts
prove to be highly profitable. Highly adaptable.
c. Needs cash for development.
d. Shares technology and marketing skills.

Defender
a. Attempts to locate and maintain a secure position in relatively stable product or service areas. Offers relatively
limited range of products or services compared with competitors.
b. Objectives focus on protecting its domain by offering lower prices, higher quality or better service than
competitors.
c. Generates excess cash.
d. Seeks operating synergies to achieve efficiencies.

3. You are the marketing manager for a generic products division of a major pharmaceutical manufacturer.
 Your division uses the corporation’s excess manufacturing capacity to produce generic prescription
drugs—drugs whose patents have expired and can thus be manufactured by any company that wishes to
produce them. Your division is a low-cost defender that maintains its position in the generic drug market
by holding down its costs and selling generic products to distributors and pharmacies at very low prices.
What are the implications of this business strategy for each of the 4Ps in the strategic marketing program
you would develop for your division?

As a low-cost defender, the job of research, product development, and initial promotion have already been done
by the original product developers. Consequently, the implications are as follows:

Product policies
 Narrow product-line breadth relative to competitors
 Low technical sophistication of products relative to competitors (generics are old and probably less
sophisticated than current patented products)
 Product quality relative to competitors must be equally high.

Price policies
 Low price levels relative to competitors.

Distribution policies
 Low trade promotion expenses as a percentage of sales relative to competitors.

Promotion policies
 Low advertising expenses as a percentage of sales relative to competitors
 Low sales promotions expenses as a percentage of sales relative to competitors
 Low sales force expenses as a percentage of sales relative to competitors.

4. You are an entrepreneur who has developed a packaging technology that instantly chills single-serving
containers of cold beverages such as beer, carbonated drinks, and fruit juices. The customers of such
packaging, therefore, would be beverage-makers. You are not certain whether your technology is
patentable. Using the seven domains framework, assess this opportunity and describe any strategic
decisions you could make to maximize the opportunity’s attractiveness.

Answers should include elements such as:

 The entrepreneur should take the macro-level elements (market attractiveness and industry attractiveness)
as given and assess the chances of success of the product. The entrepreneur has some ability to address
the sustainable advantages of the product, the benefits to the target market, critical success factors and
connectedness across and along the value chain. Entrepreneurs often lack critical resources and may not
have the ability to connect with the value chain.
 Obtaining a patent would be important and a CSF (Critical Success Factor). Having contacts in the beverage
industry and being able to promote the product directly would be critical. Any competitor in the environment
with more clout, contacts or technology could swiftly kill the opportunity.

5. Taking into account the five competitive forces, what do you think lies ahead for the worldwide
automotive industry?

Answers should include elements such as:

 Rivalry among present competitors—this should intensify as companies try to maintain their economies of
scale and justify the large capital requirements. Securing distribution in the auto industry has been difficult due
to the capital requirements for retailers.
 Threat of new entrants—the rivalry should present newcomers with serious obstacles to entry. One successful
strategy has been to penetrate the potential entrant’s home market then enter new foreign markets.
 Bargaining power of suppliers—in the auto industry, suppliers are relatively weak since they depend on
manufacturers’ orders to succeed. They tend to be dependent on the manufacturer: witness Toyota’s power in
selecting suppliers and demanding a difficult-to-achieve level of quality.
 Bargaining power of buyers—except for fleet buyers, buyers have little power. In a good economy, this factor
is minor. Buyers may select alternative brands based on standard pricing offers. Negotiation is present but not
significant. In bad times, manufacturers are willing to offer lower prices, but negotiation is still minor.
 Threat of substitute products—except for different forms of cars and trucks, including styles and power options
(like natural gas and electric), direct substitutes are minor. Public transportation or other forms of motor
vehicles like motorcycles are potential competitors.
6.1 What is the relationship between market segmentation, target marketing, and positioning?

Covered well in the text:

 Market segmentation is the process by which a market is divided into distinct subsets of customers with
similar needs and characteristics that lead them to respond in similar ways to a particular product offering and
marketing program.
 Target marketing requires evaluating the relative attractiveness of various segments in terms of market
potential, growth rate, competitive intensity and other factors, and the firm’s mission and capabilities to deliver
what each segment wants in order to choose which segments it will serve.
 Brand positioning entails designing product offerings and marketing programs that can establish an enduring
competitive advantage in the target market by creating a unique brand image, or position, in the customer’s
mind.
 These three decision processes—market segmentation, target marketing and positioning—are closely linked
and strongly interdependent.

6.2 What damage will be done to a company’s target marketing and positioning efforts if markets are
incorrectly or not effectively or insightfully segmented?
Product benefits will not match customer wants and the target marketing and positioning efforts will be wasted.

7.1 What is the difference between a growth-market targeting strategy and a niche-market targeting strategy?
 Growth-market—a fast-growth segment that may currently not be very large.
 Niche-market—targeting customers seeking specialised benefits from a product or service.

7.2 What capabilities or strengths should a business possess to implement a growth-market targeting
strategy effectively?
 Significant capital for R&D
 Significant marketing capabilities