CHAPTER 2: DETERMINING CORPORATE
STRATEGY activity in the marketplace.
What is CORPORATE STRATEGY?
• Corporate strategy refers to the
overall plan that guides a company in
achieving its long-term goals and
objectives.
Developing company strategy is a
FIVE-STEP PROCESS
• Changes in the Environment
• Analysis and Marshalling of
Company
• Resources
• Clarification or "Thinking Through" of
Values, Beliefs, and Aspirations
• Matching Process and
• Distinctive Competence
ANALYZING THE FIRM'S RESOURCES
• Some company resources are
obvious, some are less so, and some
are no resources at all.
Financial Resources
• The most obvious resources are of
course financial.
• A careful analysis of financial
resources begins with the balance
sheet and income statement.
• The businessman should also
constantly remind himself that there
have been cases of fraudulent
accounting of inventories. Even the
best auditors can be at a loss to
discover who the perpetrators are.
• In analyzing fixed assets such as
land, buildings, machinery and
equipment, what should be
constantly kept in mind is that these
are long-lived assets.
• In times of worldwide and continuing
economic crisis, it is simply prudent
financial management to stay as
liquid as possible.
Non-Financial Resources
• These resources may not be reflected
in the balance sheet at all. They are
usually operational in nature; they
give the firm strength in its overall
• Non-financial resources are not
developed overnight. They are
usually accumulated gradually over a
number of years, as a company
competes in the market and as a
result of the competence and vision
of its management.
• The most important of all non-
financial resources is the company's
human resources, particularly its top
management team.
• Some important non-financial
resources are also management's
“connections" - a reality in business,
whether in the Philippines or in other
countries.
• Whether resources are financial or
non-financial or a bit of both, the
marketing practitioner should realize
that resources are relative to the task
at hand.
ANALYZING VALUES AND ASPIRATIONS
DETERMINING CORPORATE STRATEGY
Marcelo Iron and Steel Company
Background:
• Marcelo Iron and Steel Company
recognized the changing dynamics
within the iron and steel industry,
characterized by increased
competition from well-capitalized
firms. The top management team
faced a critical decision on how to
position the company for survival
and growth. Strategic Vision is
Crucial: The case highlights the
critical role of strategic vision in
navigating industry challenges and
seizing opportunities for growth.
Persistence Pays Off:
• Despite initial skepticism and
opposition, the top management's
persistence in pursuing a specialized
strategy yielded significant returns.
Distinctive Competence Matters:
• The success of Marcelo Iron and
Steel Company underscores the
importance of understanding and
leveraging distinctive competence to
create a competitive advantage.
Eppie's Garments Co.
Strategic Focus:
• Eppie's strategic focus on high-
quality lingerie is rooted in the
owner's instinct for good design and
a commitment to using top-notch
fabrics. Commitment to Values:
Eppie's success underscores the
importance of a company's
commitment to its values, such as a
focus on good design and top-quality
materials, in determining its
corporate strategy.
San Miguel Corporation
Strategic Diversification:
• San Miguel Corporation's success
highlights the potential benefits of
strategic diversification when guided
by a common thread that aligns with
a company's core values and
competencies.
Maintaining Strategic Coherence:
• The case emphasizes the importance
of maintaining strategic coherence in
diversification efforts, ensuring that
there is a clear connection between
the newly ventured sectors and the
company's overall identity.
• To clarify the definition of its
business, its competitive posture,
and its concept of itself, a firm may
ask itself the following questions:
• In food processing: Are we a
food company, do we stay in
this business, or shall we be in
the grocery products
business?
In textiles:
• Are we to be in textiles only, or shall
we conceive of ourselves as being in
the clothing business?
• In real estate: Are we a subdivision
development company, or are we in
the business of providing homes of
various kinds: single, duplex,
condominium apartments? Or are we
a specialist in executive-type, high-
cost, high-quality homes?
• In hotels and restaurants: Are we a
hotel and restaurant company, or a
total tourism company?
Defining Fields Narrowly:
Marcelo Steel - Specialty Steels with High
Technology:
• Marcelo Steel's success is attributed
to a narrow definition strategy,
focusing on specialty steels with high
technology.
Eppie's Garments - Top-Quality Lingerie:
• Eppie's Garments found success by
concentrating on top-quality lingerie.
Defining Fields Broadly:
• San Miguel Corporation - Food
Processing and Related Lines
• Philippine Refining Company
(Unilever Subsidiary) - Detergents,
Toiletries, and Food Products
• Johnson and Johnson - Baby Care
Products, Feminine Hygiene, and
Pharmaceuticals
Great movements within a company, be it
specialization, diversification, contraction,
or expansion, are powered by visionary
leadership. It emphasizes that these
movements are not driven by small,
unimaginative, or negative-thinking minds.
Instead, they emanate from entrepreneurs
or leaders with superior talent and energy,
pushing forward with a clear vision despite
potential opposition within the organization.
Matching Environment, Resources, and
Values
• The strategic matching of a
company's environment, resources,
and values is a critical determinant of
its success. The development of
distinctive competence acts as the
 cornerstone, providing the
organization with a unique and
sustainable competitive advantage.
Constant attention from top
management to shield this
competence ensures the company's
resilience in the face of evolving
market dynamics.
THE STRATEGY IN OPERATION
• Specific Goals are set — market
share goals, sales growth, and return
on investment targets.
• The goals are stated within a specific
time frame: next six months, next
year, next three years, next five years,
and next ten years.
• Management resolves such
questions as: when do we negotiate
for the acquisition of new technology,
when do we send people abroad for
training, when do we apply for a new
long-term loan, and when do we build
up the distribution system?
• The setting of priorities demands
organizational leadership from top
management. The entire organization
must know what is going on, and how
things must unfold. Sometimes top
management must “crack the whip”
to discipline lower-level managers
away from their parochial view of
their departments and insist upon the
primacy of corporate goals.
THE FLOUR COMPANY EXAMPLE
• It would first have to conduct an
environmental analysis for the new
product lines being considered. The
company would also have to look at
its strengths and weaknesses in its
distribution system, and determine
whether it has the resources to tackle
in addition to bakeries, or is willing to
take a risk on new product lines that
would aim at housewives and be sold
through supermarkets, groceries, and
sari-sari stores.
CHAPTER 3: LOOKING INTO CONSUMER
DEMAND
What is Consumer Demand
• Consumer demand means the
quantity of goods or services that
consumers are willing and able to
purchase.
Demand Analysis
• In action refers to the practical
application of methods and tools to
study and understand consumer
demand for a particular product or
service in a real-world scenario. It
involves investigating various factors
that influence the demand for a
product, evaluating market
conditions, and making informed
decisions based on the findings.
“FIREX INTERNATIONAL”
Demand Analysis in Action
• Manila Traders, Inc. was negotiating
with Firex International Sate
Corporation for Philippine
distributorship of FIREX smoke
alarms.
• The smoke alarm is a relatively new
and unfamiliar concept in the
Philippines.
• Similar in durability to an electric flat
iron, a radio, or an alarm clock.
• On the other hand, the product is not
a producer's good such as machinery
and equipment or raw materials, the
sales of which would fluctuate more
directly with the ups and downs of
business activity.
• It was certainly not a monopoly, since
there were several brands being sold
in the market.
• Sociological or cultural differences in
demand could be accounted for by
opinion leaders, or those who tend to
be open to new products and new
technologies.

KEY ISSUES IN DEMAND ANALYSIS
Is the product a consumer good?
Consumers Good
• Consumer goods: shampoo, lotion,
soap, cosmetics, cooking oil, meat,
fish.
Producer’s Good
• Producer’s good: raw materials like
metals and fabrics, machines used
for manufacturing, office furniture
and equipment.
Is the product durable or nondurable?
Durable
• appliances, cars, trucks;
Non-durable
• cheese, chewing gum, deodorants,
cigars
Is demand for the product derived
from demand for other products?
• Derived demand would be for such
products as batteries, copper,
packaging materials.
How has demand affected the supply
side in terms of the structure of
competition?
Monopoly
• A monopoly condition is one where
there is one dominant seller.
Oligopoly
• An oligopolistic condition is one
where only a few, say three or four
sellers exist, as in the cement
industry in the local market or the
petroleum industry [OPEC] in the
international market.
Is the shape of short-run demand likely
to remain the same in the long-run, or
will changes probably happen, and why?
Short-run
• period in which wages and some
other prices are sticky.
Long-run
• period in which full wage and price
flexibility, and market adjustment,
has been achieved, so that the
economy is at the natural level of
employment and potential output.
What is the likelihood of competition from
substitutes?
• There could be changes in substitute
materials like non-soapy detergents
or NSD instead of coconut oil-based
soap; greater use of metal alloys;
substitute materials in pulp and
paper production. There could also
be changes in production processes
like low-cost automation; the boom in
electronics technology; increasing
use of lasers and robots.
Is demand relatively elastic or inelastic
with reference to price, income, or other
factors?
Elastic
• Elastic demand" means that a
percentage change in price results in
a greater percentage change in
quantity demanded
Inelastic
• In the case of "inelastic demand, "a
percentage change in price results in
a lower percentage change in
quantity demanded.
How is demand broken down by region?
• Demand analysis is more useful if the
national aggregate is broken down
into demand for various regions: the
 Ilocos region, Central Luzon,
Southern Tagalog, Eastern Visayas,
and so forth. Since the NEDA has
divided the country into thirteen
regions, it is advisable to use the
NEDA regional grouping because all
statistics from the NCSO use the
NEDA regional breakdowns.
What are the psychological characteristics
associated with demand?
• This would involve such aspects as
status symbolism, love of a mother
for her family, connotations of being
hardworking, or lazy, of being
"macho" or feminine, and so forth,
which are sometimes associated with
product types or specific brands.
Since psychological characteristics
are often powerful motivating factors
in the purchase decision of
consumers, it is particularly fruitful
for marketing practitioners to study
them.
What are the differences in demand among
economic classes?
• Different classes have different
purchase patterns. In some cases,
upper-income, or Class AB homes,
consume more of a product than
others. In others, middle-income or
Class C households are the major
consumers. In still other cases, low-
income households or Class DE
homes consume the most. Το
concentrate marketing efforts where
there would be maximum payoff,
demand analysis should include
differences in demand among
socioeconomic classes.
Elasticity of Demand
Methods in Forecasting Demands
• Demand forecasting methods are
essential tools for businesses aiming
to anticipate future customer needs
and optimize their operations.
Use of collective opinion
• Consists of evaluating forecasts from
various departments of the firm,
collecting as well as combining
separate forecasts made by the sales
department, the engineering
department, and the corporate
planning department.
Use of economic and demographic
characteristics
• Takes into account such factors as
age, sex, income and other
socioeconomic characteristics of the
target market, and taking note of
changes that occur or are likely to
occur due to inflation, recession, or
boom conditions in the local or
International markets.
Use of indicators and regression and
analysis
• This method which is primarily based
on historical patterns should be
combined with a fair amount of
judgment, since historical pattens do
not always hold true for future
events; some new factors or forces
may enter the picture to alter the
shape of demand in unforeseen
ways.
Time Series Analysis
• Consists of moving average and
exponential smoothing methods,
which are other forms of predicting
future demand through projections of
historical demand. A simple moving
average based on past sales is
computed.
• The computations are smoothed out
by correcting for trends, or adjusting
for seasonal demand patterns.
Adjustments are made for cyclical
factors (recession, recovery, boom)
 or seasonal factors (Christmas
season, school opening season,
summer season, wet season).
The Flour Company Example
• If our flour company decides to
launch cake mixes, a demand
analysis is an essential first step.
This entails evaluating the potential
of the market by examining trade,
distribution, and seasonal patterns.
Comprehending the baking habits of
housewives is crucial for success,
which is why a consumer survey is
needed.
• It is vital to look at the type of
competition: oligopoly, monopoly, or
several buyers and sellers. It is
critical to take into account both
short- and long-term demand,
particularly in light of consumer
desires for "instant" items. Other
strategic concerns include assessing
the elasticity of demand for cake
mixes and investigating alternatives
such as cassava flour.
• To determine elasticity concerning
price, consumer income, and other
factors, vital for pricing strategy, the
company must explore psychological
characteristics associated with cake
mix demand. Utilizing input from the
sales force, NCSO's economic and
demographic data, along with trade
and consumer attitude surveys, will
shape a targeted and effective
marketing strategy.
CHAPTER 4: SUCCEEDING IN
PRODUCT MANAGEMENT
PRODUCT MANAGEMENT IN ACTION
1. Through aggressive pricing, selling
and distribution efforts, and an
imaginative advertising campaign,
the manufacturer of UFC spiced
banana catsup succeeded in
capturing the major share of the total
catsup market, thus beating Del
Monte tomato catsup, a product of a
multinational company.
UFC's Strategic Move:
• Introduction of a variety of low-priced
food products.
• New Products lines: Pork and beans
corned beef, and vienna sausage, etc.
• All under the established ufc label.
2. Facing declining sales, a cocoa
powder manufacturer conducted a
consumer attitude survey to gauge
perceptions of cocoa powder brands
(Hershey's, Ricoa, Serg's) vs.
powdered chocolate drinks (Ovaltine,
Mb), understand household profiles,
and identify preferred mass media
channels.
Marketing challenges in Cocoa Powder
brand:
1. Maintaining Sales During Economic
Stagnation and High Inflation.
2. Competition with Carbohydrate-
Based Chocolate Drinks.
3. Adapting to Emerging Trends.
4. Understanding Socioeconomic Usage
Patterns
5. Shaping the Consumer Image of
Cocoa Powder:
6. Assessing Long-Term Viability.
7. Identifying New Product Development
Opportunities
Marketing Strategies for Cocoa Powder
Brand:
1. Implement dynamic pricing
strategies, such as limited-time
discounts or bundled offerings, to
maintain affordability.
2. Emphasize the purity and authenticity
of 100 percent cocoa powder.
3. Conduct market research to validate
the trend.
4. Conduct in-depth consumer research
to identify specific usage patterns.
5. Invest in modern branding and
marketing campaigns.
6. Explore premium or specialty
variants to appeal to niche markets.
 7. Assess market gaps and unmet
consumer needs.
3. Unilever faced a tough challenge
entering the toothpaste market
dominated by Colgate. Their first
products, SIGNAL and GLEAM, faced
resistance. Despite this, Unilever
persisted due to Colgate's high
profitability. They conducted
extensive research to understand
Filipino consumer preferences.
• Unilever focused on flavor, testing
various peppermint variants. Straight
peppermint stood out, especially
among upper-income households.
Extended usage tests revealed a shift
in preference over time, with a
notable "fatigue factor."
• Factors like "effect in the mouth,"
"foam," and "cleaning properties"
influenced preferences. Though
Colgate was initially preferred during
brushing, extended use narrowed the
difference. Unilever used these
insights to refine toothpaste flavors,
strategically competing in the market.
• Recognizing that Filipino consumers
preferred a "cool or refreshing"
toothpaste sensation, a Filipino
executive suggested a departure
from Colgate's dominant flavor. The
marketing director decided to pursue
a lower-level preference, emphasizing
the need for a distinct and appealing
flavor with a fighting chance in the
market.
Four Major Product Development Steps:
a. Unilever addressed the issue of
"coarseness" by developing a
microscopic cleaning abrasive,
ensuring a smooth texture during
brushing.
b. Departing from Colgate's white color,
Unilever introduced a translucent red
and green toothpaste, allowing
consumers to choose. The green
variant had a "minty" taste.
c. Chemical properties were enhanced,
enabling the toothpaste to serve as a
mouthwash simultaneously. Close-up
offered the genuine benefit of being
"a toothpaste and mouthwash in
one."
d. Branded as Close-up, the marketing
focus shifted to the middle to upper-
income youth market, capturing
teenagers and young adults. This
strategy aimed to challenge Colgate's
generational dominance.
4. RUSTAN DEPARTMENT STORE
5. GREGG SHOE STORE
6. The Dean of the De La Salle Graduate
School of Business decided that he
would try his luck in business. Upon
presenting his plans to the La Salle
brothers, the members of the
religious order informed him that
they owned a piece of real estate in
Baguio which had nothing on it, and
gave him the opportunity to turn it
into some kind of profitable venture.
After looking the property over and
discussing the project with some
friends, most notably a consultant
who was an experienced marketing
man, the budding entrepreneur
decided to construct a plush
residential apartment building on the
property. Each "apartment" inside the
building had three to five spacious
bedrooms, a living room, a dining
room, a kitchen and bath. Each
apartment, fully furnished and
carpeted wall to wall, sold for around
Php150,000 to Php300,000 depending
on the amenities, and the buyer bad a
complete legal title to the apartment.
Thus did Hermenegildo Mandanas
and his consultant friend, Manoling
de Leon, launch the hitherto-
unknown condominium concept in
the Philippines, through Far East
Realty Investment Trust (FEREIT). In
its second year of operation, FEREIT
earned some Php25 million (and
 Mandanas eventually became a Psychographic
millionaire). • Grouping customers according to
lifestyles
7. Nonprofit institutions such as • Lifestyle
schools and hospitals can also make • Personality
use of product management • Values
concepts and practices. Those that • Opinions
have done so are institutions that • Interests
have specialized along certain lines,
for example: Behavioral
• Grouping customers based on
• Schools: University of the East common behaviors
(business administration) and Mapua • Spending habits
Institute of Technology (engineering • Purchasing habits
and related fields) • Browsing habits
• Interactions with your brand
• Hospitals: National Children's • Loyalty to your brand
Hospital (children's diseases), the
National Orthopedic Hospital THE PRODUCT LIFE CYCLE
(orthopedic cases) and the Philippine • The term product life cycle refers to
Heart Center for Asia (diseases of the the length of time from when a
heart) product is introduced to consumers
into the market until it's removed
Market Segmentation and the Filipino from the shelves.
Consumer
• The process of grouping customers
in markets with some heterogeneity
into smaller, more similar or
homogeneous segments with similar
requirements and buying
characteristics.

Geographic
• Grouping customers based on
defined geographical boundaries
• Country
• Region
• Culture
• Language • Population

Demographic
• Grouping customers based on
customer personal attributes
• Age
• Gender
• Income
• Religion
• Education