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2.1 Introduction This following chapter shall in detail discuss about the literature review of marketing strategies which are used and can be used by business particularly in the fast food industry to improve and enhance their customer base. Marketing strategies play a vital role in achieving the objectives of the organization and are essential pillars of the organization. Thus, it is essential to understand the need of having efficient marketing strategies is very important for the progress of the business. 2.2. Marketing Marketing is a significant dimension of any business in today’s highly competitive environment and financial success is often dependent on marketing ability. Finance, operations, accounting, administration and other business functions will not really matter if companies do not under- stand consumer needs and identify sufficient demand for their products and services for them to make a profit. Companies of all kinds; from consumer product manufacturers (such as Nokia or Ericsson in Sweden), to health care insurers (e.g. Bupa in the United Kingdom), from car manufacturers (e.g. BMW or Porsche in Germany) to banks (such as Socirale in France or RaboBank in Holland), from non-profit organisations (Amnesty International, which was founded by a British lawyer) to industrial product manufacturers (e.g. Airbus a French, German, English and Spanish conglomerate); all have to use marketing to understand their core customers and grow their businesses. The report highlighted the fact that marketing challenges differ globally, with European CEOs focusing on getting new, more responsive ideas out sooner. Therefore execution in terms of speed, flexibility and adaptability to change is a more dominant theme in Europe (3rd place) than in Asia (8th place) and the United States (10th place). All CEOs recognised the importance of marketing to building brands and a loyal customer base, two core
while H&M has been competing with Gap in many markets. or with these trends.hard dis. is a major marketing skill set for the future generation of marketers. Upper conservatives and Modern mainstreams. by being the first to focus on energy-efficient. BMW prides itself on being the world’s number one car manufacturer in the luxury niche market and also on its marketing ability to react to changing consumer lifestyle segments and match these segments with products. There are also new consumer concerns. The German discount supermarket Lidl has Euro 9 billion in non-domestic European sales. The Dutch company Philips. Lithuania. Kaiser and Edeka in its domestic market. where its main rival Aldi has no presence. Lidl has had a dramatic effect on established supermarkets such as Spar. Croatia and Slovenia. Consumers also have more choice. and a nationwide survey by the consumer magazine 2007 reported that British consumers rated Lidl and Aldi higher than Tesco. Morrison’s and Sainsbury’s.assets that make up a large percentage of the value of a company. Lidl has more than 400 stores in Britain. environmentally friendly consumer and business lighting. Its policies of ‘. Changing a product range to match expected changes in future customer segments requires immense marketing skill. The strategy succeeded and in 2006 BMW had profits in excess of 4 billion. –. Awareness of changing consumer and business trends and the use of marketing expertise to react to and change before. and now plans to target Hungary. If BMW had got this . Marketing is a complex set of tasks as well as a philosophy of business and it has been the Achilles heel of many formerly prosperous companies. and supplying only own brands characterise its marketing strategy. Marketing managers have to rethink and reorient their marketing efforts to deliver customer satisfaction within competitive markets. Estonia.counting’. has overtaken many national light bulb brands in Europe. offering goods at prices even lower than normal discount stores. In 2000 BMW commissioned consumer research that identified four new market segments: Upper liberals. Asda. Some companies had to confront new competitors: the Spanish clothing company Zara entered Benetton’. Postmodern’s.s target market. and then redesigned its product range to provide cars to match these predicted new segments.
The companies at greatest risk are those that fail to carefully monitor their customers and competitors and who fail to continuously match their value offerings to customer needs. Strategically they must consider which features to design into new services or products. or the Internet. sales-driven view of their business and ultimately they fail to satisfy their stockholders. Making the right decisions isn’t always easy. their customers. . but never an end. for it is a process. When the Swedish company IKEA noticed that people wanted good . suppliers and supply network members and most importantly. Marketing is not an event. managing ongoing research. The scope of marketing To prepare to be a marketing manager. the colour of the wallpaper in reception and the format for answering the phone. As Jay Conrad Levinson 7 author of Guerrilla Marketing noted. what channels to use to distribute their services and products. what is marketed. . how much to spend on communications including advertising.3. sales. how it works. perfect it. Skilful marketing is a never-ending pursuit. which is a focus on the customer but also on the company and its objectives. You improve it. It has a beginning. a middle. But you never stop it completely. 2. and who does the marketing. ignoring the strategic role of marketing in the overall success of the company. this has been called balanced centricity. but a process . but BMW was right and have the profits to reflect that.wrong it could have been disastrous. For many companies the role of the marketing department has being confined to tactical issues. They take a short-term. what kind of price to offer customers. and which other media is most appropriate. employees. Tactically they must also decide on details as diverse as the exact wording or colour for new packaging. Marketing managers must make major strategic or long-term decisions along with tactical or short-term decisions. even pause it. One of the shortest definitions of marketing is the process of meeting needs profitably. you need to understand what marketing is. What is marketing? Marketing is about identifying and meeting human and social needs. change it.
and other stakeholders. relationship marketing. and the ultimate test of marketing success is a profit level that allows a company to prosper in the long run. Social marketing is an umbrella term used to describe how. Marketing is a customer focus that permeates organisational functions and processes and is geared towards marketing promises through value proposition. they created well-designed. services marketing and the promise concept. Marketing is a revenue-generating function of a business. proposed a definition that encompasses recent research into customer value. one marketer has said that marketing’s role is to. managing. When Nokia realised that phone design was crucial and began to design its own range of clam shell phones the company captured part of a growing market. communicating and delivering superior customer value. Here is a definition that reflects the role of marketing in society: Marketing is a societal process by which individuals and groups obtain what they need and want through creating. keeping and increasing customers through creating.furniture at a substantially lower price. There is much debate about a definition of marketing. We can distinguish between a social and a managerial definition of marketing. It must be applicable to different marketing contexts and be able to change. A social definition shows the role that marketing plays in society. marketing can . offering and freely exchanging products and services of value with others. deliver a higher standard of living. enabling the fulfillment of individual expectations created by such promises and fulfilling such expectations through support to customers. for example. value-generating processes. Marketing management is the art and science of choosing target markets and getting. in different ways. low-priced furniture. of the Hanken Swedish School of Economics in Finland. thereby supporting value creation in the firm’s as well as its customers. In 2007 Professor Christian Gronroos. Managing exchange processes between businesses and consumers and business-to-business calls for a considerable amount of work and skill. processes. A definition must be generic enough to cover a large variety of products and services in both consumer and business-to-business markets.. These companies demonstrated marketing savvy and expertise in turning a private or social need into a profitable business opportunity.
one marketer has said that marketing’s role. new regulatory requirements. Here. patients or students that typically play the same role. In the private sector. in determining success. clients. This is made up of organisations producing the same products or services.standing the attractiveness of particular industries or sectors and potential threats from outside the present set of competitors. environmental and legal environments might impinge on organisations. economic. revolutionary technologies or the entry of new competitors.. technological. satisfied customers are what keep an organization in business. the environment is also the source of threats: for example. Environmental change can be fatal for organisations. green or sustainable marketing. Industry . Scenarios consider how strategies might need to change depending on the different ways in which the business environment might change. Key drivers can be used to construct scenarios of possible futures. it is government. rather than business-specific factors.. This chapter’s key debate addresses the importance of industry factors.. forms the next layer with this broad general environment. some more remote. from which to identify key drivers of change. and includes critical marketing. Within most industries or sectors there will be many different organisations with different characteristics and competing on different bases. Here the five forces framework is particularly useful in under. or sector . definition shows the role that marketing plays in society. for example. This consists of broad environmental factors that impact to a greater or lesser extent on almost all organisations. The concept .encourage positive social behaviour. However. 2. social. hostile shifts in market demand. the PESTEL framework can be used to identify how future trends in the political. Marketing Environment The environment is what gives organizations their means of survival. Competitors and markets are the most immediate layer surrounding organisations. and. The macro-environment is the highest-level layer. some closer to a particular organisation. in the public sector.4. This PESTEL analysis provides the broad.
social factors (facilitating more leisure) and environmental factors (reducing pollution). for example ageing populations in many Western societies. drawing out implications for the organisation. The PESTEL framework The PESTEL framework provides a comprehensive list of influences on the possible success or failure of particular strategies. Environmental stands specifically for green. For example. expectations are not all the same. Similarly. and finally Legal embraces legislative constraints or changes. analysing these factors and their interrelationships can produce long and complex lists. Rather than getting overwhelmed by a multitude of details. Technological. For example. business cycles and differential economic growth rates around the world. such as pollution and waste. Economics refers to macro-economic factors such as exchange rates. it is important to analyse how these factors are changing now and how they are likely to change in the future. PESTEL stands for Political. creating new jobs). Politics highlights the role of governments. Social. customers. Key drivers for change are the high-impact factors likely to affect significantly the success or failure of strategy. They have a range of different requirements the importance of which can be understood through the concepts of market segments and critical success factors . technology developments may simultaneously change economic factors (for example. For managers. Typical key drivers will vary by industry or sector. such as health and safety legislation or restrictions on company mergers and acquisitions. therefore. As can be imagined. a clothing retailer may be primarily concerned with social changes driving customer tastes and . Technological influences refer to innovations such as the Internet. issues. Economic. in the marketplace. Many of these factors are linked together. Environmental and Legal. Social influences include changing cultures and demographics.of strategic groups can help identify close and more remote competitors. nanotechnology or the rise of new composite materials. it is necessary to step back eventually to identify the key drivers for change.
because they protect them from new competitors coming in.5. High barriers to entry are good for incumbents (existing competitors). In some industries. Identifying key drivers for change helps managers to focus on the PESTEL factors that are most important and which must be addressed as the highest priority. it will be very expensive for new entrants to match them and until they reach a similar volume they will have higher unit costs.behaviour. Without a clear sense of the key drivers for change. A computer manufacturer is likely to be concerned with technological change. Typical barriers are as follows: Scale and experience. Competitive forces: The five forces framework Porter’s five forces framework 6 was originally developed as a way of assessing the attractiveness (profit potential) of different industries. political change (changing government funding and policies) and legislative change (introducing new requirements). Once incumbents have reached large-scale production. Many other changes will depend on these key drivers anyway (for example. for example increases in microprocessor speeds. Public sector managers are likely to be especially concerned with social change (for example. economies of scale are extremely important: for example. an ageing population). The five forces constitute Porter’s five forces framework was originally developed as a way of assessing the attractiveness (profit potential) of different industries. This scale effect is . Threat of entry depends on the extent and height of barriers to entry. managers will not be able to take the decisions that allow for effective action. for example forces encouraging out-of-town shopping. an ageing population will drive changes in public policy and funding). Barriers are the factors that need to be overcome by new entrants if they are to compete successfully. 2. The five forces constitute The threat of entry How easy it is to enter the industry obviously influences the degree of competition. in the production of automobiles or the advertising of fast-moving consumer goods.
In some industries this barrier has been overcome by new entrants who have bypassed retail distributors and sold directly to consumers through e-commerce (for example. sometimes just through customer or supplier loyalty. If an organisation considering entering an industry believes that the retaliation of an existing firm will be so great as to prevent entry. In global markets this retaliation can take place at many different locations.accentuated where there are high investment requirements for entry. Just the knowledge that incumbents are prepared to retaliate is often sufficiently discouraging to act as a barrier. Of course. tariffs). The threat of substitutes . organisations are vulnerable to new entrants if governments remove such protection. Legislation or government action: Legal restraints on new entry vary from patent protection (for example. for example research costs in pharmaceuticals or capital equipment costs in automobiles. Until the new entrant has built up equivalent experience over time. it will tend to produce at higher cost. Dell Computers and Amazon). Retaliation could take the form of a price war or a marketing blitz. through to direct government action (for example. as has happened with deregulation of the airline industry. Access to supply or distribution channels: In many industries manufacturers have had control over supply and/or distribution channels. or mean that entry would be too costly. Barriers to entry also come from experience curve effects that give incumbents a cost advantage because they have learnt how to do things more efficiently than an inexperienced new entrant could possibly do. Differentiation means providing a product or service with higher perceived value than the competition. this is also a barrier. changing business models can alter scale effects or make certain kinds of experience redundant. to regulation of markets (for example. For example. pharmaceuticals). Internet banking requires only 10. Sometimes this has been through direct ownership (vertical integration).000 customers to be viable (particularly if they are from a profitable niche) and makes experience in running branches much less important. pension selling). Of course.
so long as it offers performance advantages that customer’s value. even to the extent that this class of products or services becomes obsolete. Managers often focus on their competitors in their own industry. Buyer power is likely to be high when some of the following conditions prevail: Concentrated buyers. However. It is the ratio of price to performance that matters. but its relative lightness and its resistance to corrosion gives it an advantage in some automobile manufacturing applications. Thus. aluminium is a substitute for steel in automobiles. although Eurostar has no direct competitors in terms of train services from Paris to London. and neglect the threat posed by substitutes. here buyers can have such high bargaining power that their suppliers are hard pressed to make any profits at all. rather than simple price. Substitutes can reduce demand for a particularly of products as customers switch to alternatives. . Substitutes come from outside the incumbents industry and should not be confused with competitors. The value of the substitution concept is to force managers to look outside their own industry to consider more distant threats and constraints. threats from within the industry.times customers. For example. the less attractive the industry is likely to be. of course.Substitutes are products or services that offer a similar benefit to an industry’s products or services. Thus aluminium is more expensive than steel. The power of buyers Customers. films and theatre are substitutes for each other. are essential for the survival of any business. Extra-industry effects are the core of the substitution concept. A substitute is still an effective threat even if more expensive. there does not have to be much actual switching for the substitute threat to have an effect. trains are a substitute for cars. There are two important points to bear in mind about substitutes. the prices it can charge are ultimately limited by the cost of flights between the two cities. The price/performance ratio is critical to substitution threats. But some. The more threats of substitution there are. but by a different process. The simple risk of substitution puts a cap on the prices that can be charged in an industry.
where just a few retailers dominate the market. This is the case on items such as milk in the grocery sector in many European countries. moving back to sources of supply. Switching costs are typically low for weakly differentiated commodities such as steel. If the buyer has some facilities to supply itself. to get the best price and therefore suppliers than they would for more trivial purchases. buyer power is increased. Low switching costs: Where buyers can easily switch between one supplier or another. As well as fuel. and might occur if satisfactory prices or quality from sup. not ordinary consumers. suppliers . or Unilever. The high buying power of such supermarkets has become a major source of pressure for the companies supplying them. it tends to be powerful. In negotiation with its suppliers. It is very important that buyers are distinguished from ultimate consumers. Concentrated suppliers . Carrefour and Tesco have much more negotiating power than an ordinary consumer would have. their buyers are retailers such as Carrefour or Tesco. or if it has the possibility of acquiring such facilities. The factors increasing supplier power are the converse to those for buyer power. Thus supplier power is likely to be high where there are. glass manufacturers have lost power against their buyers as some large window manufacturers have decided to produce some of their own glass. this can include labour and sources of finance. it can raise the threat of doing the suppliers job themselves. This is called backward vertical integration. Thus for companies like Nestle. raw materials and equipment.Where a few large customers account for the majority of sales.pliers cannot be obtained. Buyer competition threat. For example. Where just a few producers dominate supply. they have a strong negotiating position and can squeeze suppliers who are desperate for their business. total purchases their power is also likely to increase as they are more likely to shop around. If a product or service accounts for a high percentage of the buyers. The power of suppliers Suppliers are those who supply the organization with what it needs to produce the product or service.
trains are a substitute. Buyers are prepared to pay a premium to avoid the trouble. Competitor balance: Where competitors are of roughly equal size there is the danger of intense competition as one competitor attempts to gain dominance over others. If their power is high. Microsoft is a powerful supplier because of the high switching costs of moving from one operating system to another. so it is necessary to concentrate the analysis on the most important ones or types. If it is expensive or disruptive to move from one supplier to another. and Microsoft knows it. not substitutes). As well as the influence of the four previous forces. moving up closer to the ultimate customer. sup. Most organisations have many suppliers. Conversely.have more power over buyers. Star football players have succeeded in raising their rewards to astronomical levels. Competitive rivals are organisations with similar products and services aimed at the same customer group (that is. by focusing on niches to avoid the of the dominant companies). Air France and British Airways are rivals. while even the leading football clubs buyers. High switching cost . This is called forward vertical integration. in a very weak negotiating position for this essential raw material. with the smaller players reluctant to challenge the larger ones directly (for example. . In the European transport industry. relatively fragmented. then the buyer becomes relatively dependent and correspondingly weak. Thus airlines have been able to negotiate tough contracts with travel agencies as the rise of online booking has allowed them to create a direct route to customers. struggle to make money. Supplier competition threat: Suppliers have increased power where they are able to cut out buyers who are acting as intermediaries. leaving the steel companies. there are a number of additional factors directly affecting the degree of competitive rivalry in an industry or sector. The iron ore industry is now concentrated in the hands of three main producers.pliers can capture all their buyers own potential profits simply by raising their prices. less rivalrous industries tend to have one or two dominant organisations.
an organisation can grow with the market. perhaps because they require high investments in capital equipment or initial research. Such customer differences can be captured by distinguishing between strategic customers and ultimate consumers and between different market segments. and meet with fierce resistance. The five forces can impact differently on different kinds of players.Industry growth rate .abilities and compete on different bases. Ford and Porsche may be in the same broad industry (automobiles). prompting competitors to do the same and thereby triggering price wars in which everyone in the industry suffers. but in situations of low growth or decline. The industry life cycle influences growth rates. tend to be highly rivalries. each of which have different cap. they typically cut their prices. Under- . especially in declining industries. but they are positioned differently: they face different kinds of buyer power and supplier power at the very least. In situations of strong growth. Many industries contain a range of companies.standing of competition. if extra capacity can only be added in large increments (as in many manufacturing sectors. any growth is likely to be at the expense of a rival. the competitor making such an addition is likely to create short-term overcapacity in the industry. Similarly. Low-growth markets are therefore often associated with price competition and low profitability. Excess capacity persists and consequently incumbents Competitors and Strategies An industry or sector may be too high a level to provide for a detailed under. For example. High exit barriers: The existence of high barriers to exit. for example a chemical or glass factory). and hence competitive conditions: High fixed costs: Industries with high fixed costs. It is often useful to disaggregate. in other words. Companies will seek to reduce unit costs by increasing their volumes: to do so. leading to increased competition to use capacity. Customers too can differ significantly. These competitor differences are captured by the concept of strategic groups. closure or disinvestment tends to increase rivalry.
some of which are identified. Indeed. it may be that this is not the most relevant basis of segmentation when thinking about the future. any of these factors could be used to identify market segments. Organisations that have built up most experience in servicing a particular market segment should not only have lower costs in so doing. It will be seen in that this under. However.standing of what customers (and other stakeholders) value and how an organisation and its competitors are positioned to meet these needs are critical to understanding strategic capability. However. 2. such as we sell to the domestic appliance industry. in practical terms it is important to consider which bases of segmentation are most important in any particular market.6. high-value bulk purchasers versus frequent low-value purchasers) might be more appropriate in some markets. For example. but also have built relationships which may be difficult for others to break down. A market segment is a group of customers who have similar needs that are different from customer needs in other parts of the market. in industrial markets. direct buying versus those users who buy through third parties such as contractors) or purchase value (for example. What customer’s value will vary by market segment and . Segmentation by buyer behaviour (for example. segmentation is often thought of in terms of industrial classification of buyers.pinning strategic groups and market segments is recognition of what customers value and critical success factors . share in relation to that of competitors) within a market segment is an important consideration. Market Segments The concept of market segment focuses attention on differences in customer needs. Theoretically. it is often useful to consider different bases of segmentation in the same market to help understand the dynamics of that market and how these are changing. The concept of market segments should remind managers of several important issues: Customer needs may vary for a whole variety of reasons. Relative market share (that is.
Critical success factors (CSFs) are those product features that are particularly valued by a group of customers and. These are known as the critical success factors. The extent to which the offerings of different . usually one of these will be more influential than the others. Although both customers influence demand. therefore. and the shop customers. managers may fail to be realistic about how markets are segmented and the strategic implications of that segmentation. It will be seen in the next chapter that an understanding of customer needs and how they differ between segments is crucial to developing the appropriate strategic capability in an organisation. From the potential providers viewpoint it is valuable to understand which features are of particular importance to a group of customers (market segment). customers will value many product/service features to a greater or lesser degree. managers can end up analyzing and targeting the wrong people. most consumer’s purchase goods through retail outlets. Understanding what customer’s value: critical success factors Although the concept of market segments is useful.7. The requirements of the other customers are not unimportant they have to be met but the requirements of the strategic customer are paramount. They may find it very difficult to compete on a broader basis. the shops. this is the strategic customer. Unless there is clarity on whom the strategic customer is. the ultimate consumers of the product. For example.therefore are likely to achieve advantage in segments that are especially suited to their particular strengths. However. where the organisation must excel to outperform competition. 2. The strategic customer is the person(s) at whom the strategy is primarily addressed because they have the most influence over which goods or services are purchased. their direct customers. So the manufacturers must attend to two sorts of customers. It is the desires of the strategic customer that provide the starting point for strategy. Identifying the strategic customer Bringing goods and services to market usually involves a range of organisations performing different roles.
The canvas is a simple but useful way of comparing competitors positions in a market and potential in different segments.providers address the factors valued by customers can be visualised by creating a strategy canvas 21. .
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