Kotler on Marketing

A key ingredient of the marketing

management process is insightful, creative
marketing strategies and plans that can
guide marketing activities. Developing the
right marketing strategy over time requires
a blend of discipline and flexibility. Firms
must stick to a strategy but must also find
new ways to constantly improve it.1
Marketing strategy also requires a clear
understanding of how marketing works.2

09/05/22 1 Dr. HG
 Strategic Market Planning

Strategic market planning is the managerial process that

entails analysis, formulation and evaluation of strategies
that would enable an organisation to achieve its goals
by developing and maintaining a strategic fit between
the organisation’s capabilities and the threats and
opportunities arising from its changing environment.

09/05/22 2 Dr. HG
 Strategic Market Planning Process

The SMP Process involves :

• Analysis (environmental analysis, competitor and
industry analysis; customer and market analysis, firm
internal analysis.
• The formulation and evaluation of alternative strategies.

• The selection of a strategy, and

• The development of detailed plans for implementing.

09/05/22 3 Dr. HG
 While the Companies Corporate strategic planning
formulates and decides on strategies – they need to
consider the following aspects :
 
What is our corporate mission?

What are our strengths and weaknesses?

What are the relevant threats and opportunities?

What are our corporate objectives?

09/05/22 4 Dr. HG
 Strategic Business Unit (S B U )

SBU denotes a division, product line, or other profit

centre within a company that:

 Produces and markets a well defined set of related

products and / or services,

 Serves a clearly defined set of customers, and

 Competes with a distinctive set of competitors.

09/05/22 5 Dr. HG
 Planning New Business, Downsizing Older Businesses
When there is a strategic gap between future desired sales and
projected sales.

Desired sales

ion
Diversificat
Strategic
Integrative growth planning
Intensive growth gap
Sales

Current portfolio

0 Time (years) 5
09/05/22 6 Dr. HG
 Present Products New Products

Market Product
Penetration Development
Present
Markets Strategy Strategy

Market
Development Diversification
New Strategy
Strategy
Markets

Ansoff’s Product – Market Expansion Grid

09/05/22 7 Dr. HG
 Ansoff Model
Present Products New Products
I. Market Penetration (Intensive Growth) III. Product Development (Intensive)
• Increase Market Share
Present Attract users of competitors products Product reformulation strategy
Market Convert nonusers into users Product quality improvement strategy
Increase product usage Product feature additions strategy
Increase the frequency of purchase Product line extension strategy
Find new applications for current users New product development strategy
II. Market Development (Intensive) IV. Diversification
Expand geographically Related
Target new segments unrelated
New
Market Integrative Growth
Forward Integration
Backward Integration
Horizontal Integration

09/05/22 8 Dr. HG
 Boston Consulting Groups (BCG)
Growth / Share Matrix :

 BCG is simple but useful strategic planning technique based

on an analysis of a company’s product portfolio.
 The technique entails assigning each individual product
(SBU) of an organisation to one of four possible cells in a
simple matrix according to the relative market share and rate
of market growth associated with that particular product /
business.
 According to the cell of the matrix, the product / business is
calculated. They are classified as : Stars, Cashcows,
Question Marks / Problem Children and Dogs.
09/05/22 9 Dr. HG
  
20%
 
18%
 
Market Growth Rate

16% Stars Question Marks

 
14%
 
12%
 
10%
 
8%
  Dogs
6% Cash Cow
 
4%
 
2%

  0.2x

0.1x
0.3x
0.4x
0.5x
1.5x
10x 

1x
2x
4x

 
 
Relative Market Share
 
 
 

09/05/22 10 Dr. HG
 Stars

 These SBU’s are in the high market growth rate / high

relative market quadrant.

 Deletion / retention decision – SBU’s here should be

retained in the firm’s portfolio.

09/05/22 11 Dr. HG
  Market Share Strategy Decision :

 An SBU in this quadrant with a very high relative market

share – the appropriate strategy would be market share

maintenance.

 On the other hand, for an SBU whose relative market

share is marginal – then the appropriate market-share

strategy would be to build share.

09/05/22 12 Dr. HG
  Cash Flow Outlook :

 An SBU with a high relative market share in a

high - growth market will produce - a high level of cash
owing to experience effects and the result is high profit
margins.

 Maintaining market share will require considerable cash to

support increased expenditures on working capital and on
plant and equipment.

09/05/22 13 Dr. HG
  Building Market share in such a market will require
even larger cash outlays to support increased, scale of
operations.

 SBU’s in the high market growth - rate / high - relative

market share quadrant will be self - sustaining.

09/05/22 14 Dr. HG
 Their high relative market share, coupled with relatively
high profit margins and low costs owing to experience
effects - makes them a major generator of cash.

 However, a strategy of share building or share

maintenance in a high growth market also makes them a
major user of cash.

 SBU’s in this quadrant tend to be either in a state of cash

balance (cash outflow = cash inflow) marginal cash
surplus, or marginal cash deficit.
09/05/22 15 Dr. HG
 Cash Cows :

 These are SBU’s in the low market growth / high

relative market share quadrant.

 Deletion / Retention decision :

 SBUs in this quadrant should be retained in the firms

portfolio.

09/05/22 16 Dr. HG
  Market Share Strategy Decision :

 A strategy of market share maintenance is recommended

in view of low rate of their market growth. 

 Investments in capacity expansion may not be desirable.

 However, investments may be made which will improve

manufacturing processes that might lead to lower costs and
/ or better quality products.

09/05/22 17 Dr. HG
  Cash Flow Outlook

 Here, the SBU will be a net cash generator given its

high relative market share. 

 Relatively lower costs, vis-à-vis competitors because

of experience effects and high profit margins,

 A sizable net cash surplus will be a major source of

cash to the parent corporation.

09/05/22 18 Dr. HG
  It may be used to :

 Finance the growth (share building strategy) of selected

SBUs in the high - market - growth - rate/low-relative-
market-share.

 Finance corporate R & D efforts oriented towards the

development of new SBUs,

 Finance the acquisition of new SBUs, and

 Meet other financial obligations of the parent company-

eg. Dividend payments.

09/05/22 19 Dr. HG
 Question Marks

 SBUs in high-market-growth-rate / low-relative-market

share quadrant.

 Retention / Deletion Decision :

 For some SBUs, a firm’s competitors might be holding

commendable position – under such circumstances the
firm needs to invest heavily to build market share and
move the SBU into Star quadrant.

09/05/22 20 Dr. HG
  The viability of a market - share - building strategy should
be on identifiable sources of sustainable advantage - which
will be a major consideration in deciding which SBUs
should be retained or deleted.

 Market Share Strategy Decision :

 A share building strategy for SBUs retained in the

portfolio and a share harvesting or liquidation strategy for
SBUs to be deleted.

09/05/22 21 Dr. HG
  Cash Flow Outlook :

 SBUs here need a sizable cash infusion to finance

share - building strategies and to make investments in
plant and equipment.

 The source of cash to finance share - building strategy

of the SBUs to be retained comes from the cash
surplus generated by cash cow (SBU).

09/05/22 22 Dr. HG
 Dogs
 SBUs are in the low – market growth – rate / low relative
market share. 

 Retention / Deletion Decision : 

 Deletion of SBU is generally advocated. 

 Market share strategy decision : 

 A market share harvesting strategy is generally advocated

if for some reason (exit barriers, lack of buyers) a firm is
unable to divert some of SBUs.

09/05/22 23 Dr. HG
 Cash Flow Outlook

 Minimum investment in running day-to-day operations

of these SBUs and pursuing a share harvesting strategy
could lead to the generation of a substantial cash
surplus.

 Low Investment : Attempt to harvest the business,

drawing cash out and cutting investment to a minimum.

 Divestiture : Sell or liquidate the business.

09/05/22 24 Dr. HG
 Porter’s Generic Strategies

 Michael Porter proposed three generic strategies for

strategic thinking.

a) Overall cost leadership.

b) Differentiation.
c) Focus.

09/05/22 25 Dr. HG
 G E Matrix
Business Strength / Position
(its ability to compete)

High Medium Low

H
1 1 2
Market / Industry
Attractiveness M 1 2 3

L 2 3 3

1. Invest / Grow
2. Selective Investment
3. Harvest / Divest

09/05/22 26 Dr. HG
 Evaluating the Evaluating Market
ability to compete Attractiveness

 Market Share  Market Size

 Share Growth
 Share by Segment
 Customer Loyalty
 Brand Reputation
 Margins
 Technology Skills
 Marketing
 Distribution Network
09/05/22 27
 Annual Market Growth
 Customers satisfaction levels
 Competition ; types
 Profitability
 Technology
 Government regulations
 Sensitivity to economic
trends
Dr. HG