Selecting Market Strategies-Chapter 9

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  • Selecting Marketing Strategies-Chapter 9
    • Differentiation vs. Cost Leadership
      • Every business strategy needs a find a basis for competitive advantage. This means that business strategy must involve the analysis of Porter's five competitive forces.
        • Five forces analysis considers:
          • New Entrants
          • Substitute products
          • Power of buyers and sellers
          • The level of competition between firms
    • Cost Leadership
      • By pursuing a strategy of cost leadership, a firms sets out to become the lowest-cost producer in its industry
      • It produces on a large scale and gaining economies of scale
      • Its products will tend to be standard and mass produced
      • Key to success with cost leadership-achieve low costs and set prices close to industry average
      • Problems with Cost Leadership
        • This strategy occurs if customers perceive the quality/value of products to be lower than competitors
        • Reduction in quality may lead to a forced reduction in prices, thus profit
        • If competitors lower their costs to match the firm's level, cost leadership will be lost
    • Differentiation
      • In order to compete in the mass market, a firm needs to make sure that its product is different from competitors
      • If the consumers value this difference, it will benefit the firm in two ways:
        • Increased sales volume
        • Greater scope of charging s higher price
      • Differentiation can be based on a number of characteristics such as:
        • Superior performance
        • Product durability
        • After-sales service
        • Design, branding and packaging to improve the attractiveness of a product
        • Clever promotional and advertising campaigns to boost brand image and sales
        • Different distribution methods
      • Pursuing a policy of differentiation can add value by creating a USP. This may be real, such as a different design or different components, or it may be based on image and branding
    • Ansoff Matrix
      • The matrix shows the degree of risk involved in different business strategies
      • Market Penetration
        • Market Penetration is keeping an existing product in an existing market
        • Safest and most common strategy
        • May involve finding new customers
        • Could increase use among existing customers
      • Product Development
        • Product Development is a new product in an existing market
        • Boosting share of existing market with new products
        • Quite high risk as many new products fail
        • Could target competitors strengths
        • Develop new niches e.g. Side-stepping the competition
      • Market Development
        • Market Development is an existing product in a new market
        • Quite high risk due to lack of new knowledge
        • Quite high risk as you may lack market knowledge
        • They have the option of repositioning your product or move abroad
      • Diversification
        • Diversification is a new product in a new market
        • Could spread risk but could be high risk
    • Factors influencing business strategy
      • Management objectives and corporate objectives
      • Risk and management attitude to risk
      • Ltd or Plc
      • Financial situation of company
      • Culture of company e.g. flexibility to change
    • Entering International Markets
      • Exporting
        • Business manufacturers in its own country then sells goods overseas. However, control of marketing may be passed to an agent/retailer overseas
      • Setting up a base overseas
        • Setting up a factory in a new country e.g. Nissan in the UK, avoids tariff barriers
      • Joint Ventures
        • Working in partnership with another company who may have more local knowledge overseas e.g. apple working with China mobile in China to ensure wide distribution
      • Franchising
        • Ensures rapid growth without risking finance as the franchisee pays to use the brand format
      • Licensing
        • Applies to manufacturing where a royalty is given to the parent company by the licensee
      • Benefits of International Marketing
        • Wider target market resulting in sales growth
        • Profit Growth
        • Economies of Scale
        • Spreading risk
      • Risks of International Marketing
        • Culture differences e.g. Tesco's setting up in China
        • Legislation and regulation
        • Economic issues e.g. exchange rates
        • Ethical issues e.g. use of sweat shops
    • Assessing the effectiveness of marketing strategies
      • We assess the effectiveness of a marketing strategy in two ways: Market Share and Sales Revenue
      • Reasons why a marketing strategy might fail to meet its sales objectives
        • Not enough money spent on the marketing of the product
        • Other cheaper competition in the market
        • Unrealistic objectives
        • Poor product
        • Economic state of country
        • Changes in views of health of the public

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