8. Choosing Strategic Direction

Ansoff’s Matrix

A marketing planning model that helps a business determine its product and market strategy

Market Penetration

A growth strategy where a business aims to sell existing products into existing markets

Aldi: Market Penetration Example

Rapid organic growth in the UK targeting the same customer base with new stores

Dominos: Market Penetration Example

Effective use of e-commerce to encourage existing customers to buy more pizza

Product Development

A growth strategy where a business aims to introduce new products into existing markets

Brand extensions

Common examples of product development strategies

Technological innovation

Provides significant opportunities for product development strategies

Market Development

A growth strategy where the business seeks to sell its existing products into new markets

New geographical markets

Exporting to emerging markets

New distribution channels

Using e-commerce and mail order

Market Development Example

Starbuck’s expansion into China

Diversification

The growth strategy where a business markets new products in new markets

Benefits of Diversification

Reduced Risk, Increased Revenue, Improved Financial Performance, Improved Market Position, New Opportunities for Growth

The Challenge Facing Marketing Strategy

To find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market

Porter’s Approach

Differentiation and low cost are effective strategies for firms to gain competitive advantage

Competitive Advantage

An advantage over competitors is gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and services that justify higher prices

Low cost

The objective is to become the lowest-cost operator

Differentiation

A differentiation strategy aims to offer a product that is distinctively different from the competition, with the customer valuing that differentiation

Ways to Achieve Differentiation

Superior product quality, Branding, Wide distribution, Sustained promotion

Competitors

Market share/ resources/ strategy and competitive

Core Competencies

Unique selling points, scope to be able to differentiate, scale and efficiency to be able to compete at low cost

External Environment

Changes all businesses in the market need to respond to and opportunities and Threats

Loss of product differentiation

Spending on R&D to maintain innovative image, Rivals launch their own 'copy-cat' products

New competition

Competitors exploit gaps in the market to gain market share

Changes in Tastes/ Fashions

Changing tastes can bring an end to competitive advantages

New legislation

Government intervention in the market, new laws and regulations

Competitive advantage

A sustainable advantage that a business has over competitors that enables it to succeed in the market

Competitive Advantage Examples

Awareness and familiarity, Powerful brands, Being more 'in tune' with buyers’ needs, More effective promotion, Being better at bringing innovation to the market

Cost Advantage

Where a business is able to produce its product at a lower cost than the competition

Differentiation Advantage

Where a business is able to differentiate its product from the competition such that customers perceive superior value

Focus/Niche

Focus is a marketing strategy of targeting specific market segments, rather than the entire market.

Value propositions as a competitive advantage

Customers often choose products and services based on their value proposition- how they perceive the merits of a product relative to the alternative, competing products

Four ways to create a winning value proposition

Offer more for less: IKEA- Good quality at low prices

Changing buyer preferences

Markets are always changing and a key dimension of change is changing buyer preferences and expectations.

Higher profits

A competitive advantage can lead to higher profit margins because businesses can make a reasonable profit on each good or service sold.

Competitive response

Competitors may try to replicate or surpass a company's competitive advantage.

Slower growth

Competitive advantage strategies may lead to slower growth compared to other strategies

Investment in new equipment and technology

Machinery and computers can improve the speed, reliability and quality of produces, and still provide flexibility. Labour and other costs can be reduced.

Staff skills, education and training

A skilled and educated staff will be more adaptable and flexible, able to cope with change more readily, and possess more creativity and innovative talents.

Innovation through investment in research and development

The pace of change requires companies to update and broaden their product range constantly.

The effectiveness of a business's marketing

A well-planned marketing mix, suited to the needs of a business, can greatly improve its competitive advantage and therefore its ability to gain greater sales volume and charge higher prices in the face of competition.

Improving quality

As living standards have improved, quality has become more important to consumers.

Effective human resource management

This can take different forms, such as effective recruitment, high-quality training, an efficient organisational structure and appropriate use of incentives in order to motivate workers.

Lack of differentiation

Companies need to create a unique value proposition to set themselves apart from their competitors

Well-informed buyers

Buyers are more aware of what's available in the marketplace, making it harder for companies to maintain a competitive edge.

Increased competition

There are more types of competition than ever before, making it harder for companies to stand out

Need for constant adjustment

Competitive advantages aren't permanent, and companies need to be able to adapt and evolve to meet changing customer preferences and challenges from competitors.