Marketing Competition Strategy

Abstract

In the world of today, where there is already too much competition due to increasing requirements, the number of firms and new businesses is growing rapidly in order to fulfill these demands. In such a competitive environment, it is compulsory for a firm to come up and work with tactful skills and market competitive strategy to remain and compete in the business and it is this strategy that we shall be discussing throughout this paper.

Introduction

A strategy is a plan that integrates an organization’s major goals, policies, decisions and sequences of action into a cohesive whole. It can apply at all levels in an organization and pertain to any of the functional areas of management. Thus there may be production, financial, marketing, personnel and corporate strategies, just to name a few. If we look specifically at marketing then there may be pricing, product, promotion, distribution, marketing research, sales, advertising, merchandising, and etc. strategies. Strategy is concerned with effectiveness rather than efficiency and is the process of analyzing the environment and designing the fit between the organization, its resources and objectives and the environment.

The strategic process refers to the manner in which strategy is formulated. There are several approaches. First, the rational approach, making use of tools such as SWOT analysis and portfolio models. Second, the flexible approach, which employs multiple scenario planning. The creative approach reflects the use of imagination in planning. The behavioural approach reflects the influence of power, politics and personalities. And finally, the incremental approach is based on small adjustments or changes to previously successful strategies.

Marketing is about satisfying customer wants and needs and in the course of doing so facilitating the achievement of an organization’s objectives. By paying attention to customer wants and needs, organizations are more likely to achieve their objectives in the marketplace. Of course, organizations have to compete with each other and so also have to satisfy customers’ wants and needs at least as well as their competitors. Fortunately, organizations can do this in different ways. Competition involves finding a different way to satisfy customers from other organizations in the market place. In the pursuit of this end, products and services need to be seen as more than physical entities—it is the benefits they offer customers that are being purchased.

Competition involves positioning products and services in the minds of customers in such a way that the products and services are perceived to be different from one another. Marketing is about the competitive positioning of products and services in the minds of the customers. It is also about the communication of messages and images (reflecting product and service positioning) and the means which are used to convey these messages and images to the customers (Doyle, 1994).

Marketing is also about managing relationships. In order to persuade the ultimate consumers of the products to buy, others concerned with the product have to be persuaded that what is on offer will satisfy customers’ wants and needs. The chain of persuasion can stretch right back into the organization itself and involve employees of the company. This is the area where internal marketing has come to the fore in recent years. Building relationships with other organizations is also important.

The 21st century is seeing the development of strategic alliances and networks where firms work together towards shared goals and collaborate in their operations. Managing such relationships productively is almost certainly the key to success or failure. The foregoing is at the heart of marketing strategy, which has to take into account the following factors:

•  the opening and closing of strategic windows
•  the impact of market drivers
•  the nature of competition in the market place
•  the stage of the market or industry life cycle.
•  the assets and skills that a firm possesses or can readily acquire/access.

Cognizance of all five of these factors is essential if effective long-term marketing strategies are to be evolved which will lead to a firm securing a strategic competitive advantage in industries or product markets.

Competition is important in influencing how successful an organization’s business venture can be. It is not simply a matter of producing a good product or service which matches with customer wants and needs and provides customer satisfaction. In one way or another, most firms are able to do this but some are much more successful in the marketplace than others.

A firm must be able to position itself competitively in the minds of its customers so that its products and services stand out very favorably in important respects in relationship to competitors. Shell and Esso, for example, both sell essentially the same fuel oils, but both are able to carve out positions for themselves in the minds of their customers, so that they can both operate successfully in the marketplace. The nature and strength of competitors and how a firm jockeys for position are key aspects of marketing and business strategy.

Technologies and products have life cycles and so do markets and industries. There are different stages in the life cycle of markets and industries and these have important ramifications for marketing strategy. Moreover, taken in conjunction with the number and strength of competitors that operate in a market or an industry at any one time in the life cycle. It poses a tight boundary within which the firm can design an optimal marketing strategy.

Some firms may be ideally suited to exploiting certain types of product market opportunities whereas others may languish and fail when trying to exploit the same ones. In another situation the reverse can easily apply. One cannot assume that every firm will be able to exploit the same situation to its advantage, even when the opportunity does appear to be very exciting and has much to promise. Having the necessary skills and assets, or having access to them, is critical in implementing successful marketing strategies. Without these assets and skills a whole series of strategies may fail (Brown, 1999).

A competitive strategy is made up of six parts. The first four apply to any type of business whereas the other two are used when there is more than one business unit in an organization. It involves a determination of:

The product market in which the business competes. The scope of a business is partially determined by what products it offers, by the markets it serves, by the nature of other businesses with whom it chooses to compete, and by the extent of its vertical integration. The scope of the business is also affected by those same elements it chooses to avoid. Often the latter is more important because decisions regarding what to avoid, if acted upon rigorously, can conserve resources needed to compete successfully elsewhere.

The level of investment. Although there are variations and refinements, it is useful to see the options in terms of:

•  Invest to grow
•  Invest only to maintain the existing position
•  Milk the business by minimizing investment
•  Recover as much of the assets as possible by liquidating or divesting the business.

The functional area strategies required to compete in the selected product market. These are:

• Product line strategy
•  Positioning strategy
•  Pricing strategy
•  Distribution strategy
•  Manufacturing strategy
•  Information technology strategy
•  Segmentation strategy
•  Global strategy.

The strategic assets or skills that underpin the strategy and provide the sustainable competitive advantage. A strategic skill is something that the business does extremely well such as manufacturing or marketing and which is strategically important to the business. A strategic asset is a resource such as a brand name or installed customer base that is strong relative to competitors. Strategy formulation should take into account the   cost and feasibility of producing or maintaining assets or skills that will provide the basis for a sustainable competitive advantage.

A single organization, firm or business, is usually made up of a number of business units. Most business units share an organizational framework with other business units which take us to the remaining two points.

The allocation of the resources among the business units. Financial resources generated either internally or externally, plus non-financial resources such as plant, equipment and people, have to be allocated. The allocation decision is a key component in the strategy formulation process.

Looking for synergies across the business—that is the creation of value by having business units that support and complement each other. Where a firm has many businesses that can achieve synergistic effects it will have an advantage over those firms that ignore such possibilities in their own organizations or who fail or are unable to achieve any synergy.

Essentially, competitive strategy is operationalized in terms of:

• The product market investment decision that encompasses the product market scope of the business strategy, its investment intensity and the resource allocation over multiple businesses.
•  The functional area strategies—what to do.
•  The basis of a sustainable competitive advantage to compete in those markets. This core concept encompasses assets, skills and/or synergies matched with functional area strategies (Egan, 1998).

Developing a competitive strategy means developing a broad formula for how a business is going to compete, what its goals should be and what policies will be needed to attain those goals. Competitive strategy is a combination of the ends or goals for which the firm is striving and the means or policies by which it is seeking to get there.

The Wheel of Competitive Strategy is a device for articulating the key aspects of a firm’s competitive strategy. At the hub of the wheel are the firm’s goals—definitions of how the firm is going to compete; objectives for profitability, growth, market share, social responsiveness, etc. The spokes of the wheel are key operating policies with which the firm is seeking to achieve these goals—purchasing, R&D, finance and control, product line, target markets, marketing, sales, distribution, manufacturing, Labour. Under each heading on the wheel a succinct statement of the key operating policies in that functional area should be derived from the company’s activities. Like a wheel, the spokes (policies) must radiate from and reflect the hub (goals) and the spokes must be connected with each other or the wheel will not roll.

A competitive strategy requires the consideration of matters that determine the upper limits of what it can reasonably accomplish. An organization’s strengths and weaknesses are reflected in its profile of assets and skills relative to competitors. This profile includes financial resources, technological posture, brand identification and so on. The personal values of an organization are reflected in the motivations and needs of key executives and other personnel who implement strategic decisions. Strengths and weaknesses along with values determine from an internal point of view what competitive strategy a company can successfully adopt (Bateson, 1995).

An organization’s industry and broader environment determine its external limits. Societal expectations reflect the impact on the company of such things as government policy, social concerns, evolving mores and many others. All of these factors must be considered before a business can develop a realistic and implementable set of goals and policies.

There are three possible broad areas for consideration. The first is the selection of product markets in which the firm will operate and the question of how much investment should be allocated to each. The second is the development of functional area strategies and the third is the determination of the bases of sustainable competitive advantage in those product markets.

Product market investment strategies

Many strategic decisions involve products: which product lines to continue, which to add and which to delete. Markets need to be selected in which a competitive advantage will exist. It is crucial in strategy development to have a dynamic rather than a static focus. The concept of a product-market matrix (Ansoff matrix—see Ansoff, 1987) is helpful for identifying options and encouraging a dynamic perspective.

In the product-market matrix suggested by Ansoff there are four growth vectors. The first is to penetrate existing product markets. A firm may attempt to attract customers from competitors or to increase usage rates of existing customers. A second growth vector involves product expansion while remaining in existing markets. A third growth vector is to apply the same products in new markets, while the fourth growth vector is to diversify into new products. In addition, there is a third dimension to the matrix which is based on vertical integration.

Investment strategies

For each product market, a number of investment options are possible. The firm can reduce or control the investment in a business area by either a milking or a holding strategy. Alternatively, it can withdraw completely if prospects become very unattractive or if the business area becomes incompatible with the overall thrust of the firm. It can also invest to enter or grow.

Functional area strategies

The development of a business strategy involves the specification of the strategies in functional areas such as sales, brand management, R&D, manufacturing and finance. The co-ordination of various functional area strategies so that they don’t work at cross-purposes can be difficult. The role of strategic objectives is to help in that task.

The strategic thrusts representing various ways to achieve sustainable competitive advantage can be implemented in a variety of ways. Differentiation, for instance, can be based upon product quality, product features, innovation, service, distribution or even a strong brand name. Low-cost strategies can be based on an experience curve which links cost reduction to cumulative production volume. However, it can also be based on factors such as no frills products or automated production processes (Bateson, 1995).

Conclusion

An effective strategy needs to involve assets and skills or synergies based on unique combinations of businesses. Thus, identifying which assets, skills and synergies to develop or maintain becomes a key decision.

Strategies have to be developed and implemented as part of the business management process. Most firms do have some form of regular cyclical planning. However, in an era of rapidly changing business environments such as those being experienced in the 21st century, the cyclical planning process does face many problems.

Strategic market management is motivated by the assumption that the planning cycle is inadequate to deal with the rapid rate of change that can occur in a firm’s external environment. To cope with strategic surprises and fast-developing threats and opportunities, strategic decisions need to be precipitated and made outside the planning cycle.

It is useful to have a real time information system rather than periodic continuous monitoring of the environment. In addition, efforts to develop strategic flexibility are likely to be helpful. The latter involves strategic options that allow quick and appropriate responses to sudden changes in the environment.

An important dimension to strategic market management is to be proactive rather than simply reactive to environmental change. The firm can itself bring about change in the environment. It is possible to make a sizeable impact on governmental policies, customer needs and technological developments. The goal is to develop market-driven strategies that are sensitive to the customer.

Reference

1. Ansoff, H.I. (1987), Corporate Strategy (revised edition), Harmondsworth: Penguin.
2. Bateson, J.E.G. (1995), Marketing Services: Marketing Text and Readings, Orlando, Florida: The Dryden Press.
3. Brown, S. (1999), ‘Postmodernism: The End of Marketing’, in D. Brownlie, M. Saren, R. Wensley and R. Whittington Rethinking Marketing, London: Sage.
4. Doyle, P. (1994), Marketing Management and Strategy, Hemel Hempstead: Prentice Hall.
5. Egan, C. (1998), ‘Market dynamics and marketing strategies’, in C. Egan, and M.J. Thomas (eds), The CIM Book of Strategic Marketing, Oxford: Butterworth Heinemann.