Strategic Marketing

I. Introduction - Competing for the future

Today organizations have to find answers to questions that might be asked in near future by both: customers and competitors.

In his book ]On Marketing^ 1 by Kotler written in 1999, the author is drawing a

dramatic picture of the future, for the competitive situation in 2005: ]Companies are unable to sustain competitive advantages (outside of patentsU)^ 2 .

Although his scenario maybe came not true , the point is interesting: How do companies find the right way to respond to new developments (e-business, globalization etc.).

Strategy is about the long term development. Organizations need to collect information of the market, they have to define strategies and difficulty enough, they need to implement the strategies.

In order to remain a market leader, Hamel and Pralahad advise their reader in an article from 1994 3 to pause for a moment and ask questions like:

-Who are the customers today and who will be the customers in the future? -Who are presently our competitors and who will compete with us in the future?

-What is our competitive advantage today and what will make us a leader in the future?

Models like Ansoff\s matrix or Porter\s 5 Forces make today\s situation visible and allow to formulate strategic options.

1 Kotler, On Marketing, 1999 2 Kotler, On Marketing, page 16 3 Competing for the future, by Gary Hamel and C.K. Prahalad Harvard business review _ july`august 1994 page 2 of 9

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The task is to find and implement strategic options, that allow the best allocation of recourses in the future.

II. Marketing

According to Kotler, there are two wrong views of Marketing: ]Marketing is selling^ and ]Marketing is mainly a department^ 4 . For him it\s the

job of Marketing to understand the markets and to formulate strategies how to dominate target markets. According to Stender-Mohemius 5 , Kotler is following

here a broader (modern) definition of marketing, which is also promoted by the AMA 6 .

I understand marketing as a corporate function, that deals with two components:

The marketing system (the company itself, resources provided by the firm, suppliers and distributors) and the external environment 7 . Whereas the first

part can be controlled and planned to some extend, the external environment (demographic factors, the society and development etc) is hard to control or to predict.

Marketing has to understand the external environments and formulate strategies (that are later to be broken down to tactics and operationable goals).

There are many definitions out there for marketing, however ]there is not one [correct\ approach of marketing^ 8 .

4 Kotler, On Marketing, page 19 5 Stender-Mohemius, Marketing: Grundlagen mit Fallstudien, page 1 6 The American Marketing Association :^ Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas ,goods, and services to create exchanges that satisfy individual and organizational objectives^, www.bsu.edu/marketing/ 7 See also Module MN7002/D, Strategic Marketing, Edition 10, University of Leicester page 2.3 8 Module MN7002/D, Strategic Marketing, page 1.12

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III. To close a gap

In his famous book [Corporate Strategy\ Ansoff offered a new way, to close the gap between the company\s objectives and the forecasted performance. 9

The literature distinguishes between the operative gap (potential basis business ./. basis business) and the strategic gap (development limit ./.expected new business). The strategic gap might be closed by either downsizing the expectation or by using the Ansoff matrix.

Or as Kotler puts it: ]Either the company will have to reduce its sales (and profit) goal or find ]breakthrough^ ideas to fill the remaining strategic gap.^ 10

9 See also http://www.market-modelling.co.uk/MATRIX/MATRIX_Step11_1.htm 10 Kotler, On Marketing, page 44

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IV. Ansoff Matrix

After working for some years for the RAND corporation and Lockheed,

Russian emigrant Igor Ansoff started to teach at the Carnegie Mellon university 1963 11 . In 1965 he published a book called ]Corporate Strategy^,

within this publication, he offered a grid, later was called ]The Ansoff Matrix^ 12 . The grid has two dimensions: present and new and a product axis

and a market axis.

11 See also : http://www.thgweb.de/lexikon/Harry_Igor_Ansoff#Weblinks 12 He already talked about the for strategies before, see for example: ]Strategies for Diversification By H. Igor Ansoff^ published in Harvard Business Review; Sep/Oct57, Vol. 35 Issue 5

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The grid offers 4 strategic options:

1. Market penetration

In order to make use of the market potential, the organization will have to enhance the marketing efforts. Stender-Monhemius 13 sees three ways:

a) find new customers (who currently use the competitor\s products) through price reduction or improvement of the product Intensifying the use of the products among the existing customers. In order to do that, the company has to create new applications for the product.

c) Find new customers, who do not (other than option a) use the product at all. This can be achieved through samples, ore trying new distribution.

2. Market development

Market development means to find new markets for existing products. New markets could be:

a) regional (stretch to national, international ) or

b) Enter a new market through product differentiation. One example I have seen was convenience food. In the past the packages were rather big, then companies paid attention to new trends like the growing amount of single households, then these customers were offered smaller packages of convenience food. Before these customers might have hesitated to buy such a big bag of frozen Paella for example.

13 Stender-Mohemius, Marketing: Grundlagen mit Fallstudien, page 98

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