INTRODUCTION TO STRTEGIC MARKETING

INTRODUCTION TO STRTEGIC MARKETING










Objectives of the chapter:

	To understand the concept of marketing strategy
	To study the role of marketing strategy in business functioning
	To discuss the essentials of  a successful marketing strategy
	To understand the different strategy levels

Synopsis of the chapter:
1.	Meaning and definition of marketing strategy
2.	Significance of marketing strategy
3.	Conditions for a successful marketing strategy
4.	Three strategy levels

MEANING AND DEFINITION OF MARKETING STRATEGY

At the heart of any business strategy is a marketing strategy. A marketing strategy is something that every single business; no matter how big or small, needs to have in place. Businesses exist to deliver products that satisfy customers. Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services. A marketing strategy is composed of several interrelated components called the marketing mix. The Marketing mix consists of answers to a series of product and customer related questions.

A marketing strategy is a written plan that includes marketing topics like product development, promotion, distribution and pricing approach. It identifies company's marketing goals and explains how company can achieve those goals. Marketing strategies help in identifying strengths and weaknesses of the company and that of its competitors. Marketing strategy helps to identify the areas on which the company has to focus its marketing tactics.

A strategy is a long-term plan to achieve certain objectives. A marketing strategy is therefore a marketing plan designed to achieve marketing objectives. For example, marketing objective may relate to becoming the market leader by delighting customers. The strategic plan therefore is the detailed planning involving marketing research, and then developing a marketing mix to delight customers. Every organization’s needs to have clear marketing objectives, and the major route to achieving organizational goals will depend on strategy. Developing a strategy involves establishing clear aims and objectives around which the framework for a policy is created. Having established its strategy, an organization can then work out its day-to-day tools and tactics to meet the objectives. Marketing can thus be seen as the process of developing and implementing a strategy to plan and coordinate ways of identifying, anticipating and satisfying consumer demands, in such a way as to make profits. It is this strategic planning process that lies at the heart of marketing.
A marketing strategy is a process or model to allow a company or organization to focus limited resources on the best opportunities to increase sales and thereby achieve a sustainable competitive advantage. Marketing strategy includes all basic and long-term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market-oriented strategies and therefore contributes to the goals of the company and its marketing objectives.
Definitions:
1.	“Strategy is a plan of action or policy designed to achieve a major or overall aim.” - Oxford Dictionary
2.	“Marketing Strategy is a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage.” - David Aaker,
The term strategy can be defined in simple words as follows:
“Strategy is a broad long-term plan designed to achieve overall objectives of the firm.”

SIGNIFICANCE OF MARKETING STRATEGY
The effective marketing strategy plays a very important role in the business working of the firm. Some of its important benefits are discussed as follows:
1.	Strategic Planning:

The most important aspect of marketing strategy is that it involves strategic planning. Strategic planning is a concept that encompasses marketing, promotion, sales, and financial goals and is essentially about developing goals for your business. Having a strategic plan for the business means having a plan in place to deal with both expected and unexpected situations. For example if company knows that its mortgage will increase by 5 percent next year, then a strategic plan will outline how company will increase sales or decrease expenses to meet this additional outflow.
2.	Establishes Effective Distribution:
With the effective marketing strategy company can establish an effective distribution network to reach its customers. Once the strategy is finalized it is very easy to locate target customers and also the market areas where it can sell product effectively. For example younger customers will be more likely to shop using a smart phone or on a website. Older customers might prefer to shop at retail outlets. If the market research shows that the company’s product need to be in retail stores but if the company doesn’t have a sales force, then it can use a wholesaler or distributor.
3.	Streamlines Product Development:

A marketing strategy helps the company to create products and services with the best chances for making a profit. This is because marketing strategy starts with market place research, taking into Consideration Company’s optimal target customer, what your competition is doing and what trends might be on the horizon. Using this information, company can determine the benefit customers and clients want what they’re willing to pay and how company can differentiate its product or service from the competition.
4.	Developing Financial Goals:
Marketing strategies are also important for guiding the business into the development of financial goals. Financial goals are two-fold: They are related to sales targets and also to expenses budget. Sales targets are initially set as part of the marketing plan but might change over time according to changing market conditions, increases in product price, or increases or decreases in consumer demand. Monitoring expenses is also part of financial goal development. If business tends to spend more than it brings in, it will have a serious problem maintaining long-term business viability. However, if the business is able to closely monitor its outflows, only spending what it absolutely needs to, then it will be better equipped to increase the profit margins.
5.	Preparation of marketing Plan:
Marketing strategies are often first brainstormed and written as part of an organization's marketing plan. Most marketing plans include the current or expected strategies for your products, the price points of those products, how to distribute the products, and also the advertising and marketing tools. A marketing plan is also important for developing a promotional strategy as it helps the business to identify its target markets and to set measurable goals. It is vital to the success of the organization that implements a marketing plan that aims for growth and positive change in the bottom line.
6.	Understanding the customers:

Marketing strategies can also assist the business in understanding and connecting with clients and customers. If the marketing plan is loosely structured, company will not have much success at targeting products to the "right" demographics. Effective marketing strategy enables a business firm to identify market segments that it will serve and what product offers it will make. A well defined marketing strategy clearly describes whom to serve and whom to exclude.
7.	Assists with Marketing Communications:
Market research will help to create brand, or image it wants to establish about business. It facilitates the company to communicate to its target customer. Marketing strategy facilities the company to determine if a particular magazine, radio station or website fits company’s selling plans.
8.	Facilitates optimum use of resources:
There can be optimum utilization of resources in order to achieve the desired objectives. If there are no proper strategies, then the organization may not be able to make arrangement of proper resources. There may be arrangement of fewer resources, in which case, the organization may not be able to undertake its activities and there may be also arrangement of more resources that what is actually required and as such it may lead to wastage of resources.
9.	Selection of the Right Communication Tactics:

A clear understanding of the target audience and an idea of the desired goal will help to drive the selection of appropriate media choices. For instance, if the target audience is elderly, the Internet is not likely to represent a good communication tactic. Conversely, if the target audience is college-age students, local newspapers are not likely to be a good choice. The company’s goals also provide insight into communication tactics. A goal of increasing marketing share by 25 percent might require an extensive multi-media campaign; a goal of adding 10 new customers might require only a news release and an ad in the local paper. Marketers rarely benefit by over-reaching their goals and being unable to meet demand.
10.	Enhances corporate image:
Well defined strategies can generate corporate image of the firm. This is because strategies when implemented properly bring good returns to the organization. The organization is in a position to undertake its social responsibility towards customers, employees, suppliers and others and as such the organization can earn goodwill in the market.

CONDITIONS FOR A SUCCESSFUL MARKETING STRATEGY

The essentials of an effective marketing strategy refer to the guidelines for designing a marketing strategy. The following are the essentials of a good marketing strategy:
1.	Knowing the target audience:

For a truly effective marketing strategy, company must study and evaluate its business and its target audience, then create a plan of action and follow through with it. The first part of business is to evaluate the actual business the company is having. This means looking at business from a customer’s or end user’s point of view and finding what they truly get out of company. And many business owners are surprised to find that it’s not what they actually thought.


2.	Proper market segmentation:

To have effective marketing strategy proper market segmentation is required.  Market segmentation facilitates demographic segmentation of the customers.  For example a plumbing business might focus on homeowners, whereas the companies that supply video games might focus on teenagers. It can’t be said enough how important it is to know who your target audience is, and how you can best appeal to them.

3.	Unique selling proposition:

The next part of creating a great marketing strategy is finding out what company offers that no other company does. To set the company apart, it should advertise the thing that makes the company special – the magic that no other company has. This unique selling proposition may include offering products at the lowest prices, providing the best customer service etc. This must not only be included in marketing strategy, but it must be a part of every aspect of marketing done by the company.

4.	Situation Analysis:

Marketing strategy should conduct market analysis i.e. SWOT analysis (strengths, weaknesses, opportunities, and threats), and a competitive analysis. The market analysis will include a market forecast, segmentation, customer information, and market needs analysis. This analysis will make the strategy effective.

5.	Objective oriented:

The strategy should be objective oriented. It should be developed by considering the organizational objectives. Strategies, which are not consistent with the objectives of the organizations, do not serve any purpose. The strategies which are consistent with the organizational objectives will be able to achieve desired objectives.

6.	Identification of competitive advantage:

One important part of any strategy is a specification of how the organization will compete in each business and product-market within its domain. How can it position itself to develop and sustain a differential advantage over current and potential competitors? To answer such questions, managers must examine the market opportunities in each business and product-market and the company’s distinctive competencies or strengths relative to its competitors.

7.	Simplicity:

The marketing strategy should be simple and clear to understand. It should be well defined. Clarity in terms is important while framing marketing strategy. While designing the marketing strategy ambiguity should be avoided. It should be understood by all in the organization.

8.	Flexibility:

Business has to survive in the competitive and uncertain business environment. These environmental factors are not constant. To adjust with these changes, marketing strategy should be flexible. It should allow the changes in the short run. They should not be rigid. It should allow modifications whenever the situation demands.

9.	Resource deployments:

Every organization has limited financial and human resources. Formulating a strategy also involves deciding how those resources are to be obtained and allocated, across businesses, product-markets, functional departments, and activities within each business or product-market.

10.	Comprehensive:

The marketing strategy should be comprehensive in nature. It should cover all those areas which are relevant to the firm. A good strategy always considers the factors which are affecting the business functioning directly or indirectly.

11.	Consistency:

The marketing strategy should be consistent with the strategies of the other departments of the organization. All the functional strategies should be complimentary to each other, ultimately all the functional strategies of the organization should be consistent with the overall organizational strategy.

12.	Periodical review:

Strategies should be periodically reviewed. Such a review allows the firm to make necessary changes in the strategy depending upon the needs of the firm. Periodic review also benefits to incorporate the fluctuations taking place in the business environmental factors.

CONDITIONS FOR A SUCCESSFUL MARKETING STRATEGY

The strategy can be broadly classified into three levels:

1.	Corporate Strategy - Defining what business the company is in   Setting the overall structure, systems and processes
2.	Business Strategy -  Deciding how to compete Identifying competitive advantage Selecting key success factors
3.	Functional Strategy - Coordination of company departments to business strategy

1.	Corporate Strategy:

Corporate level strategy occupies the highest level of strategic decision-making and components dealing with the objective of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance. Top management of the organization makes such decisions. The nature of strategic decisions tends to be value-oriented, conceptual and less concrete than decisions at the business or functional level.
Single-business companies have the advantage of focus and rapid response but are vulnerable to problems in their industry. Their corporate strategy must demonstrate the advantages of remaining active in only one industry while evaluating business opportunities in areas with complementary activities. With a goal of optimizing company operations, profitability and growth, the corporate strategy must compare the return of a continuing investment in the single business with the acquisition or starting up of complementary businesses. At the corporate level, managers must coordinate the activities of multiple business units. Attempts to develop and maintain distinctive competencies at the corporate level focus on generating superior human, financial, and technological resources; designing effective organization structures and processes; and seeking synergy among the firm’s various businesses. Synergy can provide a major competitive advantage for firms where related businesses share R&D investments, product or production technologies, distribution channels, a common sales force and/or promotional themes.

Corporate strategy describes company’s overall direction in terms of its general attitude toward growth and the management of its various businesses. The corporate strategy typically fits within the three main categories - stability strategy, growth strategy and retrenchment strategy.

a)	Stability strategy:
The basic approach of stability strategy is to maintain present course and be steady as it goes. In an effective stability strategy, companies will concentrate their resources where the company presently has or can rapidly develop a meaningful competitive advantage in the narrowest possible product-market scope consistent with the firm’s resources and market requirement's.

b)	Growth strategy:
Growth strategy is the means through which an organization plans to achieve its objective to grow in turnover and volume. There are four broad growth strategies which include; product development, diversification, market development and market penetration. It is a style that seeks stock with future investment rates of return being great than the stocks.

A business growth strategy starts with market insights. The source of insights lies within and across the market ecosystem. While research firms and strategic marketing consultants can bring these insights to bear on an ad-hoc basis, companies committed to growth will serve themselves well by developing systems and processes to ensure a continuous flow of market insights into their business. This is a key strategy for developing the demand side of the business.

Business growth strategies are unique in every business. However there are broad categories of strategies for business growth:
	New Product/Service Strategy Development
	Market Expansion Strategy
	Product Diversification Strategy
	Market Opportunity Analysis
	Competitive Market Analysis
	Market Segmentation Strategy

c)	Retrenchment strategy:
A strategy used by corporations to reduce the diversity or the overall size of the operations of the company. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial  turnaround.

          Retrenchment is a corporate level strategy that aims to reduce the size or diversity of an organization. Retrenchment is also reduction in expenditure to become financially stable. Retrenchment strategy is a strategy used by corporate in order to reduce the diversity or to cut the overall size of the operations of the company. This strategy is often used to cut down expenses with the goal of becoming more financially stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or services in order to make a beneficial turn around.

2.	Business Strategy:
The business strategy of a single-business company is similar to that of a business unit of a diversified company except that the business strategy must support corporate strategic initiatives aimed at the single business. The business strategy sets goals for performance, evaluates the actions of competitors and specifies actions the company must take to maintain and improve its competitive advantages. Typical strategies are to become a low-price leader, to achieve differentiation in quality or other desirable features or to focus on promotion. How a business unit competes within its industry is the critical focus of business-level strategy. A major issue in a business strategy is that of sustainable competitive advantage. What distinctive competencies can give the business unit a competitive advantage? And which of those competencies best match the needs and wants of the customers in the business’s target segments?  Another important issue a business-level strategy must address is appropriate scope: how many and which market segments to compete in, and the overall breadth of product offerings and marketing programs to appeal to these segments. Finally, synergy should be sought across product-markets and across the functional departments of the organization.
Business-level strategy is applicable in those organizations, which have different businesses and each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to identify the discrete independent product/market segments served by an organization. Since each product/market segment has a distinct environment, a SBU is created for each such segment. For example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety of petrochemical products. For each product group, the nature of market in terms of customers, competition, and marketing channel differs. Therefore, it requires different strategies for its different product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages) given the environment it faces. At such a level, strategy is a comprehensive plan providing objectives for SBUs, allocation of re-sources among functional areas and coordination between them for making optimal contribution to the achievement of corporate-level objectives. Such strategies operate within the overall strategies of the organization. The corporate strategy sets the long-term objectives of the firm and the broad constraints and policies within which a SBU operates. The corporate level will help the SBU define its scope of operations and also limit or enhance the SBUs operations by the resources the corporate level assigns to it. There is a difference between corporate-level and business-level strategies.

3.	Functional Strategy:

Functional strategy, as is suggested by the title, relates to a single functional operation and the activities involved therein. Decisions at this level within the organization are often described as tactical. Such decisions are guided and constrained by some overall strategic considerations. Functional strategy deals with relatively restricted plan providing objectives for specific function, allocation of resources among different operations within that functional area and coordination between them for optimal contribution to the achievement of the SBU and corporate level objectives. Below the functional-level strategy, there may be operations level strategies as each function may be dividend into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy.

Marketing Functional Strategy:
	In companies that are marketing oriented, the marketing strategy on a functional level influences the other functions and their strategies. A typical marketing strategy is to determine customer needs in an area where the company has a natural competitive advantage. Such advantages might be in location, facilities, reputation or staffing. Once the marketing strategy has identified the kind of product customers want, it passes the information to operations to design and produce such a product at the required cost. The advertising department must develop a promotional strategy, sales must sell the product and customer service must support it. The marketing strategy forms the basis for the strategies of these other departments. The primary focus of marketing strategy is to effectively allocate and coordinate marketing resources and activities to accomplish the firm’s objectives within a specific product-market. Therefore, the critical issue concerning the scope of a marketing strategy is specifying the target market for a particular product or product line. Next, firms seek competitive advantage and synergy through a well-integrated programme of marketing mix elements (the 4 Ps of product, price, place, promotion) tailored to the needs and wants of potential customers in that target market.
Other Functional Strategies:
The non-marketing functional strategies must support the marketing strategy that, in turn, is a component of the overall business strategy. In a single-business company, those strategies are tightly focused on one industry, but they must also deliver data that allows the corporate strategy to examine possible diversification. Single-business companies are usually either highly ranked in their single business or dominant in their niche. The strategies at the functional level try to maintain such a position but also look for external danger signs. If events outside the company's control lead to a deterioration of its position, strategic components from a functional level must signal to the corporate level that an implementation of alternative strategies is required.
SUMMARY

From the above discussion it is clear that the marketing strategy is the most important tool while framing the overall business strategy of the organization. While designing the marketing strategy the firm has to consider many factors like potential customers, market segmentation, unique selling proposition, situations prevailing etc. Effective marketing strategy benefits the company in not only knowing its customers but also delivering maximum customer satisfaction. Thus an effective marketing strategy finally results into building corporate image of the company. The functional strategy should be designed on the basis of business level strategy, whereas the business level strategy should be derived from the corporate level strategy.
SUGGESTED QUESTIONS

1.	What is marketing strategy? Discuss the role and importance of marketing strategy in business.
2.	State and explain the essential conditions for having a successful marketing strategy.
3.	What are the three strategy levels? Discuss them in detail.
4.	Explain the following concepts:
i.	Marketing Strategy
ii.	Corporate Strategy
iii.	Business Strategy
iv.	Functional Strategy
5.	Write a note on three strategy levels.


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