MODULE TWO: MARKETING MANAGEMENT

LEARNING OBJECTIVES

Upon completion of Module II, the students are expected to:

1. identify the marketing problems.

2. distinguish the case analysis framework in marketing.
3. make a solution base on marketing problems.

LEARNING COMPETENCIES

After going through and understanding Module II, the students are expected to know the
problems in marketing, use the strategic planning in problem solving and differentiate the case
analysis.

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Business Strategic Planning Process

SWOT Analysis
The overall evaluation of a company’s strengths, weaknesses, opportunities, and threats is
called SWOT analysis. It involves monitoring the external and internal marketing environment.

1. External Environment (Opportunity and Threats) Analysis

A business unit has to monitor key microenvironment forces (demographic-economic,
natural, technological, political-legal, and social-cultural) and significant
microenvironment actors (customers, competitors, suppliers, distributors, dealers) that
affect its ability to earn profit. The business unit should set up a marketing intelligence
system to track trends and important developments. A major purpose of environmental
scanning is to discern new opportunities. In many ways, good marketing is the art of
finding, developing, and profiting from opportunities.

 Marketing Opportunity is an area of buyer needs and interests, in which there is a high
probability that a company can profitably satisfy that need. There are three main sources of
market opportunities. The first is to supply something that is in short supply. This requires
little marketing talent, as the need is fairly obvious. The second is to supply an existing
product or service in a new or superior way. There are several ways to uncover possible
product or service improvements: by asking consumers for their suggestions (problem
detection method); by asking consumers to imagine an ideal version of the product or
service (ideal method); and by asking consumers to chart their steps in acquiring, using, and
 disposing of a product (consumption chain method). The third source often leads to a totally
new product or service.
Opportunities can take many forms, and marketers have to be good at spotting them.
Consider the following:

 A company may benefit from converging industry needs and introduce hybrid products or
services that are new to the market. Example: at least five major cell phone manufacturers
released phones with digital photo capabilities.
 A company may make a buying process more convenient or efficient. Example: Consumers
can now use the Internet to find more books than ever and search for the lowest price with
just a few clicks.
 A company can meet the need for more information and advice. Example: Guru.com
facilitates finding professional experts in a wide range of fields.
 A company can customize a product or service that was formerly offered only in a standard
form. P& G’s Rleflect.com Web site is capable of producing a customized skin care or hair
care product to meet a customer’s specific needs.
 A company can introduce a new capability. Example: Consumers can now create and edit
digital “iMovies” with the new iMac and upload them to an Apple Web server to share with
friends around the world.
 A company may be able to deliver a product or a service faster. Example: FedEx developed
a way to deliver mail and packages much more quickly than the U.S. Post Office.
 A company may be able to offer a product at a much lower price. Example: Pharmaceutical
firms have created generic versions of brand-name drugs.

To evaluate opportunities, companies can use Market Opportunity Analysis (MOA) to

determine the attractiveness and probability of success:

1. Can the benefits involved in the opportunity be articulated convincingly to a defined

target market (s)?
2. Can the target market (s) be located and reached with cost-effective media and trade
channels?
3. Does the company possess or have access to the critical capabilities and resources needed
to deliver the benefits to the customer?
4. Can the company deliver the benefits better than any actual or potential competitors?
5. Will the financial rate of return meet or exceed the company’s required threshold for
acquiring investment?

Environmental Threat is a challenge posed by an unfavorable trend or development that would

lead, in the absence of defensive marketing action, to lower sales or profit.

Internal Environment (Strengths/Weaknesses) Analysis

It is one thing to find attractive opportunities and another to be able to take advantage of
them. Each business needs to evaluate its internal strengths and weaknesses. The business does
not have to correct all its weaknesses, nor should it dwell on its strengths. The critical question is
whether the business should limit itself to those opportunities where it possesses the required
 strengths or whether it should consider opportunities that mean it might have to acquire or
develop new strengths.

Goal formation
It is the stage process for the development of specific goal and planning period. Managers use
the term goals to describe objectives that are specific with respect to magnitude and time. Most
business units pursue a mix of objectives including profitability, sales growth, market share
improvement, risk containment, innovation, and reputation. The business unit sets these
objectives and then manages by objectives (MBO). For an MBO system to work, the unit’s
objectives must meet four criteria.

1. They must be arranged hierarchically, from the most to the least important
For example, the business unit’s key objective for the period may be to increase the rate
of return on investment. This can be accomplished by increasing the profit level and
reducing the amount of invested capital. Profit itself can be increased by increasing
revenue and reducing expenses. Revenue can be increased by increasing market share
and prices. By proceeding this way, the business can move from abroad to specific
department and individuals.
2. Objectives should be stated quantitatively whenever possible
The objective “increase the return on investment (ROI)” is better stated as the goal
“increase ROI 15 percent within two years.
3. Goal should be realistic
A goal should arise from an analysis of the business unit’s opportunities and strengths,
not from arbitrary numbers.
4. Objectives must be consistent
It is not possible to maximize sales and profits simultaneously.

Strategic Formulation
Michael Porter has proposed three generic strategies that provide a good starting point of
strategic thinking: overall cost leadership, differentiation, and focus.

Overall Cost leadership. The business works hard to achieve the lowest production and
distribution costs so that it can lower the price of its product than its competitors and win
a larger market share. Firms pursuing this strategy must be good at engineering,
purchasing, manufacturing, and physical distribution. They need less skill in marketing.
The problem with this strategy is that other firms will usually compete with still lower
costs and decrease profits of the firm that tied its entire profits and a reduction of costs.

Differentiation. The business concentrates on achieving superior performance in an important

customer benefit area valued by a large part of the market. The firm cultivates those
strengths that will contribute to the intended differentiation. Thus the firm seeking a
quality advantage, for example, must make products with the best components, put them
together expertly, inspect them carefully, and effectively communicate their quality.
Focus. The business focuses one or more narrow market segments. The firms get to know these
segments intimately and pursue either cost leadership or differentiation within the target
segment.

Strategic Alliances (4 major categories)

1. Product or service alliances- One company licenses another to produce its product, or two
companies jointly market their complementary products or a new product. For instance,
H&R Block and Hyatt Legal Services ─ two service businesses ─ have also joined
together in a marketing alliance to better serve these customers.
2. Promotional alliances- One company agrees to carry a promotion for another company’s
product or service. McDonald’s, for example, has often teamed up with Disney to offer
products related to current films as part of its McDonalds meals for children.
3. Logistic alliances- One company offers logistical services for another company’s product.
For example, Abbott Laboratories warehouses and delivers all 3M’s medical and
surgical products to hospitals across the United States.
4. Pricing Collaborations- One or more companies join in a special pricing collaboration.
Hotel and rental car companies often offer mutual price discounts.

Case for Case Analysis

Cases assist in bridging the gap between classroom learning and the so-called real world
of marketing management. They provide us with an opportunity to develop, sharpen,
and test one’s analytical skills at:

 Assessing situations
 Sorting out arid organizing key information
 Asking the right questions
 Defining opportunities and problems
 Identifying and evaluating alternatives courses of action.
 Interpreting data
 Evaluating the results of past strategies
 Developing and defending new strategies
 Interacting with other managers
 Making decisions under conditions of uncertainty
 Critically evaluating the work of others
 Responding to criticism

A Case Analysis Framework

A basic approach to case analysis involves a four step process. First, the problem is
defined. Second, alternative courses with actions are formulated to solve the problem. Third, the
alternatives are analyzed in terms of their strengths and weaknesses. And fourth, an alternative is
accepted, and a course of action is recommended. This basic approach is practical for the student
well versed in case analysis, particularly for worker cases or incidents. However, for the new
comer, this framework may be inadequate and oversimplified. Thus, the following expanded
framework and checklist are intended to aid the student in becoming proficient at case and
problem analysis.

1. Analyze and Record the Situation

The first step is to analyze the situation. This approach is useful not only for getting a
better handle on the situation but also discovering both real and potential problems which is the
central concern for case analysis.

Aspects of Case Analysis

 The Environment- The first aspect in analyzing a marketing problem or case is to consider
the environment in which the firm is operating. The environment can be broken down into
a number of different components such as the economic, social, political, and legal areas.
Any of these may contain threats to a firm’s success or opportunities for improving a
firm’s situation

 The industry- The second aspect involves analyzing the threats under which the firm
operates. A framework provided by Michael Porter includes five competitive forces that
need to be considered to do a complete industry analysis. The framework is shown in figure
1 and includes rivalry among existing competitors, threat of new entrants, and threat of
substitute products. In addition, in this framework, buyers and suppliers are included as
competitors since they can threaten the profitability of an industry for firm.

While rivalry among existing competitors is an issue in most cases, analysis and
strategies for dealing with the other forces can also be critical. This is particularly so
when a firm is considering entering a new industry and wants to forecast its potential
success.

Figure 1
Source: Marketing Management by Philip Kotler
  Rivalry among existing competitors- In most cases and business situations a firm needs
to consider the current competitors in its industry in order to develop successful strategies
such as price competition, advertising battles, sales promotion, new product introductions,
and increased customer service which are all commonly used to attract customers from
competitors.

In order to fully analyze an existing rivalry, it is important to determine which firms are
the major competitors and what are their annual sales, market share, growth profile, and
strengths and weaknesses. Also, it is useful to analyze their current and past marketing
strategies in order to forecast their likely reactions to a change in a competitive firm’s
strategy. Finally, it is important to consider any trends or changes in government
regulation of an industry or changes in technology that could affect the success of a
firm’s potential.

 Threat of new competitor. It is always possible for firms in other industries to try to
compete in a new industry ─ new aspirant are more likely in industries that have low entry
barriers. Entry barriers include such factors as a need for large financial resources, high
brand equity for existing firms in an industry, or economies of scale obtained by existing
firms in an industry may benefit from experience curves; that is, their cumulative
experience in producing and marketing a product may reduce their per unit costs below
those of inexperienced firms. In general, the higher the entry barriers, the less likely outside
 firms are to enter an industry. For example, the entry barriers for starting up a new car
company are much higher than for starting up a new software company.

Michael Porter identified five forces that determine the intrinsic long-run attractiveness of a
market or market segment: industry competitors, potential entrants, substitutes, buyers and
suppliers.

1. Threat on intense segment rivalry. A segment is unattractive if it already contains

numerous, strong, or aggressive competitors. It is even more unattractive if the segment is stable
or declining, if plant capacity additions are done in large increments, if fixed costs are high, if
exit barriers are high, or if competitors have high stakes in staying in the segment. These
conditions will lead to frequent price wars, advertising battles, and new-product introductions
and will increase the expenses of competition.

2. Threat of new entrants- A segment’s attractiveness varies with the height of its entry and
exit barriers. The most attractive segment is one in which entry barriers are high and exit barriers
are low. Few new firms can enter the industry, and poor-performing firms can easily exit. When
both entry and exit barriers are high, profit potential is high, but firms face more risk because
poorer-performing firms stay in and fight it out. When entry and exit barriers are both low, firms
easily enter and leave the industry, and the returns are stable and low. The worst case is when
entry barriers are low and exit barriers are high: Here firms enter during profitable times but find
it hard to leave during down times. The result is chronic overcapacity and depressed earnings for
all.
3. Threat of substitute products- A segment is unattractive when there are actual or potential
substitutes for the product. Substitutes place a limit on prices and on the profits that a segment
can earn. The company has to monitor the price trends in the substitutes closely. If technology
advances or competition increases in these substitute industries, prices and profits in the segment
are likely to fall.

4. Threat of buyer’s growing bargaining power- A segment is unattractive if the buyers

possess strong or growing bargaining power. Buyers will try to force prices down, demand more
quality or services, and set competitors against each other, all at the expense of seller
profitability. Buyers’ bargaining power grows when they become more concentrated or
organized, when the product represents a significant fraction of the buyers’ costs are low, when
buyers are price sensitive because of low profits, or when buyers can integrate upstream. To
protect themselves, sellers might select buyers who have the least power to negotiate or switch
suppliers. A better defense consists of developing superior offers that strong buyers cannot
refuse.

5. Threat of suppliers’ growing bargaining power- A segment is unattractive if the company’s

suppliers are able to raise prices or reduce quantities of resources. Suppliers tend to be powerful
when they are few substitutes, when the supplied product is an important input, when the cost of
switching suppliers is high, and when the suppliers can integrate downstream. The best defense
is to build win-win relations with suppliers or use multiple supply sources.

Industry Concept of Competition

Industry- is a group of firms that offer a product or class of products that are close
substitutes for each other.

Number of Sellers and Degrees of Differentiation

The starting point of describing an industry is to specify the number of sellers and whether
they are homogenous or highly differentiated. These characteristics give rise to four
structure type.

 Pure Monopoly- Only one firm provides a certain product or service in a certain
country or area (local electricity or gas company). An unregulated monopolist might
charge a high price, do little or no advertising, and offer minimal service. If partial
substitutes are available and there is some danger of competition, the monopolist might
invest in more service and technology. A regulated monopolist is required to charge a
lower price and provide more service as a matter of public interest.

 Oligopoly- A small number of (usually) large firms produces products that range from
highly differentiated to standardized. Pure oligopoly consists of a few companies
producing essentially the same commodity (oil, steel). Such companies would find it
hard to charge anything more than the going price. If competitors make a match on
services, the only way to gain a competitive advantage is through lower costs.
Differentiated oligopoly consists of a few companies producing products (autos,
 cameras) partially differentiated along lines of quality, features, styling, or services.
Each competitor may seek leadership in one of these major attributes, attract the
customers favoring that attribute, and charge a price premium for that attribute.

 Monopolistic Competition: Many competitors are able to differentiate their offers in

whole or part (restaurants, beauty shops). Competitors focus on market segments where
they can meet the customer needs in a superior way and command a price normal
maybe in business its reversed premium.

 Pure competition- Many competitors offer the same product and service (stock market,
commodity market). Because there is no basis for differentiation, competitors’ prices
will be the same. No competitor will advertise unless advertising can create
psychological differentiation (cigarettes, beer), in which case it would be more proper
to describe the industry as monopolistically competitive.

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Slides and Powerpoint Presentations:

www.apmf.org.sg/Lt1--CorpStragPlanning.ppt

Further Reading:
http://www.slideworld.com/slideshows.aspx/Starbucks-Case-Study-ppt-2755868

References:

Kotler, Philip (2000). Marketing Management. USA: Prentice Hall Inc.

Kotler, Philip et,. Al. (2006). Marketing Management. New Jersey: Pearson Education Inc.

Internet Sources:

http://www.buec.udel.edu/antilj/BUAD%20880-2/Analyzing%20Marketing%20Problems
%20and%20Cases.pdf
htpp://www.drawpack.com
ACTIVITIES

From the brief notes, slides and powerpoint presentations above and from the other
sources that you can find, identify the problems in marketing, apply the strategies that you have
learned and make an example of case study.

EVALUATION

Assess yourself how much you have developed your competencies by doing the
activities. The following questions can help you to reflect on your improvement:

 What are the problems in marketing? Explain briefly.

 What are the possible solutions that you can suggest?

 How does strategic planning process help the problems in marketing?

 What is the significance of case analysis?