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Strategic Management

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Strategic Management ­ MGT603
VU
Lesson 37
MARKET SEGMENTATION
Learning objectives
The main objective of this chapter to enable to students about concern marketing issue such marketing
segmentation, marketing mix and product positioning relating to strategy implementation.
Marketing Mix
Marketing decisions generally fall into the following four controllable categories:
 Product
 Price
 Place (distribution)
 Promotion
The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept
of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had
described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix
included product planning, pricing, branding, distribution channels, personal selling, advertising,
promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome
McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of
marketing, depicted below:
The Marketing Mix
These four P's are the parameters that the marketing manager can control, subject to the internal and
external constraints of the marketing environment. The goal is to make decisions that center the four P's
on the customers in the target market in order to create perceived value and generate a positive response.
Product Decisions
The term "product" refers to tangible, physical products as well as services. Here are some examples of the
product decisions to be made:
 Brand name
 Functionality
 Styling
 Quality
 Safety
 Packaging
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Strategic Management ­ MGT603
VU
 Repairs and Support
 Warranty
 Accessories and services
Price Decisions
Some examples of pricing decisions to be made include:
 Pricing strategy (skim, penetration, etc.)
 Suggested retail price
 Volume discounts and wholesale pricing
 Cash and early payment discounts
 Seasonal pricing
 Bundling
 Price flexibility
 Price discrimination
Distribution (Place) Decisions
Distribution is about getting the products to the customer. Some examples of distribution decisions
include:
 Distribution channels
 Market coverage (inclusive, selective, or exclusive distribution)
 Specific channel members
 Inventory management
 Warehousing
 Distribution centers
 Order processing
 Transportation
 Reverse logistics
Promotion Decisions
In the context of the marketing mix, promotion represents the various aspects of marketing
communication, that is, the communication of information about the product with the goal of generating a
positive customer response. Marketing communication decisions include:
 Promotional strategy (push, pull, etc.)
 Advertising
 Personal selling & sales force
 Sales promotions
 Public relations & publicity
 Marketing communications budget
Product Positioning
"It simply means Positioning is how a product appears in relation to other products in the market"
After segmenting markets so that the firm can target particular customer groups, the next step is to find
out what customers want and expect. This takes analysis and research. A severe mistake is to assume the
firm knows what customers want and expect. Countless research studies reveal large differences between
how customers define service and rank the importance of different service activities and how producers
view services. Many firms have become successful by filling the gap between what customers and
producers see as good service. What the customer believes is good service is paramount, not what the
producer believes service should be.
Product positioning strategy
The ability to spot a positioning opportunity is a sure test of a person's marketing ability. Successful
positioning strategies are usually rooted in a product's sustainable competitive advantage. The most
common basis for constructing a product positioning strategy are:
 Positioning on specific product features
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Strategic Management ­ MGT603
VU
 Positioning on specific benefits, needs, or solutions
 Positioning on specific use categories
 Positioning on specific usage occasions
 Positioning on a reason to choose an offering over the competition
 Positioning against another product
 Positioning through product class dissociation
 Positioning by cultural symbols
The following steps are required in product positioning:
1. Select key criteria that effectively differentiate products or services in the industry.
2. Diagram a two-dimensional product-positioning map with specified criteria on each axis.
3. Plot major competitors' products or services in the resultant four-quadrant matrix.
4. Identify areas in the positioning map where the company's products or services could be most
competitive in the given target market. Look for vacant areas (niches).
5. Develop a marketing plan to position the company's products or services appropriately.
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Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning