Market Growth And Competitive Positioning Growth Strategies

“Nobody plans to fail but fails to plan”. Marketing Planning is the first and foremost activity that a company should perform before embarking on a mission such as launching a new product into the market or revamp of existing product line. Not just in the case of new product launch, but also marketing planning provides a strategic direction to the company in terms of increasing the market share, building brand value and thus obtain increased revenues.

1.1 SOSTAC Model

SOSTAC is a renowned model in marketing planning which is widely followed across several industries. It is also claimed to be the most powerful technique of in helping the companies to plan their marketing process. SOSTAC stands for Situation Analysis, Objective Analysis, Strategy, Tactics, Action and Control.

Situation Analysis helps visualize the internal and external factors that affect the company which prevail at a given time. This analysis mainly comprises of employing SWOT technique to understand the situation at company level and also PESTLE technique to analyse the global environment which impacts the industry in which the company is operating. By carrying out this analysis, the company can get a snap shot of the current situation which will help the managers to take necessary actions to take advantage of the situation. Elements such as performance, competitors and customers are analysed in this stage.

Objective Analysis will provide a clear path to the company in terms of the revenues and sales targets that should be achieved in a stipulated time limit to obtain the desired market share. The main outcome of this analysis is to shape the marketing strategy for the company based on the corporate strategy as to what the company aims to achieve within a time frame.

Strategies part of SOSTAC mentions about the need for segmenting the target market and then specifically design the products based on the needs of the customers in each segment. In this stage, the company will go onto design its individual strategies on segmentation, positioning and competitiveness to place the product in a safe position in the market. Strategy emphasizes on the need for designing a USP for each of the product to give it a competitive edge over the existing products in the market.

Tactics will help design the 4Ps of marketing by carefully selecting the right mix in order to achieve optimum results in terms of sales. Tactics also inform about the different ways of promotional activities and communication techniques that a company should take up in order to get the attention and create awareness among the target market.

Actions refer to the action plan the company should have about who does what and how the strategies are executed. The focus of the company at this stage will be budgets, staff and risk analysis. The allocation of resources and work break down structure are defined in this stage as well as key performance indicators are determined along with the bench marks that are supposed to be achieved.

Control deals with the measurement and monitoring of the effectiveness of the strategies that are followed. It mainly revolves around the measurement of performance in each communication channel in terms of ROI (Return On Investment) for the promotional activities.

2. Importance and Scope of Internal and External Auditing

Marketing audit forms the base of marketing planning. It is divided into two types, internal and external auditing. The aim of any auditing activity is to review the effectiveness of existing processes and suggest necessary improvements to be made. Internal auditing helps to analyse the strengths and weaknesses within the company and the way the company is performing whereas external auditing helps to assess the external environment that will affect the operations of the company. A wide range of tools are used to carryout auditing such as SWOT analysis, PESTEL analysis, Porter’s Five Forces analysis etc. Both the audits together give a multi-faceted approach to look at the company’s operations and the need for improvements.

The aim of internal audit is to measure the performance of the resources and processes in the company and find the gaps where improvements are required. The main focus of this audit is to review the marketing process and quantify its effectiveness in terms of achieving the sales targets and objectives. Aspects like distribution channels, communication channels, customer interaction, product price and product design are analysed in the internal auditing.

The aim of external auditing is to provide an Outside-in view to the company by analysing the external factors such as the competition in market place, the consumer buying behaviour and the trends in market. This assessment will enable the company to predict the dynamics of the market and take necessary actions to sustain and grow within the industry. The global environment of the industry in which the company operates will be analysed by looking at the factors like polity, economy, society, technology, legislature and environment which have a direct impact on the business. This analysis will be helpful in redesigning the business strategy to match with the environment.

3. SWOT and TOWS Process

SWOT analysis is carried out at the organizational level to observe the internal capabilities of a company and match them against threats and opportunities presented by outside factors such as competition. It is one of the simplest techniques to conduct internal audit. The main focus of SWOT technique is to analyse the internal weaknesses that can be converted to strengths as well as work on strengths to take advantage of the external opportunities in the market.

The limitation of SWOT analysis as tool for designing strategy is that it will not include all the necessary dimensions to be analysed for providing a robust strategy. In order to overcome the limitations of SWOT, Weihrich (1982) developed TOWS technique that will help the managers to go a step further in analysing the state of the company at a given time.

TOWS framework is considered to be a situational planning tool that provides more number of parameters to analyse and give a holistic view for designing the strategy of a company. The technique of TOWS analysis is to compare each strength and weakness to each opportunity and threat in the form of a matrix which provides a more comprehensive solution for devising the strategy than in a traditional planning process like SWOT.

TOWS technique involves 4 types of analyses as follows:

SO: Strengths- to-Opportunities

ST: Strengths-to-Threats

WO: Weaknesses-to-Opportunities

WT: Weaknesses-to-Threats

For all the four analyses mentioned above, a matrix can be designed to map each element with the other. The following figure will describe a typical Strengths-to-Opportunities matrix based on the strengths and Opportunities which originated from SWOT analysis:

SO Matrix

Strength1

Strength2

Strength3

Opportunity1

Opportunity2

Opportunity3

TOWS analysis has to be conducted in succession to SWOT where initially the strengths and weaknesses of the organization are identified. Once the list of SWOT elements is obtained, the organization should then develop strategy to attack the external opportunities with help of its strengths and try to convert the threats into opportunities. This process is done in the TOWS analysis which gives a rounded perspective for the managers to tally and improve every row element in the TOWS matrix against every column element as shown above. Hence both SWOT and TOWS analyses complement each other to inform strategy for an organization.

4. Segmentation, Targeting and Positioning

Strategy formulation is the key to success for launching a product into the market. The foremost objective of any strategy is to give a sustainable competitive advantage to the product over its rivals in the market (Barney, 1991). According to Kotler, the essential elements of any organisation’s marketing strategy are segmentation, targeting and positioning. These three processes are collectively and shortly termed as STP.

Segmentation

Dividing the target market into specific groups based on the demographics, habits and location is called Segmentation. The target market is grouped based on the factors like age, sex, annual house hold income etc. This process is very crucial in forming the market strategy because it will inform both product development team and the marketing team on what products to be designed and how they can be promoted to the different sections of people respectively. Effective marketing is all about “making what you can sell, but not selling what you can make” (Ali, 2001).

For example a simple segmentation of market for a Sports Footwear manufacturer can be based on the following factors:

1) Type of Sport

2) Percentage of Men, Women and Children interested in different sports

 

Based on the above segmentation, the company would then decide on the type and quantity of footwear to be manufactured as well as how to market it to the target customers in order to achieve the sales objectives. Therefore Segmentation directly informs the marketing strategy in the initial stages of formulation.

Targeting

Once the segmentation of customers is over, then the company has to devise strategies to target the identified segments by designing the products that closely match their requirements which could generate optimum sales revenue. Targeting is to identify the target customers who will potentially buy the product when it is out in the market. This process involves identifying three target groups which is mostly common to many industries, the niche customers group, mass customers group and the differentiated customers group.

Niche Market: The products designed for this segment are very specific and tailor-made in order to suit the particular requirements of very few customers who are ready to pay premium prices.

In Niche markets the volume of sales is very low but sales revenue is high due to premium prices for the heavily customized products.

Example: Equipment manufacturer for military needs.

Mass/ Undifferentiated Market: In this market products are designed to suit the generic needs of customers rather than meeting specific requirement of each customer. The prices for this target market are relatively low and the companies can achieve economies of scale by doing batch production.

In this segment the volume of sales are high and the revenues depend on the volume of sales.

Example: Fast moving consumer goods like cosmetics etc.

Selective/ Differentiated Market: The needs of customers in this target market are similar but specific. The main reason for companies to address this market is to enhance customer experience and thus grab a significant market share by surpassing the competitors.

Product price is slightly higher but is complemented by customer satisfaction hence resulting in increased market share and sales revenues.

Example: Apple iPhone can be a classical example of differentiated target market product as it provides enhanced user satisfaction at a premium price.

Positioning

Any company thinking of introducing a new product into the market should create a launch pad for it as to define the position where it fits into the existing space in the market place. This act of identifying and defining the position can be called Market Positioning. In this process, the main focus is on the quality and the price of the product to be launched. Therefore positioning process should start by identifying the gap in the market place where there is less density of competitors and bleak possibility for new entrants to occupy that position. Market positioning mainly depends on which type of competition is prevailing in the industry (Monopoly, oligopoly, Perfect competition).

The below figure demonstrates a situation where there are 3 existing players and a possible market gap where the 4th player, a new entrant can position itself:

HIGH PRICE

C

DHIGH LOW

A

BQUALITY QUALITY

LOW PRICE

In the above market place, each of the products are in a different position where the new product ‘D’ has entered into the space of providing high quality products at a price less than premium. This space was earlier empty as all the other three players are not providing as much quality at the price slightly higher and lower than that of ‘D’. Therefore it can be understood that product ‘D’ can capture a significant market share if right marketing campaigns are adopted.

5. Strategies for Market Growth and Competitive Positioning

Growth strategy

After successfully launching the product in the market the companies should then look at enhancing the growth prospects for the product by designing appropriate growth strategies. Growth in terms of market share as well as sales revenues. There are various growth strategies like mergers and acquisitions, franchises, strategic collaborations and outsourcing.

Ansoff’s Matrix explains the various market growth strategies in detail which will help the organizations to select the appropriate strategy that best fits their case. Depending on whether the product and market whether they are new or existing a company should adopt a growth strategy. Ansoff’s matrix is a tool whose output will provide a set of growth strategies which can be followed.

Figure: Ansoff’s Product-Market Growth Matrix

Existing Product New Products

Market Penetration

Product Development

Market Development

Diversification

Existing Market

New Markets

To understand the market growth strategy in more detail, consider the example of a company which wants to explore a new market by exporting its existing products to another country. Let us say, a UK car manufacturer finds a potential growth factor in Indian market, the strategy would be market development. In the process of Market Development the company should segment its target customers based on the socio-economic sections in the context of India and build an entirely new distribution channel in to sell the cars. The company should also change the pricing structure according to the prevailing competitive prices. Likewise, depending on the type of market and the type of product broadly four growth strategies can be adopted as shown in the figure.

6. Need for differentiated marketing mix

Marketing mix essentially deals with the 4 crucial elements which form the core of marketing any product. The 4Ps stand for Product, Price, Place and Promotion. With the following example all the four Ps are explained:

Example: Fashion Clothing for Teenagers Vs Formal Clothing for Older middle class

Product: A right product has to be designed that exactly meets the needs of the target customers. Target customers in this case are teenagers and older people in middle income group. In UK the market size for clothing is dominated by Women with more than half of the total value of the sector (KeyNote, 2009). By value women’s garments contribute for £19.1 bn whereas Men and Children’s garments are at £11 bn and £7bn respectively of the total market value of £37.2bn as of 2008. The variety of clothes for women is huge and for simplicity purposes only Men’s clothing is discussed in this context.

Teenagers: Population in the age of 15 to 19 can be treated as active teenagers. Teenagers generally like to be trendy and fashionable. So the product for this target market should reflect the same in its design and appearance.

Trousers: Teenagers prefer Jeans for trousers with various styles according to their tastes like boot-cut, low waist, straight fit.

T-Shirts: Teenagers prefer round-necks over collar T-shirts

Older Middle class: The average annual house hold income in UK per capita is £14,921 as of 2008 (KeyNote, 2009). The target customers, older middle class population in UK belong to the social grade ‘B’ based on the classification of the Office of National Statistics. According to the buying behaviour based on age, sex and social grade the penetration is observed to be more in the clothing accessories like rain coats, jackets and polo shirts in this segment (Older Middle class).

Hence the products designed for this segment should take the above trend into consideration for selling the clothes easily.

Price: Price is the most crucial factor that can influence consumer buying decision and hence should be fixed by considering the factors like right price for right quality and the competitive prices in the market for similar products.

In the context of clothing, most of the brands have a varying price structure based on the style and the quality of material used for production. For example, jackets made of cashmere wool are costlier than other ordinary wool and there would not be much price difference in this segment across the brands. Price for natural fibre-made clothes is always premium while there is a great variation in the prices of clothes made up of man-made fibre like Viscose, Acrylic, Polyester and Poly Propelene.

As the investment in designing fashionable out fits is high, the price for clothes made for teenagers is higher than that of the clothes designed for Older people.

Prices

Jeans: Price varies depending on the style

Boot-cut: £15 to £30

Narrow-fit: £20 to £40

Formal Trousers: £10 and above depending on the fabric

T-shirts: Price varies depending on the material

Cotton round-neck: £10

Cotton Polo: £15 and above

Polyester round-neck: From £6 onwards

Place: Place is where the product is available for the customers to purchase. The places might range from a corner shop to that of high street stores and large wholesale stores.

There were around 3,530 enterprises in UK that are involved in clothes manufacturing and there is a strong distribution network in UK for clothing manufacturers (KeyNote, 2010). Clothes can be made available at a variety of stores across all the regions in UK.

The places which sell clothes in UK are Super markets, sports shops, department stores, independent stores, mail orders and online stores.

Teenagers: As the clothes made for this segment are fashionable, they need to be located in an eye-catching area like high street retailers and sports stores. However a large number of clothes can also be sold through online retailer like Amazon which is quite popular among internet users.

Older Middle Class: The major place for sales in this segment would be large supermarkets. Older singles and couples visit large supermarkets for grocery and household needs quite often, therefore clothes in this segment might find right place in super markets for large volume of sales.

Promotion

Promotion is about communicating the brand and the products to the customer who will then make a buying decision. Without the awareness of the brand, the customer would hardly make a purchase. Therefore quantity of sales is directly proportional to the effectiveness of the promotional activity.

There are different ways of promoting a product. Advertisement, brand endorsements, email marketing, discount offers like buy 2 for 1, pre-launch and post-launch promotional campaign etc. are some of the commonly adopted promotional techniques.

Teenagers watch television quite regularly and hence it is a good medium to advertise. On the other hand, fashion magazines and internet are also very popular among teenagers and advertising on these might attract them to buy the clothes.

Older people might not be as good in using the internet as computers are modern and they might feel it difficult to adopt. However television and magazine advertisements might boost up the sales for the clothes in this segment.

Bill Carlson

Next Post

Uppsala Model, Transaction Cost Theory and Network Model

Sun Jan 12 , 2020
According to Calof and Beamish (1995), internationalization is “the method of adapting organizations’ operations (resources, strategy, structure,) to foreign environments”. This process comprises of the amount and geographic distance of the foreign market that is entered; the different amount of activities that are carried out in the different countries and […]