SOLUTIONS FOR MARKETING STRATEGY – NOV 2010
An external marketing audit (5 MARKS)
1(a)
The mobile service provider of your choice could be Zain Malawi for example;
1.1Political/Legal
Zain will have to comply with the current taxation policy, the actions of politicians, regulations of the
telecommunications industry.
1.2Economic
The world recession impacted different mobile service providers in Africa including Malawi. Low GNP
per capital, low disposable incomes. Tariff rates e.tc.
1.3Social
Zain will have to appreciate the impact of the mobile phone on the social lives of Malawians. The type of
phone is fashion statement. Nowadays phones are regarded as life tools i.e. important gadgets which
help individuals on various aspects of life. Mobile phones provide banking services or can be a
Newspaper , social networking e.g. Facebook. e. t. c .
1.4Technological
The 3G technology will technology will have implications on the telecommunications industry in Malawi
.New products and services will be developed.
1b. The Marketing Plan for Zain (10 MARKS)
The content of the Marketing plan can be as follows;
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Executive summary
Mission ,Vision and goal
Corporate Objectives
Micro & Macro environmental analysis
SWOT Analysis
Marketing Objectives
Strategic options
Strategic Management of the marketing mix
Implementation
Monitoring, Evaluation & Control
Executive Summary
This will be a summary of the overall marketing plan of Zain. It contains the key points of the plan. Some
individuals who will not be interested with the details of the whole plan use the Executive summary.
Mission statement, Vision & Goals
The mission statement should indicate why the Zain as an organization exist. I should also indicate the
values of the organization. It should also provide clearly the direction of the organization.
Corporate Objectives
These are the overall objectives of the organization. Zain should derive its marketing objectives from the
corporate objectives after considering environmental forces.
Micro & Macro environmental analysis
Micro environmental analysis includes the analysis of the internal factors e.g. Resources, capabilities,
organization structure and culture, customer analysis e.t.c. The following models can be used e.g. 5 M
model, 7S framework, stakeholder analysis e.t.c
Macro environmental forces can be analysed using PEST/PESTEL
SWOT Analysis
The Environmental forces can be summarized in the SWOT profile. Strengths and weaknesses will be
derived from the Micro environment and Opportunities and Threats from the Macro environment.
Marketing Objectives
These should be SMART. And should be in line with the mission. They can be qualitative or quantitative
objectives
Strategy Options
These can be derived using a number of models depending on the formulated objectives. For example
growth objectives can use the Ansoff Model. Competitive objectives can use Porters models.
Management of the Marketing mix
Marketing mix will be the 7P’s. These will be used to assist implement the strategies
Budgeting
The conversion of the tactical intentions into monetary form
Implementation
Successful implementation will depend on




Organisational and marketing department structure
Organisational culture
Availability of Resources
Management Authority and Leadership
Monitoring, Review and Control
The budgeted results need to be compared with actual results on the ground and corrective action
should be taken if there are any variances
2. (A)
the Mission Statement (7 MARKS)
The mission statement of an organization gives its reason of existence and tells its stakeholder such as
customers, shareholders what the company is doing and why. It also indicates the values of the
organization. The mission statement therefore indicates the direction that the organization should take.
The mission statement assists the organization to formulate its objective after considering its
environmental factors. Pearce and David suggest that the following nine issues should be addressed;
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Customers
Products and services
Geographic markets
Technology
Concerns for growth and profits
Values, ethics and beliefs
Public image
Employees
Distinctive competence
Mission statements can benefit the organization in the following ways
(a)
(b)
(c)
(d)
Providing a clear sense of purpose and direction
Helps it to differentiate itself similar competing organizations
Keeps the organization focused
Provide direction to management
(b)The role of marketing objectives. (4 MARKS)
Marketing objectives are derived from the corporate objectives in the strategic planning process which
involves the following stages; mission statement, vision, goal, corporate objectives, Micro/Macro
environmental analysis, SWOT, marketing objectives, tactics, Budgeting, implementation, monitoring ,
review and control. Corporate objectives define the direction and goals of the organization as a whole.
Corporate objective will then be passed down to various departments such as the marketing
department. Marketing objectives are designed to help achieve the corporate objectives of the
organization. Marketing objectives also helps to give direction to the marketing staff involved.
Marketing objectives will need to be SMART
Benefits of the marketing objectives include; ( 4 MARKS)
(a)
(b)
(c)
(d)
(e)
3. (a)
Providing a clear direction to those who are involved
Can create unity
They allow measurement and control
They can reduce risk
They can improve decision making
GE Matrix (7.5 MARKS)
Candidates should show the matrix diagrammatically
The GE matrix was developed to overcome the problems of the BCG model. SBUs are assessed in terms
of the attractiveness of the industry and the business strengths of the company. Typical aspects which
are taken into account are:
Industry Attractiveness
INDUSTRY ATTRACTIVENESS
Market size
Market Diversity
Growth rate
Profitability
Competitors
Social/legal environment
Business Strength(s)
BUSINESS STRENGTHS
Differential advantages
Market share
Sales
Breadth of product line
Mix effectiveness
innovativeness
Planners, with their knowledge of the market and the company itself, can decide how an SBU, or a
product, can be assessed in terms of the market attractiveness and the company's strength and can then
place that product, or SBU, on the matrix. Assessment can be based on "High", "Medium" or "Low" or,
more likely, on a basis of "weighting" where the planner will give a score to each of the factors under
consideration and then the total is taken as the point at which the SBU is placed on the grid.
Although this model uses circles, similar to the BCG model, it is different in that the GE circles represent
the overall market sales (BCG circles represent the income for the company only). The share held by the
company is then shown as a proportion of the circle.
General Electric Matrix Strategies
Investment for Growth
This is a strategy for use with strong products in markets with high or medium attractiveness (similar to
BCG Stars), where the company also has high or medium business strengths. Full resources should be
used: innovations, product-line extensions, product/brand advertising, intensive distribution, good price
margins, etc. Profitability expectations would be high.
Manage Selectively for Earnings
Strong position in weak market (like BCG Cash Cow); company uses marketing to retain loyalty.
Moderate position in moderate market; company can identify underserved segments and invest on a
selective basis.
Weak position in attractive market (like BCG Question Mark); company must decide whether to increase
investment, concentrate on the niche(s), acquire another business or trim off activities.
Harvest/Divest
Here the SBUs are similar to BCG Dogs. The strategy can be to minimise marketing activities and
concentrate on selected products rather than the whole range. They can divest products from the range,
closing down or deleting an SBU which is seen as nonproductive or to have little future. Profits are
"harvested" because investments are minimal.
(b)
Ansoff Product/Matrix Model (7.5 MARKS)
Market penetration
Product development
Market Development
Diversification
Ansoff claimed that in marketing we can only be talking about products and markets, and that these can
only be old, or existing, and new, or potential. Thus marketers have:
(a) existing products which they can sell to existing markets
(b) existing products which they can sell to new markets
(c) new products which they can sell to existing markets
(d) new products which they can sell to new markets.
Using these combinations gives a choice, according to Ansoff, of four possible basic
strategies:
Market Penetration
This strategy – same product/same market – will be appropriate when a market is growing
and not yet saturated. Penetration can be achieved by:
(a) Attracting non-users of a product
(b) Increasing the usage, or purchasing rate, of existing customers.
The strategy will often be implemented by increasing activity on one or more of the mix
elements – for example, using more intensive distribution, aggressive promotion, pricing, etc.
Market Development
This strategy – same product/new market – is often found when a regional business wishes to expand or
if new markets are emerging because of changes in consumer habits. It can also occur when a new use
has been discovered for an existing product.
Implementation of this strategy involves appealing to market sectors (or geographical regions) not
currently catered for and many mean a repositioning of products as well as, very often, new distribution
methods or channels.
Product Development
With this strategy – new product/existing market – an organisation develops new products to appeal to
its existing markets. It may simply be a product "refinement" – for example, change of packaging or
taste, etc.
Product development is most prevalent when branding exists. Promotional aspects will emphasise the
added qualities of the "new" product and link it specifically to the security of, and confidence in, the
brand. This strategy builds on customer loyalty and the benefits to be gained by purchase. Other mix
elements, such as distribution, may remain unchanged.
Diversification
This strategy – new products/new market – is sometimes introduced so that a company does not
become too dependent on its existing SBUs. It can be a form of "insurance" against potential disasters
that could occur in the event of drastic environmental changes. It can also simply be a means of growth
and expansion of power, etc.
"New" might be a totally innovative product, which has never been seen in the marketplace, or it can be
a product which is already available in the market but is new to the firm. In either case, Diversification
means catering for market sectors which are also new to the firm. If a new product is developed for the
existing market it is Product Development and not Diversification. Firms can diversify by producing their
own new products or by taking over some other product. In the latter case there are two main types of
diversification – integration (which may be vertical or horizontal) or conglomeration.
(c) Porters generic Routes to competitive advantage(7.5 MARKS)
Michael Porter model claims that there are only three main strategies which a business can follow:
I.
Overall cost leadership
II.
Differentiation strategy
III.
Focus strategy.
A business which followed none of these strategies would become "stuck in the middle".
Cost Leadership
Following this strategy means that the company aims to produce in large quantities, at the lowest cost
possible and sell at lower prices. By doing this they can capitalise on economies of scale and defeat any
competitor who has not got equal production capacity, or who can keep prices to a minimum. This
strategy will also attract price-sensitive buyers away from the competition.
Differentiation
This strategy involves offering some unique selling proposition (USP) that the competition do not have.
Prices may not be too important to buyers of products sold under this strategy and it often follows that
customers become brand or product loyal – an example could be that of a fashion; company producing a
diverse range of clothes to suit different requirements for different target sectors (military
uniforms/work wear/leisure).
Focus
The company aims at very select market sectors and will be charging higher prices or offer special USPs.
The company can concentrate on its key products for specific targets, acquire a reputation for being
"specialist", or can simply attack sectors of the market which are being ignored by the competition. They
are, to some effect, niche marketers – for example, Rolex watches, Rolls Royce cars or bespoke tailoring.
(a) MacKinsey 7S Framework(7.5 MARKS)
(a) Structure
Chandler first identified that the structure of an organisation followed strategy development. In a study
of large companies, he found that diversified activities forced them to adopt decentralised structures.
He concluded that changes in strategy often result in management difficulties, because the current
structures do not fit with the new strategies. This leads, for example, to excessive bureaucracy,
extended lines of communication and large spans of control, and as a result, the organisation then has
to make structural changes.
(b) Systems
By systems, we mean all the procedures within an organisation, either formal or informal, such as
budgetary systems, financial control procedures, reward systems, management information systems,
operating procedures, etc. These can have a significant impact on strategy development and
implementation. For example, portfolio analysis requires analysis of current activities as SBUs, but can
existing systems provide financial data in the format required to assess their position and prospects?
(c) Style
By style, we are referring to the culture of an organisation: the values, beliefs and shared by its
members. As we have already seen, organisational culture is principally shaped by the approach of top
management: not only in their formal statements, but also by their actions, such as how particular
events are regarded, and which skills and abilities appear to be valued. Culture can also be affected by
other factors as well, such as significant external changes forcing a reappraisal of accepted methods of
working. Culture can support the achievement of strategic plans,
d) Staff
As we have already seen, the management of human resources has developed from the traditional
approach of regarding labour as simply one of the factors of production and managing staff through the
operation of formal procedures such as reward systems, appraisal schemes,. to recognising the
important contribution which people can make to organisational success. Human resource strategy
must be aligned with the development of the corporate strategy. This is achieved by the implementation
of policies and procedures which support the achievement of organisational goals, such as performance
management.
There are also strong links between staff and style, as key staff management processes such as
recruitment and rewards have an obvious impact on values, attitudes and behaviours.
(e) Skills
By skill we are referring not just to the individual skills of employees, but also to the distinctive
competences and capabilities which an organisation possesses, such as a strong focus on product
development, skills in project management or excellent aftersales service.
There is an obvious link between skills and staff, as skills of an organisation are embodied in its
employees. Specific skills may be acquired by recruitment, but also by equipping existing staff with the
new skills required. Strategic human resource management links the acquisition of skills directly with
the achievement of goals.
(f)Strategy
This refers to the means to achieve the formulated objectives. Strategies can be formulated using
different models depending on the objectives. For instance the growth objectives can be achieved using
the Ansoff model strategies.
(e)Super ordinate goals
These refer to the organizational goal which gives the organization a direction. They are shared by the
organization departments.
Question 4
Gap analysis (15 marks)
Marketing planning is concerned with developing strategies to meet objectives set. Forecasts can be
made which try to assess how strategies will affect over time
A planning gap can be defined as the difference between the objective and the forecast based on level
of changes in the environment.
The planning gap can be represented diagrammatically as below;
The gap is caused by environmental changes/forces that impact on the organization which can
potentially delay the achievement of the formulated objectives
This is a useful tool, both in helping to set realistic objectives and as a basis for identifying the extent to
which existing strategies will fail to meet performance objectives in the future.
It combines the "where are we now?” (and the "where would we be with no further action?"), with the
"where do we want to be?". The gap between these two gives a clear picture to management of what
must be achieved. When planning at strategic level, it is possible to first conduct a forecast of desired
revenue/profits, and also those which are expected to be obtained from existing products and markets.
Often this leaves a shortfall between what is desired and what is believed to be possible. It is then
possible to consider how this gap may be closed, by pursuing strategic options such as internal growth
and diversification
Advantages of Gap Analysis
There are a number of advantages from using gap analysis:
(a) It forces management to be forward-thinking.
(b) It encourages an analysis to be made of the forces which may either help or
hinder the achievement of future objectives.
(c) It can be used as a dampening device to convert either over-optimistic or over pessimistic
objectives to more realistic ones.
(d) It encourages management to think about the strategies they can use in order to
close gaps; which is probably the most important advantage from a strategic
planning point of view.
Methods of Closing the Gap
When a gap is forecast, for example, in the company's profit level, management needs
to look for strategies which are likely to close it. These strategies will be related to the
Reasons for the gap, which might be:
(a) a decline in sales due to obsolete products;
(b) an increase in production costs due to ageing machinery, or increasing labour
costs, or both;
(c) a change in the needs or demands of the market target.
Once the gaps and the causes of them have been identified then suitable strategies for closing them can
be considered. These might include:
(a) the development of new products;
(b) reducing costs, by improved efficiency or the replacement of old machinery;
(c) Diversification into new products or markets.
Often it is necessary for a company to use, not just one strategy to close the gap, but a combination of
strategies introduced over time and phased in as and when they can be delivered.
Different types of strategy take different times to become effective and have different levels of risk
associated with them.
The implication of the gap analysis is that marketing will need to identify strategies that will help close
this gap by dealing with the environmental forces causing the gap. The gap can be closed using one
strategy or number of strategies e.g. market penetration strategy.
While marketing is an uncertain industry it is important that forecasts and projects are as accurate as
possible as they impact on decision making. The purpose of marketing planning is to plan for all
eventualities and be prepared all the time. The planning gap indicates what action needs to be taken.
6. Porters Five Forces Model (20 marks)
Students should show this model diagrammatically;
Porter states that there are five forces that determine competition in an industry: the
Threat of new entrants, the bargaining power of suppliers, the bargaining power of
buyers, the threat of substitute products or services and rivalry among existing
competitors. Let us consider each of these in turn.
The threat of new entrants (4 marks)
New entrants to an industry bring additional capacity and the desire to gain
market share. The seriousness of the threat of entry depends on the extent to
which there are barriers present within the market which deter potential new
competitors, and on the reaction from existing competitors which the new entrant
can expect.
The bargaining power of suppliers (4 marks)
Powerful suppliers can exert bargaining power over participants in an industry byraising prices or
reducing the quality of purchases. A supplier is powerful if:
(i) The industry is dominated by a few companies;
(ii) Either its product is differentiated or there would be significant costs
Involved in changing to another supplier;
(iii) It does not compete with other products;
(iv) It poses the threat of integrating forward into the organisation's own
business;
(v) the organisation is not an important customer of the supplier.
The bargaining power of buyers (4 marks)
A buyer group is powerful if:
(i) it purchases in large volumes;
(ii) the products it buys from the organisation are standard or undifferentiated;
(iii) The products it buys form a component of its own product and represent a significant fraction of the
cost, so that buyers are more likely to shop for a favorable price;
(iv) It earns low profits, creating an incentive to reduce purchasing costs;
(v) The organisation's product is unimportant to the quality of the buyer's own
product (where it is, the buyer is much less likely to be price-sensitive);
(vi) The organisation's product does not save the buyer money (if it does, then
The buyer is rarely price-sensitive);
(vii) The buyer poses a threat of integrating backwards into the organisation's
business.
Substitute products or services (4 marks)
The availability of substitute products or services limits the potential for earnings and growth from
existing products or services, since these have to be priced so as to be more attractive than the
substitutes.
Rivalry among existing competitors (4marks)
Rivalry among existing competitors takes the form of seeking to increase market share by cutting prices,
introducing new products and promotional advertising. Intense rivalry is related to the presence of:
(i) numerous competitors, roughly equal in size;
(ii) slow industry growth;
(iii) lack of product differentiation, or significant costs of changing;
(iv) high fixed costs or the product being perishable, resulting in significant price-cutting to stimulate
sales;
(v) capacity which is normally increased in large increments, leading to periods of over-capacity and
price-cutting;
(vi) high exit barriers, such as the difficulty of disposing of very specialized assets. Once top management
have assessed the forces affecting competition in the industry and their underlying causes, the
organisation's strengths and weaknesses can be identified.
Question 7
Market Skimming (10 marks)
This is where the marketer charges a high or premium price for a new product. Skimming involves setting a high
initial price for a new product in order to take advantage of those buyers prepared to pay a high price.
A typical strategy would be initially to command a premium price and then gradually to reduce the price to attract
more price sensitive segments of the market. This strategy is an example of price discrimination over time.
Conditions for Market Skimming pricing include these:
(a) Insufficient market capacity and competitors cannot increase capacity.
(b) Buyers are relatively insensitive to price increases.
(c) High price perceived as high quality.
Advantages of Skimming
1. It allows for quick recovery on investment in the new product such as R & D costs, etc.
2. It may confer a prestigious/quality image to customers.
3. Higher prices are likely to appeal to innovator groups.
4. It allows for flexibility in reducing prices should the initial price result in too few sales.
5. It allows for reduced prices for later stages of the product life cycle to appeal to the mass market.
Disadvantages of Skimming pricing
1. It may encourage competitors to enter the market more quickly.
2. It results in lower levels of sales and hence few economies of scale.
3. It may attract attention from regulatory bodies or consumer groups where profiteering is suspected.
Many new electronic consumer products are priced in this way.
Market penetration pricing (10 marks)
This is the setting of low prices in order to gain rapid market share. Here, the organisation sets a
relatively low price for product or service, to stimulate growth of the market and/or to obtain a large
share of the market. This method maximises sales and conditions favouring market penetration pricing
policy include these:
(a) If unit costs will fall with increased output.
(b) If the market is price sensitive and relatively low prices will attract more sales.
(c) When low prices will discourage new competitors.
ADVANTAGES OF PENETRATION PRICING
(a) It produces larger sales volumes.
(b) It leads to an organisation gaining a large slice of the market.
(c) It can prevent competitors from entering the market.
DISADVANTAGES OF MARKET PENETRATION PRICING
(a) It is often difficult to raise prices after this policy has been used.
(b) It is less flexible than using a skimming policy.
(c) It may not be appropriate due to the costs of R & D and Competitors’ positions.
Question 9
Cost Leadership strategy (4 marks)
Following this strategy means that the company aims to produce in large quantities, at the lowest cost
possible and sell at lower prices. By doing this they can capitalise on economies of scale and defeat any
competitor who has not got equal production capacity, or who can keep prices to a minimum. This
strategy will also attract price-sensitive buyers away from the competition.
Distribution strategy (4 marks)
There are three main distribution strategies:
Intensive distribution
This involves concentrating on a segment of the total market such as choosing limited geographical
distribution rather than national distribution.
Selective distribution
The producer selects a group of retail outlets from amongst all retail outlets on grounds of the brand
image (“quality” outlets), or related to retailers’ capacity to provide after sales service.
Exclusive distribution
This is an extension of selective distribution.
Particular outlets are granted exclusive handling rights within a prescribed geographical area.
Sometimes exclusive distribution, or franchise rights, are coupled with making special financial
arrangements for land, building or equipment, such as petrol station agreements.
Harvest/Divest strategy( 4 marks)
The strategy can be to minimise marketing activities and concentrate on selected products rather than
the whole range. They can divest products from the range, closing down or deleting an SBU which is
seen as non productive or to have little future. Profits are "harvested" because investments are minimal.
Joint venture( 4 marks)
Joint venture are arrangements whereby one or more organisations set up a newly
business units which they jointly own whilst still retaining their individual independence
Question 10
The marketing process will set objectives which are specific, measurable, achievable, realistic and time
based. It is against these that marketing activities can be evaluated.
Key performance indicators (6 marks)
Once objectives are set, key performance indicators should be decided and the responsibilities for each
task allocated appropriately. Such indicators may include market share, levels of sales, levels of
awareness, feedback from customers, number of customers e.t.c.
Variance analysis (6 marks)
Any variance from the expected performance should be investigated and activities adjusted accordingly.
Budgetary Control (6 marks)
Marketing activity can be evaluated against expected expenditure. As finances will be very limited, any
additional cost can cause problems and so must be controlled and adjustments made quickly before too
much money is lost.
(2 marks)
Methods of evaluation could include customer surveys, pre and post testing of customer awareness, and
sales levels.