unit 7 strategic marketing management edexcel

7/21/2019 Unit 7 Strategic Marketing Management Edexcel

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Strategic Marketing Management


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Introduction

Strategic marketing management is the roadmap that assists an organization to implement its

marketing strategies to achieve competitive advantage in the market. An organization needs

to understand the principles of strategic marketing management for determining the role ofstrategic marketing, processes involved in strategic marketing and links between corporate

strategy and marketing strategy. Again there are different value model used in strategic

marketing planning to have understanding about the tools used to developed strategic

marketing strategy. Lining between strategic positioning and marketing tactics, analysis of

relationship marketing are also require for this purpose. Organizations ability to use strategic

marketing techniques depends on using appropriate marketing techniques to ascertain growth

opportunities in a market, planning marketing strategy option and creating appropriate

strategic marketing objectives for a market. Organization also needs to respond with respect

to changes in the marketing environment. It has to understand the impact of changes in

external environment on marketing strategy, analyze internal environment to identify current

strengths and weaknesses. Throughout the study a strategic marketing management of Tesco,

has been discussed and developed. Tesco PLC is the UK's most successful supermarket

which is a multinational retailer of grocery and general merchandize. It is world's second

largest profit making retailer having stores in 14 countries in Asia, Europe and North

America. Obviously it is the grocery market leader of UK with 30% market share. The name

Tesco appeared first in 1924 although it was founded in 1919. Tesco was UK focused retailer

until 1990 and then it has diversified geographically at a rapid pace from 500 stores to 2,500

stores fifteen years later. It covers areas such as the retailing of books, clothing, electronics,

furniture, petrol and software, telecoms, internet and financial services, DVD rental and

music downloads. Tesco is the 15th largest of any company with a primary listing on the

London Stock Exchange having a market capitalization of approximately 24.4 billion as of

January 15, 2012.

Competitors

Wal-Mart Stores, Inc.

J Sainsbury plc

Carrefour SA
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1.1 Role of Strategic Marketing in an Organization

Tesco sets its marketing actions such a way so that it can achieve customer satisfaction and

organizational goals. It includes planning and executing of the ideas of conception, pricing,

promotion and distribution of goods and services in order to satisfy customer. To achievethese objectives Tesco approaches towards strategic marketing. It is more structured process

because it helps to identify its resources and opportunities to achieve sustainable competitive

advantage in the market. Moreover, it aims at to analyze and evaluate organizational

effectiveness. Tesco can achieve better understandings about its existing and potential

customers by communicating through marketing activities. We can enumerate the role of

strategic marketing in Tesco as below:

It assists Tesco to understand customers need and demandso that new areas can be

opened.

It relates marketing strategy with business strategy.

It structures Tescos future direction strategically.

It assists to increase organizational effectiveness and revenue.

It helps to identify and create new opportunities for the organization.

It considers customer voice to take decision about various aspects.

It helps to develop proper marketing structure.

To grow the UK core: To grow the UK core, the largest business in the Group and a

key driver of sales and profit, is a priority. Our Building a Better Tesco plan has

been restoring growth to the business through a comprehensive series of

improvements for customers.

To be an outstanding international retailer in stores and online: We have

established profitable businesses in Asian and European markets. Today, 32% of our

Group sales and 29% of profits are made internationally and our goal now is to take

the performance of these businesses to higher levels.

To be as strong in everything we sell as we are in food: Food is our heritage but as

the business has grown and diversified over recent years, we have added an ever-

wider range of products and services in-store and online, bringing Tesco value and

quality to many more categories.

To grow retail services in all our markets: Consumers are increasingly spending a

bigger proportion of their income on serviceswhether it is in telecoms, eating out or


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financial services. In the UK, we have built some strong, successful new businesses

and our ambition now is to take that experience to all of our markets.

To put our responsibilities to the communities we serve at the heart of what we

do: The changes we have made to our Core Purpose and Values to reflect Tescos

wider social purpose are clear signals that we put our responsibilities to the

communities we serve at the heart of what we do.

To be a creator of highly valued brands: Brands are about giving customers

confidence in the quality, value and reliability of the things we sell. We aim to be a

creator of highly valued brands across our offer, whether it is Finest, F&F or Tesco

Bank.

To build our team so that we create more value: As Tesco continues to grow and

diversify we need more leaders to run the broad range of businesses, operations and

support functions. We are investing in the development of more leaders and a bigger,

more diverse talent pool to support the growth of the Group.


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1.2 Processes Involved in Strategic Marketing

Tesco strategic marketing planning process seeks to establish a clear direction and unified

purpose for marketing efforts. The outcomes are documented in a marketing plan and updated

regularly by the marketing management. Strategic marketing process of Tesco involved 5steps: identifying a mission, analyzing the situation, setting objectives, developing a

marketing strategy and planning for evaluation.

1. Identifying a Mission: The first step is to articulate the mission statement to

anticipate future benefit from target customers. It also includes a clear explanation of

ongoing role for the goods and services of the organization. For instance, an airline

could state a mission to provide continuous innovation in global transportation.

2. Analyze the Situation:In this step organization conducts SWOT analysis to evaluate

and understand the resources they can build on and the challenges they face. For

example, using best quality technology would be a key strength for smart phones

while a poor relationship with dealer would be a weakness. Opportunities and threats

are derived from the influence of external factors like changes in taxation systems.

3. Setting Objectives: The third step is to set clear and measurable goals so that

decision makers have a basis for making choices. In general objectives are expressed

in terms of some quantitative measures like sales revenue, net profit, market share etc.

For example, targeting an increase of sales by 5% within a year may be realistic but

not within a quarter.

4. Developing a Marketing Strategy: In the fourth step a marketing strategy is

developed by targeting market from where organization highly likely to add value.

Managers also determine implementation tactics of effective ways of mixing product,

promotion and price to the prospective buyers.

5. Planning for Evaluation:At the very last stage of strategic marketing organization

specifies how, when and by whom the overall activities are to be monitored and

assessed over time. (Byrne, August 26, 1996)

Our Vision sets out what we want to be:In any business, clear direction is vital. Our Vision guides the directionand the decisions we take as an organization. Tesco is a company builtaround customers and colleagues, high quality assets around the worldand multiple opportunities for growthand these characteristics arecentral to our Vision for the business.


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We want Tesco to be the most highly valued business by: the customerswe serve, the communities in which we operate, our loyal and committedcolleagues and of course, our shareholders. For these things to bepossible our Vision for the business has five elementseach of them

describes the sort of company Tesco aspires to be.


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1.3 Link between Strategic Marketing and Corporate Strategy

Corporate strategy is set up with overall business concept and the CEO of the organization is

responsible to set the over all corporate strategy. On the other hand marketing is the

operational strategy which includes activities such as product identification, advertising,selling etc. Corporate strategy is developed not only for marketing department but also for the

others. Strategic marketing assists marketing department in achieving marketing objectives so

that corporate strategy will also be achieved. In an organization, corporate strategy is

supposed to be determined before setting marketing strategy. For example, to achieve

corporate strategy such as sustainable competitive advantage marketing strategy will be

providing quality goods and services. A suitable marketing strategy may be the best way to

achieve the corporate strategy because it is unswervingly connected with the customer from

which value of an organization derived. Marketing strategy emphasizes more on the customer

and value creation. The more value creation the more competitive advantage. We can relate

corporate strategy with marketing strategy as follow (Nancy Upton, January 2001).

Corporate Position Corporate Strategy Marketing Strategy

Attractive Market

Strong PositionInvest best resources Offer best product

Attractive Market

Weak PositionConcentrate on strengthening position Offer best product

Not Especially

Attractive Market

Strong Position

Invest best resources

Continuing earning and holding position

Effective marketing

Sales promotion

Not Especially

Attractive Market

Weak Position

Concentrate on strengthening position

Concentrate on product

Effective marketing

Sales promotion

Wanted and needed around the world

We see it as essential not only to be the shop of choice for customers but also the place

people want to work, a business that communities welcome and the retailer in which every

shareholder wants to invest.

A growing business, full of opportunities


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Whether its food or general merchandise, books or digitalentertainment, banking or eating

out, our business is full of opportunities for both customers and colleagues. We want our

business to offer something new every time.

Modern, innovative and full of ideas

Tescos success has always been based on trying tounderstand customers needs better than

anyone elseand then innovating to make their lives that little bit easier. This attitude, which

brought online grocery shopping, extended shopping hours, Finest, Everyday Value, a range

of formats from Express to Extra and all the other things that make us who we are is as

central to our Vision now as it ever has been.

Winners locally whilst applying our skills globally

Retail is local because cultures, tastes, climates, regulations are all different. But the core

skills that we have earned in one place can be applied in others. For example, setting up our

grocery home shopping operations from scratch in eight international markets across the

Group wouldnt have been possible without what weve learned in the UK.

Inspiring, earning trust and loyalty from customers, our colleagues and communities

We want Tesco to be a company that earns trust, not just respect, through everything we do

be it our in-store shopping trip, our Price Promise, or our determination to assure customers

on food quality. We want to be a business that customers, colleagues and communities trust

and are loyal to

Tesco is one of Britain's leading foodretailers with 568 stores throughoutEngland, Scotland, Wales andNorthern Ireland. There are also 103stores in France, 43 in Hungary, 31 inPoland and 13 in the Czech Republicand Slovakia.

Tesco is committed to creatingshareholder value through aninnovative customer focused strategy

implemented by our people. Thisstrategy is based on the following
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principles:
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2.1 Models Used in Strategic Marketing Planning

There business environment of smart phones and tabs is so competitive and growing at a

rapid pace. To cope up with the competition Tesco uses following techniques and models for

risk assessment in the environment, competitor analysis, internal and external analysis.Porters 5 Forces Model: Competitive forces of an organization can be analyzed by a

framework developed by Michael E. Porter. This framework is commonly known asPorters

5 Forces Modeland the forces are as below:

1. Risk of new entry by potential competitors.

2. Revelry among established organization within industries.

3. Bargaining power of suppliers.

4. Bargaining power of buyers.

5. Threat of substitute products.

Porter said in this model that those organizations have lesser opportunity to raise price and

earn profit where these forces are strongly active. He added also that weakness of these forces

means there is more opportunities to earn greater profit.

Figure 1: Porter's 5 Forces Model (Porter, November-December 1996)

SWOT Analysis: To integrate internal environment and external environment an

organization emphasized both evenly. The best way to integrate them is SWOT analysis:

Risk of entry by

potential competitors

Rivalry among

established organization

Bargaining power

of buyers

Bargaining power

of suppliers

Threats of substitute

products


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Strengths, Weaknesses, Opportunities and Threats. SWOT analysis allows an organization to

identify its strengths, weaknesses, opportunities and threats. Strengths and weaknesses of an

organization are the internal factors where opportunities and threats arise from the influence

of external factors. SWOT analysis suggest to focus on strengths of the organization and to

shore up on weakness. It also allows capitalizing opportunities by recognizing threats.

Figure 2: SWOT Analysis

PESTLE: PESTLE is a very common and widely used technique to analyze external

environment of an organization. PESTLE stands for Political, Economical, Social,

Technological and Legal analysis which is also read as SLEPT. An organization needs to take

into consideration external environmental factors while conducting strategic analysis and

doing market research. PESTLE analysis allows an organization to understand its business

position, market growth and decline, potential and direction for operation.

Strengths Weaknesses

Opportunities Threats

Internal

Factors

External


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2.2 Link between Strategic Positioning and Marketing Tactics

Strategic positioning complies with the development of a product or service and a marketing

mix to occupy a specific place in the minds of the targeted customers. Positioning is required

for perceptual processes of customers, greater competition and growing volume ofcommercial messages. It allows organization to screen out more information, to share more

customers and to promote clutter. Marketing tactics are the measurable goals that an

organization attempts to achieve for a target market within a specific time period. The most

popularly used tactics for strategic positioning is the 5Ds of Positioning.

Documenting: What benefits are the most important to your current and potential

customers?

Deciding: What image do you want your current and potential customers to have of

your organization?

Differentiation: Which competitors do you want to appear different from, and what

are the factors that you will use to make your organization different from them?

Designing: How will you develop and communicate these differences?

Delivering: How will you make good on what youve promised, and how do you

make sure that you have delivered?

Some organizations develop strategy in such way that will position them close to their

competitors so prospects can make a direct comparison when they purchase. Some

organizations use marketing tactics like offering a superior benefit depending on the

marketing mix strategy.


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2.3 Merits of Relationship Marketing in a Strategic Marketing Strategy

Customers are the value creator of an organization. Success of an organization depends on

the satisfaction of their customers. Organization needs to take appropriate strategies to satisfy

them. This includes providing quality product and services at minimum price, ensuringavailability, post sale services, polite behavior with customers etc. The goal of relationship

marketing is to develop loyalty between customer and organization. It may be with particular

brand or product to the targeted customer base. Relationship marketing provides following

benefits.

Customer Value: Relationship marketing assist in determining who the most valuable

customers for the organization are. It also determines who are too costly to maintain

relationship with. For example, relationship with a non-profitable customer will lead

subsequent cost by nonpayment or less payment.

Communication: Philip Kotler suggested in his books that organization should find

its easier and more efficient to obtain and keep their customer. Organization can

provide promotional incentives for repeat communication.

Innovation: Organization such as Starbucks through their website

MyStarbucksIdea.com offers their customer to provide ideas. It allows customer to

vote, discuss and share their views and ideas.

Customer Feedback: Relationship marketing allows organization to open

communication and cooperation so that customer concern, complaints and

compliment can quickly be addressed. Organization can use customers feedback to

make appropriate adjustment with the products and services.

Advocates: When customers are pleased and satisfied with a consistent experience,

they share this information with others. Relationship marketing use these tactics for

suggestions and recommendations.
http://www.starbucks.com/coffeehouse/community/mystarbucksideahttp://www.starbucks.com/coffeehouse/community/mystarbucksidea


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3.1 Appropriate Marketing Techniques to Ascertain Growth

Opportunities in a Market

Strategic marketing is an overall marketing plan which is designed to meet the needs and

requirements of customers. For example: For a high profile brand like Apple IPhone the

focus will be on promotion and physical evidence. To ensure effectiveness a number of

techniques are employed. Ansoff matrix is a strategic marketing tool to determine product

and growth strategy. This matrix suggests an organization that whether it should focus to

grow in existing or new market with existing or new product.

Existing Products New Products

Existing

Mark

ets

New

Markets

Figure 3: Ansoff Matrix (Ansoff, September-October 1957)

Market penetration is the growth strategy in which organization focus in its existing

market with existing product. This strategy is more applicable when organization

seeks to increase its current market share and dominance in the market by means of

product. To apply this strategy organization needs to have very clear idea and good

information about its competitors and customers.

The market development of growth strategy means providing existing goods and

services to a new market so that the size of market widens. This strategy is more risky

than penetration strategy because organization needs to develop a new customer

group along with a new distribution channel and pricing policy.

Product development strategy is the growth strategy by means of providing new

goods and services to the existing market of the organization. This strategy may

lucrative when customers seek for differentiated products. But there is a risk that new

product and service may not attract customer. So organization needs to have strong

capability in research and development.

The most risky growth strategy is diversification strategy which means to provide new

goods and services to a new market. Organization implements this strategy after

having a clear idea about market and customer needs and risk assessment procedure.

MarketPenetration

Market

Development

Diversification

ProductDevelopment


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Market research enables Tesco to identify the best marketing mix which should include right

product at right price in the right place by using of most suitable promotional techniques. To

create the right marketing mix organization must ensure that the product has right features,

price is accurately charged, product will be in right place at right time and target group of

customers are aware through promotion. (O'Reilly, March 3, 1997)

Stage 1Prior to Marketing

Activity

Stage 2During Marketing

Activity

Stage 3After Marketing

Activity

Evaluation of Marketing

Effectiveness

Developing the

Marketing Mix

Market Research


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3.2 How to Use Marketing Strategy Option in a Market

Porter Generic Strategies: Michael E. Porter describes three general strategies to achieve

and maintain competitive advantage. These three strategies can be categorized in two

dimensions: Strategic Strength and Strategic Scope. Strategic strength is a dimension thatarises from the side of supply and suggests the organization to focus at the core competence

of the organization. On the other hand strategic scope is a dimension that arises from demand

side and suggests the organization to focus at the size of the market organization want to

target. Porter identified two competencies: Product cost Efficiency and Product

Differentiation.

Figure 4: Porter Generic Strategies (Porter, November-December 1996)

GE Model: The best business portfolio fits organizations strengths with most attractive

opportunities. Organization must decide where to invest more or less by analyzing current

Segmentation Strategy

Cost

Leadership

Differentiation

Strategy

Broad Market

Scope

Narrow Market

Scope


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portfolio. To add new products and businesses with the current portfolio organization should

develop a growth strategy. The diagram of GE model below illustrates some possible

elements of determining market attractiveness and competitive strength.

Size

Growth

Competitive Rivalry

Profit Level

Ability to Differentiate

Cyclicality

Market Attractiveness

High Medium Low

Market Share

Size/Scale

Quality

Technology

Cost Base

Brand Strength

Customer Loyalty CompetitiveStrength

s

L

ow Product A Product B Product C

Medium

Product D Product E Product F

High

Product G Product H Product I

Figure 5: GE Model

In the above diagram, factors of competitive advantage are market share, size/scale, quality,

cost base, technology, brand strength, customer loyalty etc. Organization with the use of

these strengths attracts market and the factors are size, growth, competitive rivalry, profit

level, ability to differentiate and cyclicality etc.


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3.3 Appropriate Strategic Marketing Objectives for a Market

Strategic marketing aims at achieving customer satisfaction so the value of the organization

will increase. A well-defined objective of strategic marketing plays a crucial role in business

performing. Setting marketing objectives is critical because organization has to articulatethese with the overall mission and goals and also determine how it will be benefited. For

example, marketing objectives for Tesco are as follows.

Achieve an annual growth rate of at least 10%.

Promote adventure activities through strategic alliances with clubs, local athletic

organizations, and retailers.

By the end of year three, achieve 28% of sales through the Internet.

Become the market leader of adventure travel in the Woodville area.

Accomplishment of strategic marketing objectives goes through three steps.

It is very difficult to define and formulate objectives of strategic marketing in a prcis

manner. In this case, organization must demonstrate their best policies and procedures so that

objectives can be set more precisely. Sometimes it seems difficult to distinguish between

strategies and tactics. A strategy is an idea which conceptualizes how the goals of an

organization could be achieved. To execute strategies all the necessary actions are taken as

tactics. For the accomplishment of strategic marketing objectives organization needs to

ingrate its marketing activities like 7Ps (product, price, place, promotion, people, process and

physical evidence) of marketing and resources requirement for the execution. (Day, February

2001)

Define Clear Marketing

Objectives

Initiate Effective Strategies

Realistic Tactics to Accomplish


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4.1 Impact of Changes in the External Environment on a Marketing

Strategy

The elements of external environment are uncontrollable but have direct influence on

marketing strategy. Thus their existence may be either boon or threat to the organization.

Efficiency of an organization does not depend only on building strength and analyzing

weakness. It requires a third eye view for how external environment affects the organization

externally and internally for strengthening itself. If an organization is sound and efficient

internally then external environment may pose some threat on operation and profitability by

imposing tax. (Banerjee, March 2002)

Economic Forces:The growth rate of the economy, interest rates, currency exchange

rates, and inflation or deflation rates are the most important factors of economicforces which affect on the ability to earn an adequate rate of return. Economic forces

affect marketing strategy by extending sales when return is high.

Global Forces:During last few decades there have been significant changes in the

world economic system. Global forces affect marketing strategy to change. For

example, due to elimination of international trade barrier new market is opened and

new marketing strategy is taken for the outsiders.

Technological Forces: After Second World War the pace of technological change

has accelerated and become one of the most powerful forces in the external

environment. Technological change is so rapid to the smart phones and tabs. For

example, Tesco has a research team who regularly updated with the new technology.

Demographic Forces: Like other forces, elements of demographic forces such as

age, gender, ethnic origin, race, sexual orientation and social class forces marketing

strategy to change. For example, increasing number of women in workforce has

brought issues like equal pay and addressing sexual harassment. On the other hand

different targeting strategy is required for different class of customers according to

their tastes.

Social Forces: Changes in social values may affect marketing strategy to change.

Now organization goes for tree plantation, green operation, less carbon concept

because of change in social belief. Again all promotional activities are conducted in

such a way so that society cannot be harmed.

Political and Legal Forces:Changes in laws and regulations force organization to

price restructure, product differentiate and change distribution channel.


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4.2 Internal Analysis to Identify Current Strengths and Weaknesses in

a Marketing Strategy

Tesco conducts a three steps internal analysis process of identifying strengths and weaknesses

of the organization.

The elements of internal environments (men, machine, money, materials and markets) are

comparably easy to control and change to external environment. Organization has

competitive advantage when it has greater profitability than average in the market. The

sources of competitive advantages are strategy, distinctive competency and extended market

share. Strategies are made at all the levels of organization in creating competitive advantage.

Distinctive competencies arise from resources and capabilities. Resources allow organization

to create value for its customers and competencies of organization coordinate resources for

productive use. Sustainability of competitive advantage depends on two factors.

1. Barriers to Imitation: This includes the factors that create it difficult to copy the

competencies of the organization for its competitors.

2. Capability of Competitors: Competitors degree of response to competitive

advantage to identify value and new knowledge.

Understand the process by which companies create value for customers

and profit themselves, and the role of resources, capabilities &

Understand how important superior efficiency, innovation, quality &

responsiveness to customers are in creating value & high profitability.

Analyze the sources of company's competitive advantage to identify

what is driving the profitability of their enterprise and where


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4.3 Strategic Marketing Responses to Key Emerging Themes in a

Marketing Strategy

Tesco allows responses to key emerging themes as a part of its marketing strategy. The

proposed responses are as follow.

Reengineering the process of business

Changes in distribution channel

Change in the marketing mix

Attracting customers through e-commerce

Fascinating the website

Allowing online order

Benchmarking the performance Introduce balance scorecard

Restructuring cost function

Cost control

Cost reduction

Building a global network and more market-driven

Updated with the world

Relationship marketing


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Conclusion

Strategic marketing management aims at to assist the organization in achieving competitive

positioning within few years. While developing a strategic marketing strategy it is important

to analyze both internal and external factors of the environment and identify the opportunisticand treat factors. Organization must remind about the customers, the value creator, while

developing marketing strategy. The strategy should include pricing and distribution systems,

and also define communicating ways to customers. Most challenging and difficult task in

strategic marketing management is to implement it in practically. Organization should

identify it drawbacks and response to key emerging themes in a marketing strategy.

unit 7 strategic marketing management edexcel

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