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Dr.B.N.F. Warnakulasooriya 1

Marketing Management

An Overview

Prof. B.N.F. Warnakulasooriya

MBA/MPM/M. Sc. In Management Program 2012

University of Sri Jayewardenepura

Faculty of Graduate Studies

MMS 5302: Marketing Management


“Marketing is so basic that it cannot be

considered a separate function. It is the

whole business seen from the point of view

of its final result, that is from the customer’s

point of view. … Business success is not

determined by the product but by the

customer” Peter Drucker.

Good Afternoon


Learning Objectives: On the completion of this module

students should be able to:

Define the marketing as a business philosophy, a

skill and a business function

Discuss the core concepts of marketing

Analyze and evaluate business strategies and

marketing opportunities

Solve problems by formulating sound and

practical marketing strategies

Understand the major strategic marketing concepts

including situation analyses, strategic models/ options

and planning for market orientation. Dr.B.N.F. Warnakulasooriya 4

ASSESSMENT

Class Participation 10 marks

Presentations ( 5 x 4) 20 marks

Research Paper 20 marks

Final Examination 50 marks

Total 100 marks


Marketing – Social and managerial process by which

individuals and group obtain what they need and want through

creating and exchanging products and values with others

(Kotler) .

Need - a state of felt deprivation of some basic satisfaction

Want – objects that will satisfy needs

Demand – Want are backed by an ability and willingness to

buy

Product – Any thing that can be offered to a market for

attention, acquisition, use or consumption and that might

satisfy a need or want.


The marketers job is to sell the benefits or services built into

physical products rather than just describe their physical

features. Sellers who concentrate their thinking on the want

instead of the customer’s need are said to suffer from

“marketing myopia”(read the article “ Marketing Myopia”

written by Theodore Levitt ,HBR 1974)

Benefits: Utilitarian Benefits : objective, functional product

attributes.

Hedonic benefits: encompasses emotional responses, sensory

pleasures, daydreams, and aesthetic consideration. The

criteria is subjective and symbolic.

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It is common for utilitarian and hedonic benefits to function

simultaneously in a purchase decision.

Product choice set

Alternative solutions to a need

Need Set: additional needs

Exchange : Act of obtaining a desired product from

someone by offering something in return.

• There are at least two parties

• Each party has something that might be of value to the

other party.

• Each party is capable of communication and delivery

• Each party is free to accept or reject the offer

• Each party believes it is appropriate or desirable to deal

with the other party Dr.B.N.F. Warnakulasooriya 8

Markets : Consists of all the potential customers

sharing a particular need or want who might be willing

and able to engage in exchange to satisfy that need or

want.

Marketer: A marketer is someone seeking a resource

from someone else and willing to offer something of

value in exchange

Marketing : A business philosophy, a skill and a

business function


• As a business philosophy- core values and

beliefs that espouse the view that customer

satisfaction is the ultimate goal of all

marketing activities.

• Marketing As a business philosophy-

Achievement of effectiveness

• The ability to create and keep a customer


Creating customers

Innovate to meet the challenges of a changing market

Managing the product portfolio in a way which ensure that

mature and declining products generate the cash to invest in

new and growing products

Keeping customers

•Maintaining a Sustainable Competitive Advantage (SCA)

•Managing a marketing mix in a way which ensures

continuing customer satisfaction


Business operates within a fast changing and unpredictable

environment

S In Com In Cus

Demographic

Competitors

Public

EconomicSocial

Natural

Legal

Political

Core marketing SystemDr.B.N.F. Warnakulasooriya 12

The Market Attractiveness – Business Position

Matrix

MABPM provides a structured way to evaluate

business units on two key dimensions : the

attractiveness of market involved and the strength

of the firm’s position in that market. The analysis

and representation naturally lead to a resource

allocation decision.

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Evaluating market Attractiveness : size, growth, customer

satisfaction level, competition ( quantity,types, effectiveness,

commitment), price levels, profitability, technology,

government regulations, sensitivity to economic trends.

Evaluating the Ability to Compete : organization, growth, share

by segment, customer loyalty, margins, distribution, technology

skill, patents, marketing,flexibility.

The market attractiveness – business position matrix is a

formal, structured way to match a firm’s strengths with

market opportunities.


The Market Attractiveness – Business Position Matrix

High

Medium

Low

Market Attractiveness

1 1 2

1 2 3

2 3 3

High Medium Low

Business

Position: Its

Ability to

Compete


1 - Invest and attempt to grow

2 – Invest would be made only when there is a specific

reason to believe the investment to be profitable.

3 – Harvest or divest ( when the assessment is more

negative)

The BCG Matrix

To use BCG matrix , each of the company’s businesses is plotted according to market growth rate ( percentage growth in sales) and relative competitive position ( market share) .


Market Growth Rate: The projected rate of sales growth for the market to be served by a particular business. It is usually measured as the percentage increase in a market’s sales or unit of volume over the two most recent years. MGR provides an indicator of the relative attractiveness of the market served by each of the business in the corporation’s portfolio businesses.

Relative Competitive Position: Expressed as the ratio of a business’s market share divided by the market share of the largest competitor in that market.


Businesses are plotted on the matrix once their market growth rate and relative competitive position have been computed. Once plotted, businesses in the BCG matrix will be in one of four cells with differing implications for their role in an overall corporate strategy.

RCP provides a basis for comparing the relative strengths of different business in the business’s portfolio in terms of the “strength” of their position in each business’s respective market.


The BCG Growth/ Share Matrix (Boston Consulting Group)

Stars Question Mark

DogsCash cows

Relative competitive position ( Market Share)

Market

Growth

Rate

High Low

High

Low

(Net Users of Resources)

Net Suppliers of resources

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The sustainable competitive advantage: Unique

abilities ( skills and assets that are hard to imitate) that

allow the business to consistently and persistently

outperform its competitors.

Concept of Sustainable Competitive Advantage

Competitive, advantage or edge, results from the

execution of a strategy not pursued by competing

businesses. Sometimes, competitors may have the same

strategy but a competitive advantage is realized when

one business implement it better than others. An

advantage that is durable is, therefore, an SCA.


Marketing strategy: Total sum of integration of

segmentation, targeting, differentiation, and

positioning strategies designed to create,

communicate, and deliver an offer to a target

market, (Fig 1) .

•Marketing strategy is not a stand alone

endeavor, marketing strategy is an integral

component of functional area strategies. The

significance of these strategy links lie in the

performance synergy between effectiveness and

efficiency that lead to productivity gains

necessary to create customer value.


Customer

Competition

Targeting Company

Fig 1 Marketing Strategy


Not all firm resources hold the potential of sustained competitive

advantages. To have this potential, a firm resource must have

certain properties (Barney 1991).

(a) Resources must be valuable, in the sense that it

exploits opportunities and/or neutralizes threats in a

firm environment. Resources are valuable when they

enable a firm to conceive of or implement strategies

that improve its efficiency and effectiveness.

(b) Resources must be rare among the current and

potential competitors of the firm; However, if these

resources are common, and other firms are also

having the capability of exploiting the resources in the

same way then no firm will enjoy a competitive

advantage;


(c) Resource must be imperfectly imitable and there

cannot be strategically equivalent substitute for these

resources that are valuable but neither rare nor

perfectly imitable;

(d) Resources must have the multiple application

capability in the sense that they must provide a basis

to detect and take advantage of opportunities in new

or current markets Dr.B.N.F. Warnakulasooriya 24

(e) Presence of causal ambiguity (the relationship

between the firm’s competitive advantage in the

market place and its comparative advantage in

resources is causally ambiguous)

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Factors Requisite for the Creation of an SCA

SCA

The Way you Compete Product Strategy

Positioning Strategy

Manufacturing Strategy Distribution strategy

Basis of Competition

Assets and Competencies

Where You compete

Product – Market Selection

Whom you compete Against

Competitor Selection Dr.B.N.F. Warnakulasooriya 26

The strategy needs to be based on a set of assets and

competencies. Without the support of assets or competencies it

is unlikely that the SCA will be enduring. Several questions

can help to identify relevant assets and competencies.

What assets and competencies are possessed by successful businesses and lacking in unsuccessful businesses ?

What are the key motivations of the major market segments?

What are the large value added components?

What are the mobility barriers?

What elements of the value chain can generate advantage?

Basis of Competition

In general, for an assets or competency to be the basis of an

SCA, it should help create a cost advantage over competitors

or a point of difference from competitors.


Where you Compete

The choice of the target product market. A well defined

strategy supported by assets and competencies can fail because

it does not work in the market place. Thus, a strategy and its

underline assets and competencies should involve something

valued by the market.

Identify the Competitors

It is vital to assess whether a competitor or strategic group is

weak, adequate, or strong with respect to assets and

competencies. The goal is to engage in a strategy that will match

up with competitors’ lack of strength in relevant assets and

competencies. Dr.B.N.F. Warnakulasooriya 28

In addition , an SCA or the skills and assets used

, should have the following conditions

(characteristics)

Valued and unique : skills and assets are valued and

used only if they can improve the efficiency or

effectiveness of key marketing activities. These

competencies should be those which are unique to

the business

Flexible and responsive: an SCA should resist

competitors’ duplication and be flexible enough to

face environmental changes, etc.


Marketing Mix

The marketing mix, core of traditional marketing,

consists of four process elements –product, price,

promotion and place- that are used for the tactical

development of a marketing programme

Substantial: the resulting product or service on the

market place should be noticeably and substantially

different from those of the competitors. The

product’s attributes must be valued.


Marketing

Mix

Target Market

Promotion

PlaceProduct

Price

•Channels•Coverage•Locations•Inventory•Transport

•Sales Promotion

•Advertising

•Sales-force

•Public relation

•Direct marketing

•Variety

•Quality

•Design

•Feature

•Brand name

•Packaging

•Sizes

•Services

•List price

•Discounts

•Allowances

•Payment period

•Credit terms

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• Except for the price variable, all other variables in

the marketing mix are resources needed to enter

and operate in the market place. Resources are

viewed as the tangible and intangible entities that

enable a firm to conceive of and implement

strategies that improve its efficiency and or

effectiveness (Barney 1991).

• Resources (assets and competencies) if isolated do

not generate any synergistic effect of forming core

competencies (the things a firm does best in

creating value for customers). They should be

blended in such a way that superior performance

of process can be achieved.


• Similarly, if marketing mix elements are taken individually they do not create any synergistic effect. Shapiro (1985) identifies three types of interaction within the mix:

• (a) consistency, a logical and useful fit between two or more elements; (b) integration, an active, harmonious interaction among the elements of the mix; and (c) leverage, each element is used to the best advantage in support of the total mix.

• However, not every combination of marketing mix permits the attainable of competitive advantage. If a firm has a specific assortment of marketing mix (resource) that is rare among competitors, then, it has the potential for generating a comparative advantage for that firm (Barney 1991).


• Shapiro (1985) asserts that the total assortment of

marketing mix should be fit with the market, the

company, and the competitor

p

pp

p

COMPANY

COMPETITOR

CUSTOMER


Marketing as a skill

• Market sensing skills – a deep ability to

understand customers, market and

environment trend ahead of their competitors,

ability to anticipate more accurately the

responses to actions designed to retain or

attract customers, to improve channel

relations, or thwart competitors.

– Open minded inquiry – Open mindedness is

described as a desire to see and experience

new things (Gregersen et al. 1998).


• Openness consists of two factors: cosmopolitan orientation, an attitude of openness to others’ values and practices; and cultural flexibility, the willingness to experiment with different customers (Manning 2003).

Open minded inquiry - acquire information about trends, events, opportunities, and threats in the market environment through scanning, direct experience, imitating or problem solving inquiries in a more thoughtful and systematic fashion, in the belief that all decisions starts with the market


– Synergistic information Distribution- Information

is widely distributed, its value is mutually

appreciated, and those functions with potentially

synergistic information know where else it could be

used beneficially.

– Mutually informed interpretations – Use scenarios

and other devices to force managers to articulate,

examine, and modify their mental models of how

their markets work, how competitors and suppliers

will react.

– Accessible Memory – Develop practical mechanism

to remember what has worked and why. This data

bank should be accessible to the entire orgn.

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• Market Relating Skills – an ability to maintain

and enhance customer relationship, marketing

skills in negotiation, inter-organizational

coordination and conflict management. New

skills, abilities, and processes must be mastered

– Close communication and joint problem

solving- develop team based mechanisms for

continuously exchanging information about

needs, problems, and emerging requirements

and taking action.


Coordinating Activities - New mgt processes for

(a) joint production planning and scheduling

(b) mgt of information system links so each knows other’s requirements and status and orders can be communicated electronically, and

(c) Mutual commitments to the improvement of quality and reliability.


Marketing As a

business function

Is dedicated to efficiency

The achievement of maximum output for minimum input

Principle Combination of Efficiency And Effectiveness

Effective Ineffective

Efficient

Inefficient

Thrive Die slowly

Survive Die quickly

SM

OM


Fig - Marketing as a Business Function

Market

Segmentation -

CB

Competition

TargetingOffer - Goods

services

experiences

Customer Company


Marketing as a Business Function

• The process of creating the value

(product/price), communicating the value

(promotion), and delivering the value

(channels) (fig 3).


Process

Marketing Management

Mix

Program

Cannels/value

chainPromotion

Product/offer

Price/ Value

Deliver ValueCommunicate

value

Create

Value:

:

:

Marketing As a Business Function

Marketing%20Management.ppt

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