Discuss The Strategic Options And Provide Examples Marketing Essay

Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization refers to the integration of economics and societies all over the world. It involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation and infrastructure. http://hubpages.com/hub/Definition-of-Globalization

Integration in globalization is either negative or positive depends breaking down of trade barriers. The removal of barriers can be beneficial for products that are important to the economy growth. An example of imported raw materials is very expensive but the cost will be down if the supply will increase and will make cheaper to produce the final products for export.

2STRATEGY

Strategy is reflects decisions to offer particular products or services in the particular markets. The strategic options for the exploring opportunities in the new established market and existing product are good opportunity to use the availability resources. It is a tool in the direction of the firm’s objective in achieving business success in the long term.

CORPORATE STRATEGY:

This is the focus of an organization which products or service markets to compete and area to operate. This is because market definition is the domain of corporate level strategists, the responsibility for diversification, addition of new products or services to the existing product, also falls within the realm of corporate-level strategy.

A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.

Businesses use strategic alliances to:

Achieve advantages of scale, scope and speed

Increase market penetration

Enhance competitiveness in domestic and/or global markets

Enhance product development

Develop new business opportunities through new products and services

Expand market development

Increase exports

Diversify

Create new businesses

Reduce costs.

3How to enter Market

The best mode of entry its broad choices are indirect exporting, direct exporting, licencing, joint ventures and direct investment.

A joint venture is an agreement by two or more parties to form a single entity to undertake a certain project. Each of the businesses has an equity stake in the individual business and share revenues, expenses and profits.

Joint ownership has certain drawbacks. The partners might disagree over investment, marketing, or other policies. One partner might want to reinvest earnings for growth, and the other partner might want to take out these earnings. Furthermore joint ownership can hamper a multinational company from carrying out specific manufacturing and marketing policies on a worldwide basis.

Licensing is a simple way for a manufacturer to become involved in International business. The licensor enters an agreement with a licensee in the foreign market, offering the right to use a manufacturing process trademarks, intellectual property and trade secrets are licensed to an external firm. It’s used mainly to manufacture and sell a certain product. It’s a lower risk way of expanding the reach of product compared to building company manufacturing base and distribution reach.

Coca-cola is an example of an international market by licensing bottlers around the world.

Franchising is an excellent way of quickly rolling out a successful concept nationwide. Franchisees pays fixed fee and agree to ongoing payments so the process is financially risk-free for the company. However, downsides do exist, particularly with the loss of control over how franchisees run their franchise. It is thus an important form of vertical market integration. Potentially, the system provides an effective blending of skill centralization and operational decentralization. It permits the franchise to sell products or services under a highly publicized brand name and a well-proven set of procedures; it is a carefully developed and controlled marketing strategy.

Examples of franchisers are hotels brands i.e. Hilton, Holiday in and Coco-cola.

Advantages of forming strategic alliances

Provide companies with the opportunity to gain new capacity and expertise

Allow companies to enter related businesses or new geographic markets or gain new technological knowledge

access to greater resources, including specialized staff and technology

sharing of risks with a venture partner

Disadvantages of strategic alliances

It takes time and effort to build the right relationship and partnering with another business can be challenging. Problems are likely to arise if:

There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.

Different cultures and management styles result in poor integration and co-operation.

The partners don’t provide enough leadership and support in the early stages.

Success in a joint venture depends on thorough research and analysis of the objectives.

Examples of strategic alliances companies 

Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones.

Virgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Tele service and Richard Branson’s Service Group. http://wiki.answers.com/Q/Examples_of_joint_ventures#ixzz1KAPliPOB

Product Strategies

Is the central focus of the marketing mix. It is fails to satisfy the needs of the consumers, no amount of promotion, price cutting, or distribution will persuade them to buy. The total product, which is what the customer buys, which also include the package, the brand name, accessories, after sales service, the warranty and instructions for use. Thus international product strategies and policies should include the following aspects.

4Strategies Matrix

Ansoff Matrix has four strategies which an organization will be good to process for good foundation of the company future development. Ansoff matrix focused on the firm’s present and potential products and market, customers by considering ways to grow through existing products and new products and in existing market and new markets. It is one of the best tools for the companies to develop market and product expansion.

Market Penetration,

Product development,

Market Development

Diversification

Diagram below indicate the Ansoff Matrix :

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5MARKET PENETRATION

Is a term that indicates how deeply a product or service has become entrenched with a given consumer market. The degree of penetration is often measured by the amount of sales that are generated within the market itself, increasing sales force, increase distribution and promotion of products, more expenditure in marketing and advertising activities will results in increasing sales.

Market penetration can be considered in broader terms, and be used as a way of identifying a wider consumer base. Penetration expands the influence of the product to new consumers and thus increases the sales and general proportion of the consumer market that the manufacturer controls. http://www.wisegeek.com/what-is-market-penetration.htm

Market penetration seeks to achieve four main objectives:

The market share of current products should be maintained, this will be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps

Dominance of growth markets should be secured

Competitors should be driving to restructure a mature market, promotion campaign should be more aggressive for the same pricing strategy should be designed to make difficult to the competitors

Implemented loyalty scheme for the existing customers.

6Examples of Market Penetration

Dell

Recognizing the software as a service can be a potent market penetration tool, also assembling a services portfolio that now includes e-mail disaster recovery, spam/virus filtering and archiving via its Message one acquisition.

Airlines

– Easyjet Airline market was by offering flights for the small distance cities.

– Southwest Airline same as Easyjet were more profitable on operating small distances

Pakistan State Oil penetrates in Pakistan market growth from 40% to 65% in the duration of 4 years by developing new retail outlets.

Car Manufacturing

Toyota Motor Corporation is the world’s largest automobile manufacturer by sales and production. Toyota and BMW good relationship in marketing in order to retain and have high profile for their value customers. Toyota Motor Corporation is the largest conglomerates in the world. Toyota has grown to a large multinational corporation from where it started and expanded to different worldwide markets and countries.

Banking

HSBC Bank customers were very happy on internet banking that they can access their online account 24hrs a day wherever they are in the world.

Telecommunication

Airtel promoting its services to penetrate in the Indian market. It is the world’s fastest growing industry, they have couple of joint ventures with Alcatel in Indian, it is operates in 19 countries across South Asia, Africa and the Channel Islands. Airtel is the fifth largest telecom operator in the world. http://en.wikipedia.org/wiki/Market_penetration

7Advantage and Disadvantage of Market Penetration

Benefits

One of the successful penetration is pricing strategy may lead to large sales volumes/market shares and therefore lower costs per unit. Penetration strategies are often used by businesses that need to use up spare resources. A penetration pricing strategy may also promote complimentary and captive products. The main product may be priced with a low mark-up to attract sales.

Risk

The most obvious potential disadvantage of market penetration is the likelihood of competing suppliers following suit by reducing their prices, May lead to a price war with a competitor with the same strategy

The effects of economies of both scale and experience lead to lower production costs, which justify the use of penetration pricing strategies to gain market share Low pricing could be detrimental to the perceived brand value and to the company reputation.

Another potential disadvantage is the impact of the reduced price on the image of the offering, particularly where buyers associate price with quality.

http://tutor2u.net/business/marketing/pricing_strategy_penetration.asp

8MARKET DEVELOPMENT

Market development is a marketing technique aimed at increasing a company’s market in order to widen the customer base for the purpose of selling more products.

This is an important aspect of helping a company grow. Small companies with limited marketing experience may turn to consultants for this, while experienced large companies have internal marketing departments that may be responsible for market development. It is an ongoing part of doing business for successful companies. Also will help to grow your market by understanding how your product is perceived in the marketplace and what areas of improvement are there.

Using the Starbucks example

This occurs when the market analyzing makes some sort of change, market development has occurred over the past couple of years as consumers are becoming more health conscience. Preferences are moving toward different types of teas/drinks and consumers are demanding more healthy alternatives. These factors have aided to market development, with different franchises popping up, such as Argo tea, which become direct competitors to Starbucks

Benefits

Another way would be to focus on the   technology base used to supply existing products and to identify other products needs, which customers might need to be produced using current facilities and know how.

Here the organization tries to develop   new products or services and thereby makes similar existing products obsolete unlike product development strategy which extends an existing product’s life cycle. There could be radical innovations where the company tries to replace existing products or technologies in an industry. In the case of incremental innovations, the firm tries to put focus on new products or services that modify the existing ones.

Apart from such radical innovations firms, also carry out incremental innovations to differentiate their products. One example, is Toyota’s multi-utility vehicle Qualis.  Although other Indian   companies had similar products, Toyota, more effectively combined the styling an engineering that resulted  in increased demand  for its product (a great hit compared) to Sumo,

Disadvantages/Risks

As per Ansoff framework of a Market Development strategy

New Markets may be different then expected ( especially in new geographic market with cultural differences

Costly modifications may be required

Examples of Market Development

Compact disc technology has virtually replaced long playing vinyl records in the recording industry, and high definition television is likely to replace regular television technology.

McDonald’s has couple of new markets in the wake of globalization with its existing products. This is because of the nature of the business and products, McDonald; implemented its burgers which helps the growth of the market.

Nestle expanded the market for its product Milkmaid by advertising the new uses of the product aggressively in India.

Chinese products developed new market for their product worldwide

Toyota’s multi-utility vehicle Qualis although there are same product in India, Toyota, more effectively combined the styling an engineering that resulted in increased demand  for its product than Indian.

Close Up toothpaste was first gel toothpaste which was transparent with a red distinctive colour, all others pastes were white. The market was dominated by Colgate which promised that it would fight tooth decay and bad breath.   Close up promised the dual benefit of being a toothpaste and mouthwash in one and thus delivered fresh breath and white teeth.

9PRODUCT DEVELOPMENT

This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.

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Developing of new products and offering to the existing market is product development strategy which need capital and time to implement. The company has to do a market survey in detailed if it is feasible to introduce new product in the current market.

Challenges

Several things need to be checked in developing new products in the company this is including,

Technology and Cost, by using latest technology the product performance or the quality of products will be on highest level of functionality although Cost will be challenge to the company in either buying the new equipments or conducting trainings.

Benefits

Company products will be extended by producing different variants, packaging in new ways.

Service industries shorten time to market and improve customer service and quality.

Risks

Customers might be confused among the existed and developed products, if the analysis will not performed carefully, example is the new Coke, Customers liked the taste of the new Coke in the taste tests conducted by Coca Cola, customers of the brand favoured classic Coke over the new product.

Another Examples of Market Development

Google developed a new browser chrome for the existing internet user

McDonalds is always within the fast food industry, but frequently markets new burgers

10DIVERSIFICATION STRATEGY

Diversification is a form of corporate strategy for a company. It seeks to increase profitability through greater sales volume obtained from new products and new markets. Diversification can occur either at the business unit level or at the corporate level. Diversification is very important into related and unrelated areas.

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Diversification related in the form of backward, forward, and horizontal integration.

Concentric diversification

This means that there is a technological similarity between the industries, which means that the firm is able to leverage its technical know-how to gain some advantage. For example, a company that manufactures industrial adhesives might decide to diversify into adhesives to be sold via retailers. The technology would be the same but the marketing effort would need to change.

The company will focus to add more market share to launch a new product that helps the company earn more profit. An example technological related in concentric diversification is Tomato ketchup and sauce to the existing brand processed items of food specialties.

Vertical diversification

This is when the company is closer to the raw materials sources in production, in another words is backward vertical integration strategy. An example of Avon’s line on cosmetics business. Avon pursued a backward form of vertical integration by entering the production of cosmetics. Forward diversification occurs when Avon move closer to the consumer in term of production stages.

Horizontal diversification, occurs when a company develops interests complementary to its current activities. For a company may integrate its activities to include all aspect of the value chain; design, manufacture, market and distribute. The company adds new products or services that are often technologically or commercially unrelated to current products but that may appeal to current customers. In a competitive environment, this form of diversification is desirable if the present customers are loyal to the current products and if the new products have a good quality and are well promoted and priced. For example, Avon’s move to market jewelry through its regular sales force involved marketing new products through existing channels of distribution.

Conglomerate diversification (or lateral diversification)

The company markets new products or services that have no technological or commercial synergies with current products but that may appeal to new groups of customers. The conglomerate diversification has very little relationship with the firm’s current business. Therefore, the main reasons of adopting such a strategy are first to improve the profitability and the flexibility of the company, and second to get a better reception in capital markets as the company gets bigger. Even if this strategy is very risky, it could also, if successful, provide increased growth and profitability.

For example a company whose core business is media services may diversify into provision of financial services.

Advantages of diversification strategy

Control markets by guaranteeing sales and distribution. This can arise through a combination of linkages in the value chain. For example where production and distribution channels are combined, or where a company uses its well-established brand names or corporate identity to gain benefits in new markets

Take advantage of existing expertise, knowledge and resources in the company when expanding into new activities. This may result in transfer of skills, such as research and development knowledge and sharing of resources.

Provide better risk control through no longer being reliant on a single market

Spread risk by avoiding having all eggs in one basket

Disadvantages of diversification strategy

Adding bureaucratic complexity. In addition to direct financial costs, there may additional bureaucratic complexities necessitated by the need to coordinate and control core activities with additional activities.

Diversification through acquisition across national boundaries may result in the organisation having to deal with varying intricacies of the political and legal requirements of the different countries in which the organisation has controlling interests.

Diversification also acquisition May result in failure where there is a mismatch between core competencies Adding management costs.

Adding bureaucratic complexity. In addition to direct financial costs, there may additional bureaucratic complexities necessitated by the need to coordinate and control core activities with additional activities.

Examples

Virgin Media moved from music producing to travels and mobile phones

Walt Disney moved from producing animated movies to theme park and vacation properties

Canon diversified from a camera making company into producing whole new range of office equipment

CONCLUSION

It is true for the world investment and business to move from national and domestic markets to a worldwide environment. Globalisation eliminates all boundaries, causing firms to engage in business worldwide. Consequently firms have to deal with couple of challenges if the management strategies will not help them to make the correct choices and decisions. Strategic options related to products and services which a firm may offer in which markets are critical to the success of companies. The differences in strategic choices of the firm can often be attributed to the type of market in which the company operates. Changes in business environment play a crucial role in the strategic options that an organisation may pursue over its future development. There are risks associated with all of the four strategic options entailed in the Ansoff matrix. Market penetration is generally considered as a low risk strategy while diversification, on the other hand, is deemed as a high risk growth strategy as it involves moving simultaneously into new products and new markets. Diversification remains a popular strategic option for firms in today’s competitive business arena, and if the diversification strategy is consistent and well throughout, like the case of IBM, significant improvements in profitability can be experienced.