Kotler 2020, Chapter 2 - Company and Strategy Marketing PDF

CHAPTER 2 Company and strategy marketing Mini contents Company-wide strategic planning: defining marketing's role Company case - The end of endless growth? Marketing strategy and the marketing mix Key insights: digitization: the end of the relationship marketing era? Real Marketing - Duck...

CHAPTER 2 Company and strategy marketing Mini contents Company-wide strategic planning: defining marketing's role Company case - The end of endless growth? Marketing strategy and the marketing mix Key insights: digitization: the end of the relationship marketing era? Real Marketing - DuckDuckGo: Google's tiniest, fiercest competitor The value chain: partnering to create great offers and build relationships Managing the marketing effort and marketing return on investment International marketing strategy Company case- Balancing local adaptation and global efficiencies: what does local adaptation bring? Chapter preview in the first chapter, We explored the marketing process by which companies create value for consumers in order to capture value from them in return. We will now dig deeper into steps two and three of the marketing process - designing customer-driven marketing strategies and constructing marketing programmes. These are important in creating an attractive whole that will in turn attract customers. First, we look at the organization's overall strategic planning, which guides marketing strategy and planning. Next, we discuss how, guided by the strategic plan, marketers partner closely with others inside and outside the irm to create value for customers. We then examine marketing strategy and planning - how narketers choose target markets, position their market offerings, develop a marketing mix and manage their marketing programmes. This process is at the heart of marketing theory and practice. Finally, we look at the important step of measuring and managing return on marketing investment Learning objectives After reading this chapter, you should be able to: 1. Explain company-wide strategic planning and its four steps 2. Discuss how to design business portfolios and develop growth strategies. 3. Explain marketing's role in strategic planning and how marketing works with its partners to create and deliver customer value. 4. Describe the elements of a customer-driven marketing strategy and mix and the forces that influence it. 5. List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing return on marketing investment 6. Explain the main considerations in international marketing strategy. Company-wide strategic planning: defining marketing's role Strategic planning-The process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities. Each company must find the game plan for long-term survival and growth that makes the most sense given its specific situation, opportunities, objectives and resources. This is the focus o strategic planning the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its ever-changing marketing opportunities. Strategic planning sets the stage for the rest of the planning in the firm. Companies usually prepare several short-term plans, e.g. for liquidity planning and sales activities, as well as long-range plans, e.g. for sustainability and product portfolio management, sometimes with scenario planning to prepare for different situations. Long-range plans particularly reflect strategic priorities, thus relating the company's overall strategy to the opportunities of adapting to emerging changes, threats and opportunities in a constantly changing environment At the corporate level, the company starts the strategic planning process by defining its overall purpose and mission (see Figure 2.1). Here, the reason the company exists is outlined - why is there a need for this particular company in the marketplace and in what way does it serve customers better than other companies? This mission is then turned into detailed supporting objectives that guide the whole company. Next, headquarters decides what portfolio of businesses and products is best for the company and how much support to give each one - with a portfolio perspective, there is competition among businesses and products and each part has to justify its existence and the resources required to invest and develop in competition with other parts of the company. Each business and product line develops detailed marketing and other departmental plans that support the company-wide plan. For each market in which the company operates or plans to operate, there should be a plan. All in all, marketing planning occurs at the business-unit, product and market levels. It supports company strategic planning with more detailed plans for specific marketing opportunities Defining a market-oriented mission An organization exists to accomplish something, and this purpose should be clearly stated. Forging a sound mission begins with the following questions. What is our business? Who is the customer? What do consumers value? What should our business be? How can our company deliver more value in the marketplace than our competitors? These simple-sounding questions are among the most difficult the company will ever have to answer. Successful companies continually raise these questions and answer them carefully and completely - and successful companies always provide a great answer. IKEA and Zara, for instance, both offer a unique combination of appealing design, attractive store locations, well-thought-out logis- tics and marketing channels, great CRM systems (at least in the case of H & M) and attractive prices. This combination has convinced consumers all over the world, and these companies are profitable and successful. STEPS IN STRATEGIC PLANNING Mission statement-A statement of the organization's purpose-what it wants to accomplish in the larger environment. Many organizations develop mission statements that reflect the organization's purpose- what i it wants to accomplish in the larger environment. A clear mission statement acts as an "invisible hand' that guides people in the organization. Studies have shown that firms with well-crafted mission statements have better organizational and financial performance.1 Some companies define their missions myopically in product or technology terms ('We make and sell furniture' or 'We are a chemical processing firm'). But mission statements should be market-oriented and defined in terms of satisfying basic customer needs. Products and technologies eventually become outdated, but basic market needs can last forever. Among basic market needs you will find transport, socializing and bragging. A car may fulfil all these needs, but has some inherent disadvantages: driving a car may, depending on type of power train (gasoline, electric, natural gas, fuel cells etc.) and how many people travel together, harm the environment more than public transport, it contributes significantly to traffic jams and may reduce the aesthetic appeal of, for example, city centres. However, people need transport for all sorts of reasons, eg. getting to work, seeing relatives or taking a day offin the Alps, and other modes of transport also have their inherent disadvantages. Although traffic may constitute some socialization, in terms of the show-off effect', the car doesn't perform as Well as S few decades ago,2 So for some people and applications, products from other indus- tries may compete with the car. Table 2.1 provides several other examples of product-oriented versus market-oriented business definitions.3 Mission statements should be meaningful and specific yet motivating. They should empha- size the company's strengths in the marketplace. Too often, mission statements are written for public relations purposes and lack specific, workable guidelines. An ideal mission statement should be appealing to all stakeholders. Companies should define themselves not in terms of what they do or make (We sell high-quality computers') but in terms of how they create value for customers (We bring inspiration and innovation to work and leisure time'). Finally, a company's mission should not be stated as making more sales or profits - profits are only a reward for creating value for customers. A company's employees need to feel that their work is significant and that it contributes to people's lives. Setting company objectives and goals The company needs to turn its mission into detailed supporting objectives for each level of management. Each manager should have objectives and be responsible for reaching them. For example, IKEA makes and markets a diverse product mix of furniture and home accessories that basically includes everything a family may need for their home (singles are welcome but the IKEA stores are very family-oriented!). But IKEA does more than just distribute and sell furniture. Its mission is to create a better everyday life for the many - a much broader perspective that includes attractive prices, a great retail environment with cheap food and a playground for kids. In business-to-business markets, Volvo Trucks present themselves as total solution providers, signifying that they don't only offer trucks, but also help their customers improve logistics, reduce emissions and make transport more efficient, thus helping customers improve their marketing offer. Marketing plays a key role in the company's strategic planning in several ways. First, marketing provides a guiding philosophy - the marketing concept - that suggests that company strategy should revolve around creating competitive offers and building profitable relationships with important consumer groups. This is something different from a short-term financial focus. Second, marketing provides inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm's potential to take advantage of them. Finally, within individual business units, marketing designs strategies for reaching the unit's objectives. Once the unit's objectives are set, marketing's task is to help carry them out profitably. To become stronger in the marketplace, a company may need to increase the product's promo tion by increasing spending on salespeople, advertising and public relations efforts. In this way, the firm's mission is translated into a set of objectives for the current period. Business portfolio -The collection of businesses and products that make up the company. Portfolio analysis -The process bywhich management evaluates the products and businesses that make up the company. Growth-share matrix-A portfolio-planning method that evaluates a company's strategic business units in terms of its market growth rate and relative market share. SBUs are classified as stars, cash cows, question marks or dogs. It's crucial that the various parts of the organization operate under the same strategic guide lines, for several reasons: First, in competitive markets, it's increasingly important that the strategies are followed by all parts of the organization, If not, the well-thought-out plans of top management cannot be followed albeit, of course, all parts and units should give feedback to the strategic planning process by addressing how strategies work at unit level. Second, in our digitized and globalized world, consumers and other stakeholders assume that a brand stands for something across the world. If in New York a customer has a poor experience with Pret A Manger (also known as PRET), that will influence the consumers' perception of the brand and hence influence the expectations of PRET in other cities and countries as well. Third, through applying a similar approach everywhere, marketing gets cheaper. The same website, offers, and product promotions in various markets makes the entire marketing system smother and easier to run. On the other hand, it may make sense to adapt marketing to circumstances in different markets. Guided by the organization's mission statement and objectives, management must plan its business portfolio - the collection of businesses and products that make up the company. Portfolio thinking is at the heart of a business person's approach - tintegrates the market analysis with an understanding of risks and financial mechanisms. The best business port- folio S the one that creates the best fit between the company's strengths and weaknesses to opportunities in the environment- but parts of the portfolio may look very different, in terms of risk profile and market opportunities. Business portfolio planning involves two steps. First, the company must analyse its current business portfolio and decide which businesses should receive more, less or no investment. Second, it must shape the future portfolio by developing strategies foT growth and downsizing. Analysing the current business portfolio The major activity in strategic planning is business portfolio analysis, whereby manage- ment evaluates the products and businesses that make up the company. The company is likely to put strong resources into its more profitable businesses and phase down or drop its weaker ones, unless future forecasts suggest other priorities. Management's first step is to identify the key businesses that make up the company, known as strategic business units (SBUS). A SBU can be a company division, a product line within a divi- sion, or sometimes a single product or brand. The company next assesses the attractiveness of its various SBUS and decides how much support each deserves. When designing a business portfolio, it's a good idea to add and Support products and businesses that fit closely with the firm's core philosophy and competencies. The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. So most standard portfolio analysis methods evaluate SBUs on two important dimensions - the attractive- ness of t the SBU 'S market Or i industry and the strength of the SBU'S position in that market or industry. The best-known portfolio-planning method was developed by the Boston Consulting Group, a leading management consulting firm.6 Although this model has been criticised from various angles, it is very well known and useful: most marketers know this model extremely well. The Boston Consulting Group approach Using the now-classic Boston Consulting Group (cG) approach, a company classifies all its SBUs according to the growth-share matrix as shown in Figure 2.2. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, rela- tive market share serves as a measure of company strength in the market. The growth-share matrix defines four types of SBu: 1. Stars. Stars are high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows. 2. Cash cows. Cash cows are low-growth, high- share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, theyproduce a lot of cash that the company uses to support other sBus that need investment and to develop new businesses. 3. Question marks. Question marks are low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out. 4. Dogs. Dogs are low-growth, low-s share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash. The BCG matrix uses relative market share to measure a company's competitiveness. A high or low relative market share indicates the per formance and makes the difference between a cash cow or a star – both are good portfolio positions, and between a dog and a question mark. The measure for relative market share is the company's share relative to its largest competitor. If Volvo has a 20 per cent market share in Sweden and Volkswagen has 16, the ratio would be 0.8, implying that Volkswagen has a weaker position. If Apple has a share of 50 per cent in a market, and Samsung 25, the ratio would be 2.0, hence implying that Apple is in a stronger position, hence having a higher elative market share, which might be reflected in above average profits and cash flows. Under the BCG approach, the company invests funds from mature. successful products and businesses (cash cows) to support promising products and businesses in faster-growing markets (stars and question marks), hoping to turn them into future cash COWS. The company must decide how much it will invest in each product or business (BU). For each SBU, it must decide whether to build, hold, harvest, or divest. The ten circles in the growth-share matrix (Figure 2.2) represent a typical company's ten current SBUs. The company has two stars, two cash cows, three question marks and three dogs. The areas of the circles are proportional to the sBu's sales. This company is in fair shape, although not in good shape. It wants to invest in the more promising question marks to make them stars and to maintain the stars so that they will become cash cows as their markets mature. Fortunately, it has two good-sized cash cows. Income from these cash cows will help finance the company's question marks. The company should take some decisive action concerning its dogs and its question marks. Once it has classified its SBUs, the company must determine what role each will play in the future. One of four strategies can be pursued for each SBU, The company can invest more in the business unit in order to build its share. Or it can invest just enough to hold the sBu's share at the current level. It can harvest the sBu, milking its short-term cash flow regardless of the long-term effect. Finally, the company can divest the sBu by selling it or phasing it out and using the resources elsewhere. As time passes, SBUs change their positions in the growth-share matrix. Many SBUs start out as question marks and move into the star category if they succeed. They later become cash cows as market growth falls, then finally die off or turn into dogs towards the end of their life cycle. The company needs to add new products and units continually so that some of them will become stars and, eventually, cash cows that will help finance other SBUs. In large companies with many SBUs, it's a common practice that cash cows, i.e. SBUs that generate stable profits and cash flows, finance question mark SBUs with substantial needs for investments. Problems with matrix approaches The BCG and other formal methods have revolutionized strategic planning. However, such centralized approaches have limitations: they can be dificult, time-consuming and costly to implement. Management may find it difficult to define SBUs and measure market share and growth. In addition, these approaches focus on classifying current businesses, but provide little advice on future planning. Because of such problems, many companies have dropped formal matrix methods in favour of more customized approaches that better suit their specific situations. Moreover, unlike former strategic planning efforts that rested mostly in the hands of senior managers at company headquarters, today's strategic planning has been decentralized. Increasingly, companies are placing responsibility for strategic planning in the hands of cross-functional teams of divisional managers who are close to their markets. But there should not be too much flexibility and freedom - the decentralized planning efforts taken together must represent a well-functioning whole. Developing strategies for growth and downsizing Beyond evaluating current businesses, designing the business portfolio involves finding businesses and products the company should consider in the future. Many companies need growth if they are to compete more effectively, keep their stakeholders happy and attract the best talent. 'Growth is pure oxygen,' states one executive. 'It creates a vital, enthusiastic corporation where people see genuine opportunity.' Executives in downsizing companies find it more difficult to maintain and develop staff and partner motivation. And a firm must be careful not to make growth itself an objective. The company's objective must be to manage profitable growth',s The Corona crisis showed that many companies had relied too much on expectations of future growth, but resources to deal with a dip in demand were too scarce. Market penetration strategy- A strategy for company growth by increasing sales of current products to current market segments without changing the product. First, in market penetration, it is difficult not to think about McDonald's. In Sweden, as in many other markets, McDonald's has gone through a process of market penetration and finally the process has slowed down as a certain level of saturation has been reached and the market share has increased. McDonald's launched its first restaurant in Sweden in 1973. Years later, McDonald's only had ten restaurants in Sweden, but it started engaging heavily in market penetration. By 1993 there were 68 restaurants in Sweden and McDon- ald's continued to grow rapidly. Growth has slowed during the last decade and there are now about 200 restaurants in Sweden, a number that is lower than around the turn of the millennium.? This is a perfect example of market penetration -making more sales without changing the original product significantly. McDonald's has made some minor modifica- tions but has largely stayed with the original product range. Growth has been realized through marketing mix improvements, i.e. adjustments to its product design, advertising, pricing and marketing channels. The introduction of new products means, from a larger perspective, a minor change, even though more recently the product range has become significantly broader, and it does not change the pronounced market penetration approach. Market development strategy - A strategy for company growth by identifying and developing new market segments for current company products. Marketing has the main responsibility for achieving profitable growth for the company. Marketing needs to identify, evaluate and select market opportunities and lay down strategies for capturing them. One useful device for identifying growth opportunities is the product/ market expansion grid, shown in Figure 2.3.11. Second, management might consider possibilities for market development identifying and developing new markets for its current products. H& M, Subway and Zara have emphasized market development by rapid growth into new countries and regions, i.e. Europe, the USA, Russia, China and Japan, in the last 20-30 years. However, entering new markets doesn't have to mean new countries - for instance, managers could review new demographic markets. New demographic groups -such as senior consumers, the 55+ cohort2 - could be encouraged to try new food styles, travel destinations or products. Managers could also review new geographical markets, while considering the opportunities and risks involved in such decisions (see Chapter 12). Third, product development could be considered offering modified or new products tc current markets. Charter tour operators such as Apollo, Detur, Solresor, TUI and Ving have introduced numerous new products, i.e. travel concepts for couples, families, seniors, SPA weekends and romantic city weekends. Product development strategy -A strategy for company growth by offering modified or new products to current markets. Fourth, through diversification, companies can grow by starting or buying businesses outside their current product/markets. Many strong brands explore the opportunities to make use of their brands through expanding into new markets. Examples are numerous among them Fiat and BM w clothing, Peugeot bicycles, the ICA Bank and Harley-Davidson Perfume. Diversification strategy – A strategy for company growth through starting up or buying businesses outside of its current products and markets. Companies must not only develop strategies for growing their business portfolios, but also strategies for downsizing them. There are many reasons that a firm might want to abandon products or markets. The market environment might change, making some of the company's products or markets less profitable. The firm may have grown too quickly or entered areas in which it lacks experience. Reallocating managerial and financial resources to areas where they are better needed and more critical for company future success may be a reasonable priority. Moreover, a company may have entered too many international markets without the proper research or introduced new products that do not offer superior customer value. Finally, some products or business units simply age and die, a process that may take decades or just a few years. Typical examples are CRT television sets, Polaroid photographs with instant processing, and steam trains and ferries. Downsizing – Reducing the business portfolio by eliminating products of business units that are not profitable or that no longer fit the company's overall strategy. When a firm finds it owns brands or businesses that are unprofitable or that no longer fit its overall strategy, it must carefully prune, harvest or divest them Weak businesses usually require a disproportionate amount of management attention. That's a key rationale for outsourcing activities that require attention but don't result in customer value and company profitability. The same principle applies here. Managers should focus on promising growth opportunities, not fritter away energy trying to salvage fading ones. Marketing strategy and the marketing mix Now that we've set the context in terms of company-wide strategy, it's time to talk about customer-driven marketing strategy and programmes. The strategic plan defines the company's overall mission and objectives. Marketing's role and activities are shown in Figure 2.4, which summarizes the major activities involved in managing a customer-driven marketing strategy and the marketing mix. The primary goal is to create value for customers and build profitable customer relationships, Next comes marketing strategy -the long-term, forward- looking approach to how the company can create customer value and achieve sustainable competitive advantage. Most companies also want to create value for other stakeholders and society overall Marketing strategy – The marketing logic by which the company hopes to create customervalue and achieve profitable relationships. The company decides which customers it will serve (segmentation and targeting) and how (differentiation and positioning). It identifies the total market, then divides it into smaller segments, selects the most promising segments, and focuses on serving and satisfying the customers in these segments. Guided by marketing strategy, the company designs an integrated marketing mix made up of factors under its control - product, price, marketing channels (place) and marketing communications (promotion) (the four Ps). This will all be expressed in the marketing plan. We will now look briefly at each activity, and in later chap- ters discuss each one in more depth. Digitization: the end of the relationship marketing era? Relationship marketing has been a hot concept for marketers since the 1990s. The advantages for consumers as well as companies are well known. But still, and maybe increasingly so, companies are working a lot with transaction marketing. How come? In times of digitization one has to face reality - digitization may undermine attempts to develop relationships with customers. A company that chooses to work with relationship marketing works with long-term customer relationships and has discussions with customers about how it can create more value for them. By creating and developing relationships with customers and other stakeholders, the company can develop competitive advantages. That's the traditional wisdom. Transaction marketing stands for a different approach. The company focuses on sales transactions and attractive offers, in many cases at low prices. It's about making the customer buy here and now. Relationships can certainly still be created, but it doesn't matter to the company if customers are new, or if old customers are coming back. The company wants to sell as much as possible, while the customer wants low prices and the best ofer for a specific purchase need. Transactional marketing is more common in markets where buyers are happy to change supplier quickly. Electricity, pharmaceutical products and air travel are exam- ples of typical transaction-based businesses. For lunch or a haircut, it can be both about transactions and about relationships. In the case of air travel too - but through the emergence of price comparison websites, numerous customers are looking for the best deal rather than staying loyal with a particular brand. Companies that work with relational marketing have different values compared with companies that focus on transactional marketing. With transaction marketing communication with customers can be seen as a cost that should be kept at a minimum. With relationship marketing, contacts with customers are an opportunity to learn more about how customers live and what they want. The information can be used to develop better products and offers. Why is transaction marketing then threatening relationship marketing? There are several reasons for this, many of them emphasized by digitization: Relationship marketing gives buyers higher expectations of the company, which can be perceived as a problem. A complaint is taken more seriously by a company that uses relationship marketing. Such a company must have people, structures and processes to deal with complaints. Transaction marketing is very much about short-term sales. It's easy to control and manage. Once the company has achieved its sales goals, it has succeeded! Relationships require more work and more things have to be taken into account long-term customer satisfaction, what customers say in social media, etc. These are certainly not unimportant for transaction-focused companies, but not as important as for those who engage in relationship marketing. Some companies have the business idea of only offering a low price. Ryanair is one example of this, DollarStore another. At the same time, it can be difficult to build long-term customer relationships, since it usually costs a lot. Transactional marketing makes it easy to see which employees should be rewarded -the best-selling employees! With relationship marketing, there are more work to be rewarded: the ability to build relationships with key customers, the ability to create a good reputation and a strong brand, the ability to identify and execute activities that show that the company takes corporate responsibility etc. It also requires more coordination and bigger and more complex marketing and customer care departments, which are more expensive to run. Transactional marketing makes it easier to expand a business, such as opening more restaurants, and selling more. With relationship marketing, relationships with entrepreneurs who run the restaurants are important and these companies also take a clear responsibility for the health of consumers and the long-term well- being of society. This can mean raising prices, reducing profit margins or closing restaurants -besides having to invest more in customer relationships and a more sustainable business model. Transactional marketing does not require much customer contact. With relation- ship marketing, however: - value creation for the customer is important; - dialogue and relationships with the customer are more important than the short-term profitability; - long-term customer satisfaction does matter; - innovations that create important customer value must come about - and innovations require investments. Relationship marketing means that companies and customers like and depend on each other. When you as a customer know your company and what it can offer it becomes easier for you and easier for the company to deliver exactly what you want. If you book a cheap train ticket or hotel on a price comparison website, your expecta- tions are likely to be a bit lower. Meanwhile, as value creation becomes more important, relationships also become more important. Relationships become more important internally within an organiza- tion -the entire organization and the network with other organizations that are in the organization's environment provide opportunities for value creation- a theme that has been discussed extensively in this chapter. With a transaction perspective, customers and selling companies have different inter- ests. The seller wants to receive the best possible price, while the customer wants to get the lowest possible price, every time a purchase is made. That is very different from the interactive relationships that could be developed and nurtured long-term when customers stay with a company for a long time. So at the end of the day, relationships still count.. What do you think? Answer the following questions: 1. How do you think digitization will change the emphasis in marketing with regard to transactions based and relationship based? 2. How do you choose? Give a number of examples from different industries. 3. Mention a few industries characterized by transaction-based and relationship- based marketing, respectively. Customer value-driven marketing strategy Before it can satisfy consumers, a company must first understand their needs and wants. Companies know that they cannot profitably serve all consumers in a given market at least not all consumers in the same way. There are too many different kinds of consumers with too many different kinds of needs. Most companies are in a position to serve some segments better than others. Thus, each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments. This process involves market segmentation, market targeting, differentiation and positioning. Market segmentation – Dividing a market into distinct groups of consumers who have different needs, characteristics or behaviours, and who might require separate products or marketing programmes. Market segment – A sroup of consumers who respond in a similarwayto a given set of marketing efforts. Market targeting – The process of evaluating each market segment's attractive- ness and selecting one or more segments to enter. Market segmentation The market consists of many types of customers, products and needs. The marketer has to determine which segments offer the best opportunities. Consumers can be grouped and served in various ways based on geographic, demographic, psychographic and behavioural factors The process of dividing a market into distinct groups of buyers who have different needs, characteristics or behaviours, and who might require separate products or marketing programmes, is called market segmentation. The extent to which market segmentation is useful varies. IKEA would gain little by distinguishing between low-income and high-income customers, while most airlines have sophisticated tools to identify, communicate with and set prices for different segments. This is reflected in flight ticket prices: a return ticket from Copenhagen or Frankfurt to New York may cost sek 5,000 in economy class, SEK 10,000 in premium economy class, sEK 25,000 in business class and sek 65,000 in first class. A market segment consists of consumers who respond in a similar way to a given set of marketing efforts. In the market for fashion clothing, for example, consumers who want the best design and finest fabric regardless of price make up one market segment. Consumers who care mainly about price make up another segment, It would be dificult to create one clothing brand that was the first choice of consumers in both segments. Market targeting After a company has defined market segments, it can enter one or many of these segments. Market targeting involves evaluating each market segment's attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time. Most companies enter a new market by serving a single segment, and if this proves successful, they add more segments. A company with limited resources might decide to serve only one or a feW special segments or market niches', An TT company in the Västbo region in western Småland. also known as the Gnosjö area, may have less competence in a strict sense than the majc competitors in Gothenburg, Malmö and Helsingborg, and at the same time higher cost structures than low-cost players. However, through their unique attachment to the local area, superior knowledge about their customers and a location advantage resulting in shorter travel times and faster delivery, they may still be very competitive within their region, i.e. their niche market. Market differentiation and positioning After a company has decided which market segments to enter, it must decide how it will differentiate its market offering for each targeted segment and what positions it wants to occupy in those segments. Positioning is arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers. As one positioning expert puts it, positioning is why a shopper will pay a little more for your brand".13 Marketers want to develop unique market positions for their products, reflecting a competitive advantage. If a product is perceived to be exactly like others on the market, consumers would have no reason to buy it, unless a lower price is offered. Effective positioning begins with differentiation actually differentiating the company's market offering so that it gives consumers more value. The company's entire marketing programme should support the chosen positioning strategy. Differentiation is more difficult to achieve than a price advantage the former needs attention from the entire organization and throughout the customer experience, while the latter is easier: if prices are lower than competitors' prices and the offer is good enough', many customers will like it. Positioning - Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers. Differentiation - Actually differentiating the market offering to create superior customervalue. REAL MARKETING DuckDuckGo: Google's tiniest, fiercest competitor Google dominates U.S. online search with its massive 64 per cent market share. Two other giants - Microsoft's Bing and Yahoo! - combine for another 34 per cent of the market. That leaves a precious 2 per cent sliver of the market for dozens of other search engines trying to get a foothold. In Europe, Google's dominance is far stronger with more than 93 per cent of the market, Bing has less than 3 per cent, Yahoo! 1 per cent and DuckDuckGo 0,4 per cent. What's more, Google and the other search giants have deep pockets from their non-search businesses, letting them spend abundantly to hold and grow market share. So how does a small search engine wannabe compete against global powerhouses? The best answer: It doesn't - at least not directly. Instead, it finds a unique market niche and runs where the big dogs don't. Enter DuckDuckGo, a plucky search engine start-up that's carving out its own special market niche. Instead of battling Google and other giants head-on, Duck-DuckGo provides a customer benefit that the market leaders can't - privacy. Then it energizes its unique niche with brand personality and user community. One look at DuckDuckGo's icon - a quirky bow-tied duck gives you the sense that, like the small locomotive in th classic children's story, this might be 'the little engine that could'. DuckDuckGo isn't just surviving in its niche, it's expanding at a significant pace. The company is still comparatively tiny - t averages about 3 billion searche a year compared with Google's more than 1.2 trillion But DuckDuckGo's daily search volume has surged nearly tenfold in just the past three years, whereas Google's volume growth has lagged a bit. When Gabriel Weinberg first launched DuckDuckGo eight years ago, most people questioned his sanity. How could a small upstart challenge the likes of mighty Google? But rather than simply mimicking Google, Weinberg went a different direction, developing a quality search engine with a key differentiating feature. DuckDuckGo now positions itself strongly on 'Smarter Search. Less Clutter. Real Privacy." DuckDuckGo focuses only on search. It offers a stream- lined, clutter-free, customizable user interface with far fewer sponsored ads. As with other search engines, a DuckDuckGo query returns link-by-link search results based on third-party sources, but the results are filtered and reorganized to reduce spam. And beyond the usual search-result links, for many searches, DuckDuckGo provides direct "Instant Answers' in the form of zero- click information boxes above the search results. When you do a search, you generally want an answer,' says Weinberg. 'It's our job to try to get an answer.' With Instant Answers, DuckDuckGo can 'help you get where you want to go in fewer clicks. The Instant Answer feature is a good one, so good in fact that it has now been copied by Google and Bing. For example, run a Google search for davinci' or how long is the great wall' and along with the familiar list of blue links you'l get a white box containing a mini-biography of Leonardo Da Vinci or displaying the length of the Great Wall of China (5,500.3 miles) and other interesting facts about it. DuckDuckGo would tell you that its Instant Answers are often better. Its answers rely not just on third-party data sources but also on the deep and diverse knowledge of its active, growing, and loyal community of users and developers. DuckDuckGo's community provides addi- tional power behind its searches. In a Wikipedia-like fashion, DuckDuckGo users come up with ideas about what the answers should be, suggest sources, and even develop answers themselves. "DuckDuckGo is a search engine driven by community - you're on the team!' says the company. 'Were not just servers and an algorithm. We're so much more.' Still, even though DuckDuckGo had Instant Answers long before Google, Google's response illustrates a typical nicher dilemma. Market leaders usually have huge resources and can quickly copy the start-up's most popular features. 'At any point, notes one analyst, 'the Googles or Facebooks or Apples of the world can just mimic what made you different, slam-dunking your shattered dreams into the waste bin of tech history. Fortunately for DuckDuckGo, it has one crucial differ- entiator that the Googles of the world simply can't mimic. Real privacy. Google's entire model is built around personalization for customers and behaviour- ally targeted marketing for advertisers. That requires collecting and sharing data about users and their searches. When you search on Google, the company knows and retains in detail who you are, what you've searched for, and when you've searched. It then inte. grates your online identity and data with its services. By contrast, DuckDuckGo is specifically designed to be less invasive and less creepy than its competitors. Duck- DuckGo doesn't know who you are. It doesn't log user IP addresses or use cookies to track users over time or other online locations. Users don't have accounts. In fact, DuckDuckGo doesn't even save user search histories. Perhaps most important, when users click on DuckDuckGo's search results links, the linked websites don't receive any information generated by the search engine. As one privacy advocate puts it, DuckDuckGo is a solid search engine that lets you surf the web without leaving behind a bunch of breadcrumbs for Uncle Sam or anyone else to follow. The sites you visit are being kept at arm's length. So DuckDuckGo has become the preferred search engine for people concerned about online privacy, and that's a fast-growing group. If you look at the logs of people's search sessions, they're the most personal thing on the internet,' Weinberg sayS. 'Unlike Facebook, where you choose what to post, with search you're typing in medical and financial problems and all sorts of other things.' Today, more and more people are thinking about the privacy implications of their search histories. It was extreme at the time,' says Weinberg of DuckDuckGo's early privacy positioning. But today, he adds, It's become obvious why people don't want to be tracked. How does DuckDuckGo make money? Last year, Google made 9o per cent of its $74.5 billion of revenue from search-related advertising, and most of that business involved large-scale, behaviourally targeted advertising that relies on the very tracking tools that DuckDuckGo shuns. However, even without tracking users, smaller DuckDuckGo can be profitable. It simply focuses on the other part of Google's busi- ness - delivering contextual search ads based on the topic of the search itself. So when users search for 'curved OLED TVs,' DuckDuckGo shows ads and links for Ty manufacturers and retailers who've paid for the associated key words. Thus, in many ways, Duck- DuckGo is David to Google's Goliath. But unlike David DuckDuckGo isn't out to slay the giant. It knows that it can't compete head-on with the Googles and Bings of the world it doesn't even try. Then again, given the depth of consumer engagement and loyalty that Duck- DuckGo engenders in its own small corner of the online search market, Google and the other giants may find it difficult to compete with DuckDuckGo for privacy- minded users. DuckDuckGo is currently the nation's 11th most-popular search engine based on unique monthly visitors. And as privacy grows in importance, so will DuckDuckGo. That's what niche marketing is all about – a well-defined brand engaging a focused customer community with meaningful brand relationships that even large and resourceful competitors can't crack. Smart niching has made DuckDuckGo 'Google's tiniest, fiercest compet- itor,' says the analyst. 'Our vision is simple,' says DuckDuckGo. To give you great search results without tracking you. Marketing mix – The set of controllable tactical marketing tools-product, price, place/marketing channels and promotion/ marketing communications that the firm blends to produce the response it wants in the target market. Developing an integrated marketing mix After deciding on its overall marketing strategy, the company is ready to begin planning the details of the marketing mix, one of the major concepts in modern marketing. The marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of every- thing the firm can do to influence the demand for its product. The many possibilities can be collected into four groups of variables known as 'the four Ps': product, price, place/marketing channels and promotion/marketing communications. Figure 2.5 shows the marketing tools under each P. Product means the goods-and-services combination the company offers to the target market. Thus, a Volvo xc40 consists of nuts and bolts, Spark plugs, pistons, head- lig hts and thousands of other parts. The car comes fully serviced and with some support functions, e.g. up to 11-year road assistance in the case of Volvo. Price is the suggested retail price plus factory options, e.g. sunroof, adaptive suspen- sion, bigger wheels, and a premium sound system, minus discounts that are negoti- ated. Car dealers rarely charge the full sticker price. The buyer may get winter tyres, four-year inspections for free or attractive credit terms as part of the price offer to adjust the suggested price for the current competitive situation. Place/Marketing channels includes company activities that make the product available to target consumers in various markets Volvo partners include a large body of inde- pendently owned dealerships around the world that sell the company's model range. Availability is key here and is a function of dealer network density and location. When selling online, availability is measured in terms of time to delivery: ifthe customer will get the goods in a few days, it doesn't matter whether the selling firm is located in northern Sweden, in the U k or anywhere else in the world. Promotion/Marketing Communications means activities that communicate the merits of the product and persuade target customers to buy it. Volvo Cars spends billions of Krona each year on marketing and advertising to convince consumers about the company and its many products.' Dealership salespeople get many customer leads through the efforts made by Volvo Cars. Manufacturers, importers and dealers offer special promotions -sales, cash rebates, low-financing rates etc. as added purchase incentives. And they co-operate to create great and seamless offers such as Care by Volvo or other private or business lease arrangements. An effective marketing programme blends all of the marketing mix elements into an integrated marketing programme designed to achieve the company's marketing objectives by delivering value to consumers. The marketing mix constitutes the company's tactical toolkit for establishing strong positioning in target markets. Product Variety Quality Design Features Brand name Packaging Services Promotion/ Marketing Communications Advertising Personal selling Sales promotion Public relations Price List price Discounts Allowances Payment period Credit terms Place/Marketing Communications Channels Coverage Assortments Locations Inventory Transportation Logistics The marketing mix– or the four Ps -consists of tactical marketing tools, blended into an integrated marketing programme that actually delivers the intended value proposition to target customers. Some critics think that the four Ps may omit or under-emphasize certain important activities For example, they ask, Where are services? Just because they don't start with a 'P doesn't justify omitting them. The answer is that services, such as banking, airlines and retailing services, are products too. We might call them service products. 'Where is packaging?' the critics might ask. Marketers would answer that they include packaging as just one of many product decisions. All said, as Figure 2.5 suggests, many marketing activities that might appear to be left out of the marketing mix are subsumed under one of the four Ps. The issue is not whether there should be four, seven or ten Ps so much as what framework is most helpful in designing integrated marketing programmes. There is another concern, however, that is valid. It holds that the four Ps concept takes the seller's view of the market, not the buyer's view. From the buyer's viewpoint, in the age of customer value and relationships, the four Ps might be better described as the four As: 4 Ps 4 As  Product Acceptability Price Affordability Place Accessibility Promotion Awareness Under this more customer-centred framework, acceptability is the extent to which the product exceeds customer expectations; affordability: the extent to which customers are willing and able to pay the product's price; accessibility: the extent to which customers can readily acquire the product; and awareness: the extent to which customers are informed about the product's features, persuaded to try it, and reminded to repurchase. The four As relate closely to the traditional four Ps. Product design influences accept- ability, price affects affordability, place affects accessibility, and promotion influences awareness. Marketers would do well to think through the four As first and then build the four Ps on that platform. The value chain: partnering to create great offers and build relationships Marketing alone can't create superior customer value. Under the company-wide strategic plan, marketers must work closely with other departments to form an effective company value chain and must then work with other companies in the marketing system to create an overall value delivery network that jointly serves customers. For example, Toyota knows the importance of building close relationships with its suppliers and includes the phrase 'achieve supplier satisfaction' in its mission statement. The major functional departments in each business unit - marketing, human resources, finance, controlling, accounting, purchasing, operations, information systems and others - must work together to accomplish strategic objectives and make sure the company reaches its overall goals in terms of growth, profitability and sustainability. Controlling, finance and human resources, in particular, may be crucial partners: marketers may come up with great ideas, but they need a counterpart to discuss the financial implica- tions - controlling and finance may have a better overview of the company's overall priorities, financial situation and risk profile.17 The human resources function is crucial in finding the best employees for the company. In addition to customer relationship management, marketers must also practise partner relationship management. They must work closely with partners in other company departments to form an effective value chain that serves the customer. Companies must partner effectively with other companies in the marketing system to form a competitively superior value delivery network. Value chain – The series of departments that carry out value-creating activities to design, produce, market, deliver and support a firm's products. Each company department can be thought of as a link in the company's value chain. Each department carries out value-creating activities to design, produce, market, deliver and support the firm's products. That being said, activities and departments that don't create value to the customer should be questioned. The firm's success depends not only on how well each department performs its work, but also on how well the various departments co-ordinate their activities. For instance, Stadium's, ICA's or IKEA's ability to offer the right products at low prices depends on the purchasing department's skill in developing the required suppliers and buying from them at low cost. The enterprise system provides fast and accurate informa- tion about which products are selling in each store. And its operations people must provide effective, low-cost merchandise handling. In practice, departmental relations are full of conflicts and misunderstandings. The marketing department largely takes the consumer's point of view. But when marketing tries to develop customer satisfaction, it can cause other departments to do a poorer job in their terms, Marketing department actions can increase purchasing costs, disrupt production schedules increase inventories and create budget headaches. Overly influential marketers in combina- tion with little budget control can result in financial problems, just as too little marketing orientation can result in dissatisfied customers. Other companies are not only competitors - they may also be partners that we need to deal with on a regular basis in a non-competitive context. Increasingly, competition no longer takes place between individual competitors. Rather, it takes place between the entire value delivery networks created by these competitors. Thus, Volvo's performance against Lexus depends on the quality of Volvo's overall value delivery network versus that of Lexus. Ever if Volvo makes the best cars, it might lose out in the marketplace if the Lexus dealer network provides more customer-satisfying sales and service. Managing the marketing effort and marketing return on investment So far we 've focused on the marketing in marketing management. Now, let's turn to the management. Managing the marketing process requires the four marketing managemen functions shown in Figure 2.6- analysis, planning, implementation and control. The company îirst develops company-wide strategic plans and then translates them into marketing and other plans for each division, product and brand. Through implementation, the company turns the plans into actions. Control consists of measuring and evaluating the results of marketing activities and taking corrective action where needed - here, assistance from controllers may be needed. Finally, marketing analysis provides information and evaluations needed for all of the other marketing activities. Marketing analysis SWOT analysis-An overall evaluation of the company's overall strengths (S), weaknesses (W), opportunities (0) and threats (T). Managing the marketing function begins with a complete analysis of the company's S situation. The marketer should conduct a SWOT analysis, by which it evaluates the company's overall strengths (S), weaknesses (W), opportunities (0) and threats (T) (see Figure 2.7). Strengths include internal capabilities, resources and positive situational factors that may help the company to serve its customers and achieve its objectives. Weaknesses include internal limi- tations and negative situational factors that may interfere with the company's performance. Opportunities are favourable factors or trends in the external environment that the company may be able to exploit to its advantage. And threats are unfavourable external factors OI trends that may present challenges to performance. The company should analyse its markets and marketing environment to find attractive opportunities and identify environmental threats. It should analyse company strengths and weaknesses as well as current and possible marketing actions to determine which opportuni- ties it can best pursue. The goal is to match the company's strengths to attractive opportuni- ties in the environment, while eliminating or overcoming the weaknesses and minimizing the threats. Marketing planning Through strategic planning, the company decides what it wants to do with each business unit. A marketing plan is needed for each business, product or brand, Table 2,2 outlines the major sections of a typical product or brand marketing plan. The plan begins with an execu- tive summary that quickly reviews major assessments, goals and recommendations. The main section of the plan presents a detailed s wot analysis of the current marketing situation as well as potential threats and opportunities. The plan next states major objectives for the brand and outlines the specifics of a marketing strategy for achieving them. A marketing strategy consists of specific strategies for target markets, positioning, the marketing mix and marketing expenditure levels. It outlines how the company's busi- ness model intends to create value for target customers in order to capture value in return. In this section, the planner explains how each strategy responds to the threats, opportuni- ties and critical issues spelled out earlier in the plan. Additional sections of the marketing plan lay out an action programme for implementing the marketing strategy along with the details of a supporting marketing budget. The last section outlines the controls that will be used to monitor progress, measure return on marketing investment, and take corrective action. Marketing implementation Planning good strategies is only a start on the road to successful marketing. A brilliant marketing strategy counts for little if the company fails to implement it properly. Marketing implementation is the process that turns marketing plans into marketing actions in order to accomplish strategic marketing objectives. Whereas marketing plan- ning addresses the what and why of marketing activities, implementation addresses the who, where, when and how. Many managers think that "doing things right (implementation) is as important as, or even more important than, 'doing the right things' (strategy). The fact is that both are critical to success, and companies can gain competitive advantages through effective implementa- tion. One firm can have essentially the same strategy as another, yet win in the marketplace through faster or better execution. Implementation is dificult - it is often easier to think up good marketing strategies than it is to carry them out. Marketing department organization The company must design a marketing organization that can carry out marketing strate gies and plans. If the company is very small, one person might do all the research, selling, advertising, customer service, and other marketing work. As the company expands however, a marketing department emerges to plan and carry out marketing activities. In large compa nies, this department contains many specialists - product and market managers, sales managers and salespeople, market researchers, and advertising and social media experts, among others. To head up such large marketing organizations, many companies have now created a chief marketing offcer (or cMo) position. This person heads up the company's entire marketing operation and represents marketing in the company's top management team. The CMO position puts marketing on an equal footing with other 'C-level executives, such as the chief operating officer (c00) and the chief financial officer (Cro), As a member of top manage ment, the CMO's role is to champion the customer's cause to be the 'chief customer officer'. To that end, British Airways even went So far as to rename its top marketing position as Director of Customer Experience. Contemporary marketing departments can be arranged in several ways. The most common form of marketing organization is the functional organization, under which different marketing activities are headed by a functional specialist - a sales manager, a marketing research manager, a customer service manager, a dealer network development manager or a new product manager. A company that sells across the country or internationally often uses a geographic organization, assigning sales and marketing people to specific coun- tries, regions, and districts. Companies with many very different products or brands often create a product management organization. For companies that sell one product line to many different types of markets and customers who have different needs and preferences, a market or customer management organization might be best. Large companies that produce many different products flowing into many different geographic and customer markets usually employ some combination of the functional, geographic, product, and market organization forms. Marketing organization has become an increasingly important issue in recent years. More and more, companies are shifting their brand management focus towards customer management - moving away from managing only product or brand profitability and towards managing customer profitability and customer equity. They think of themselves not as managing portfolios of brands but as managing portfolios of customers. And rather than managing the fortunes of a brand, they see themselves as managing customer-brand engagement, experi- ences, and relationships. Unless companies work successfully with such things, they could soon lose customers and lose the competitive battle in their industries. Marketing control Because many surprises occur during the implementation of marketing plans, marketers must practise constant marketing control - evaluating the results and taking corrective action to ensure that objectives are attained. The marketing control process involves four steps. Management first sets specific marketing goals. It then measures its performance in the marketplace and evaluates the causes of any differences between expected and actual performance. Finally, management takes corrective action to close the gaps between its goals and its performance. This may require changing the action programmes or even changing the goals. Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary. Its purpose is to ensure that the company achieves the sales, profits and other goals set out in its annual plan, e.g. brand controllers ensuring that the brand exposition (physical appearance, signs, labels etc.) and brand experience (mystery shoppers may be used to control customer treatment; see Chapter 12) meet the standards. Operating control also involves determining the profitability of different products, territo- ries, markets and channels. Strategic control involves looking at whether the company's basic strategies are well matched to its opportunities. Marketing strategies and programmes can quickly become outdated, and each company should periodically reassess its overall approach to the marketplace. Companies may also use the marketing audit to assess different parts of the marketing process. The audit is normally conducted by an objective and experienced outside party. The findings may come as a Surprise – and sometimes as a shock – to management. Managers claiming that their understanding of the brand is right, while the market is wrong, need to reconsider what they are thinking about their brand. International marketing strategy Marketing strategy may be a local, domestic or international undertaking depending on the size, scope and ambition of the company. Most companies have an ambition to grow and when they finally enter international markets, there are some further considerations to take into account. In deciding on international marketings strategy, companies have to mal ke deci- sions on the emphasis of their international strategies: are we applying a national or a (truly) global attitude? Are we exploring local marketing opportunities across countries or markets, or are We striving for a standardized approach to draw benefits from global efficiencies? We'11 explore international strategies in more detail in Chapter 12, where international marketing channels are dealt with. Global marketing The rapidly changing global environment provides both opportunities and threats. It's difficult to find a marketer today that isn't affected in some way by global developments. The world is shrinking with digitization and the advent of cheaper and faster transportation and financial flows. Products developed in one country - Volvo cars, Chanel purses or French trains - have found enthusiastic acceptance in other countries. We would not be surprised to hear about a Norwegian businessperson wearing an Italian suit meeting an English friend at a Japanese restaurant who later returns home in a Chinese-Swedish Volvo to drink French wine and watch a South American reality show. While global trade is growing, global competition is intensifying. Foreign firms are expanding aggressively into new international markets, and home markets are no longer as rich in opportunity. Few industries are now safe from foreign competition. If companies delay taking steps towards internationalizing, they risk being shut out of growing markets in, for example the BRIC countries ( Brazil, Russia, India and China), the Pacific Rim, and elsewhere. Firms that play it safe by staying at home might not only lose their chance to enter other markets but also risk losing their home markets. Domestic companies that never thought about foreign competitors suddenly find these competitors in their own backyards. However, increased sustainability concerns have made billions of consumers around the world, and many Companies alike, to think about the effects on the nature of extensive consumption, transportation and travelling. Although new technologies and economic growth create many opportunities to increase our living standards while polluting less, it's an unavoidable fact that our consumption is too extensive. This is a concern that companies, consumers, politicians, authorities and many other actors in society need to take responsi- bility for and as a marketer, it means a particular responsibility in that marketers, by tradi- tion, have contributed significantly to unsustainable consumption. For marketers, navigating between the enormous opportunities of global markets and global trade on the one hand and the advantages of local business in terms of ecological footprint and business opportunities on the other hand. Local businesses may mean sustainability advantages while also offering something that stands out in a time when international companies take over and standardize offers in many industries. The risks associated with going abroad should not be understated Companies that go global may face hig hly unstable governments and currencies, restrictive government policies and regulations, and high trade barriers. Corruption is also an increasing problem officials in several countries often award business not to the best bidder but to the highest briber. A common way of ranking various countries levels of corruption is via the annual index of the perceived level of corruption in the public sector compiled by the organization Transparency International. In the 2018 corruption index (see Figure 2.8) Denmark is the least corrupt country followed by New Zealand. Sweden, Switzerland, Singapore and Finland share the third place The Nordic countries usually rank wellin these measurements. Nor way is in seventh place with Iceland at number 14 out of 180 countries. Global firm - A firm that, by operating in more than one country, gains marketing, production, R&D and financial advantages that are not available to purely domestic competitors. Is the company truly global? National and global attitudes A global firm is one that, by operating in more than one country, gains marketing, production, R&D and financial advantages that are not available to purely domestic competitors. The global company sees the world as one market. It minimizes the impor- tance of national boundaries and develops transnational' brands. It raises capital, obtains materials and components, and manufactures and markets its goods wherever it can do the best job. The rapid move towards globalization means that all companies will have to answer some basic questions. What market position should we try to establish in our country, in our economic region, and globally? Who will our global competitors be, and what are their strategies and resources? Where should we produce or source our products? What strategic alliances should we form with other firms around the world? Many large companies, regardless of their home country', now think of themselves as truly global. They view the entire world as a single, borderless market. For example, although headquartered in Chicago, Boeing is as comfortable selling planes to Lufthansa or Air China as to American Airlines. But even though it is easy to argue that companies must become more global if they hope to compete, many companies suffer from being overly characterized by the attitudes of the home country. For instance, a Swede who wants to make a career in a Us company may find it difficult if they are planning to adhere to Swedish HR policies in relation to employee rights, length of working week, paternity leave and so on - in the end, the American labour market values will determine whether the Swede succeeds with their career plans or not. Standardization or local adaptation? Deciding on the global marketing programme The major global marketing decision usually boils down to this: how much, ifat all, should We adapt our marketing strategy and programmes to local markets? How would the answer differ for Airbus versus Kitchen Aid? Companies that operate in one or more foreign markets must decide how much, ifat all, to adapt their marketing strategies and programmes to local conditions. At one extreme are global companies that use standardized global marketing, using largely the same marketing strategy approaches and marketing mix worldwide. At the other extreme is adapted global marketing. In this case, the producer adjusts the marketing strategy and mix elements to each target market, bearing more costs but hoping for a larger market share and return. The question o whether to adapt or standardize the marketing strategy and programme has been much debated. On the one hand, some global marketers believe that digitization and technology are making the world a smaller place and that consumer needs around the world are becoming more similar. This paves the way for 'global brands' and standardized global marketing. Global branding and standardization, in turn, result in greater brand power and reduced costs from economies of scale both in manufacturing and in marketing. On the other hand, the marketing concept holds that marketing programmes will be more effective if tailored to the unique needs of each targeted customer group. If this concept applies within a country, it should apply even more across international markets. Despite global convergence, consumers in different countries still have widely varied cultural backgrounds. They still differ significantly in their needs and wants, spending power, product preferences and shopping patterns. Because these differences have proven hard to change, most marketers adapt their products, prices, channels and promotions to fit consumer desires in each country, However, global standardization is not an all-or-nothing proposition. It's a matter of degree. Most international marketers suggest that companies should think globally but act locally'- that they should seek a balance between standardization and adaptation. The corporate level gives global strategic direction; regional or local units focus on individual consumer differ. ences across global markets. Sometimes the word glocal refers to the (successful) co-existence of local and global considerations - or getting the balance right in a marketing context. Standardized global marketing – An international marketing strategy for using basically the same marketing strategy and mix in all the company's international markets. Adapted global marketing – Aninternational marketing strategy for adjusting the marketing strategy and mix elements to each international target market, bearing more costs but hoping for a larger market share and return. COMPANY CASE Balancing local adaptation and global efficiencies: what does local adaptation bring? A dilemma for every company operating in number of markets is to balance centralization and decentralization -to what extent willthe company fulfil its intended strategies better by a centralized approach, with decision-making, marketing intelligence processing and other key functions taking place at the headquarters? Or might the company benefit from a decentralized approach, where local branches in different countries and markets take an active part in designing strategies, marketing research and other key areas to adapt them to local circumstances? The size of the market matters, meaning that China or the US are more likely to have an influence than, say, Iceland or Ảland. However, regardless of the size of the markets in which the company operates,management stillhas to deal with the problem of balancing the advan tages of emphasizing the standardized, global approach with the more complex- at least from the point of view ofthe headquarters approach that attempts to exploit every local market's unique character. One industry that is dealing with this issue - at a national level as well as within each domestic market iS the banking sector. While many companies in other industries are genuinely global or at least multinational, banks often have a very clear centre of authority: the head office in their country of origin. Handelsbanken, one of Sweden's major banks, was founded in 1871, and its infrastructural and intellec-tual hub has been Stockholm ever since. Today it is one of the leading banks in the Nordic region and one of Europe's most profitable and cost-effective banks In fact, Handelsbanken is one of the most solid and profitable banks in the world, and has stayed profitable with consistently higher profitability than its competi- tors for several decades. Handelsbanken did not suffer as heavily as many of its competitors in the financial crises of the early 19905 and 2008. And Handelsbanken has had the most satisfied customers among the major Nordic banks since 1989, when the first customer survey was conducted. How does that come about? One thing that character- izes Handelsbanken is its decentralized approach: every local bank has a high degree of freedom in making decisions on a variety of issues, including borrowing and lending money. Handelsbanken is heavily engaged in both the private market and the corporate market, which is a great benefit as many customers are actually in both markets -e.g. owners of small and medium- sized businesses. Like other major banks, Handelsbanken operates an investment bank - Handelsbanken Capital Markets that assists corporations and wealthy private individuals in investing their money, and it assists corporations and governments in raising capital by underwriting and acting as the agent in the issuance of securities. Moreover, it assists companies involved in mergers and acquisitions and services, e.g. market- making and the trading of derivatives, foreign exchange and equity securities. Unlike commercial banks and retail banks, an investment bank typically doesn't take deposits. Handelsbanken Capital Markets has offices in the Nordic capitals, in London and in New York. Tom Skogman, Equity Analyst at Handelsbanken's Helsinki branch, is focusing on Finnish companies, while his colleagues follow other Nordic countries in certain industries too. So why does Handelsbanken run an office with four analysts in Helsinki? 'It's a one-hour flight from Stockholm and it might be more efficient to run fewer offices. And specialization is increasingly becoming an issue. We create hubs with a strong focus on certain industries. For instance, Finland is a hub for the paper industry, for the pharmaceutical industry it's Denmark, for banking and finance, it's Sweden, and for oil, it's Norway among the Nordic countries. For engineering and consumer goods, it's more diffi- cult to find hubs, they tend to be more spread out,' Skogman says. "It's about getting the right information at the right point of time and knowing what is going on in the domestic market. You can certainly run the type of activ- ities we do from Stockholm, but you will never have the same contact with the local companies, customers or suppliers. Notably, we are to a large extent dependent on analysing Finnish companies while an analyst covering Finnish stocks from another country could easily end up focusing on the biggest companies in the industry or the stocks that are interesting for the local sales force, even though the biggest potential could be in a smaller foreign company. Imagine you are a New York-based mid-cap investor considering investing in a Finnish company. In his eyes, what is the edge in talking to a Stockholm-based analyst compared with a London-based analyst? He gets his macro and sector view typically from New York analysts while he wants the local input from somebody closer to the company than anyone else - this person can only live and work where the company and its management team is based. He lives in the same culture and has more opportunities to see the management face to face. The big informa- tion advantage is typically truly local and if not defined by city borders then at least by country and language, Being Finnish, I can deal with the local businesses here and we can talk Finnish and Swedish and often see each other at meetings. Our edge is that we have an advantage over, for example, uBs and Goldman Sachs through our local foothold We read the local newspa- pers and we are part of the social environment,'says Skogman. Offices of companies in bigger countries sometimes have a tendency to be patronizing when dealing with offices in smaller countries, be it the us in relation to Canada, Germany in relation to Austria, or Sweden in relation to Finland. Often this is simply because headquarters meetings and conferences take place in the bigger country. A typical imbalance in Nordic busi- nesses is that meetings are held in Stockholm efficient from a logistics point of view, but it contrib- utes to centralization at the cost of knowing the local environments that are often very important for the company's success. Skogman says, You know nothing about Finland, do you? What's the name of our prime minister? And our foreign minister? Can you name five companies other than Nokia, Swedish-Finnish Stora Enso and Finnair? guess you can't. And, at the end of the day, this is an advantage to us. We read two pages in the newspaper about Sweden every day. You may read a half page when we get a new government or there is a political scandal. Skogman visits Finnish companies on a regular basis something that rarely happens if the investment bank office is located n another country. Analysts working for other investment banks may cover Finland and Norway but don't know the local language and, as they are located in other countries, a company visit means considerable travelling time and some costs. 'Even a city like Björneborg with 80,000 citizens has some interesting industries and companies, but ifyou are in the London office, you don't consider places like that, says Skogman. Skogman emphasizes the balance between the local Finnish environment and global trends. 'The Helsinki branch is very integrated with Sweden and we talk with them every day, and also often with London.' But the message is clear. Companies need local people with the drive to run it with passion- look at ICA in Sweden with their local dealers, they are doing great. Their edge is local knowledge -just like ours,' says Skogman. 'A tendency we see in my industry is that global brokers, often New York- or London-based, are losing market share while regional brokers are gaining. And that all has to do with the advantages of knowing the local context, An international conglomerate may have 12 or even 30 full-time analysts tracking them (some like Telia Company or Ericsson far more) but typically a maximum of 10 of these are based in Helsinki and not many of them have international customers. Skogman is one of the top engineering analysts in Finland, which makes him an important asset for Handelsbanken. So what's the secret? 'We try to go beyond the financial engineering approach and really learn to know interesting companies. You need to do the maths, but you must also have some Fingerspitzengefühl -for what is going on, what is happening. We know companies' financial reporting doesn't give the whole picture, and you can't under- stand what is going on from another country.' Over time, it appears increasingly difficult to find great investment opportunities, but Skogman likes the chal- lenge and is convinced that the dual understanding of global trends and the local environment will be very important in the future in trying to find opportunities in an increasingly transparent business environment: Few industries really create value. And most industries are becoming very consolidated, so it's getting more difficult to find attractive companies to buy. Look at the car manufacturers; there are five or six groups now compared with 15 or 20 a few decades ago, so they can't really be fewer. But there may be potential anyway. Did you know that more than half of all lifts now are sold in China? They are still very product-focused, while in Europe, and in the Nordic countries particularly, we are more life-cycle oriented, i.e. what a sale means in terms of profitability over the product's life cycle, So that means potential: energy consumption, environmental considerations, recycling, after-sales services and costs etc. Source: Interview with Tom Skogman, Equity Analyst, Equity & Credit Research, Handelsbanken Capital Markets, Helsinki Measuring and managing return on marketing investment Marketing managers must ensure that their marketing budget is being spent wisely. In the past, many marketers spent freely on big, expensive marketing programmes, often without thinking carefully about the financial returns on their spending. They believed that marketing produces intangible outcomes, which do not lend themselves readily to measures of productivity or return. But because of more pressure from owners, tougher competition in most markets. and the fact that marketing spending has been questioned in many companies, improved methods for measuring the return on marketing investment have emerged. Measuring marketing return on investment has become a major emphasis in many compa nies But it can be difficult. A television commercial campaign that reaches two million. viewers could cost millions of euros. How do you measure the return on such an invest- nent in terms of sales, profits, and building customer engagement and relationships: Return on marketing investment (marketing ROI) – The net return from a marketing investment divided by the costs of the marketing investment. Return on marketing investment (or marketing ROI) is the net return from marketing investment divided by the cost of the marketing investment It measures the profits generated by investments in marketing activities. In measuring financial ROI, both the return and the investment are uniformly measured in krona, dollars, euros or any other currency. This seems straightforward but there are some problems involved in measuring return on marketing expenditure. First, there is as yet no consistent definition of marketing ROI. Second, the effects of marketing are, by definition, dificult to assess since there are an almost indefinite array of factors, including competitor moves, changing cost structures and emerging prod ucts. However, in some instances it is very easy to measure increased sales, e.g. Findus selling 750 per cent more fish sticks during a campaign with ICA. Third, there are a multitude of goals in spending money on marketing: increased sales may be one goal, but improved image, a higher price premium or a better product mix may also be desired outcomes. Without any doubt, there is a certain element of contradiction across these goals: a higher price premium normally leads to lower short-term sales, everything else being equal. Fourth, the dynamic nature of marketing makes emphasis one goal difficult. Findus may sell a lot more during a campaign but find that consumers are less willing to pay full retail price after the campaign is finished. Fifth, ROI measures have some inherent limitations. If the company has a low current ROI - assume 8 per cent, even unprofitable activities that generate 10 per cent will boost ROI. Because of depreciation, the investment in the ROI formula will become lower, thus boosting ROI figures solely due to the passage of time. A company can assess marketing RoI in terms of standard marketing performance meas- ures, such as brand awareness, sales, or market share. Many companies are assembling such measures into marketing dashboards - meaningful sets of marketing performance measures in a single display used to monitor strategic marketing performance. Just as automobile dash- boards present drivers with details on how their cars are performing, the marketing dash- board gives marketers the detailed measures they need to assess and adjust their marketing strategies. For example, vF Corporation uses a marketing dashboard to track the performance of its more than 30 lifestyle apparel brands- including Wrangler, Lee, The North Face, Vans, Nautica, 7 For All Mankind, Timberland, and others. vr's marketing dashboard tracks brand equity and trends. share of voice, market share, online sentiment, and marketing ROI in key markets worldwide, not only for vF brands but also for competing brands. Increasingly, however, beyond standard performance measures, marketers are using customer-centred measures of marketing impact, such as customer acquisition, customer retention, customer lifetime value and customer equity. These measures capture not just current marketing performance but also future performance resulting from stronger customer relationships. Figure 2.9 views marketing expenditures as investments that produce returns in the form of more profitable customer relationships. SUMMARY In this chapter we examined company-wide strategic planning and marketing's role in the organization. Then, we looked more deeply into marketing strategy and the marketing mix and we reviewed the major marketing management functions. In future chapters, we'll expand on these fundamentals Strategic planning sets the stage for the rest of the company's planning and involves developing a strategy for long-term survival and growth. It consists of four steps: defining the company's mission, setting objec- tives and goals, designing a business portfolio, and developing functional plans. The company mission should be market-oriented, realistic, specific, motivating and consistent with the market environment. he mission is then transformed into detailed supporting goals and objectives to guide the entire company. Based on those goals and objectives, along with the ability to create a fit between the strengths of the organization and opportu- nities in the environment, headquarters design a busi- ness portfolio, deciding which businesses and products should receive more or fewer resources. The product/ market expansion grid suggests four possible growth paths: market penetration, market development, product development and diversification. In turn,each business and product unit must develop detailed marketing plans in line with the company-wide plan. Under the strategic plan, the major functional departments-marketing, human resources, finance, accounting, purchasing, operations, information systems and others -must work together to accomplish strategic objectives. Marketing plays a key role in the company's strategic planning by providing a marketing concept philosophy and inputs regarding attractive market opportunities. Within individual business units, marketing designs strategies for reaching the unit's objectives and helps to carry them out profitably. Marketers alone cannot produce superior value for customers. A company's success depends on how well each department performs its customer value- adding activities and how well the departments work together to serve the customer. Thus, marketers must work closely with partners in other departments to form an effective value chain that serves the customer and partner effectively with other companies to form a competitively superior value delivery network. Through market segmentation, targeting, differentiation and positioning, the company divides the total market into smaller segments, selects segments it can best serve, and decides how it wants to bring value to target consumers. It then designs an integrated marketing mix to produce the response it wants in the target market. The marketing mix consists of product, price, place/ marketing channels and promotion/marketing commu- nications decisions. To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation and control. The main compo- nents of a marketing plan are the executive summary, current marketing situation, threats and opportunities, objectives and issues, marketing strategies, action programmes, budgets and controls. To be successful, companies must not only plan but also be effective at implementation and make sure that their marketing budget is being well spent. Today's marketers face growing pressures to show that they are adding value in line with their costs. Companies today can no longer afford to pay attention only to their domestic market, regardless of their size, Many industries are global industries, and firms that operate globally achieve lower costs and higher brand awareness. At the same time, global marketing is risky because of variable exchange rates, unstable govern- ments, protectionist tariffs and trade barriers, and several other factors. Given the potential gains and risks of international marketing, companies need a system- atic way to make their global marketing decisions, and it often boils down to the extent to which the company should apply standardized or adapted marketing. KEY TERMS Adapted global marketing Business portfolio Differentiation Diversification strategy Downsizing Global firm Growth-share matrix Market development strategy Market penetration strategy Market segment Market segmentation Market targeting Marketing control Marketing implementation Marketing mix Marketing strategy Mission statement Portfolio analysis Positioning Product development strategy Return on marketing investment (marketing Rot) Standardized Global Marketing Strategic planning SWOT analysis Value chain DISCUSSING THE CONCEPTS 1. Define strategic planning and briefly describe the four steps that lead managers and the firm through the strategic planning process. Discuss the role marketing plays in this process. 2. Describe the Boston Consulting Group's approach to portfolio analysis. Briefly discuss why management may find it difficult to dispose of a question mark'. In what ways may this portfolio approach be criticised? 3. Name and describe the four product/market expan- sion grid strategies by referring to companies or other organizations you know. 4. Discuss the differences between market segmenta- tion, targeting, differentiation and positioning. What two simple questions do they address? 5. Define each of the four Ps in the marketing mix. Does the four Ps framework do an adequate job of describing marketer responsibilities in preparing and managing marketing programmes? Why? Do you see any issues with this framework in relation to service products? 6. What is return on marketing investment? Why is it difficult to measure? Describe inherent problems in this approach. 7. Give an example of the tricky balance between global efficiencies and local adaptation.