Strategic Marketing Summary PDF

Karim Abu Jahrur SUMMARY: STRATEGIC MARKETING  TOPIC 1 The strategy Historical Link to War: Originating from the military paradigm, strategy was primarily associated with war from 5th century BC until the mid-20th century. Historical Construction Process...

Karim Abu Jahrur SUMMARY: STRATEGIC MARKETING  TOPIC 1 The strategy Historical Link to War: Originating from the military paradigm, strategy was primarily associated with war from 5th century BC until the mid-20th century. Historical Construction Process: Pérez (2001) describes strategy's evolution as a "historical construction process" shaped by Western force-oriented and Eastern intelligence-oriented contexts. Eastern Background (Intelligence) Sun Tzu's Influence: Sun Tzu's "The Art of War" (5th century BC) emphasizes deception, maneuvering, cunning, and calculation for intelligent conflict resolution. Japanese Philosophy: Contributed aspects of discretion, secrecy, and appearance, associating strategy with the samurai. Quranic Influence: Quran phrases support Eastern strategy, rooted in communication, language, patience, and cleverness. Application to Society: Ancient games like chess and Go reflect Eastern strategic philosophies. Western Background (Strength) Greek Origin: Originated in ancient Greece and evolved through classical Rome. Evolution of Signifier: Stratos / Strategia / Strategy. Rationalism (17th-18th Centuries): Shifted to reaching optimal decisions in clashes of interests. 1960s Definitions: Andrews (1965) defines strategy as patterns of objectives, goals, and plans for businesses. Integrative Vision (Hax and Majluf, 1977): Continuous Adaptation: Views strategy as a structure continuously adapting to a changing environment. Competitiveness and Stakeholder Reward: Aims for competitiveness and rewarding stakeholders in a dynamic environment. Competitive Advantage Definition: A company has a competitive advantage when it achieves consistently higher profit rates. Internal or External Origin: Competitive advantages can originate internally or externally to the sector. Competitive Advantages of Responsiveness: Ability to respond to external changes is crucial for managerial and entrepreneurial capacity. Competitive Advantages of Innovation: Innovation, both in products and strategic approaches, creates and maintains competitive advantages. Maintaining Competitive Advantage Erosion by Imitation: Competitive advantages are subject to erosion through imitation. Barriers to Imitation: Creating barriers to imitation is essential for maintaining a competitive advantage. Anticipation: Anticipation strategies involve proliferation of product varieties, large investments, and patents to deter rivals. Causal Ambiguity: The uncertain capacity for imitation arises from causal ambiguity, making it difficult for competitors to diagnose the determinants of success. Market Entry Advantage: The first company entering a market, segment, or niche gains a strategic advantage by accessing unique resources and capabilities. Competitive Advantage Classes: Competitive Cost Advantage: Advantage in manufacturing, administration, or marketing costs (economies of scale and learning). Provides value through low unit cost to the producer and a low price to the consumer. External Competitive Advantage or Differentiation: Occurs when a product or brand possesses qualities that make it preferable to consumers over competing alternatives. Resources and Capabilities Theory of Resources and Capacities: Identifies a company's potential for competitive advantages by evaluating resources and skills. Assumptions: Companies differ based on resources and capacities, and these are not equally available. Analysis of Resources and Capacities Identification: Inventory of tangible and intangible resources. Tangible resources: Physical and financial assets. Intangible resources: Human, technological, organizational. Strategic Evaluation: Assess the usefulness and value of resources for competitive advantage. Resource and Capacity Management: Analyze how top management can obtain and exploit resources internally or externally. Identification of Resources Tangible Resources: Physical assets: Buildings, machinery. Financial assets: Indebtedness, collection rights. Intangible Resources: Non-human resources: Technological (patents, designs), Organizational (brand image, reputation). Human resources: Human capital, including knowledge, experience, motivation. Identification of Capacities: Organizational Routines Capacities allow successful activity development by combining and coordinating individual resources. Capacities, intangible and linked to human capital, are distinguished from intangible resources. Hierarchically organized, managed through formal coordination mechanisms and organizational routines. Evaluation of Resources and Capacities: Criteria for Competitive Advantage: Scarcity, Relevance, Durability, Transferability, Imitation, Substitutability, Complementarity. Criteria for Maintaining Competitive Advantage: Durability, Transferability, Imitation, Substitutability, Complementarity. The management of resources and capacities: Functions: Improve resource endowment (develop new internal resources, improve those that exist and adapt those that come from outside) and exploit existing resources efficiently. Stakeholders or Stakeholders CSR Plan (Corporate Social Responsibility): Approach stakeholders through Dialogical Business and Economic Ethics. Consideration of five basic aspects for managing ethical dimensions. Stakeholder theory used for CSR proposals. Stakeholders identified through a dialogue procedure based on interests, validity, and principles. The Three Strategic Levels of the Company Corporate or Company Strategy: Sets the basic orientation for the entire company. Involves decisions on entering new businesses, mergers, internationalization. Significant for diversified companies seeking synergies. Competitive or Business Strategy: Decides actions for each business to achieve the best competitive position. Addresses quality improvement, cost reduction plans, technology investments. Analyzed through "strategic business units" in diversified companies. Functional Strategies: Focuses on efficient resource and skill utilization in functional areas (production, marketing, human resources). Involves decisions on commercial, human resources, marketing policies. Strategic Marketing and Operational Marketing Strategic Marketing: Tasks involve defining the relevant market, dynamic analysis of market attractiveness, segmentation process, rivalry analysis, and product portfolio models. Operational Marketing: Translates marketing strategy into tactical decisions (product, price, distribution, communication). Determines product characteristics, selects intermediaries, pricing, and communication planning. Responsible for controlling actions, achieving objectives, and taking corrective measures if needed.  TOPIC 2 The Product and Its Evolution "The product is the cornerstone of the marketing strategy, since its situation conditions the performance of the company with the other variables" (Cruz Roche, 1990). Evolution of the Product Concept Self-Centered Product: Tangible attributes united in a recognizable way. Product-Brand: Recognizes common physical identities, even from different companies. Product Focused on Consumer Needs or Product-Service: Emphasizes after-sales or pre-sales services (information, maintenance, warranty, financing). Consumer Product: Viewed as a set of tangible and intangible attributes satisfying consumer needs. Individual perceptions lead to different products for each consumer. For analysis, the term used is "product-service" for studying and analyzing consumer preferences. The Reference Market, Relevant Market, and Product-Market The Reference Market: Defined based on three dimensions, Product Dimension (set of products with technological and functional coherence, buyers Dimension (consumers of the same class of product) and Consumer Needs or Function Dimension: (Basic function vs. added attributes). The Product-Market: Intersection of macro segment, generic need, and specific technology. Defined as a strategic segment with a generic need covered by a specific technology. The Relevant Market: Part of the reference market where the company competes. Includes the market products the company targets. Segmentation in Markets: Concept, Segmentation Criteria, and Methods Segmentation: Division of the market into segments, each responding similarly to a marketing mix strategy. Importance lies in selecting segments that provide the greatest commercial added value. Levels of Approach to the Market a. Mass Marketing: Serving the entire market with a homogenous offer. b. Segment Marketing: Dividing the market into homogeneous groups based on demographics, habits, etc. c. Niche Marketing: Targeting small consumer groups with specific characteristics. d. Marketing of Local Groups: Geographical segmentation using geomarketing. e. One-to-One Marketing: Highest level of segmentation, each segment composed of a single consumer. Segmentation Criteria in Consumer Markets a. Based on Consumer Characteristics: Geographical, demographic, socioeconomic, psychographic variables. b. Behavior-Based Segmentation Criteria: Time of use, benefits sought, level of use, brand loyalty, attitude. Selection of the Target Market Segment evaluation and strategies: Sales potential and stability: directly related to profitability. Growth: Preferable to target segments with growth potential. Identification and accessibility: consider socio-demographic variables and accessibility. Response to marketing actions: apply specific marketing mix policies to each segment. Resources and capabilities: ensure the company has the necessary resources for an attractive segment. Coverage Strategies: Undifferentiated Strategy: serving the entire market with a single offer. Differentiating Strategy: addressing each segment differently with a range of products. Concentrated Strategy: targeting a single or a few attractive segments. Strategic Positioning Positioning: Set of perceptions consumers form about a brand or product relative to others. Differentiation strategies highlight attributes positively valued by consumers. Perceptual maps represent consumer opinions about product characteristics graphically in relation to competitors.  TOPIC 3 Notion of Competition and Perspectives in Its Analysis The company must consider competitors and customers, analyzing them continuously to develop competitive strategies for an advantage. Three main approaches to studying competition: Competitors from the Consumer's Point of View: Defined if consumer perceives similar attributes, basic benefits, or competes for the same budget or free time. Also includes companies competing for the same resources or workforce. Competitors from the Point of View of Resources: Companies competing for the same material resources or workforce. Competitors from the Point of View of Marketing Activities: Competition in distribution, sales promotions, or advertising media. Focus on the first approach: Competition from the consumer's perspective Four Levels of Competition from the Consumer's Perspective: a) Competition in the Form of a Product: brands with the same attributes and similar levels, targeting the same market segment. b) Competition in the Product Category: products and brands sharing attributes, some with different levels. c) Generic Competition: medium to long-term analysis, involving categories of substitutable products. d) Competition at Budget Level: rivalry for consumer budget. Notion of Expanded Rivalry Porter's Five Forces: a) Potential Competitors (New Entrants): influence industry attractiveness. b) Rivalry (Real Competitors): direct competition within the industry. c) Substitute Products: products that can fulfill the same need. d) Suppliers' Negotiating Power: power suppliers have over companies. e) Client Negotiating Power: power clients have over companies. Determinants of Degree of Rivalry Intramarket Rivalry: Cost Structure: Entry and exit barriers, economies of scale and scope, and asset specificity influence rivalry. 1) Market Structure: Perfect competition, monopolistic competition, oligopoly, or monopoly. 2) Consumer Preference Structure: Highly segmented markets reduce rivalry. Threat of New Entrants Depends on entry barriers: Economies of scale, product differentiation, capital requirements, distribution access, cost disadvantages, government regulations. Bargaining Power of Suppliers: Influenced by concentration, substitute availability, buyer importance, supplier's product significance, change costs, and threat of integration. Bargaining Power with Clients: Depends on buyer concentration, product importance, standardization, supplier change costs, and buyer threat of integration. Substitute Products: More substitutes increase competition and reduce sector profitability. Alternatives of Behavior in Front of Competitors Legal Actions: Legal measures to protect business if rivals' approach is deemed illegal. Examples: anti-monopoly legislation, lobbying for government restrictions. Cooperation: Rival companies cooperate based on common interests, preventing market access for others. 1) Active Collaboration: joint costs lower through collaboration than internal costs. Companies focus on core competencies. Risk of a solo project is high. 2) Passive Collaboration: competing establishments jointly participate in new projects to increase traffic. 3) Collusion: Agreements to soften or prevent competition. Success influenced by industry concentration; OPEC is an example.  TOPIC 4 Product Portfolio Products are interrelated elements, leading to the focus on the product portfolio instead of individual products. Matrix models and financial indicators guide the analysis. Financial Indicators: Sales and market share Profits (ROA = profits / assets) Economic Value Added (VEA = sales - operating costs - taxes) Performance Indicators (Long-term Viability): Customer satisfaction/brand loyalty Quality of service and productBrand associationsRelative costs compared to competitors Activity in new products (R+D+i) Capacity and performance of employees Decision Support Systems: Techniques (PIMS, SWOT) aiding decision- making, including product portfolio design. Matrix Development Methodology Hypotheses: Experience Effect: high relative market share implies cost advantage and greater profitability. Product Life Cycle: increasing market share is more economical in a growing market. Matrix Axes: X-axis: Market share relative to the most important products Y-axis: Growth rate in the market. Four Quadrants: Question Products: high growth, low market share. Star Products: high growth, high market share. Cash-Generating Products (Cow): low growth, high market share. Disaster Products (Dog): low growth, low market share. Strategic Diagnosis of the Product Portfolio Strategies for Quadrants: Question Products: heavy investment to expand market share. Star Products: protect market share, reinvest profits for growth. Cash-Generating Products (Cow): main support for R&D, maintain position. Disaster Products (Dog): concentrate on profitable niches, divest, or eliminate. Limitations: Applicable to large volume industries. Doesn't consider differentiation advantages. Difficulty in measurement and subjectivity. General strategic recommendations. Financial focus, neglecting other synergies. Favors investments in high-growth products only. Matrix Development Methodology: Phases: Identification of Factors: external and internal factors influencing market attractiveness and competitiveness. Evaluation and Weighting: quantifying factors' contributions, using a scale of 1 to 5. Placement in the Matrix: market attractiveness on the y-axis, company competitiveness on the x-axis. Strategic Diagnosis: differentiated based on quadrant placement. Strategic Diagnosis of the Product Portfolio Strategies for Quadrants: High Market Appeal: invest and grow, selective growth, opportunistic selection. Attractive Mid-Market: maintain, invest selectively, divest. Low Market Appeal: protective selection, divest, sell or eliminate. Limitations: Subjectivity in calculation. Difficulty in measuring dimensions. Multivariate dimensions can hide differences. Difficulty in defining the business analysis unit. Business Model Canvas as a Strategic Tool Components: Customer Segments: define common characteristics. Value Proposition: defines the business and motivates customers. Channel Strategies: interact and sell products to customers. Customer Relationships: influence customer experience and engagement frequency. Key Income Streams: how cash is generated from different customer segments. Key Resources: most important assets of the business. Key Activities: key tasks for fulfilling the value proposition. Key Partnerships: collaborate with partners for business expansion. Cost Structures: all costs incurred to meet the business model. Business Model Canvas: 9 Steps Step 1: Define Your Customer Segments: Identify commonalities among customer groups. Understand their interests, where to find them, and their needs. Step 2: Define Your Value Proposition: Articulate what defines your business. Motivate customers by creating excitement. Ensure that customers are sufficiently motivated to test your product or service. Step 3: Channel Strategies: Determine how you interact with customers and deliver services. Find convenient ways for customers to purchase and have a positive experience. Step 4: Types of Customer Relationships: Understand the impact of your relationship with customers. Influence their experience and engagement frequency. Step 5: Key Income Streams Identify how you generate cash from different customer segments. Recognize that sales are vital for business function. Step 6: Types of Key Resources: Identify and protect critical business assets. Make the most of key resources for business success. Step 7: Key Activities Clarify essential activities for fulfilling the value proposition. Prioritize efforts to align with business goals. Step 8: Key Associations: Form strong partnerships within your ecosystem. Expand reach and ensure that the business delivers on its promise. Step 9: Important Cost Structures: Understand and manage all costs incurred to meet the business model. Keep costs under control for a healthy and sustainable business.  TOPIC 5 The Field of Activity and the Development of the Company The field of activity of a company, encompassing the products and markets in which it competes, may evolve over time, leading to considerations of modifying this field. This necessitates the formulation of development or growth strategies. Ansoff's (1976) typology identifies two fundamental strategies: 1) Expansion: Involves a close relationship with the current situation. 2) Diversification: Implies a certain break with the current situation, prompting the company to develop through new products and new markets. Based on Ansoff's criteria, several types of development or growth strategies can be identified: a) Consolidation: Aims to maintain the current business at current levels without seeking growth. b) Expansion: Involves maintaining a close relationship with the current situation, indicating growth through traditional products, traditional markets, or both. c) Diversification: Occurs when the company simultaneously enters new markets with new products. d) Vertical Integration: Takes place when the company enters new businesses related to the full cycle of production, becoming its own customer or supplier. e) Restructuring: Involves rebuilding the business portfolio, potentially maintaining or reducing its size, thereby implying a change in its field of activity. Single Business Company or Specialization A specialized company concentrates all efforts on marketing a single line of product or service. Advantages include mastery in-depth, resource accumulation, avoidance of hierarchical complexities, and benefits from economies of scale and the experience curve. Risks associated with specialization include vulnerability to changes, sector maturity, limited adaptability, and challenges during price wars. Specialized companies have three growth alternatives: 1) Market Penetration: Achieved through aggressive marketing policies or price wars. 2) New Markets: Involves expanding the product or marketing globally, aligning with the "relevant" market. 3) Diversification: The company may appear diversified externally but might view it as an extension of its product line, driven by technology, marketing, and distribution channels. Vertical Integration Vertical integration involves a company entering activities related to the complete cycle of a product or service. It includes backward (supplier-related) and forward (customer-related) integration. Advantages of vertical integration include cost reduction, market foreclosure prevention, direct access to consumer information, stability in relationships, and better control over proprietary technology. However, vertical integration also poses risks such as loss of flexibility, management challenges, problems of incentives and agency costs, integration costs, and potential difficulties in matching supplier efficiency. Diversification Diversification occurs when a company adds new products and markets. Reasons for diversification include risk reduction, market saturation, surplus resources utilization, investment opportunities, and the generation of synergies. Diversification can be related or unrelated. Related Diversification: Involves businesses with similarities in resources, distribution channels, technologies, or markets. Unrelated Diversification (Conglomerate): Represents businesses with no apparent relationship. Success in related diversification relies on achieving synergies while managing coordination costs, commitment costs, and inflexibility. Unrelated diversification aims for overall risk reduction and profitability, yet it may face challenges like the absence of synergies, difficulties in managing diverse businesses, and barriers to entry into new industries. Diversification by Technological Potential Companies can diversify efficiently through technological potential, allowing products for different markets while sharing common technology. This approach focuses on how to compete rather than where, emphasizing the importance of technological potential as the basis for business selection. Incentives for Diversification Beyond reasons mentioned, diversification is driven by factors such as risk distribution, compensation for seasonal sales, compliance with antitrust regulations, and support for predatory pricing policies and cross-subsidies. Restructuring Business portfolio restructuring involves modifying the company's field of activity, potentially abandoning or divesting businesses. Reasons for restructuring include poor management, excessive growth, inadequate competitive strategy, new competitors, or unexpected changes in demand. Sanitation of a Business: Aimed at keeping a business or product in the portfolio, feasible when there are opportunities to recover profitability. Measures include changes in management, redefinition of strategy, and asset sales. Restructuring of the Business Portfolio: May result from excessive diversification, the emergence of significant competitors, or management objectives prevailing over value creation. Strategies for Abandoning a Business Sale: Attractive for recovering investments. Harvest: Maximizes short-term financial flows by ceasing investments and exploiting existing profitability opportunities, often leading to eventual liquidation. Liquidation: The least attractive strategy, involving the cessation of activities and sale of remaining assets.  TOPIC 6 Introduction Context: Innovation and competitiveness are intertwined concepts crucial for economic success. The focus on either product or process innovation can reshape a company's portfolio. Purpose of the Chapter: Understanding the dynamics of new product development in the context of marketing strategies. Economic Dynamics: Innovation and Competitiveness: The dynamic relationship between innovation and competitiveness is fundamental to economic success. Companies leverage innovation, whether in products or processes, as a key strategy for gaining a competitive edge and ensuring long-term viability in the market. Estrategias de desarrollo de nuevos productos Caracterización y Etapas del La comercialización tipologías de desarrollo de un nuevos productos nuevo producto Orientación Generación Filtrado Desarrollo Desarrollo estratégica de ideas de ideas y test de y test de concepto producto Characterization and Typologies of New Products Definition of Innovation: Holistic Concept: Innovation, as defined here, represents a holistic concept covering a spectrum of activities culminating in the successful market introduction of an idea, whether it takes the form of a product, service, or process. Types of New Products: Dual Perspectives: Understanding new products requires acknowledging the dual perspective – from the company's internal development and the consumer's perception of novelty. This distinction highlights that what's new for the company might not necessarily be perceived as such by the consumer. Stages of New Product Development Strategic Orientation: Guiding Principles: Before embarking on the intricate journey of new product development, a strategic orientation is imperative. This involves establishing clear business objectives, defining the technological and market landscape, balancing innovation, and determining the level of accepted risk. Additionally, identifying the competitive advantage the product aims to provide is crucial for shaping the entire development process. Generation of Ideas: Organic Ideation: The generation of ideas is not a linear process but rather a dynamic, organic flow. Leveraging informal discussions and inter-departmental meetings fosters an environment conducive to the emergence of viable ideas. The recognition of the vitality of unstructured techniques, such as informal contacts, alongside structured methods like brainstorming, underlines the multifaceted approach needed in this phase. Filtering Ideas: Balancing Act: The filtering stage demands a delicate balance between strategic, marketing, R&D, and financial criteria. Striking this equilibrium ensures the weeding out of excessively conservative ideas and mitigates the risk of allowing high-potential yet high-risk ideas to progress. The decision-making process at this stage is pivotal, aiming to avoid errors that could hinder the innovation's progress. Concept Development and Testing: Comprehensive Evaluation: The concept development and testing phase involves a comprehensive evaluation of the product concept. From defining the product concept to testing purchase intent, seeking improvements, and profiling the market, this stage is critical for aligning the product with consumer expectations. The monadic or comparative approach to concept testing offers flexibility, enabling a nuanced understanding of consumer preferences. Product Development and Testing: Critical Decisions: The transition from concept to product development requires meticulous decision-making. Decisions encompass product content, sample selection, testing location, and mediation strategies in case of technical or commercial unviability. The realization that costs escalate during this phase underscores the substantial investment and commitment required. Marketing New Product Marketing Plan: Strategic Blueprint: The development of a marketing plan serves as the strategic blueprint for introducing the new product. Beginning with a comprehensive analysis and diagnosis of the commercial and marketing landscape, the plan cascades into defining marketing objectives, devising strategies, and translating these strategies into actionable plans with allocated budgets. Market Test: Insightful Assessment: The market test acts as a lens through which the feasibility of the marketing plan is assessed under real-world conditions. It goes beyond predicting purchase intentions by providing insights into actual consumer behavior and market dynamics. Despite its costs and limitations, the market test's role in refining marketing strategies and detecting unforeseen challenges is invaluable. Market Launch: Strategic Approaches: The market launch involves strategic decision-making on whether to enter all markets simultaneously or adopt a gradual deployment strategy. Simultaneous entry offers advantages in terms of gaining prime distribution channels and establishing a strong initial presence but comes with considerable risks. Gradual deployment, akin to a market test on a larger scale, allows for learning from segment-specific challenges before a full-scale launch. Pre-announcement Trend: An emerging trend in market launches is the pre- announcement strategy. Pre-announcing a product's market launch through press and magazine advertisements creates anticipation and buzz. However, careful consideration is needed to balance excitement with the risk of competitors reacting swiftly. Post-launch Monitoring: Adaptive Strategy: The chapter recognizes that the new product development process extends beyond the market launch. The continuous monitoring and evaluation post-launch are emphasized as essential components of an adaptive strategy. This iterative approach allows for modifications in marketing plans based on real-world results, ensuring alignment with the ever-evolving market landscape. Conclusion Holistic Approach: Dynamic Continuity: The conclusion reiterates the need for a holistic approach to new product development. It emphasizes that the process doesn't conclude with market launch but necessitates ongoing monitoring and adaptation. This dynamic continuity ensures that the product remains aligned with market demands, thus increasing the likelihood of meeting set objectives. Key Ideas (Introduction) Innovation and Competitiveness: Interconnected Themes: The introduction lays the groundwork by highlighting the interconnected themes of innovation and competitiveness. It sets the stage for understanding how innovation becomes a driving force for competitive advantage in the economic landscape. Key Ideas (Characterization and Typologies of New Products) Perspectives on Innovation: Consumer-Centric Innovation: Recognizing the divergence between a company's internal perspective and consumers' perceptions emphasizes the consumer-centric nature of innovation. This dual perspective underscores the challenge of aligning internal development with external perceptions. Innovation Classifications: Nuanced Classifications: The classifications based on dominance and intensity of innovation provide a nuanced understanding. Recognizing technological vs. marketing dominance and radical vs. incremental innovation offers a framework for comprehending the diverse nature of innovations within the market. Key Ideas (Stages of New Product Development) Strategic Orientation: Foundational Framework: The strategic orientation is positioned as the foundational framework that guides the entire new product development process. The factors, including objectives, technological-market balance, and competitive advantage, underscore the importance of pre-defining the strategic landscape. Idea Generation and Filtering: Organic Ideation and Strategic Filtering: Emphasizing the organic nature of idea generation and the strategic filtering process, this section underscores the need for a multifaceted approach. Combining informal discussions with structured techniques ensures a holistic ideation process. Concept Development and Testing: Consumer-Centric Approach: The concept development and testing phase, centered around understanding consumer reactions, showcases a consumer- centric approach. The multifaceted objectives of testing purchase intent, seeking improvements, and profiling the market emphasize a comprehensive evaluation.  TOPIC 7 Introduction The concept of competitive advantage arises when a product or service possesses certain characteristics in the market, granting it a privilege over competitors and resulting in higher profitability compared to the sector's average. The origin of competitive advantages can be internal or external to the industry. Responding to external changes constitutes the core managerial or entrepreneurial capacity. Internal Competitive Advantage: Source: Originates within the organization itself. Components: Stem from factors such as organizational capabilities, resources, skills, technology, and processes that are unique or superior compared to competitors. Examples: Strong research and development capabilities, efficient production processes, skilled workforce, proprietary technologies, and unique patents. External Competitive Advantage: Source: Arises from factors outside the organization in the external business environment. Components: Result from market positioning, brand image, customer relationships, and favorable conditions in the external environment. Examples: Strong brand reputation, extensive distribution networks, exclusive access to scarce resources, favorable government regulations, and strategic partnerships. Low-Cost Strategy Economies of Experience: The low-cost strategy is grounded in the belief that cost reduction is the primary foundation of competitive advantage. Economies of experience, measured by cost reduction with successive production duplications, play a key role. Sources of Cost Advantages: In addition to economies of experience, sources of cost reduction include capacity utilization, cost of production factors, and residual efficiency. Limits of economies of scale include differentiation, flexibility, and issues related to motivation and coordination. Cost Reduction Management: Dynamic management of cost efficiency, emphasizing continuous improvement, is essential. In cases of poor results, radical measures such as plant closures, outsourcing, workforce reduction, and improved managerial efficiency may be necessary. Differentiation Strategy Competitive advantage through differentiation occurs when a company achieves a higher market price that exceeds the cost of providing said differentiation. Nature and Advantages of Differentiation: Differentiation is rooted in understanding consumer needs and creating something unique that adds value. Tangible and intangible variables influence differentiation success. Analysis of Differentiation from the Demand Side: Successful differentiation must align with demand, requiring in-depth analysis of psychosocial factors and consumer preferences. Differentiated segmentation carries risks like higher unit costs. Analysis of Differentiation from the Supply Side: A company's ability to offer something unique depends on its activities, resources, and factors like product features, complementary services, marketing activities, and technology. Product Integrity: Product or service integrity, measured by consistency between function and structure, is crucial for sustained competitive advantage. Signaling and Reputation: Quality signaling, brand reputation, communication campaigns, guarantees, and other strategies are employed to enhance quality and differentiation credibility. Brand Capital Building brand reputation, communication campaigns, and credibility are crucial for establishing a strong brand capital. Brand-Related Decisions Branded vs. Non-Branded Products: The choice between branded and non-branded products depends on differentiation strategy and consumer preferences. Single Brand or Multiple Brands: The decision between a single or multiple brands depends on segmentation and consumer preferences. New Brand or Brand Extension: The decision between a new brand or extension depends on the existing brand's awareness and consistency with the new offering. Strategic Alliances of Brands: Strategic alliances of brands can enhance credibility and extend the reach of differentiation. Manufacturer's Brands vs. Distributor’s Brands: The choice between manufacturer's brands and distributor's brands depends on differentiation goals and the relationship with distributors. Brand Integrity and Reputation: Maintaining integrity, both internally and externally, is vital for sustained differentiation. Strategies like offering comprehensive guarantees, engaging in communication campaigns, and creating attractive packaging contribute to building a strong brand reputation. Signaling and Credibility Measures: In addition to product differentiation, signaling variables play a crucial role. Investments in quality signage, communication campaigns, sponsorships, and attractive store designs contribute to differentiating the brand. The need for signaling increases when consumer assessment of product quality is challenging. Total Integrity and Consumer Perception: The total integrity of a product, considering factors like reliability, aesthetics, and semantics, is essential, especially for products linked to lifestyle and psychosocial aspects. Consumer perception and endorsement of the values associated with the brand are critical for maintaining integrity. In summary, brand-based differentiation strategies require a comprehensive understanding of consumer preferences, effective management of tangible and intangible variables, and strategic decisions regarding brand-related aspects. Building and maintaining brand integrity and reputation, along with effective signaling measures, are key elements for long-term success in a competitive market. Trademarks Brand image and advertising, its main engine, are essential elements to provide quality signals. The brand serves as a guarantee of quality from the manufacturer to the consumer for several reasons: Identification and Legitimacy: The brand identifies the manufacturer, conferring legality and responsibility for manufactured products. Investment and Incentive: The brand represents an investment that provides an incentive to maintain quality. Value Growth with Complexity: The greater the difficulty in perceiving quality before purchase and the higher the product or service cost, the more the brand's value grows. The Function of Brands in E-Commerce: In electronic commerce, where transactions are often anonymous and lacking general commercial regulation, companies with higher brand capital reduce the perceived risk for their clients. Costs of Differentiation: The costs of differentiation can be direct (higher quality inputs, advertising, better after-sales services) and indirect, arising from the relationship between differentiation and cost variables. Efficient cost differentiation is often deferred until later stages in the value chain. Brand Capital Despite not always being reflected in balance sheets, brand value plays a significant role in buying and selling processes. Key components include: Brand Awareness: Brand awareness is the ability of people to identify, recognize, or remember a brand as a member of a product category. It creates value through supporting associations, familiarity, and inclusion in the set of considered brands. Brand Identity and Image: Brand identity is what emanates from the company through signs, messages, and products. Brand image is how the target audience interprets these signals. The integrity of a product or service, balancing various characteristics, is crucial for maintaining brand differentiation. Benefits of Brand Capital: Greater Loyalty: Future purchase commitment is less expensive from loyal customers. Less Vulnerability: Customer loyalty reduces the impact of competition and crises. Higher Profit Margins: Improves margins by reducing marketing costs and attracting new customers. Inelastic Demand to Price Increases: High-value brands can charge a premium. Elastic Demand in Price Reductions: Demand for prestigious brands is usually elastic with lower prices. Cooperation and Business Support: A positive brand image among consumers benefits cooperation with distributors. Effective Communication: Positive brand image improves the effectiveness of communication policies. Opportunities to License the Brand: Desirable characteristics of powerful brands can be licensed. Brand Extension: Brand equity can be used to market new product categories. Brand Decisions Branded vs. Non-Branded Products: Unbranded products are becoming less common. Advantages of using a brand include facilitating internal management, differentiation, advertising support, building customer loyalty, protection from competition, and financial value addition. Single Brand or Multiple Brands Single Brand Strategy: Puts the same brand name on all company products, providing greater notoriety and recognition. Multi-Brand Strategy: Uses different brands for products within the same category, allowing segmentation and flexibility. Multi-Brand Strategy Advantages: Contributes to market development through advertising competition. Enables better market segmentation. Provides tactical flexibility across market segments. Limits competitors' expansion possibilities. Reduces the risk of failure harming the company's brand. Attracts consumers who switch brands. Multi-Brand Strategies Product Brand Strategy: Creates as many brands as products. Range Brand Strategy: Groups products under the same brand name based on a shared competence field Umbrella Brand Strategy: Uses the same brand name for different products in different markets. Source Brand Strategy: Products have their own name, but the brand provides a guarantee. Guarantee Brand Strategy: The base brand gives foundation and security to other brands it signs. Brand New or Brand Extension When marketing a new product category, a company must decide between creating a new brand, buying an existing brand, or extending its brand. Create a New Brand: Best for achieving the desired brand image. Brand Extension: Uses the same commercial name as previous products. Advantages of Brand Extension: Economies of scale by sharing resources. Facilitates achieving market share. Increases advertising efficiency. Strategic Alliances of Brands Brand alliances or cobranding involve integrating attributes of two or more brands to offer new products or images, achieving objectives like reaching new segments, markets, and diversifying risk. Manufacturer's Brands vs. Distributor's Brands The decision to sell under the manufacturer's brand, distributor's brand, or a hybrid policy depends on factors like product alteration, consumer behavior, fixed vs. variable costs, and power dynamics between the manufacturer and distributor. Positive effects for the manufacturer include easier entry into new markets and increased market share. Negative effects include a loss of power over the product, dependence on the distributor, and the obligation to compete on prices.  TOPIC 8 Leader, Challenger, Follower, and Specialist Strategies Leader Strategies: Primary Demand Development: Leaders contribute significantly to market demand, exploring new users, uses, or increasing consumption frequency. Market Share Maintenance: Leaders defend and strengthen their position through various strategies like defense, flanking, confrontation, market expansion, or contraction. Market Share Expansion: Leaders may seek to increase market share through strategies similar to those for maintenance, always considering profitability and legal aspects. Challenger Strategies: Frontal Attack: Challengers target competitors, emphasizing product differentiation, pricing, and advertising. Bypass Attack: Challengers introduce superior products, inhibiting quick responses from competitors. Lateral or Flank Attack: Challengers enter segments where competitors are weak, tailoring products and strategies accordingly. Rodeo Attack: Challengers serve multiple underserved segments simultaneously. Guerrilla Attack: In resource-limited scenarios, challengers focus on small but profitable segments, prepared to withdraw rapidly. Follower Strategies: Imitation: Followers avoid direct confrontation, imitating successful strategies. They focus on peaceful coexistence and conscious market sharing. Specialist Strategy: Niche Market Focus: Small specialist companies target specific niches, leveraging a deep understanding of consumer needs. Tailored products and higher prices can lead to profitability.  TOPIC 9 Strategies for Mature and Declining Markets Divestment Business Alternatives Detailed exploration of elimination, harvesting, and sustainability strategies. Recognition that managers often prioritize high growth but must adapt in mature markets. Elimination Strategies Causes of elimination: Sustained sales or profit decline, changing consumer preferences, and new products. Challenges: Sentimentality, impact on other products, and potential credibility issues. Removal process involves periodic monitoring, thorough evaluation, and strategic execution. Harvest Strategy Aim: Maximize short-term financial gains by ceasing investments. Considerations: No growth potential, slow sales decline, and market inertia. Execution involves maintaining secrecy, cost reduction, and gradual withdrawal strategies. Sustainability Strategy Positioned between investment and disinvestment, sustaining a competitive position. Goal: Maintain viability amidst uncertainty or as a medium-term solution. Requires continued investment in product quality, facilities, and consumer loyalty. In mature and declining markets, adept management is crucial. The chapter delves into strategies—elimination, harvesting, and sustainability—offering a nuanced understanding of how businesses can navigate these stages. The discussion recognizes the complex challenges posed by mature markets and emphasizes the need for strategic adaptation. Success hinges on managers' ability to make informed decisions, navigate evolving consumer preferences, and strike a balance between short-term gains and medium-term viability through judicious investment in critical areas.