The present study aims to provide a general and theoretical view of Strategic Marketing. The study begins with an overview of the concept, evolution, purpose and types of Marketing, then focus on the external and internal factors evaluation. After this analysis, Chapter III, entitled Comparing part, has information about the different methods of strategic marketing; SWOT analysis, matrix SPACE and matrix BCG. Finally, the last part of this study will focus on the Decision part.
The methodology used in conducting this study is mainly based on the search for information from various sources, and the collection of articles published in newspapers, magazines, web pages etc.
Marketing is the process of communicating the value of a product or service to customers, for the purpose of selling that product or service. According to Philip Kotler, considered the father of modern marketing, is the .
From a societal point of view, marketing is the link between a society’s material requirements and its economic patterns of response. Marketing satisfies these needs and wants through exchange processes and building long term relationships. Marketing can be looked at as an organizational function and a set of processes for creating, delivering and communicating value to customers, and managing customer relationships in ways that also benefit the organization and its shareholders. Marketing is the science of choosing target markets through market analysis and market segmentation, as well as understanding consumer buying behavior and providing superior customer value.
2.2.TYPES OF MARKETING: STRATEGIC MARKETING
2.2.1.Types of Marketing
There are many types of marketing and many trends within what we consider today’s marketing, not existing a unique and valid classification of the types of marketing, we can highlight: Social Marketing, or responsible marketing, relationship marketing, holistic marketing, Dayketing, Warketin, Neuromarketing, Inbound marketing, Cybermarketing, Street Marketing, Legal Marketing.
Among all these trends we will focus on Strategic Marketing or marketing strategy. Strategic marketing is the element that defines and frames the broad lines of communication and marketing company to take advantage of market opportunities. Marketing strategy is defined by David Aaker as a process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage. Marketing strategy includes all basic and long-term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and the formulation, evaluation and selection of market-oriented strategies and therefore contribute to the goals of the company and its marketing objectives. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketingobjectives. Plans and objectives are generally tested for measurable results. Commonly, marketing strategies are developed as multi-year plans, with a tactical plan detailing specific actions to be accomplished in the current year. Time horizons covered by the marketing plan vary by company, by industry, and by nation, however, time horizons are becoming shorter as the speed of change in the environment increases. Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. Seestrategy dynamics. Marketing strategy needs to take a long term view, and tools such as customer lifetime value models can be very powerful in helping to simulate the effects of strategy on acquisition, revenue per customer and churn rate.
The overall marketing environment consists of the task environment and the broad environment.
The task environment includes the immediate actors involved in producing, distributing, and promoting the offering, including the company, suppliers, distributors, dealers, and the target customers. Material suppliers and service suppliers such as marketing research agencies, advertising agencies, Web site designers, banking and insurance companies, and transportation and telecommunications companies are includedin the supplier group. Agents, brokers, manufacturer representatives, and others who facilitate finding and selling to customers are included with distributors and dealers.
The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment, and social-cultural environment.
These environments contain forces that can have a major impact on the actors in the task environment, which is why smart marketers track environmental trends and changes closely. To do the analysis easier we will divide the factor in two grupos: internal environmental facotrs and external environmental factors.
Marketing strategy involves careful scanning of the internal and external environments. Internal environmental factors include the marketing mix and marketing mix modeling, plus performance analysis and strategic constraints. External environmental factors include customer analysis, competitor analysis, target market analysis, as well as evaluation of any elements of the technological, economic, cultural or political/legal environment likely to impact success. A key component of marketing strategy is often to keep marketing in line with a company’s overarching mission statement.
Once a thorough environmental scan is complete, a strategic plan can be constructed to identify business alternatives, establish challenging goals, determine the optimal marketing mix to attain these goals, and detail implementation.
Later we will talk about the External Factor Evaluation – EFE – matrix and the Internal Factor Evaluation – IFE – matrix.
The EFE matrix is very similar to the IFE matrix. The major difference between the EFE matrix and the IFE matrix is the type of factors that are included in the model. While the IFE matrix deals with internal factors, the
EFE matrix is concerned solely with external factors. The EFE matrix goes side by side with so-called IFE matrix. The EFE matrix together with
the IFE matrix leads to the IE matrix. And, the IE matrix can be extended into so-called SPACE matrix, which we will discuss later.
2.3.1.EXTERNAL FACTORS EVALUATION
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing. External factors assessed in the EFE matrix are the ones that are subjected to the will of social, economic, political, legal, and other external forces. 18.104.22.168.Create the EFE matrix
Developing an EFE matrix is an intuitive process which works conceptually very much the same way like creating the IFE matrix. The EFE matrix process uses the same five steps as the IFE matrix.
List factors: The first step is to gather a list of external factors. Divide factors into two groups: opportunities and threats.
Assign weights: Assign a weight to each factor. The value of each weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important. One or hundred means that the factor is the most influential and critical one. The total value of all weights together should equal 1 or 100.
Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how effective the firm’s current strategies respond to the factor. 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are industry-specific. Ratings are
Multiply weights by ratings: Multiply each factor weight with its rating. This will calculate the weighted score for each factor.
Total all weighted scores: Add all weighted scores for each factor. This will calculate the total weighted score for the company.
22.214.171.124. What should I include in the EFE matrix?
Now that we know how to construct or create the EFE matrix, let’s focus on factors. External factors can be grouped into the following groups:
Social, cultural, demographic, and environmental variables: aging population, percentage or one race to other races, per-capita income, number and type of special interest groups, widening gap between rich and poor, number of marriages and/or divorces, ethnic or racial minorities, education, trends in housing, shopping, careers, business, number of births and/or deaths and immigration and emigration rates etc.
Economic variables; Growth of the economy, level of savings, investments, and capital spending, inflation, foreign exchange rates, stock market trends, level of disposable income, import and export factors and barriers, product life cycle , Government spending, industry properties etc.
Political, government, business trends, and legal variables; Globalization trends, government regulations and policies, worldwide trend toward similar consumption patterns, Internet and communication technologies (e-commerce), protection of rights (patents, trade marks, antitrust legislation), level of government subsidies,
international trade regulations, taxation, terrorism and elections and political situation home and abroad etc.
2.3.2.INTERNAL FACTOR EVALUATION
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business. IFE matrix also provides a basis for identifying and evaluating relationships among those areas. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy formulation. The IFE matrix method conceptually relates to the Balanced Scorecard method in some aspects.
The IFE matrix process uses the same five steps as the EFE matrix, as a result of it we are not going to explain the developing proces twice (Annexe).
SWOT analysis, method, or model is a way to analyze competitive position of your company. SWOT analysis uses so-called SWOT matrix to assess both internal and external aspects of doing your business. The SWOT framework is a tool for auditing an organization and its environment.
SWOT is the first stage of planning and helps decision makers to focus on key issues. SWOT method is a key tool for company top officials to formulate strategic plans. Each letter What is SWOT matrix? In the word SWOT represents one strong word: S = strengths,W = weaknesses, O = opportunities, T = threats.
Strengths: characteristics of the business or project that give it an advantage over others
Weaknesses: characteristics that place the team at a disadvantage relative to others
Opportunities: elements that the project could exploit to its advantage
Threats: elements in the environment that could cause trouble for the business or project.
SWOT model analyzes factors that are internal to your business and also factors that affect your company from outside. Strengthsand weaknesses in the SWOT matrix are internal factors.Opportunities and threats are external factors.
SWOT can be used in conjunction with other tools for strategic planning, such as the Porter’s Five-Forces analysis or the Balanced Scorecard framework. SWOT is a very popular tool in marketing because it is quick, easy, and intuitive.
The technique is credited to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies.
3.1.1 WHAT IS SWOT MATRIX?
The concept of determining strengths, weaknesses, threats, and opportunities is the fundamental idea behind the SWOT model. To present the model in a more understandable way, scholars came up with so-called SWOT matrix. SWOT matrix is only a graphical representation of the SWOT framework.
3.1.2. IS SWOT ANALYSIS A HARD SCIENCE?
The answer is no. SWOT analysis can be very subjective. Someone can see a new firm coming into the market as a threat because it takes away your current customers. Someone else might see the same company as opportunity because that company might have innovative ideas which your business can explore, and your business might even benefit from possible takeover of that new competitor.
3.1.3. HOW SHOULD I DO THE SWOT ANALYSIS?
There is a number of simple rules that you can go by when creating a SWOT matrix in SWOT analysis.
Be realistic: Make sure you assess your situation objectively. It is better to be more pessimistic about weaknesses and threats and lighter about strengths and opportunities.
Today versus future: When doing the SWOT analysis, distinguish between today’s state of your business and your expectation for the future. Mixing your expectation with the current state will result in skewed outcome.
Simple: Keep your SWOT matrix short and simple. Avoid complexity and over analysis. If you want to include many points to each quadrant of the SWOT matrix, it is a good idea to weight them.
3.1.4. NEXT STEP
We mentioned that the SWOT analysis is very subjective. One way to bring numbers into the SWOT analysis and make it more useful is to weight individual items. Give a weight to every item in the SWOT matrix and then add them together. Each quadrant in the SWOT matrix will result in some number which as a whole will give you a better picture where your business is relative to other quadrants. This leads us to two models called the IFE matrix and EFE matrix that are rooted in the SWOT analysis.
This method is not free from criticisim as Menon (1999) and and Hill and Westbrook (1997) have shown that SWOT may harm performance. Other complementary analyses have been proposed, such as the Growth-share matrix.
The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake.
The Strategic Position ; ACtion Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization.
The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix). 3.2.1. WHAT IS THE SPACE MATRIX STRATEGIC MANAGEMENT METHOD? To explain how the SPACE matrix works, it is best to reverse-engineer it. First, let’s take a look at what the outcome of a SPACE matrix analysis can be, take a look at the picture below. The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy:
This is what a completed SPACE matrix looks like:
This particular SPACE matrix tells us that our company should pursue an aggressive strategy. Our company has a strong competitive position it the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This can include product development, integration with other companies, acquisition of competitors, and so on.
Now, how do we get to the possible outcomes shown in the SPACE matrix? The SPACE Matrix analysis functions upon two internal and two external strategic dimensions in order to determine the organization’s strategic posture in the industry. The SPACE matrix is based on four areas of analysis.
Internal strategic dimensions:
Financial strength (FS)
Competitive advantage (CA)
External strategic dimensions:
Environmental stability (ES)
Industry strength (IS)
There are many SPACE matrix factors under the internal strategic dimension. These factors analyze a business internal strategic position. The financial strength factors often come from company accounting. These SPACE matrix factors can include for example return on investment, leverage, turnover, liquidity, working capital, cash flow, and others. Competitive advantage factors include for example the speed of innovation by the company, market niche position, customer loyalty, product quality, market share, product life cycle, and others. Every business is also affected by the environment in which it operates. SPACE matrix factors related to business external strategic dimension are for example overall economic condition, GDP growth, inflation, price elasticity, technology, barriers to entry, competitive pressures, industry growth potential, and others. These factors can be well analyzed using the Michael Porter’s Five Forces model.
3.2.2.HOW DO I CONSTRUCT A SPACE MATRIX?
The SPACE matrix is constructed by plotting calculated values for the competitive advantage (CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on the environmental stability (ES) and financial strength (FS) dimensions. The SPACE matrix can be created using the following seven steps:
1. Choose a set of variables to be used to gauge the competitive advantage (CA), industry strength (IS), environmental stability (ES), and financial strength (FS). 2. Rate individual factors using rating system specific to each dimension. Rate competitive advantage (CA) and environmental stability (ES) using rating scale from -6 (worst) to -1 (best). Rate industry strength (IS) and financial strength (FS) using rating scale from +1 (worst) to +6 (best).
3. Find the average scores for competitive advantage (CA), industry strength (IS), environmental stability (ES), and financial strength (FS).
4. Plot values from step 3 for each dimension on the SPACE matrix on the appropriate axis.
5. Add the average score for the competitive advantage (CA) and industry strength (IS) dimensions. This will be your final point on axis X on the SPACE matrix. 6. Add the average score for the SPACE matrix environmental stability (ES) and financial strength (FS) dimensions to find your final point on the axis Y. 7. Find intersection of your X and Y points. Draw a line from the center of the SPACE matrix to your point. This line reveals the type of strategy the company should pursue. 3.2.3.NEXT STEP
The SPACE matrix can help to find a strategy. But, what if we have 2-3 strategies and need to decide which one is the best one? The Quantitative Strategic Planning Matrix (QSPM) model can help to answer this question.