PAZARLAMA YÖNETİMİ - Deneme Sınavı - 8

The Product/Market Expansion Grid

Strategy is a unified, comprehensive, and integrated plan created to assure that the basic aims of the business are attained.

There is a consensus between scholars that strategy began to be related with businesses during 1960s.

The concept of strategic management is important for companies. The first reason for this is related to its aim of integrating other business functions. As there are several diverse divisions, units, and functions there is a need to coordinate these, and help them focus on organization’s goals, and strategic management process does this. Second reason is its impact on organizational performance. Due to diverse strategies, companies succeed or fail (See the case of Nokia above). Third reason is the fact that every organization operates in a changing environment or faces with changing situations. Strategic management process helps managers and thus, organizations to deal with these fluctuating conditions or uncertain environment. Fourth reason of the importance of strategic management is that it is included in several managerial decisions.

Dogs: Dogs may generate enough cash to sustain themselves or losses as they have weak market shares in low-growth markets. In this quadrant, managers should consider if they are holding on these dog products/businesses for good prospects (e.g. a new chance at market leadership) or for sentimental reasons.

Renewal strategy is developed to demonstrate organizational weaknesses which lead to declines in performances.

With the Product/Market Expansion Grid, a company first evaluates if it is possible to gain more market share with its existing products within existing markets which is called as market penetration strategy.

Strategic thinking is taking a long-term perspective and seeing the big picture, consisting both the organization and its competitive environment, and thinking how these fit together4. Thus, there is a positive relationship between strategic thinking and performance5

There is a consensus between scholars that strategy began to be related with businesses during 1960s. The reason of this consensus is the early works of Chandler (Strategy and Structure, 1962), Andrew (Business Policy, 1965), and Ansoff (Corporate Strategy, 1965). With these works, “strategic management” have emerged, and accepted as a scientific discipline.

Strategic Management is what managers do for creating organization’s strategies. It is explained as “the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives”19. Moreover, it is also described as “the deployment and implementation of the strategic plan and measurement and evaluation of the results”, thus it is a continuous process2

Strategic planning process starts at the corporate level by describing an overall purpose and mission. After defining specific mission or purpose of the company, managers at the corporate level analyse the company’s business portfolio which means the collection of company’s all businesses and products. The best business portfolio creates a perfect fit with company’s strengths and weaknesses, as well as the opportunities in the environment28. Portfolio analysis involves two steps: (1) Analysis of the current business portfolio and (2) Developing strategies for growth.

BCG Growth-Share Matrix is a portfolio planning method evaluating strategic business units of a company in terms of their market growth rate and relative market share.

A company may choose to use diversification strategy which examines the opportunities for developing or buying new products for new markets. Thus, it involves new brands and new markets since product modifications may develop new uses for products, which may create a different market39. Nevertheless, this strategy is the final option to use if only the other three were unable to produce expected results. Since with diversification strategy, a company enters into unknown businesses and markets, and this makes it the most dangerous of all strategic choices.

Monopolistic competition is mostly used in free-market economies, and within this type of competition, there are many sellers who are differentiating their products and services in a small way so that these products and services could be distinguished from those of competitors (e.g. supermarkets). If the number of companies in a market is quite small, oligopoly occurs.

Value chain is an “interdependent system or network of activities, connected by linkages”56, thus supporting the analysis of internal environment of a company

Functional strategies are organizational strategies that are designed to support business level strategies. These strategies are created by major functional departments such as production and operations: marketing, organization (e.g. human resources), and finance. The aim here is to aid achieving corporate and business unit objectives and strategies by providing maximization of resource productivity. To achieve this, functional strategies try to develop a distinctive competence thus in turn create a competitive advantage for the company as a whole or to the business.

The first strategy is Overall Cost Leadership, which highlights efficiency. The objective here is to achieve lowest production and distribution costs to offer lower prices than competitors. For achieving this, company offers standard products which are suitable for majority of customers. As a result, the company could obtain higher market shares. To reach cost advantage, companies may try to reach economies of scale (e.g. product designs aim to reduce manufacturing costs), obtain proprietary technology

Oligopoly creates a situation in which customers have some choices (in contrast to monopoly) such as airline or steel industry, but they do not have several choices as in monopolistic competition.

The configuration of these five forces helps companies to analyse their external environment and thus it alters from industry to industry.

The Threat of New Entrants 

The Threat of Substitutes

The Bargaining Power of Suppliers 

The Bargaining Power of Buyers

Rivalry among Existing Competitors

Porter develops three generic strategies: overall cost leadership, differentiation, and focus, “for creating a defensible position and outperforming competitors in a given industry”.