Marketing strategy refers to efforts undertaken by an organization to increase its sales and achieve competitive advantage . In other words, it is the method of advertising a company's products to the public through an established plan through the meticulous planning and organization of ideas, data, and information.
102-673: Strategic marketing emerged in the 1970s and 1980s as a distinct field of study, branching out of strategic management . Marketing strategies concern the link between the organization and its customers, and how best to leverage resources within an organization to achieve a competitive advantage. In recent years, the advent of digital marketing has revolutionized strategic marketing practices, introducing new avenues for customer engagement and data-driven decision-making. The terms “strategic” and “managerial” marketing distinguish between two processes, each with different goals and conceptual tools. Strategic marketing involves implementing policies that boost
204-568: A 1954 book The Practice of Management writing: "... the first responsibility of top management is to ask the question 'what is our business?' and to make sure it is carefully studied and correctly answered." He wrote that the answer was determined by the customer. He recommended eight areas where objectives should be set, such as market standing, innovation, productivity, physical and financial resources, worker performance and attitude, profitability, manager performance and development, and public responsibility. In 1957, Philip Selznick initially used
306-595: A Vertical Integration Strategy include the internal costs for the business and the need for overhead costs. Also if the business is not well organized and fully equipped and prepared the business will struggle using this strategy. There are also competitive disadvantages as well, which include; creates barriers for the business, and loses access to information from suppliers and distributors. In terms of market position, firms may be classified as market leaders, market challengers, market followers or market nichers. Most firms carry out strategic planning every 3– 5 years and treat
408-461: A business’s competitive position while addressing challenges and opportunities in the industry. Managerial marketing involves executing specific and targeted objectives. Marketing strategy allows a firm to narrow down its visions into practical and achievable goals while Marketing management involves practical planning to implement these goals. The term higher-order planning is often used to refer to marketing strategy since this strategy helps establish
510-416: A company must only choose one of the three or risk that the business would waste precious resources. Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies. Porter described an industry as having multiple segments that can be targeted by a firm. The breadth of its targeting refers to the competitive scope of
612-451: A company's overarching mission statement . Strategies often specify how to adjust the marketing mix ; firms can use tools such as Marketing Mix Modeling to help them decide how to allocate scarce resources, as well as how to allocate funds across a portfolio of brands. In addition, firms can conduct analyses of performance, customer analysis, competitor analysis , and target market analysis. Marketing strategies may differ depending on
714-416: A competitive advantage. The resource-based view suggests that organizations must develop unique, firm-specific core competencies that will allow them to outperform competitors by doing things differently and in a superior manner. Barney stated that for resources to hold potential as sources of sustainable competitive advantage, they should be valuable, rare, and imperfectly imitable. A key insight arising from
816-505: A complex network of inter-related assets and capabilities, organizations can adopt many possible competitive positions. Although scholars debate the precise categories of competitive positions that are used, there is general agreement, within the literature, that the resource-based view is much more flexible than Porter's prescriptive approach to strategy formulation. Hooley et al., suggest the following classification of competitive positions: The choice of competitive strategy often depends on
918-522: A distinction between strategic management and operational management , where operational management is concerned primarily with improving efficiency and controlling costs within the boundaries set by the organization's strategy . Strategy is defined as "the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals." Strategies are established to set direction, focus effort, define or clarify
1020-418: A diversification strategy is that the benefits could take a while to start showing, which could lead the business to believe that the strategy in ineffective. Another disadvantage or risk is, it has been shown that using the horizontal diversification method has become harmful for stock value, but using the vertical diversification had the best effects. A disadvantage of using the horizontal integration strategy
1122-471: A few examples to understand the basics. Marketing scholars have suggested that strategic marketing arose in the late 1970s and its origins can be understood in terms of a distinct evolutionary path: Marketing strategy involves mapping out the company's direction for the forthcoming planning period, whether that be three, five, or ten years. It involves undertaking a 360° review of the firm and its operating environment to identify new business opportunities that
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#17327823996291224-435: A firm from its rivals. A robust competitive position cumulates from many activities which should fit coherently together. Vision statement A vision statement is a high-level, inspirational statement of an idealistic emotional future of a company or group. Vision describes the basic human emotion that a founder intends to be experienced by the people the organization interacts with. Vision statements may fill
1326-402: A framework for analyzing the profitability of industries and how those profits are divided among the participants in 1980. In five forces analysis he identified the forces that shape the industry structure or environment. The framework involves the bargaining power of buyers and suppliers, the threat of new entrants, the availability of substitute products, and the competitive rivalry of firms in
1428-465: A great deal of skill and judgment. Strategic analysis is designed to address the first strategic question, "Where are we now?" Traditional market research is less useful for strategic marketing because the analyst is not seeking insights about customer attitudes and preferences. Instead, strategic analysts are seeking insights into the firm's operating environment to identify possible future scenarios, opportunities, and threats. Mintzberg suggests that
1530-561: A highly vertically integrated business this creates different economies therefore creating a positive performance for the business. Vertical integration is seen as a business controlling the inputs of supplies and outputs of products as well as the distribution of the final product. Some benefits of using a Vertical integration strategy is that costs may be reduced because of the reducing transaction costs which include finding, selling, monitoring, contracting and negotiating with other firms. Also by decreasing outside businesses input it will increase
1632-409: A key question from a portfolio perspective: "What business should we be in?" Business strategy involves answering the question: "How shall we compete in this business?" Alternatively, corporate strategy is strategic management of a corporation (a particular legal structure of a business); business strategy is the strategic management of a business . Management theory and practice often make
1734-436: A long-term coordinated strategy was necessary to give a company structure, direction and focus. He says it concisely, "structure follows strategy." Chandler wrote that: " Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals ." Igor Ansoff built on Chandler's work by adding concepts and inventing
1836-410: A lower risk when first entering a new market. By being a first entrant, it is easy to avoid higher switching costs compared to later entrants. For example, those who enter later would have to invest more expenditure in order to encourage customers away from early entrants. However, while Market Pioneers may have the “highest probability of engaging in product development” and lower switching costs, to have
1938-403: A market have serious market-share advantages above all those who enter later. Pioneers have the first-mover advantage, and in order to have this advantage, business’ must ensure they have at least one or more of three primary sources: Technological Leadership, Preemption of Assets or Buyer Switching Costs. Technological Leadership means gaining an advantage through either Research and Development or
2040-535: A merge has happened, this increases the knowledge of the business and marketing area they are focused on. The last benefit is more opportunities for deviation to occur in merged businesses rather than independent businesses. Vertical integration is when business is expanded through the vertical production line on one business. An example of a vertically integrated business could be Apple. Apple owns all their own software, hardware, designs and operating systems instead of relying on other businesses to supply these. By having
2142-600: A recent publication suggests that 72 techniques are essential. No optimal technique can be identified as useful across all situations or problems. Determining which technique to use in any given situation rests with the analyst's skills. The choice of tool depends on a variety of factors including: data availability; the nature of the marketing problem; the objective or purpose, the analyst's skill level as well as other constraints such as time or motivation. The most commonly used tools and techniques include: Research methods Analytical techniques The vision and mission address
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#17327823996292244-611: A search for sources of competitive advantage. By the 1960s, the capstone business policy course at the Harvard Business School included the concept of matching the distinctive competence of a company (its internal strengths and weaknesses) with its environment (external opportunities and threats) in the context of its objectives. This framework came to be known by the acronym SWOT and was "a major step forward in bringing explicitly competitive thinking to bear on questions of strategy". Kenneth R. Andrews helped popularize
2346-490: A shift from the production focus to market focus. The prevailing concept in strategy up to the 1950s was to create a product of high technical quality. If you created a product that worked well and was durable, it was assumed you would have no difficulty profiting. This was called the production orientation . Henry Ford famously said of the Model T car: "Any customer can have a car painted any color that he wants, so long as it
2448-472: A valuable product or service for the market. These include functions such as inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by systems and technology infrastructure. By aligning the various activities in its value chain with the organization's strategy in a coherent way, a firm can achieve a competitive advantage. Porter also wrote that strategy is an internally consistent configuration of activities that differentiates
2550-407: A variety of factors including: the firm's market position relative to rival firms, the stage of the product life cycle. A well-established firm in a mature market will likely have a different strategy than a start-up . Growth of a business is critical for business success. A firm may grow by developing the market or by developing new products. The Ansoff product and market growth matrix illustrates
2652-445: A variety of factors, such as the learning curve , substitution of labor for capital (automation), and technological sophistication. Author Walter Kiechel wrote that it reflected several insights, including: Kiechel wrote in 2010: "The experience curve was, simply, the most important concept in launching the strategy revolution...with the experience curve, the strategy revolution began to insinuate an acute awareness of competition into
2754-536: A vocabulary. He developed a grid that compared strategies for market penetration, product development, market development and horizontal and vertical integration and diversification. He felt that management could use the grid to systematically prepare for the future. In his 1965 classic Corporate Strategy , he developed gap analysis to clarify the gap between the current reality and the goals and to develop what he called "gap reducing actions". Ansoff wrote that strategic management had three parts: strategic planning ;
2856-424: Is a realistic, long-term future scenario for the organization. (Vision statements should not be confused with slogans or mottos.) It is a "clearly articulated statement of the business scope." A strong vision statement typically includes the following: Some scholars point out the market visioning is a skill or competency that encapsulates the planners' capacity "to link advanced technologies to market opportunities of
2958-525: Is also used in relation to marketing , where the variable "importance" is related to buyers' perception of important attributes of a product: for attributes which might be considered important to buyers, both their perceived importance and their performance are assessed. The concept of the corporation as a portfolio of business units, with each plotted graphically based on its market share (a measure of its competitive position relative to its peers) and industry growth rate (a measure of industry attractiveness),
3060-472: Is applied to those who are Late Followers in the market. By having a different strategy, it allows the followers to create their own unique selling point and perhaps target a different audience in comparison to that of the Market Pioneers. Early following into a market can often be encouraged by an established business’ product that is “threatened or has industry-specific supporting assets”. Following
3162-454: Is black." Management theorist Peter F Drucker wrote in 1954 that it was the customer who defined what business the organization was in. In 1960 Theodore Levitt argued that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The fallacy of the production orientation was also referred to as marketing myopia in an article of
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3264-430: Is striving and the means (policies) by which it is seeking to get there." He continued that: "The essence of formulating competitive strategy is relating a company to its environment." Some complexity theorists define strategy as the unfolding of the internal and external aspects of the organization that results in actions in a socio-economic context. Michael D. Watkins claimed in 2007 that if mission/goals answer
3366-410: Is that it is an open platform for a business to expand and build away from the already existing market. High levels of horizontal integration lead to high levels of communication within the business. Another benefit of using this strategy is that it leads to a larger market for merged businesses, and it is easier to build good reputations for a business when using this strategy. A disadvantage of using
3468-447: Is that it is possible to identify successful companies that pursue a hybrid strategy – such as low-cost positions and differentiated positions simultaneously. Toyota is a classic example of this hybrid approach. Other scholars point to the simplistic nature of the analysis and the overly prescriptive nature of the strategic choices which limits strategies to just three options. Yet others point to research showing that many practitioners find
3570-402: Is that this limits and restricts the field of interest that the business. Horizontal integration can affect a business's reputation, especially after a merge has happened between two or more businesses. There are three main benefits to a business's reputation after a merge. A larger business helps the reputation and increases the severity of the punishment. As well as the merge of information after
3672-534: Is to benefit in some way consumers on a micro level from person to person and then second, keep all of society as a whole in contentment. In 1980, Michael Porter developed an approach to strategy formulation that proved to be extremely popular with both scholars and practitioners. The approach became known as the positioning school because of its emphasis on locating a defensible competitive position within an industry or sector. In this approach, strategy formulation consists of three key strands of thinking: analysis of
3774-427: The experience curve . Companies that pursued the highest market share position to achieve cost advantages fit under Porter's cost leadership generic strategy, but the concept of choice regarding differentiation and focus represented a new perspective. Porter's 1985 description of the value chain refers to the chain of activities (processes or collections of processes) that an organization performs in order to deliver
3876-485: The 'what' question, or if vision answers the 'why' questions, then strategy provides answers to the 'how' question of business management. The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the most influential were Peter Drucker , Philip Selznick , Alfred Chandler, Igor Ansoff , and Bruce Henderson. The discipline draws from earlier thinking and texts on ' strategy ' dating back thousands of years. Prior to 1960,
3978-525: The Corporate Level 2014 In 1980, Porter defined the two types of competitive advantage an organization can achieve relative to its rivals: lower cost or differentiation . This advantage derives from attribute(s) that allow an organization to outperform its competition, such as superior market position, skills, or resources. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage. Porter developed
4080-444: The advantage of learning from their early competitors and improving the benefits or reducing the total costs. This allows them to create a strategy that could essentially mean gaining market share and most importantly, staying in the market. In addition to this, markets evolve, leading to consumers wanting improvements and advancements on products. Late Followers have the advantage of catching the shifts in customer needs and wants towards
4182-406: The approach to be overly theoretical and not applicable to their business. During the 1990s, the resource-based view (also known as the resource-advantage theory ) of the firm became the dominant paradigm. It is an interdisciplinary approach that represents a substantial shift in thinking. It focuses attention on an organization's internal resources as a means of organizing processes and obtaining
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4284-455: The argument for achieving higher market share and economies of scale . Porter wrote in 1980 that companies have to make choices about their scope and the type of competitive advantage they seek to achieve, whether lower cost or differentiation. The idea of strategy targeting particular industries and customers (i.e., competitive positions) with a differentiated offering was a departure from the experience-curve influenced strategy paradigm, which
4386-446: The basis for competing over the forthcoming planning period. For this reason, some companies engage external consultants, often advertising or marketing agencies, to provide an independent assessment of the firm's capabilities and resources. There is one strategy that is at times weaved into marketing strategies, however not explicitly stated. And it is unethical in that it specifically targets unsuspecting minority groups. First, consider
4488-536: The business. Porter defined two types of competitive advantage : lower cost or differentiation relative to its rivals. Achieving competitive advantage results from a firm's ability to cope with the five forces better than its rivals. Porter wrote: "[A]chieving competitive advantage requires a firm to make a choice...about the type of competitive advantage it seeks to attain and the scope within which it will attain it." He also wrote: "The two basic types of competitive advantage [differentiation and lower cost] combined with
4590-474: The capabilities-performance relationship. Such a logic of analysis was implicit in the original formulation of RA theory and although it was taken into consideration by several scholars, it has never been articulated explicitly and tested empirically. In the resource-based view, strategists select the strategy or competitive position that best exploits the internal resources and capabilities relative to external opportunities. Given that strategic resources represent
4692-597: The concept of "parenting advantage" to be applied at the corporate level, as a parallel to the concept of "competitive advantage" applied at the business level. Parent companies, they argued, should aim to "add more value" to their portfolio of businesses than rivals. If they succeed, they have a parenting advantage. The right level of diversification depends, therefore, on the ability of the parent company to add value in comparison to others. Different parent companies with different skills should expect to have different portfolios. See Corporate Level Strategy 1995 and Strategy for
4794-399: The configuration or transformation school, a hybrid of the other schools organized into stages, organizational life cycles, or "episodes". Michael Porter defined strategy in 1980 as the "...broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals" and the "...combination of the ends (goals) for which the firm
4896-452: The corporate consciousness." Prior to the 1960s, the word competition rarely appeared in the most prominent management literature; U.S. companies then faced considerably less competition and did not focus on performance relative to peers. Further, the experience curve provided a basis for the retail sale of business ideas, helping drive the management consulting industry. Completion of an importance-performance matrix forms "a crucial stage in
4998-548: The definition of ethics , which is the moral question of whether or not something is socially acceptable. Applying this definition to marketing strategy, companies must be wary that they do not purposefully seek to seclude groups of people based on their cultural background. A company that is seeking to expand internationally has a duty to establish their marketing agenda with multiple cultures in mind, so as to prevent bodies of people from getting left out. Marketing strategies have two goals: first of which, keeping with company's goals,
5100-400: The efficient use of inputs into the business. Another benefit of vertical integration is that it improves the exchange of information through the different stages of the production line. Some competitive advantages could include; avoiding foreclosures, improving the business marketing intelligence, and opens up opportunities to create different products for the market. Some disadvantages of using
5202-443: The entrant time – the business will gain little to no advantages, potentially missing out on a significant opportunity. The differentiated strategy The customized target strategy The requirements of individual customer markets are unique, and their purchases sufficient to make viable the design of a new marketing mix for each customer. Strategic management In the field of management , strategic management involves
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#17327823996295304-404: The environment in which the organization operates, then making a series of strategic decisions about how the organization will compete. Formulation ends with a series of goals or objectives and measures for the organization to pursue. Environmental analysis includes the: Strategic decisions are based on insight from the environmental assessment and are responses to strategic questions about how
5406-424: The firm could potentially leverage for competitive advantage. Strategic planning can also reveal market threats that the firm may need to consider for long-term sustainability. Strategic planning makes no assumptions about the firm continuing to offer the same products to the same customers in the future. Instead, it is concerned with identifying the business opportunities that are likely to be successful and evaluating
5508-425: The firm must select one approach to the exclusion of all others. Firms that try to be all things to all people can present a confusing market position which ultimately leads to below-average returns. Any ambiguity about the firm's approach is a recipe for "strategic mediocrity" and any firm that tries to pursue two approaches simultaneously is said to be "stuck in the middle" and destined for failure. Porter's approach
5610-455: The firm's capacity to leverage such opportunities. It seeks to identify the strategic gap , which is the difference between where a firm is currently situated (the strategic reality or inadvertent strategy ) and where it should be situated for sustainable, long-term growth (the strategic intent or deliberate strategy ). Strategic planning seeks to address three deceptively simple questions, specifically: A fourth question may be added to
5712-403: The first-mover advantage, it can be more expensive due to product innovation being more costly than product imitation. It has been found that while Pioneers in both consumer goods and industrial markets have gained “significant sales advantages”, they incur larger disadvantages cost-wise. Being market pioneer can, more often than not, attract entrepreneurs or investors depending on the benefits of
5814-561: The five forces to determine the sources of competitive advantage; the selection of one of three possible positions which leverage the advantage and the value chain to implement the strategy. In this approach, the strategic choices involve decisions about whether to compete for a share of the total market or for a specific target group (competitive scope) and whether to compete on costs or product differences (competitive advantage). This type of thinking leads to three generic strategies: According to Porter, these strategies are mutually exclusive and
5916-406: The following: The generic competitive strategy outlines the fundamental basis for obtaining a sustainable competitive advantage within a category. Firms can normally trace their competitive position to one of three factors: It is essential that the internal analysis provide a frank and open evaluation of the firm's superiority in terms of skills, resources or market position since this will provide
6018-503: The formulation and implementation of the major goals and initiatives taken by an organization 's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying the organization's objectives , developing policies and plans to achieve those objectives, and then allocating resources to implement
6120-522: The formulation of operations strategy", and may be considered a "simple, yet useful, method for simultaneously considering both the importance and performance dimensions when evaluating or defining strategy". Notes on this subject from the Department of Engineering at the University of Cambridge suggest that a binary matrix may be used "but may be found too crude", and nine point scales on both
6222-499: The framework via a 1963 conference and it remains commonly used in practice. The experience curve was developed by the Boston Consulting Group in 1966. It reflects a hypothesis that total per unit costs decline systematically by as much as 15–25% every time cumulative production (i.e., "experience") doubles. It has been empirically confirmed by some firms at various points in their history. Costs decline due to
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#17327823996296324-456: The future, and to do so through a shared understanding of a given product market. A mission statement is a clear and concise statement of the organization's reason for being and its scope of operations, while the generic strategy outlines how the company intends to achieve both its vision and mission. Mission statements should include detailed information and must be more than a simple motherhood statement . A mission statement typically includes
6426-508: The general direction for the firm while providing a structure for the marketing program. Marketing Management is a combined effort of strategies on how a business can launch its products and services. On the other hand, Marketing strategy is the combination of many processes where the business owner or marketer can attract potential customers via several channels. It can be through offline channels or online channels. Marketing Strategy Examples – Marketing Management Examples – These are
6528-440: The importance and performance axes are recommended. An importance scale could be labelled from "the main thrust of competitiveness" to "never considered by customers and never likely to do so", and performance can be segmented into "better than", "the same as", and "worse than" the company's competitors. The highest urgency would than be directed to the most important areas where performance is poorer than competitors. The technique
6630-448: The industry. These forces affect the organization's ability to raise its prices as well as the costs of inputs (such as raw materials) for its processes. The five forces framework helps describe how a firm can use these forces to obtain a sustainable competitive advantage , either lower cost or differentiation. Companies can maximize their profitability by competing in industries with favorable structure. Competitors can take steps to grow
6732-512: The issue of the appropriate level of diversification . In 1987, he argued that corporate strategy involves two questions: 1) What business should the corporation be in? and 2) How should the corporate office manage its business units? He mentioned four concepts of corporate strategy each of which suggest a certain type of portfolio and a certain role for the corporate office; the latter three can be used together: Building on Porter's ideas, Michael Goold, Andrew Campbell and Marcus Alexander developed
6834-437: The key dimensions considered (industry attractiveness and competitive position) remain central to strategy. In response to the evident problems of "over diversification", C. K. Prahalad and Gary Hamel suggested that companies should build portfolios of businesses around shared technical or operating competencies, and should develop structures and processes to enhance their core competencies . Michael Porter also addressed
6936-418: The list, namely 'How do we know when we got there?' Due to the increasing need for accountability, many marketing organizations use a variety of metrics to track strategic performance, allowing for corrective action to be taken as required. On the surface, strategic planning seeks to address three simple questions, however, the research and analysis involved in strategic planning are very sophisticated and require
7038-697: The main elements of strategic management theory where consensus generally existed as of the 1970s, writing that strategic management: Chaffee further wrote that research up to that point covered three models of strategy, which were not mutually exclusive: The progress of strategy since 1960 can be charted by a variety of frameworks and concepts introduced by management consultants and academics. These reflect an increased focus on cost, competition and customers. These "3 Cs" were illuminated by much more robust empirical analysis at ever-more granular levels of detail, as industries and organizations were disaggregated into business units, activities, processes, and individuals in
7140-654: The market. If there is an upside potential and the ability to have a stable market share, many businesses would start to follow in the footsteps of these pioneers. These are more commonly known as Close Followers. These entrants into the market can also be seen as challengers to the Market Pioneers and the Late Followers. This is because early followers are more than likely to invest a significant amount in Product Research and Development than later entrants. By doing this, it allows businesses to find weaknesses in
7242-601: The objectives. Implementation results in how the organization's resources are structured (such as by product or service or geography), leadership arrangements, communication, incentives, and monitoring mechanisms to track progress towards objectives, among others. Running the day-to-day operations of the business is often referred to as "operations management" or specific terms for key departments or functions, such as "logistics management" or " marketing management ," which take over once strategic management decisions are implemented. Strategy has been practiced whenever an advantage
7344-478: The opportunities and threats in the business environment. Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments. Chandler stressed the importance of taking a long-term perspective when looking to the future. In his 1962 ground breaking work Strategy and Structure , Chandler showed that
7446-445: The organization will compete, such as: The answers to these and many other strategic questions result in the organization's strategy and a series of specific short-term and long-term goals or objectives and related measures. The second major process of strategic management is implementation , which involves decisions regarding how the organization's resources (i.e., people, process and IT systems) will be aligned and mobilized towards
7548-468: The organization, and provide consistency or guidance in response to the environment. Strategic management involves the related concepts of strategic planning and strategic thinking . Strategic planning is analytical in nature and refers to formalized procedures to produce the data and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the strategy. Strategic planning may also refer to control mechanisms used to implement
7650-538: The overall profitability of the industry, or to take profit away from other parts of the industry structure. Porter modified Chandler's dictum about structure following strategy by introducing a second level of structure: while organizational structure follows strategy, it in turn follows industry structure. Porter wrote in 1980 that strategy target either cost leadership , differentiation , or focus. These are known as Porter's three generic strategies and can be applied to any size or form of business. Porter claimed that
7752-460: The plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models can include a feedback loop to monitor execution and to inform the next round of planning. Michael Porter identifies three principles underlying strategy: Corporate strategy involves answering
7854-420: The process as a means of checking whether the company is on track to achieve its vision and mission. Ideally, strategies are both dynamic and interactive, partially planned and partially unplanned. Strategies are broad in their scope in order to enable a firm to react to unforeseen developments while trying to keep focused on a specific pathway. A key aspect of marketing strategy is to keep marketing consistent with
7956-404: The products produced before, thus leading to improvements and expansion on the aforementioned product. Therefore, it could also lead to customer preference, which is essential in market success. Due to the nature of early followers and the research time being later than Market Pioneers, different development strategies are used as opposed to those who entered the market in the beginning, and the same
8058-441: The products. When bearing in mind customer preference, customer value has a significant influence. Customer value means taking into account the investment of customers as well as the brand or product. It is created through the “perceptions of benefits” and the “total cost of ownership”. On the other hand, if the needs and wants of consumers have only slightly altered, Late Followers could have a cost advantage over early entrants due to
8160-455: The resource-based view is that not all resources are of equal importance nor possess the potential to become a source of sustainable competitive advantage. The sustainability of any competitive advantage depends on the extent to which resources can be imitated or substituted. Barney and others point out that understanding the causal relationship between the sources of advantage and successful strategies can be very difficult in practice. Barney calls
8262-452: The resource-based view paradigm, Cacciolatti & Lee (2016) proposed a novel resource-advantage theory based framework that builds on those organizational capabilities that are relevant to marketing strategy and shows how they have an effect on firm performance. The capabilities-performance model proposed by Cacciolatti & Lee (2016) illustrates the mechanism whereby market orientation, strategic orientation, and organizational power moderate
8364-416: The same name by Levitt. Over time, the customer became the driving force behind all strategic business decisions. This marketing concept, in the decades since its introduction, has been reformulated and repackaged under names including market orientation, customer orientation, customer intimacy, customer focus, customer-driven and market focus. In 1985, Ellen Earle Chaffee summarized what she thought were
8466-452: The schools of informal design and conception, the formal planning, and analytical positioning. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are entrepreneurial, visionary, cognitive, learning/adaptive/emergent, negotiation, corporate culture and business environment. The third and final group consists of one school,
8568-426: The scope of activities for which a firm seeks to achieve them lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation and focus. The focus strategy has two variants, cost focus and differentiation focus." The concept of choice was a different perspective on strategy, as the 1970s paradigm was the pursuit of market share (size and scale) influenced by
8670-449: The second central question, 'Where are we going?' At the conclusion of the research and analysis stage, the firm will typically review its vision statement , mission statement and, if necessary, devise a new vision and mission for the outlook period. At this stage, the firm will also devise a generic competitive strategy as the basis for maintaining a sustainable competitive advantage for the forthcoming planning period. A vision statement
8772-527: The situation where there is a connection to a firm's organized materials and when their continued competitive advantage is only partially comprehended as "casually ambiguous". Thus, a great deal of managerial effort must be invested in identifying, understanding, and classifying core competencies. In addition, management must invest in organizational learning to develop and maintain key resources and competencies. Market Based Resources include: After more than two decades of advancements in marketing strategy and in
8874-439: The skill of a firm in converting its plans into reality; and the skill of a firm in managing its own internal resistance to change. Bruce Henderson , founder of the Boston Consulting Group , wrote about the concept of the experience curve in 1968, following initial work begun in 1965. The experience curve refers to a hypothesis that unit production costs decline by 20–30% every time cumulative production doubles. This supported
8976-463: The so called, "Close Followers" are the "Late Entrants". They get their name from their delayed arrival into the market. Despite the thought process that late entry into the market will lead to absolute failure, there are actually a few pros for those classified as late entrants. One such pro is the ability to view how others who previously joined the market have acted and strategize market planning around their mistakes and/or successes. Late Followers have
9078-433: The strategy once it is determined. In other words, strategic planning happens around the strategic thinking or strategy making activity. Strategic management is often described as involving two major processes: formulation and implementation of strategy. While described sequentially below, in practice the two processes are iterative and each provides input for the other. Formulation of strategy involves analyzing
9180-481: The term "distinctive competence" in referring to how the Navy was attempting to differentiate itself from the other services. He also formalized the idea of matching the organization's internal factors with external environmental circumstances. This core idea was developed further by Kenneth R. Andrews in 1963 into what we now call SWOT analysis , in which the strengths and weaknesses of the firm are assessed in light of
9282-400: The term "strategy" was primarily used regarding war and politics, not business. Many companies built strategic planning functions to develop and execute the formulation and implementation processes during the 1960s. Peter Drucker was a prolific management theorist and author of dozens of management books, with a career spanning five decades. He addressed fundamental strategic questions in
9384-520: The top planners spend most of their time engaged in analysis and are concerned with industry or competitive analyses as well as internal studies, including the use of computer models to analyze trends in the organization. Strategic planners use a variety of research tools and analytical techniques, depending on the environment complexity and the firm's goals. Fletcher and Bensoussan, for instance, have identified some 200 qualitative and quantitative analytical techniques regularly used by strategic analysts while
9486-402: The two broad dimensions for achieving growth. The Ansoff matrix identifies four specific growth strategies: market penetration , product development , market development and diversification . A horizontal integration strategy may be indicated in fast-changing work environments as well as providing a broad knowledge base for the business and employees. A benefit of horizontal diversification
9588-454: The unique situation of the individual business. According to Lieberman and Montgomery, every entrant into a market – whether it is new or not – is classified under a Market Pioneer, Close Follower or a Late follower Market pioneers are known to often open a new market to consumers based on a major innovation. They emphasize these product developments, and in a significant number of cases, studies have shown that early entrants – or pioneers – into
9690-414: The use of product imitation. However, if a business is switching markets, this could take the cost advantage away due to the expense of changing markets for the business. Late Entry into a market does not necessarily mean there is a disadvantage when it comes to market share, it depends on how the marketing mix is adopted and the performance of the business. If the marketing mix is not used correctly – despite
9792-451: The “learning curve”. This lets a business use the research and development stage as a key point of selling due to primary research of a new or developed product. Preemption of Assets can help gain an advantage through acquiring scarce assets within a certain market, allowing the first-mover to be able to have control of existing assets rather than those that are created through new technology. Thus allowing pre-existing information to be used and
9894-428: Was focused on larger scale and lower cost. Porter revised the strategy paradigm again in 1985, writing that superior performance of the processes and activities performed by organizations as part of their value chain is the foundation of competitive advantage, thereby outlining a process view of strategy. The direction of strategic research also paralleled a major paradigm shift in how companies competed, specifically
9996-451: Was followed by G.E. multi factoral model , developed by General Electric . Companies continued to diversify as conglomerates until the 1980s, when deregulation and a less restrictive antitrust environment led to the view that a portfolio of operating divisions in different industries was worth more as many independent companies, leading to the breakup of many conglomerates. While the popularity of portfolio theory has waxed and waned,
10098-403: Was gained by planning the sequence and timing of the deployment of resources while simultaneously taking into account the probable capabilities and behavior of competition. Bruce Henderson In 1988, Henry Mintzberg described the many different definitions and perspectives on strategy reflected in both academic research and in practice. He examined the strategic process and concluded it
10200-410: Was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning . Instead Mintzberg concludes that there are five types of strategies: In 1998, Mintzberg developed these five types of management strategy into 10 "schools of thought" and grouped them into three categories. The first group is normative. It consists of
10302-600: Was summarized in the growth–share matrix developed by the Boston Consulting Group around 1970. By 1979, one study estimated that 45% of the Fortune 500 companies were using some variation of the matrix in their strategic planning. This framework helped companies decide where to invest their resources (i.e., in their high market share, high growth businesses) and which businesses to divest (i.e., low market share, low growth businesses.) The growth-share matrix
10404-419: Was the dominant paradigm throughout the 1980s, allowing others who sought to formulate strategy within their business model to follow his (at the time) best division of the ways in which to target the market. This only lasted a little while though, as Porter's approach began receiving a good amount of criticism mainly due to its simplicity; which is part of what made his approach so popular. One important criticism
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