Principles of Strategic Marketing Management - Essay Example

Apple – Strategic Marketing Task Principles of strategic marketing management 1 Role of strategic marketing in an organisation Different views have been developed in the literature in regard to the role of strategic marketing, as part of business activities. One of the most important characteristics of strategic marketing is its power to enforce business ethics (Pride and Ferrell 2011, p.118). Indeed, all strategic marketing plans are based on specific ethical standards. This means that businesses that wish to use strategic marketing for the promotion of their products/ services need, necessarily, to support ethics (Pride and Ferrell 2011). On the other hand, reference should be made to strategic planning, as a requirement of effective strategic marketing plans (Czinkota and Ronkainen 2007). In the context of strategic marketing, strategic planning can help managers to align the business strategies with the market trends and culture (Czinkota and Ronkainen 2007). The assessment of market conditions while developing a strategic marketing plan helps managers to understand the level of competition. In this way, managers are able to identify strategies that will enhance their firm’s competitiveness (Czinkota and Ronkainen 2007). From a similar point of view, McDonald and Wilson (2011) state that strategic marketing can help towards the improvement of communication and cooperation across organization. More specifically, in order for the strategic marketing process to be completed it is necessary for employees at all levels of the organizational hierarchy to cooperate and exchange views (McDonald and Wilson 2011). In addition, strategic marketing leads to the development of marketing plans that are fully aligned with the needs and the potentials of each organization (Stanco 1996). This means that each strategic marketing plan is unique, being adjusted to the characteristics of a specific organization (Stanco 1996). McLoughlin and Aaker (2010) explain that modern marketing is quite tactical. In fact, modern marketing has become ‘part of the strategic management of the organization’ (McLoughlin and Aaker 2010, p.15). In Apple, strategic marketing is used for keeping the competitiveness of the organization at high levels. Indeed, organization has traditionally focused on two key targets: innovation of products and rapid entry of the products in the market (Mohr 2009). In Apple, the use of strategic marketing has helped not only to achieve these targets but also to cover the gaps caused by mistakes in evaluating the market response towards a firm’s product (Mohr 2009). The case of iTunes is an indicative example. Apple developed iTunes in 2000 as a means for achieving a competitive advantage: the introduction of ‘a unique device related to digital music playing’ (Mohr 2009, p.68) was expected to significantly enhance the firm’s market position. Still, the above product has been unsuccessful (Mohr 2009). Having used strategic marketing for quite a long, the firm was able to proceed to an emergent planning process in order to develop an alternative product, of improved performance, within a quite short period of time (Mohr 2009). Indeed, by April 2001 the firm’s engineers, under the directions of Steve Jobs, introduced iPod, a product that become one of Apple’s greatest successes (Mohr 2009). 1.2 Processes involved in strategic marketing Strategic marketing can be either a complex or a simple process, depending on the characteristics of the organization to which it refers (Ferrell and Hartline 2010). For example, the strategic marketing process used in a multinational corporation is expected to be more complex than the one used in a small firm (Ferrell and Hartline 2010). In general, the phases of strategic planning process are the following: a) analysis of organizational environment (Ferrell and Hartline 2010, p.31); reference is made to both the internal and the external environment of each organization (Ferrell and Hartline 2010); in the context of strategic marketing, the above task is also known as ‘situation analysis’ (Ferrell and Hartline 2010, p.31); b) identification of the organization’s goals and objectives (Ferrell and Hartline 2010, p.31); c) the firm’s strategies in regard to all its sectors (HR, marketing, financials and so on) are established (Ferrell and Hartline 2010, p.31). Any plan referring to the organization’s daily functions is also developed in this phase of the strategic marketing process (Ferrell and Hartline 2010). At the next level, managers need to seek for the resources that will support the organization’s plans, as developed in the previous phase (Ferrell and Hartline 2010). The phases of the strategic marketing process can be understood through Graph 1, below, where a sample of such process is presented. Graph 1 – Strategic Marketing Process (Source: Market segmentation UK) The strategic marketing process used in Apple seems to be similar. Although the structure of the firm’s marketing process is not clearly described in the firm’s reports (for example, Apple Annual Report 2012), the characteristics and the parts of this process can be understood by observing the firm’s strategic choices and its responses to critical market changes. The example of iTunes and its replacement by iPod, as described in the previous section, is an important indicator of the value of strategic marketing process for Apple. At the same time, the above case reveals the following fact: in Apple the strategic marketing process is fully aligned with the business goals and the market trends so that failures in product line can be covered with no delay. This fact indicates the continuous availability of resources (Phase Four of the strategic marketing process, Graph 1) for developing emerging strategic plans that reduce damages from product failures. 1.3 Links between strategic marketing and corporate Strategy In terms of their role within organization, corporate strategy and strategic marketing seem to be highly differentiated. In fact, the corporate strategy sets ‘the general plan of the organization’ (Cole 2003, p.136) while the strategic marketing process incorporates (Phase 3, Graph 1), the establishment of strategies referring to all a firm’s strategic units (Cole 2003, p.136). On the other hand, strategic marketing incorporates the analysis of the organizational environment (Phase 2, Graph 1). Corporate strategy cannot be established without a careful review and evaluation of business environment (Pieper 1990). At this point, corporate strategy and strategic marketing can be considered as being closely related. Moreover, corporate strategy can be periodically changed, especially during periods of strong crises (Frain 1999). Strategic marketing can help to identify techniques for promoting change in regard to a firm’s corporate strategy avoiding delays (Frain 1999). In the case of Apple, the rapid identification of alternatives in case of product failures has been a critical element of the firm’s Corporate strategy (Mohr 2009). Having to deal with the failure of iTune Apple used Strategic marketing in order to promote its new product, the iPod, quite rapidly, so that losses for the organization were kept at low levels (Mohr 2009). In other words, Apple has proved that the establishment of a strong relationship between corporate strategy and strategic marketing can help towards the rapid growth of a business, even during turbulent market conditions. Task 2: Developing a strategic marketing strategy 2.1 Value of models used in strategic marketing planning The strategic marketing process can be developed using a variety of models. Reference should be primarily made to the theories related to the common strategic planning process, since these theories are also used for identifying strategic marketing plans. The Planning Model is widely used in strategic marketing because of its simplicity and the relatively low risk involved (McDonald and Wilson 2011). The specific model (Graph 2 below) is based on the following idea: strategies are developed gradually after thorough research on all available solutions (McDonald and Wilson 2011). The Interpretative Model promotes the view that each organization would be regarded not as an integrate unit but rather as a ‘collection of associations sharing similar values and beliefs’ (McDonald and Wilson 2011, p.34). The marketing strategies that are developed using this model are based not on ‘the goals and objectives of the organization but rather on its culture and values’ (McDonald and Wilson 2011, p.34). The Visionary Leadership Model is based on the following rule: strategies would be developed not according to the organization’s goals but rather to the perceptions and vision of the organization’s leader (McDonald and Wilson 2011, p.34). Moreover, there is the Logical Incremental Model that promotes the value of ‘strategic sub-systems’ (McDonald and Wilson 2011, p.34) within each organization. Each of these sub-systems focuses on strategies that respond to its needs (McDonald and Wilson 2011) and not to the goals of the organization. Graph 2 – Strategic planning model (Source: Strategic Plan organization) Reference should be also made to the Five Forces model of Porter (Graph 3), a model that it is widely used for developing strategic marketing plans (Kurtz 2011). The above model promotes the view that in the context of each industry an organization is expected to face five forces: a) Pressures from customers, b) Pressures from Suppliers, c) Substitute Products, d) Industry Competition and e) New Entrants (Kurtz 2011). In practice, the Five Forces model is used along with another decision-making model, the SWOT analysis, which is based on the identification and evaluation of ‘strengths, weaknesses, opportunities and threats’ (Kurtz 2011), as related to a business and its environment. The first two elements of the specific framework refer to the firm’s strengths and weaknesses while opportunities and threats reflect the external environment of the organization, indicating the potentials of the organization to develop effective strategies (Kurtz 2011). Graph 3 – Five Forces model of Porter (Source: Harvard Business Review, January 2008) Other theoretical frameworks that are also valuable for strategic marketing, are: 1) the SOSTAC model, incorporating the following elements: ‘a) Situation, b) Objectives, c) Strategy, d) Tactics, e) Action and f) Control’ (Smith et al. 1999, p.175) and 2) the Strategic Window; the specific model is based on the view that firms need periodically to re-define their strategies taking into consideration ‘market changes and the firm’s competencies’ (Boone and Kurtz 2011, p.46). An example of the value of Strategic Window is the following one: recently, automakers worldwide realized the high increase in auto sales in India and developed their car production in that country so that they are able to respond to changing market needs (Kurtz 2001, p.44); ‘Fiat, Honda and Nissan’ (Kurtz 2011, p.44) were among the firms that decided to use the Strategic Window and redefined their strategy in regard to the distribution of their production centers worldwide. 2.2 Links between strategic positioning and marketing tactics In order to understand the potential links between strategic positioning and marketing tactics it would be necessary to refer to the elements of each of these two concepts. Positioning, as part of the decision-making process in marketing, has been characterized as ‘the selection out of many available selling propositions the one that will guarantee the higher profits’ (Sengupta 2005, p.15). From a similar point of view, strategic positioning has been characterized as the selection of a strategy the success of which can be considered as quite possible (Kurtz 2011). In marketing, strategic positioning has been related to the choice of the marketing strategy that has most chances for success (Kurtz 2011). Marketing tactics are not related to the belief of their user that success is guarantee (Kurtz 2011). In fact, marketing tactics are simply tactics developed in the context of the core marketing strategy and aim to secure the success of the latter (Kurtz 2011). 2.3 Merits of relationship marketing in a given strategic marketing strategy For modern organizations, relationship marketing is based on the idea of ‘building strong relationships with customers’ (Brink and Berndt 2009, p.36). Relationship marketing is often considered as a critical method for expanding a firm’s customer base (Brink and Berndt 2009). In the context of a specific marketing strategy, the relationship marketing has certain benefits and implications: a) relationship marketing can be more effective when it is supported by organizational culture (Kaiser 2011), b) relationship marketing does not offer standard benefits (Kaiser 2011); for example, during periods of strong financial crises relationship marketing cannot perform high as customers may not be capable to be loyal to an organization in case that their financial status does not allow the buying of the organization’s products/ services (Kaiser 2011). On the other hand, the cost for developing relationship marketing may be higher from the benefits expected (Brink and Berndt 2009). The above issues should be taken into consideration by marketers in Apple when developing the firm’s marketing strategy – as suggested below. Proposed marketing strategy for Apple Among the marketing strategies presented above, there are 4 that would be related to Apple. In the past, Apple has been a firm strongly depended on its leader, Steve Jobs. At that period of time, the firm was mainly based on the Visionary Leadership model, a framework revealing the interaction between a firm and the vision of its leader. After the death of Jobs, the firm has managed to keep a similar strategic direction, emphasizing on continuous innovation. Currently, the marketing strategy appropriate for Apple would incorporate three stages: a) at a first stage the Five Forces model of Porter would be used for assessing the firm’s external environment b) secondly, the SWOT analysis would be employed for emphasizing on certain aspects of the firm’s internal and external environment and c) at the third stage, the firm would use the Strategic Window; the changing trends of demand/ customer preferences worldwide would be identified and the firm’s strategies would be aligned accordingly. Task 3: Using strategic marketing techniques 3.1 Use appropriate marketing techniques to ascertain growth opportunities in a market In order to ensure that a particular marketing technique would enhance growth in a market it would be necessary to take certain measures: a) at a first level, research should be developed in the local market whether the demand for the product under examination is high (Johnson 2004); if the demand for the particular product is proved to be rather low, then another market should be preferred as a target market for the specific product (Johnson 2004); b) then, the potential existence of a dominant brand in the target market would be explored (Johnson 2004); if a specific brand dominates the high percentage of the target market, then the entry in this market would be re-considered as of its risks (Johnson 2004). In practice, it has been proved that the above two issues, level of demand and dominant brand, are critical being able even to eliminate the opportunities for growth in a specific market/ target market (Johnson 2004). For this reason, when trying to ascertain growth opportunities in a market it would be necessary to make sure that demand for the specific product is high and no dominant brand exists in the industry involved (Johnson 2004). Both the level of demand and the dominant brand would be evaluated using market research (Johnson 2004). From another point of view, growth could be also measured by referring to the level of sales related to a particular product (Young 2011). A product that achieves high level of sales during the initial period of its entry in the target market indicates a further growth, especially when the buying trends in regard to this product are continuously increased (Young 2011). The level of a product sales is identified through the firm’s financial reports; it can be also revealed through business reports developed in the particular industry or statistics published by governmental organizations (Young 2011). Table 1 – Net sales of Apple by region (source: 2012 Annual Report, p.30) In order to check the potential performance of Apple’s products in a market, target market, two key activities would be developed: a) market research, meaning a research over the trends/ demographics and statistics related to a specific market; both primary and secondary research could be involved for ensuring that there are growth opportunities for Apple in the specific market; b) review of the financial reports of competitors operating in the target market; in this way, it would be easy to check the profitability of the particular market especially in regard to products of similar characteristics. In addition, the review of the firm’s latest financial reports would help to identify the market segments that would result to a higher benefit for the organization. In the case of Apple, region seems to be of no particular importance for securing growth, since the increase of organizational profits in all regions worldwide has been continuous for the years from 2008 to 2012 (Table 1 above). It is suggested that innovation would be rather preferred as a criterion for achieving competitive advantage towards the rivals. 3.2 Plan how to use marketing strategy options in a market Each organization may set different priorities in regard to its marketing strategy. For example, the firms ‘Home Depot and Lowe’s tend to emphasize on strategic planning’ (Pride and Ferrell 2010, p.25) and not so much on the identification of ways for using their resources more effectively for achieving organizational objectives (Pride and Ferrell 2010, p.25). In any case, before entering a market an organization needs to develop ‘a Market Opportunity Analysis (MOA) that reviews the size and sales potentials of various market segments’ (Lamb et al. 2011, p.53). It should be noted that MOA could be developed in the beginning of the marketing strategy process, in order to reveal whether supporting the process would be beneficial for the organization (Lamb et al. 2011). At the next level, two other marketing strategy options would be used for securing the success of the marketing plan: a) the SWOT analysis would help managers to understand whether the chances for growth in a particular market are high and whether the risks involved are controllable (Lamb et al. 2011, p.53); b) then, the identification of strategic alternatives, as part of the situation analysis of the strategic marketing process, would help to ensure that in the case of unexpected failures the organization would be able to exit the crisis rapidly (Lamb et al. 2011, p.53). Strategic alternatives could be established in different ways: a) product development means the improvement of an organization’s existing products, b) market development refers to the identification of new markets for the firm’s existing products and c) diversification reveals the introduction of new products in new markets (Lamb et al. 2011, p.44). Taking into consideration current market conditions, Apple would prefer product development, a strategy that it is already used by the firm for decades. Market development could not offer adequate profits to Apple at the level that the firm has already entered most markets internationally, at least all countries where products of technology are popular. 3.3 Create appropriate strategic marketing objectives for a market Apple is a strong competitor in the global IT industry. The firm’s annual report for 2012 reveals a continuous growth in net sales for the years 2008 to 2012 (Table 2). This means that the firm is able to take the risk for investing on innovation and marketing in order to increase its customer base. Table 2 – Financial data related to Apple for the years 2008-2012 (source: 2012 Annual Report, p.25) On the other hand, Apple operates globally. The firm’s strategic managers would rather prefer to use a global strategy for controlling the firm’s operations in all countries (Doole and Lowe 2005). The marketing objectives that the organization would set for its global strategy should be aligned with the firm’s culture (Doole and Lowe 2005). In regard to new markets, these marketing objectives would be based on the following criteria: a) meeting consumer preferences, b) keeping quality high, c) keeping prices at competitive level but aligned with the profit margin set for the target market, d) creating a loyal customer base. Task 4: Responding to changes in the marketing environment 4.1 Report on the impact of changes in the external environment on a marketing strategy The external environment of an organization can be evaluated using the Five Forces model of Porter, which focuses on industry competition, or the PESTLE analysis that review six key aspects of a firm’s external environment (Ferrell and Hartline 2010). In order to understand the potential impact of changes in the external environment on Apple’s marketing strategy, one of the above strategic tools could be employed. In the context of the Five Forces model, the competitiveness of Apple could be evaluated as follows: a) Threat of customers; competition in the global IT industry is high (Seong-Hoon 2012); still, Apply has managed to secure its dominance in the particular industry (Seong-Hoon 2012). Since 2007 Apple remains the most powerful competitor of the industry with the highest market share; for example, one of the firm’s product, the Android table has reached a market share of 40% globally which is really impressive (Seong-Hoon 2012); no threat seems to exist for the organization by customer pressures, unless global financial turbulences become stronger, b) Threat of suppliers; Apple offers to the public a high range of products, many of which are produced by the organization; in other words, along with the products located through suppliers, products developed in the firm’s production units are available in Apple (2012 annual report, p.3); iOS and OS X are two of the firm’s own products (2012 annual report 2012, p.3). On the other hand, the firm’s line of suppliers is related to Europe; communication with suppliers can be easier both in terms of geography, since suppliers are not dispersed worldwide. Graph 4 – Location of Apple’s suppliers (Source: Electronic Product Design and Test, 2013) It would be quite difficult for suppliers to press Apple for increase in prices since the availability of suppliers in IT industry is high and, in addition, the firm has its own product line, d) Competition; IT industry is highly competitive; since the dominance of Apple in this industry is secured, as also proved through Graph 5 below’ e) Substitute products; it would be possible for substitute products to appear in the global IT industry but these products would be of lower quality than those of Apple; substitute products would not be a threat for the organization. Graph 5 – Apple’s share worldwide (Source: CCN Money 2012) 4.2 Conduct an internal analysis to identify current strengths and weaknesses in a marketing strategy When reviewing and evaluating the strengths and weaknesses of a particular marketing strategy, the following issues should be taken into consideration: a) the relevant assessment would refer not only to products/ resources but also to organizational processes, b) weaknesses ‘can be converter into strengths’ (Ferrell and Hartline 2010, p.131) and c) a firm need to be able ‘to match its strengths with market opportunities’ (Ferrell and Hartline 2010, p.131). The strengths and weaknesses of the firm’s current marketing strategy would be described as follows: a) Strengths: a1) extremely high range of products (2012 annual report, p.3), a2) a particular scheme, the ‘AppleCare Protection Plan’ (2012 annual report p.5) has been introduced by Apple for ensuring customer support is kept at significantly high levels;, a3) continuous increase of the number of ‘the firm’s own stores worldwide’ (2012 annual report p.6), for ensuring that communication with customers is continuous and of high quality; b) Weaknesses: b1) high industry competition (Seong-Hoon 2012) and b2) global financial crisis may become stronger (CNN 2012). 4.3 Propose strategic marketing responses to key emerging themes in a marketing strategy The last five years, Apple has managed to keep its profitability high despite the 2008 recession. The firm’s ability to secure its future market position requires the development of a series of measures that would help the organization to respond to certain emerging issues: a) costs on R&D would be closely monitored; innovation is vital for the firm’s dominance in the global market but investing high amounts on R&D increases risks for severe losses especially since the performance of markets internationally is not standardized; b) the firm should emphasize more on social media, as promotional tools, reducing the investment on traditional marketing tools at the level that the value of the latter is continuously decreased while their cost is kept quite high; c) for the future, the potential development of strategic alliances should not be rejected; despite its current dominance, the firm should try to create a network of supporters, not necessarily from the same industry. In this way, it would be easier for the firm to face unexpected market turbulences. 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