Theories of Strategic Marketing - Coursework Example

IN CAPITAL LETTERS By Strategic Marketing Marketing is an important aspect in any business and therefore there is great need to come up with the best marketing strategies to improve the sales and productivity of a firm. Creation and development of companies over the years has contributed greatly to the increased competition across all industries. Therefore, firms need to come up with effective marketing strategies in order to remain relevant in the various industries. A number of approaches are applicable in a bid to acquire a workable marketing strategy. Some of the commonly used approaches include blue ocean strategy, porters five fore model, resource based theory, cost leadership, and SWOT analysis among others. Blue Ocean Strategy The blue ocean strategy basically targets new untouched fields. Blue oceans are marked by “untapped market space, demand creation, and the opportunity for highly profitable growth” (Kim and Mauborgne 2005, p.4). Therefore, the blue ocean strategy is deeply dependent on innovation and discovery of new consumer demands that are not yet explored. The blue ocean strategy is focusses on improving the current market, for instance, by combining two or more closely related demands. In addition, it is highly dependent on the quality while still maintaining low costs of the products and services offered. The less valued products and services are replaced by the highly valued and demanded ones thereby raising the standards of the market and making it stronger. For example, in the case of Cirque du soleil that redefined the art of circus thereby crippling its competitors. Cirque found a way of combining both theatre and circus thereby establishing its own customers. In addition it did away with the animals hence reducing the operational cost and consequently the cost of its services (Kim and Mauborgne 2004, p.2-8).Since the blue ocean strategy creates a new market, there is limited or in most cases no competitors. Therefore, the rules of the market are solely left to the firm in the blue ocean. Adoption of blue ocean strategy gives a firm a competitive advantage over the others. Resource based View There have been arguments on whether to the resource based view has yet established itself into a theory or it is still just a view. Whether a view or a theory it surely has greatly impacted the marketing field. The resource based theory is based on “the principle that the source of firms competitive advantage lies in their internal resources, as opposed to their positioning in the external environment” (Raduan, Jegak, Haslinda, and Alimin 2009, p.5). The resource base theory strategy relies heavily on the firm’s available resources. The resources should only be readily available to the particular firm that applies resource based theory strategy as an approach to gaining a competitive advantage. Due the easily accessibility of the resource, the cost of production are still relatively low thereby ensuring that the firm is not disadvantaged due high prices. In addition, the resources should be able to add a unique value to the products and services being offered. Resource based strategy is largely dependent on the inaccessibility of the given resource by competitors. Moreover, the resource in play should not have a substitute that can be used by the competitors to provide similar or equal products and services. Resources used in resource based theory may be in form of either assets or services. According to Lusch and Harvey, resource based theory is highly dependent on the firm’s intangible resources such as customer relations and brand equity (Kozlenkova, Samaha and Palmatier 2013, p.2). For example, the Coca-Cola Company’s Coca-Cola soft drink is arguably distinct and has not yet been emulated. Furthermore, resource based theory creates a brand name that also gives the firm a competitive advantage over its competitors such as Microsoft. Agency Theory In most firms there are principals and agents who represent the firm on behalf of the principals. Eisenhardt argues that “the main purpose of agency theory concerns determining the most efficient contract governing the principal-agent relationship” (qtd. in Mitzkus 2013 p.3). The agency theory relies heavily on the relations between principals and the appointed agents. Principals may refer to stakeholders while agents refers to the executives such as managers. The marketing platform offers a wide range of different relationships and therefore agency theory can be used to streamline and improve marketing. Differences in terms of opinions and risks taking levels are prone to happen in marketing field and if not dealt with appropriately may have negative effects on the firm. In marketing, agency problems may arise when the principal is looking to hire an agent and on how the principal should treat the agent after the hiring. When hiring an agent, the principal faces difficulties in determining whether the agent will act accordingly to desired expectations and within the confines of the principal’s liking. On the other hand, after hiring an agent, the principal also has no assurance that the agent will act appropriately and in the interest of the principal. For example, the recent move by Apple insisting that executives mist hold stock. The agency problem can however be handled through contractual restrictions and stipulations of the roles of each party. According to Namazi, agency theory “examines different performance measures that must be encompassed in a control system in order to attain a suitable performance” (2012, p.9). This implies that agency theory an efficient strategy of attaining an effective system within an organization. Setting strong and sustainable relations within the marketing field may give a firm a competitive advantage over its competitors due to the efficiency of the marketing department. Porter’s five force model The model is based upon five determinants that firms can use to determine the levels of competition in a given industry. Results of the model can be used to show profitability levels in a particular industry. With Porter’s five force model, firms can determine whether to join a given industry and also can be able to come up with appropriate measures to face competitors. According to Porter, the underlying profit drivers are the same in all industries (2008, p.3). Therefore, regardless of the industry, firms need to carry out intense research before entering a new industry. Porter’s five determinants include ease of entry in the industry, threat of substitutes, bargaining powers of customers and suppliers, and intensity of competition. Industries without entrance barriers are prone to increased competition due to increased participants thereby causing price fall. For example, entry into detergent production industry is arguably easy for any company. Such industries have low profit ranges and era therefore not suitable for firms seeking high profits. Industries with products and services that have many substitutes, are likely to have low profits. This is because the customers have a wide range of products and services to choose from hence increased competition for the best brand and favorable prices. Customer’s bargaining power is another determiner of a viable industry. Industries where customers have high bargaining power have less profits and are not favorable for firms seeking high profits. Supplier’s bargaining power also determine the levels of profitability in a given industry. Industries where suppliers have high bargaining power may incur high costs of production hence either high prices or low prices at a much lower profit. In some industries, the levels of competitive rivalry may be too high making them unsuitable due to slow growth and low profits. For instance, industries where competitors are almost equally powerful the levels of rivalry are significantly high. SWOT Analysis The SWOT analysis strategy has been in play for a long time and is still an effective strategy of attaining a competitive advantage. SWOT analysis involves determining the strengths, weaknesses, opportunities, and threats of the firm in play. Strengths and weaknesses emanate from within the firm while opportunities and threats involve external factors. The results obtained are then used to make informed decisions that aid in boosting the firm’s performance. Strengths are those factors that give the firm an advantage and contribute greatly to its success such as an efficient management. Weaknesses refer to the factors that pose challenges to the firm’s productivity and success such as high inadequate technology and equipment. Opportunities refer to the factors that are still untapped and may be of relevance to the firm’s success if adopted. Threats are the factors that are likely to hinder success of the firm such as competitors. After a SWOT analysis, firms can be able to deal with the weaknesses and come up with possible mechanisms to handle possible threats. For example, IKEA used the SWOT analysis technique in 2013 to improve its services. In addition, firms can improve on its strengths and invest on available opportunities thereby increasing success. Baulcomb argues that “for an organization to achieve success, the driving forces must outweigh the resisting forces” (qtd. in Harrison 2010 p.5). This implies that firms need to ensure that strengths should surpass weaknesses hence attaining a competitive advantage. Cost leadership Cost leadership involves reducing production costs of a firm to give an advantage in competing for better prices. Cost leadership is dependent of producing the best quality of goods at the lowest cost possible. Cost leadership may be achieved through use of appropriate technology that is cost effective yet producing high qualities and significant quantities. Firms incurring low costs of production, are likely to offer the best prices hence have more customers. For example, Walmart offers low prices yet their products are of great quality. As a result Walmart has grown to be a global company with high numbers of loyal customers. In addition, firms applying cost leadership are able to reduce debt levels. Jermias argues that “controlling debt is of great importance for companies striving to be efficient” (qtd. in Valipour, Honarbakhsh, and Birjandi 2012, p.3). Knowledge Based View (KBV) The theory thrives under the assumption that the most important asset of a firm is knowledge. According to Kogut and Zander, a firm operating under the knowledge based view “should be understood as a social community specializing in speed and efficiency in the creation and transfer of knowledge” (qtd. in Kirsimarja and Aino, p. 2). Although there is a bit of similarity between resource based theory and knowledge based theory, they are quite different. Supporters of KBV argue that knowledge is not a resource but rather an added advantage in the firm. Under KBV, firms need to adopt the best skills in order to gain a competitive advantage. For instance, use of highly skilled IT employees may give an ICT company an advantage over its competitors. According to Raft and Lord, firms with numerous stocks of organizational knowledge have a higher chance of success (Theriou, G. Aggelidis, and Theriou, N. 2009, p.4). This implies that investing in knowledge is an effective strategy to increasing a firm’s sales. Game Theory The game theory operates under the assumption that all competitors have marketing strategies and are always coming up with more and improved strategies. Game theory builds on trying to come up with a strategy that should seemingly counter competitor’s strategies. Firms try to predict the move s of their competitors and then coming up with marketing strategies capable of countering the predicted strategies. According to Tirole, “game-theoretic modelling requires explicit assumptions about human behavior” (2014, p.19). Although a firm cannot be certain of its competitor’s strategy, it is expected to come up with a better strategy that should give it a competitive advantage. According to CMmEm and Lilien, on overall the game theory provides a powerful set of concepts and a few operational tools for marketing scientists” (1986, p.13).This implies that the game theory is a significant strategy in the marketing field and therefore can be used to attain a competitive advantage. For instance, in the competitive car making industry, companies can adopt the game theory. In the 1920s General motors used game theory to gain competitive advantage against Ford. Therefore, if game theory is an efficient marketing strategy. Conclusively, theories of strategic marketing are important in attaining a firm’s success. Application of these strategies can give a firm a great advantage over its competitors thereby increasing the rates of success. Works Cited CMmEm, Kalyan and Gary Lilien. “Game Theory in Marketing Science Uses and Limitations”. International Journal of Research in Marketing 3 (1986): 79-93. Harrison, Jeffrey. “Essentials of Strategic Planning in Healthcare”. Health Administration Press (2010). Kim, Chan and Renée Mauborgne. “Blue Ocean Strategy: From Theory to Practice”. California Management Review 47.3 (2005). Kim, Chan and Renee Mauborgne. “Blue Ocean Strategy”. Harvard Business Review, (2004). Kirsimarja, Blomqvist and Kianto Aino. “Knowledge-Based View of the Firm –Theoretical Notions and Implications for Management”. (n.d). Kozlenkova, Irina, Stephen Samaha and Robert Palmatier. “Resource-based theory in marketing”. Academy of Marketing Science Journal (2013). Mitzkus, Stefan. “Theoretical Basis of Supply Management: Theoretical and Practical Contributions of Agency Theory”. (2013). Namazi, Mohammad. “Role of the agency theory in implementing managements control”. Journal of Accounting and Taxation, 5.2 (2013): 38-47. Porter, Michael. “The Five Competitive Forces that Shape Strategy”. Harvard Business Review, (2008). Raduan, Jegak, Haslinda, and Alimin. “Management, Strategic Management Theories and the Linkage with Organizational Competitive Advantage from the Resource-Based View”. European Journal of Social Sciences 11.3 (2009). Theriou, Nikolaos, Vassilis Aggelidis, and Georgios Theriou. “A Theoretical Framework Contrasting the Resource-Based Perspective and the Knowledge-Based View”. European Research Studies, 12.3 (2009). Tirole, Jean. “Market Power and Regulation”. (2014). Valipour, Hashem, Hamid Birjandi, and Samira Honarbakhsh. “The Effects of Cost Leadership Strategy and Product Differentiation Strategy on the Performance of Firms”. Journal of Asian Business Strategy, 2.1 (2012): 14-23. Read More