1. Essentials of Health Care Marketing 2nd Ed. Eric Berkowitz
Chapter 2
Marketing Strategy

2. Chapter 2 Learning Objectives
Understand the scope of strategic marketing planning
Identify broad organizational market strategy alternatives
Describe the value of alternative portfolio models
Appreciate the factors that affect the level of competitive intensity within an industry
Understand the essential components of marketing strategy formulation

3. Introduction
Strategic planning – a process that describes the direction an organization will pursue within its chosen environment and guides the allocation of resources and efforts

4. Learning Objective 1 Four steps of Strategic planning process
Define Mission
External assessment of threats and opportunities
Internal assessment of strengths and weaknesses
Establish set of priorities based on organizational objectives
Then, determine which strategies to pursue

5. Learning Objective 1 Defining Organization mission (step 1)
Organization’s fundamental purpose for existing.
Who the organization is, its values, and the customers it wishes to serve.
Blueprint for management in developing business strategies
Must recognize what the business is and what the customer wants
Avoid marketing myopia

6. Learning Objective 1 Organization Mission components
Basic product or service, primary market, & technology in delivering product or service
Organizational goals
Growth, profitability, stability, nor survival
Organizational philosophy
Organizational Self-concept
Public Image

7. Learning Objective 1 Situational Assessment (step 2)
AKA – SWOT analysis
Strengths, Weaknesses, Opportunities, Threats
Economic, competitive, regulatory, social, and technological changes in marketplace
Questions:
What are the changes and trends?
How will these changes affect the organization?
What opportunities to these changes present?
Further describe SW – internal OT – external; micro-and macro-environments

8. Learning Objective 1 Situational Assessment (step 2)
Barriers to entry – conditions that a company must overcome in order to pursue a business opportunity.
Barriers to exit – costs of leaving a particular business line
Examples of barriers to entry? Students discuss…
Give examples of product-based, market-based and cost-based differential advantages

9. Learning Objective 1 Situational Assessment (step 2)
Differential advantage
Product, market, cost
Based on core competencies
Criteria:
Importance, Perceived, Uniqueness, Sustainable
Examples of barriers to entry? Students discuss…
Give examples of product-based, market-based and cost-based differential advantages

10. Learning Objective 2 Organizational strategy
Broad strategies are formulated
Can be either growth market or consolidation strategies
Growth market – organization attempts to gain more sales from an existing business line or penetrating new markets
Consolidation – pairing either services or markets

11. Learning Objective 2 Organizational strategy Growth Market Strategies
Market Penetration
Increasing sales of present products/services in present markets
Market Development
Increase sales in new markets
Product Development
Introduce new products/services to present markets
Diversification
Introduce new products into new markets
Students give examples of market penetration, market development, product development, diversification

12. Learning Objective 2 Organizational strategy
Product Development Strategy
Vertical Integration
Backward integration – becomes own supplier
Forward integration – offer new services closer to the customer
Students give examples of backward and forward integration

13. Learning Objective 2 Organizational strategy Diversification strategy
Strategic alliances
Formal arrangements with other companies to operate in a particular market
Joint Ventures
New corporate entities created by strategic alliances
Students give examples of strategic alliances, joint venture businesses

14. Learning Objective 2 Organizational strategy Consolidation Strategies
Divestment
Selling off a business or product line
Pruning
Reducing the number of product or service offerings
Retrenchment
Withdrawing from certain markets
Harvesting
Gradually withdrawing support from a product until market demand is reduced or eliminated
Students give examples of divestment, pruning, retrenchment, harvesting

15. Learning Objective 3 Alternative models Boston Consulting Group Matrix
Stars, Cash Cows, Problem Children, Dogs
Based on Market growth rate and market share
Can be used to focus on broad considerations
Students give examples of Stars, cash cows, problem children, dogs. See p. 53, Figure 2-6

16. Learning Objective 3 Alternative models
GE Matrix
Market attractiveness – overall market size, annual market growth rate, historical profit margin, competitive intensity, technological requirements, inflationary vulnerability, energy requirements, environmental impact, social/political/legal issues
Business Strength – market share, share growth, product quality, brand reputation, distribution network, promotional effectiveness, production capacity, production efficiency, unit costs, supply costs, R&D performance, management talent.
Refer students to page 55, table 2-3

17. Learning Objective 4 Competitive Market Must analyze:
Existing competition
Potential competition
Factors affecting competitive intensity
Threat of new entrants
Bargaining power of suppliers
Bargaining power or customers
Threat of substitute products or services
Refer students to page 57, figure 2-7

18. Learning Objective 4 Competitive Market Existing competition
When product is relatively standardized and the competitors are relatively numerous and similar in size.
When cost of switching providers is relatively low.
In industries characterized by overcapacity and among firms still in the market because of a high fixed-asset position.
Have students give examples of existing competition scenarios

19. Learning Objective 4 Competitive Market New entrants
Threat of substitution
Bargaining power of suppliers
Bargaining power of customers
Have students give examples. Refer to pp 57-60

20. Learning Objective 5 Marketing Plan
After establishing marketing objectives, then formulate MARKET STRATEGIES
Have students give examples. Refer to pp 60-63

21. Learning Objective 5 Market Strategy Formulation
Determine Target market
Specify Market strategy
Develop tactical plans for marketing mix

22. Learning Objective 5 Determine Target market Multi-segment marketing
Whom the organization is trying to attract
Assess organization’s strengths, competitive intensity for target market, the cost of capturing market share, the potential financial gain in attracting the targeted group.
Mass Marketing(undifferentiated) or Segmenting
Multi-segment marketing
Market concentration strategy
Have students describe mass marketing and different segmenting strategies

23. Learning Objective 5 Specify Market strategy market leader
market challenger
market follower
market niche
Have students describe market leader, challenger, follower, niche

24. Learning Objective 5 Tactical Action Plans
Identifies actions to be taken regarding each aspect of the marketing mix
Advertising strategy, pricing strategy, distribution issues, nature of product.
Finally, evaluate plan – discussed further in Chapter 14
Refer students to Ex. 2-4 Marketing Plan outline, pp

25. Summary
Marketing plans - along with finance, production, and human resource plans - form the core elements of an organization’s strategic plan
An organization’s strategic plan is guided by the mission that defines its purpose for existing. The mission must recognize who the customer is and what the customer wants to buy.
In developing strategic plans, a SWOT analysis provides a review of internal and external factors that can affect strategic outcomes.

26. Summary (continued)
In developing strategic plans, an organization must be able to recognize the barriers to entry and exit for any new service venture.
Invisible value is the value a producer builds into its product or service; visible value is the value that a customer sees. Typically an organization can only charge for visible value.
An organization can develop a differential advantage that is either product-based, market-based, or price-based.

27. Summary (continued)
There are four broad growth strategies that any organization can pursue: market development; market penetration; product development; diversification.
The BCG matrix and GE matrix are conceptualizations that can aid an organization in the review of its service portfolio. Both models encompass market and competitive considerations.

28. Summary (continued)
In any industry, the level of competitive intensity is affected by the threat of new entrants, the bargaining power of both suppliers and customers, and the threat of substitute products and services.
In developing a marketing plan, organizations can pursue a mass marketing or a market concentration strategy.