Marketing Strategies in the Asia Pacific Asia-Pacific Marketing Federation Certified Professional Marketer Copyright Marketing Institute of Singapore

Outline  Porter’s Three Generic Strategy  Growth strategies  Ansoff Grid—Product-Market Strategies  Market Penetration Strategy  Product-Development Strategy  Market-Development Strategy  Diversification Strategy

Introduction  Many strategies had been used since time immemorial. Fortunately for us, Prof. Michael Porter had condensed them into 3 generic types Porter’s Three Generic Strategies  See next slide: Figure: A model for developing strategic orientation

Strategic Orientation— Porter’s Three Generic Strategies Uniqueness Low Cost Position Broad Narrow Business Scope Strategic Advantages Differentiation Overall Cost Leadership Focus Focus Differentiation Focus Low Cost

Porter’s Three Generic Strategies  Differentiation  Achieve superior performance over the competition  e.g. Canon uses superior quality to differentiate itself in the photocopying industry

Porter’s Three Generic Strategies (cont’d)  Overall Low Cost  Achieve the lowest cost in the industry  e.g. Naxos in the compact disc field  Focus  Either focus differentiation or focus low cost by concentrating on a narrow segment of the market  e.g. Raffles Hotel (Source: Marketing Management, 2 nd Ed. 1999, Philip Kotler et. al.)

Growth Strategies Three Major classes  Intensive Growth  Market penetration, market development & product development (see next slide)  Integrative Growth  Backward, forward & horizontal integration  Diversification Growth  Concentric, horizontal and conglomerate Source: Marketing Management, 2 nd Ed. 1999, Philip Kotler et. al.

ExistingNew Markets Products Existing New Ansoff Matrix— Product-Market Strategies Integration Market Penetration Product Development (Expansion) Market Development (Expansion) Diversification

Market-Penetration Strategy  Why ? To dominate market  How ? To increase usage or get new customers; reduce price; expand distribution or increase promotional activities  When ? When market is growing  What to look out for ? Competitive reaction; cost of conversion  Example: Airlines used reduced fares & promotion various family travel packages to penetrate market

Product-Development Strategy  Why ? To satisfy buyer’s need  How ? New or improved product; innovate or augment product  When ? Customer has a need or a problem  What to look out for ?  Market size/volume  competitor reaction  effect on existing products  resources to deliver new products  Examples: Acer; Soundblaster 1,2,3

Market-Development Strategy  Why ? To venture into new markets  How ? Sell existing products in new markets; modify product; use different distribution; use different advertising/sales strategy  When ? Present market is saturated  What to look out for ? Competitive reaction; understand new buyers; adaptability  Example: Hong Kong and China Gas (Towngas) is to invest HK$2 billion in the transmission of natural gas in China, in a continued bid to expand away from its base in Hong Kong. (Source: SCMP; June 29, 2001)

Diversification Strategy  Why ? Growth opportunities outside current business  How ? New products for new markets  When ? Distinctive competencies available  What to look out for ? High risks, resources required, need to understand new markets, fit with distinctive competencies  Examples:  In July 1997, DBS Land diversified into Healthcare by acquiring a stake in Parkway Holdings, a leading healthcare provider in Asia and in 1999, DBS Land bought into Vista Healthcare

Diversification Strategy (cont’d)  Three types of diversification  Concentric, horizontal and conglomerate  Three essential tests of success  Attractiveness  Cost-of-entry  Better-off  PIMS findings on diversification  Not very encouraging

Vertical Integration  Why?  To gain operating economies i.e. to lower costs  To gain access to or control supply demand  To enhance technological innovation  How? Integrate backward and forward  When? Basic industry is in a growth stage  What to look out for? Problems in managing very different businesses; increase risk, reduced flexibility; cost of excessive in-growing

Example of Vertical Integration  Japanese keiretsu systems  Korean chaebols  Airlines integrate backward to in-flight kitchens; forward to travel agencies