MKT420 TUTORIAL 2 (STRATEGIC PLANNING AND THE MARKETING PROCESS) NAME : FADZLIN SYAFIQAH BINTI FAHIZAN MATRIK NO : 2018286066 CLASS : BA2421C LECTURER’S NAME : MADAM ZUHAIRAH HASAN 1. Draw the product/ market expansion grid and briefly explains how management can develop strategies for their products. The Product/ Market Expansion Grid The diagram above shows the product or market expansion grid. Product/ market expansion grid is a tool for identifying company growth opportunities through market penetration, market development, product development or diversification. It is one useful device that marketing needs to identify, evaluate and select market opportunities and lay down strategies for capturing them in order to achieve profitable growth for the company. Market penetration is a growth strategy increasing sales to current market segments without changing the product. It can spur growth through marketing mix improvements by doing adjustments to its product design, advertising, pricing and distribution efforts. For example, Coca cola in Pakistan is doing market penetration through the selling its products to the business buyer, who are a huge multinational organizations like McDonalds, Subway, Dunkin Donuts and many more. They are selling the Coca Cola as the only beverage in their restaurants. Product development is a growth strategy that offers new or modified products to existing market segments. A prime example of this was the launch of Cherry Coke in 1985 , Coca Cola’s first extension beyond its original recipe. The company has since gone on to successfully launch other flavoured variants including lime, lemon and vanilla. Thirdly, the market development is a growth strategy that identifies and develops new market segments for current products. For instance, Coca Cola’s company lauch the Coke Zero in 2005, which its concept being identical to Diet Coke (the great taste of Coca Cola) but with zero sugar and low calories. With its shiny black can and polar opposite advertising campaigns, Coke Zero has successfully generated a more masculine appeal. Finally, diversification is a growth strategy for starting up or acquiring businesses outside the company’s current products and markets. Coca cola generally avoids risky adventures into unknown territories and can instead utilise its brand strength to continue growing within the drinks industry. That said, Coca Cola offers official merchandise from pens and glasses to fridges, therefore exploiting its strong brand advocacy through this strategy. In conclusion, the product or market expansion grid is particularly useful for strategic planning because it provides a framework to help executives, senior managers and marketers devise strategies for future growth. It also can help an organisation to avoid key risks such as overlooking available growth strategies, misunderstanding the implications of pursuing a particular strategy or selecting an inappropriate strategy given the firm’s diversification objectives. 2. With the aid of a diagram, discuss four (4) types of strategic business unit (SBU) according to the Boston Consulting Group (BCG) approach in which marketers used to evaluate their current businesses. Question Marks Stars . Cash Cows . Dogs Using the now-classic Boston Consulting Group (BCG) approach, a company classifies all its SBUs according to the growth-share matrix as shown in diagram above. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. The growth-share matrix defines four types of SBUs which are question marks, stars, cash cows and dogs. The first type of SBUs is question marks. Question marks are low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out. A product that is still not a big hit as it have not consumed much time yet. All the new flavors of coke are the examples of these question marks. Lime Coke and Cherry Coke are the two products mentioned as the question marks as they have not taken much time yet to get a hold of market and not even the large percentage of the people have tasted it. So it needs time to be fully tested by the company and the company needs to think whether it should continue the production or should divert to something new. Secondly, stars. Stars are high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. For example, Coke Classic is the basic product through which the Coca Cola company got the fame. It is one product, which gives the maximum revenues from all over the world. Plus, it is one flavor, which has the maximum consumers. Coke has already worked a lot on it by launching new flavors in it, but still it is a product they can turn as famous as Coke Classic. Cash cows is a third type of SBUs. Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment. For instance, Coke Classic is one product, which the Coca Cola company can never think of stop producing. It is the one which make the coke company has a huge success and it was one product which gives billions of dollars as revenue from world over. Whenever the company thinks of launching its product in a country, the first product they launch is Coke Classic as they know that if do not work here then nothing else can. Dogs is the last type of SBUs. Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash. For example, a product that has not worked good or a product which has been a source of loss. Vanilla coke is one product that was not a big hit. Even its not a long period which Vanilla Coke has consumed but still there are signs that it won’t be a success. So it is better for the company to get rid of it. In conclusion, the company must decide how much it will invest in each product or business (SBU). For each SBU, it must decide whether to build, hold, harvest, or divest.
