their product portfolios and focus on larger more profitable customers.
Conversely, perhaps correctly, organisations may actually expand their
product range, aiming to cover the maximum number of customers by
offering a wide range of price points. We may witness takeovers, mer-
gers and acquisitions as organisations aim to reduce cost and generate
economies of scale. A portfolio approach can be taken, with ‘cash cows’
supporting operations/products with are currently struggling but are
deemed to have long-term potential. A useful strategic option is to
reduce industry exit barriers by selectively buying-out elements of
competitor’s current business. For example, we could take over their
commitment to supplying spare parts and maintain existing products.
This ‘shake-out’ inevitable leaves the industry with fewer but larger
competitors.
● Exit strategy: If business conditions are particularly unfavourable, pru-
dence may dictate that we withdraw from the industry. Such action
will involve overcoming exit barriers such as the costs associated with
downsizing (e.g. redundancy, legal costs of breaking contracts, etc.)
and handling commitments to existing customers. Exit strategy can be
rapid – withdrawing immediately – or a slow phased withdraw with
activities being gradually run-down. Remember exiting a market may
have repercussions for other actives and products, as it affects ‘good-
will’ and customer confidence.■ Summary
Strategy formulation offers alternative methods of achieving objectives.
The process has three components: (i) competitive advantage, (ii) industry
position and (iii) product/market strategies. The importance of having
constant and sustainable strategies cannot be underestimated.
Three generic (fundamental) strategies exist – cost leadership, differen-
tiation and a focused approach. Porter (1980) stresses the importance of
adopting one generic source of competitive advantage and thus avoid the
strategic equivalent of ‘being stuck-in-the-middle’. These strategies can be
expanded upon to generate specific sources of competitive advantage. For
example, superior products, perceived advantage or scale of operation are
all exploitable competitive advantages. Additionally, it is important to
understand the effects of experience curve and value chains within your
industry. The primary and secondary activities of a value chain, coupled
with experience effects, should support the organisation’s strategic thrust.
Companies need to examine their position within the market place.
They can occupy the role of market leader, challenger, follower or niche
player. Marketing strategy needs to be appropriate to the position occu-
pied, relative ambition and resource base. All organisations actively pur-
sue offensive and defensive strategies. The need exists to protect your core
business and your flanks (weak areas), while taking the fight to competitors
through appropriate offensive options (e.g. bypass or guerrilla attacks).174 Strategic Marketing: Planning and Control