BUSINESS/FUNCTIONAL LEVEL STRATEGIES

Business-Unit Composition

• Strategic Business Unit

(SBU):
– Focuses on “a single product
or brand, a line of products, or
mix of related products that
meets a common market
need or a group or related
needs, and the unit’s
management is responsible
for all (or most) of the basic
business functions”
Business-Unit Composition

•• Companies
Companies often
often organize
organize around
around
competency-based
competency-based SBUs
SBUs toto
establish
establish Sustained
Sustained Competitive
Competitive
Advantage.
Advantage.
Business Strategy Decisions

•• The
The basic
basic objective
objective of
of aa business
business strategy
strategy is
is
to
to determine
determine how
how the
the business
business unit
unit will
will
compete
compete successfully.
successfully.
Marketing Strategy Decisions
A Marketing
Strategy Addresses:
• Selection of a
target market.
• Development of a Functional strategies
marketing mix. are at the
business-unit level.

Operating strategies
are at the product level.
 Business & Product Marketing Strategies
Decision Area Business Marketing Strategy Product Marketing Strategy
Target market Segmented or mass approach Specific definition of target market

Product Number of different products Specific features of each product

Price General competitive price level Specific price

Distribution General distribution policy Specific distributions

Marketing
communications General emphasis on marketing Specific marketing
communications tools communications program
International Marketing Strategies

• Entry Strategy: • The Basic Options:

– The approach used – Exporting
to market products in – Joint Ventures
an international – Direct Investment
market.
International Marketing Strategies

Standardized
StandardizedMarketing
MarketingStrategy:
Strategy:
The
Thesame
sameproduct,
product,price,
price,distribution,
distribution,&&promotion
promotion
programs
programsininall
allinternational
internationalmarkets.
markets.

Customized
CustomizedMarketing
MarketingStrategy:
Strategy:
AAdifferent
differentmarketing
marketingmix
mixfor
foreach
each
target
targetmarket
marketcountry.
country.
Executing Strategic Plans with Teamwork

1.
1. Cross-Functional
Cross-Functional Teamwork
Teamwork

2.
2. Marketing
Marketing Teamwork
Teamwork

3.
3. Co-Marketing
Co-MarketingAlliances
Alliances
Business Function Orientations

Function Basic Orientation

Marketing To attract and retain customers
Production To produce products at lowest cost
Finance To keep within budgets
Accounting To standardize financial reports
Purchasing To purchase products at lowest cost
R&D To develop newest technologies
Engineering To design product specifications
What is the BCG Matrix?
The BCG Matrix is a strategic marketing model invented by the
Boston Consulting Group.

Companies use the BCG Matrix (portfolio analysis) to compare

different products or services against each other to determine
whether companies should:

Continue producing
Stop producing
Or invest in it
The BCG Matrix helps companies allocate resources in a way that
maximizes the following:

Market share and market growth

Company growth
Long-term profitability for each product line

By understanding where products fall in the BCG Matrix,

companies can more effectively determine how to allocate
resources.
Stars
These products have high growth rates and high market shares,
and are highly competitive. They can be expensive to develop, but
they generate cash and reinvest it for growth. Over time, stars can
become cash cows.

Cash cows
These products are well established, in constant demand, and easy
to produce. They are the company's major profit makers, and
should be milked for cash to support the portfolio's growth.
Question marks
These products have high growth rates but low market
shares. Depending on product and market conditions, companies
may invest in them for growth or divest. For example, Disney's Media
and Entertainment segment is considered a question mark because it
operates in a large market but has a relatively small market share.

Dogs
These products have low growth rates and low market shares, and
don't generate cash. They may need significant financial support and
are not a good investment.
1. Question Marks – Construction

Low market share and high market growth.

The “Question Marks” are a product group in which there
is a low market share, but where the market is actually
showing high growth.
These products are not necessarily very profitable at
this time, but have potential to gain market share with
the right investments.
It is therefore possible to build a ‘Question Mark’ into a
‘Star’.

Example
If you introduce a new smart watch to the market, it will
be difficult to gain ground, despite the fact that the
market is growing rapidly.
This is because large companies already have strong
differentiation combined with large market budgets.
2. Stars – Holding

High market share and high market growth.

The ‘Stars’ are a product group with a high market share

and a fast growing market.

These products are profitable and it is worthwhile to

continue investing in this product group so that they at
least maintain their market share and perhaps even
continue to grow.

Example
The Apple Smart watch is an example of a product where
Apple has a high market share and the smart watch
market is experiencing strong growth.
3. Cash Cows – Harvesting

High market share and low market growth.

The ‘Cash Cows’ are a product group with a high market

share and a market with hardly any growth.
These products are already profitable with little
growth potential in the market. The desired strategy
here is to invest as little as possible and still maintain the
market position.
The revenue generated from a Cash Cow can be invested
in Stars or Question Marks.
Example
HUL soap and detergent brands are well established
products with high market share in a stable market and
they consistently generate profits for HUL.
4. Dogs – Divestment

Low market share and low market growth.

The Dogs are a product group with a low market share

and a market that will hardly grow.
These products are loss-making and have no
potential to become profitable.
You want to stop investing in a ‘Dog’, because there is
nothing more to be gained from it.

Example
Suppose that a new pharmaceutical company starts
developing a corona vaccine in 2023, they will find
themselves in a market in which they have virtually
no market share and there is no market growth to
gain that share.
Taking Apple as an example…

Name Market Relative

product Own market share market Market Revenu in €
group share largest share growth
competitor

Macbook 30% 20% 1,5 5% €23.000.000

iPhone 28% 35% 0,8 11% €30.000.000

Apple TV 12% 25% 0,48 3% €6.000.000

Airpods 25% 18% 1,39 20% €18.000.000

 FUNCTIONAL LEVEL STRATEGY
The functional level of the organization is the level of the
operating divisions and departments. The strategic issues
at the functional level are related to business processes
and the value chain.

Functional levels
marketing,
finance,
operations,
human resources, and
 R&D
Functional levels strategies involve the development
and coordination of resources through which business
unit level strategies can be executed efficiently and
effectively.

Functional units of an organization are involved in

higher level strategies by providing input into the
business unit level and corporate level strategy.

e.g. providing information on resources and

capabilities on which the higher level strategies can be
based.
Once the higher-level strategy is developed, the functional units
translate it into discrete action-plans that each department or
division must accomplish for the strategy to succeed.

Functional Strategies may need to vary from region to region.

Eg: When Maggi Noodles expanded into India, it was marketed as a

snack food and not as a main course meal. Since Indians prefer a
heavy breakfast, they preferred to eat noodles in the evening as a
fast to cook and ready to serve evening meal, especially to children.

Any functional strategy will be successful if it is built around core

competence and distinctive competence.
OUTSOURCING:

is purchasing from someone else a product or service that had

been previously provided internally.

It is becoming an increasingly important part of strategic

decision making and an important way to increase efficiency
and often quickly.

Firms competing in global industries must in particular search

worldwide for the most appropriate suppliers.

(Maruti Suzuki – JBM Auto)

The key to outsourcing is to purchase from outside only those
activities that are not key to the company’s distinctive
competencies.

In determining functional strategy, the strategist must.

Identify the company’s or business unit’s core competencies

Ensure that the competencies are continually being strengthened

and

Manage the competencies in such a way that best preserves the

competitive advantage they create.
MARKETING STRATEGY
Marketing strategy deals with pricing, selling and distributing a
product.

Using a market development strategy, a company or business unit

can:

Capture a larger share of an existing market for current products

through market saturation and market penetration or develop new
market for current products.

Eg: P & G, Colgate – Palmolive