A marketing strategy is a plan to combine the right combination of the four elements of the marketing mix for a product to achieve its marketing objectives. Marketing objectives could include maintaining market shares, increasing sales in a niche market, increasing sale of an existing product by using extension strategies etc.
Factors that affect the marketing strategy:
Legal Controls on Marketing
- laws that protect consumers from being sold faulty and dangerous goods
- laws that prevent the firms from using misleading information in advertising Example: Volkswagen falsely advertised environmentally friendly diesel cars and were legally forced to pull all cars from the market
- laws that protect consumers from being exploited in industries where there is little or no competition, known as monopolising.
Entering New Markets
Growing in other countries can increase sales, revenue and profits. This is because the business is now available to a wider group of people, which increases potential customers. If the home markets have saturated (product is in maturity stage), firms take their products to international markets. Trade barriers and restrictions have also reduced significantly over the years, along with new transport infrastructures, so it is now cheaper and easier to export products to other countries.
Problems of entering foreign markets:
- Difference in language and culture: It may be difficult to communicate with people in other countries because of language barriers and as for the culture, different images, colors and symbols have different meanings and importance in different places. For example, McDonald’s had to make its menu more vegetarian in Indian markets
- Lack of market knowledge: The business won’t know much about the market it is entering and the customers won’t be familiar with the new business brand, and so establishing in the market will be difficult and expensive
- Economic differences: The cost and prices may be lower or higher in different countries so businesses may not be able to sell the product at the price which will give them a profit
- High transport costs
- Social differences: Different people will have different needs and wants from people in other countries, and so the product may not be successful in all countries
- Difference in legal controls to protect consumers: The business may have to spend more money on producing the products in a way that complies with that countries laws.
How to overcome such problems:
- Joint venture: an agreement between two or more businesses to work together on a project. The foreign business will work with a domestic business in the same industry. Eg: Japan’s Suzuki Motor Corporations created a joint venture with India’s Maruti Udyog Limited to form Maruti Suzuki, a highly successful car manufacturing project in India.
- Reduces risks and cuts costs
- Each business brings different expertise to the joint venture
- The market potential for all the businesses in the joint venture is increased
- Market and product knowledge can be shared to the benefit of the businesses
- Any mistakes made will reflect on all parties in the joint venture, which may damage their reputations
- The decision-making process may be ineffective due to different business culture or different styles of leadership
- Franchise/License: the owner of a business (the franchisor) grants a licence to another person or business (the franchisee) to use their business idea – often in a specific geographical area. Fast food companies such as McDonald’s and Subway operate around the globe through lots of franchises in different countries.
|TO FRANCHISOR||Rapid, low cost method of business expansion
Gets and income from franchisee in the form of franchise fees and royalties
Franchisee will better understand the local tastes and so can advertise and sell appropriately
Can access ideas and suggestions from franchisee
Franchisee will run the operations
|Profits from the franchise needs to be shared with the franchisee
Loss of control over running of business
If one franchise fails, it can affect the reputation of the entire brand
Franchisee may not be as skilled
Need to supply raw material/product and provide support and training
|TO FRANCHISEE||An established brand and trademark, so chance of business failing is low
Franchisor will give technical and managerial support
Franchisor will supply the raw materials/products
|Cost of setting up business
No full control over business- need to strictly follow franchisor’s standards and rules
Profits have to be shared with franchisor
Need to pay franchisor franchise fees and royalties
Need to advertise and promote the business in the region themselves