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opportunities – and help their firms succeed against aggressive competitors offering similar products.

Questions for discussion and review

1.What does marketing strategy planning focus on?

2.What are four basic opportunities sought by the firm? Describe each of them.

3.What is market segmentation? What is the aim of segmenting markets?

4.Speak on the seven steps of segmenting markets

Case study: Gerber Products Company

Andrea Kelly, president of Kelly Research, Inc., wants to develop a research proposal for Gerber Products Company’s CEO, David Johnson, who is seriously looking for new product-market opportunities which might make sense for Gerber. As the new CEO, David Johnson has just cleaned out some weak diversification efforts – including trucking, furniture, and toy ventures – which tended to take the company away from its core baby food business. Now he is looking for new opportunities close to the food business. But David Johnson has also made it clear that Gerber may want to move beyond baby foods because only about 4% of U.S. households have babies – and the baby food market is very competitive.

Mr. Johnson, (according to trade press articles) would like new ideas for

“premium-quality, value-added products in niche markets”. It might be possible, for example, to extend the sales of its baby food products to adults (in general) and/or senior citizens. Some of its current chunky food items are intended for very small children and might be attractive for some adults. They are no-salt, easy-to-chew items. But care might be needed in expanded into theses markets. Gerber had troubles in the 1970s with some products that were intended for adult tastes – one was beef stroganoff in a baby-food jar. Yet, Mr. Johnson now wonders, “How come we can’t develop food products that target everyone over the toddler age”.

Recent new Gerber product offerings include a line of applesauce-based fruit cups, bottled water, and shelf-stable homogenized milk. All three of these seem to fit with Gerber’s growth plans – offering more premium-quality, value-added products to niche markets. Further growth efforts might include products that will enable the company to get enough experience to understand a market area and be able to pursue joint ventures or acquisitions. This might include activities other than food, or at least

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baby food – which has become almost a commodity business. The feeling of some Gerber executives is that “opportunities must be better elsewhere – in niches that haven’t been worked as hard as baby food.” Some market possibilities that have been mentioned in the food-oriented trade press for a company like Gerber are: canned or frozen food items for restaurants, military commissaries, gourmet food stores, or specialty departments in chain food stores.

Mr. Johnson’s background includes not only domestic but international marketing with major companies that sell cleaning products, health and beauty aids, drug products, and baked goods. So, it is likely that he will be willing to consider going quite far from baby foods. And given that Gerber is a major U.S. food processor – with sales over $1billion – it is clear the company has the production, distribution, and financial resources to consider a good-sized product-market opportunity. But are there any attractive new opportunities – or must Gerber simply copy someone else’s earlier developments?

Andrea Kelly wants to develop a research proposal to find and evaluate some new opportunities for Gerber. But she wants to narrow the scope of the search somewhat so she doesn’t seem to be “fishing in the whole ocean:”. She also wants to suggest some attractive-sounding possibilities to catch Mr. Johnson’s attention. So she is asking her staff for ideas – to make her proposal more attractive.

Questions for discussion

1.Explain how Andrea Kelly should go about selecting possible “attractive opportunities”.

2.Suggest five product-market opportunities that might make sense for Mr. Johnson and Gerber Products Company. Explain.

3.Evaluating Opportunities in the Changing Marketing Environment

Businesses need innovative strategy planning to survive in our increasingly competitive market. First, the marketing manager should look at how the firm’s resources and objectives may help guide or limit the search for opportunities. Making a profit is an objective that serves as a guide for business. This objective should be supported by others not less important basic objectives, like: performing socially and

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economically useful function in the society, being responsive to changes and adjusting their offerings to meeting new needs of consumers.

Every firm has some resources – hopefully some unique ones – that set it apart from other firms. Breakthrough opportunities – or at least some competitive advantage

– come from making use of these strengths while avoiding direct competition with firms having similar strengths.

To find its strengths, a firm must evaluate its functional areas (production, research and engineering, marketing, general management, and finance) as well as its present products and markets. By analyzing successes or failures in relation to the firm’s resources, management can discover why the firm was successful – or why it failed – in the past.

Harley-Davidson’s motorcycle business was on the ropes, and it was losing customers to Japanese competitors. Competitors’ prices were so low that Harley initially thought the Japanese were “dumping” – selling in the United States at prices below cost. However, careful analysis revealed that superior manufacturing techniques kept Japanese companies’ operating costs 30 percent lower than Harley’s. Studying the

Japanese firms helped Harley identify ways to use its resources more efficiently and improve the quality of its products. With these resource-use problems resolved, new opportunities opened up – and Harley was again on the road to achieving its objectives. The pressure of the competition focused Harley’s attention on manufacturing resources.

Other resources that should be considered are financial strength (sufficient amounts of capital), producing capability and flexibility (the ability to produce more quantity of goods at a lower cost and adjust to the demands of the market), and marketing strengths – the ability to analyze current marketing resources (availability of brands or patents) and good relations with established middlemen.

Then the marketing manager has to look at external environments. They are important because changes in the environments present new opportunities – as well as problems – that a marketing manager must deal within marketing strategy planning.

A manager must study the competitive environment. How well established are competitors? Are there competitive barriers, and what effect will they have? How will competitors respond to a plan?

The economic environment – including chances of recessions or inflation – also affects the choice of strategies. And the marketer must try to anticipate, understand, and deal with these changes – as well as changes in the technological base underlying the economic environment.

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The marketing manager must also be aware of legal restrictions – and be sensitive to changing political climates. Consumerism and the law say, “Let the seller beware”. The current shift to pro-consumer laws and court decisions suggest that lawmakers are more interested in protecting consumers. This may upset production-oriented managers. But times have changed – and managers must adapt to new political and legal environment. After all, it is the consumers who determine the kind of economic system they want.

The social and cultural environment affects how people behave and what marketing strategies will be successful.

Developing good marketing strategies within all these environments isn’t easy.

Marketing management is a challenging job that requires integration of information from many disciplines.

Eventually, managers need procedures for screening and evaluating opportunities. Screening criteria involves the analysis of the strengths and weaknesses of the company’s resources, the environmental trends it faces, and top management’s objectives. These criteria should include both quantitative and qualitative components.

The quantitative components summarize the firm’s objectives: sales, profit and return on investment targets. The qualitative components summarize what kinds of businesses the firm wants to be in, what businesses it wants to exclude, what weaknesses it should avoid, and what resources (strengths) and trends it should build on.

Questions for discussion and review

1.Explain how a firm’s objectives may affect its search for opportunities.

2.Discuss how a company’s financial strength may have a bearing on the kinds of products it produces. Will it have an impact on the other three Ps as well? How?

3.In your own words, explain how a marketing manager might use a competitor analysis to avoid situations that involve head-on competition.

4.The owner of a small grocery store – the only one in a medium-sized town in the mountains – has just learned that a large chain plans to open a new store nearby. How difficult will it be for the owner to plan for this new competitive threat? Explain your answer.

5.Discuss the probable impact on your hometown if a major breakthrough in air transportation allowed foreign producers to ship into any part of your native market for about the same transportation cost that domestic producers incur.