Strategic Marketing

Formulating Marketing Strategies Lecture Overview

Introduction Competitive Advantage
Generic Strategies Sources of Competitive Advantage Experience Curve

Industry Position
Market Position
Offensive and Defensive Strategies

Strategic Position
Ansoffs Growth Matrix PIMS Product Life Cycle (PLC)

INTRODUCTION
Marketing Strategy aims to generate sustainable competitive advantage. The process is influenced by industry position, experience curves, value effects and other factors such as the product life cycle. All businesses will need to take account of the above in adopting either defensive or attacking strategies. Such actions aim to maintain and/or increase market share, but they will only be successful if the strategic position they seek is relevant to current/future market conditions. The last session outlined the principals of forecasting and of setting objectives. This session seeks to present the alternative methods of achieving those objectives. The ability to identify and evaluate the alternatives in order to determine the best way forward forms the essence of strategy development. The goal is to achieve sustainable competitive advantage within selective markets by taking a particular position vis a vie competitors. The framework over helps to identify the strategic options available, it also helps to evaluate and to choose the appropriate options and so justify the direction taken.

FORMULATING MARKETING STRATEGIES

Competitive Advantage - Generic Strategy - Sources of Advantage - Experience
Low cost operator, superior competencies, global skills.
Scale advantages, legal advantages, learning curve. Superior Product. Low cost, differentiation, focus/niche.

Corporate and Marketing Objectives

Industry Position/ Strategic Direction - Market Position - Ansoff Matrix - PIMS - PLC

Strategies for leaders, followers, challengers, nichers

Market penetration/development, product development and diversification.

Do nothing or withdraw Strategies for growth, mature and declining markets.

Strategy Formulation

Strategic Choice Methods and Positioning

- Alliances - Positioning - Branding

Figure 1

Value, positioning. Branding.

COMPETITIVE ADVANTAGE
The idea of competitive advantage and marketing strategy are intrinsically linked. Competitive advantage is the process of identifying a sustainable basis from which to compete. Ultimately marketing strategy seeks to deliver this advantage to the selected market place. Michael Porter (1980) identified 3 generic strategies which offered fundamental sources of competitive advantage. These are shown below in figure 2.

Cost Leadership

Figure 2

Differentiation

Focus

Generic Strategies

Based on Porters 5 forces model, management also need to define the competitive scope of the business whether to target a broad or narrow range of industries/customers as shown over in figure 3.

Strategic Advantage

Uniqueness Broad Industry-wide

Strategic Target Narrow Specific segment
Figure 3

Low cost Position

Differentiation

Overall Cost Leadership

Focused Differentiation

Focused Cost Leadership

Cost Leadership - The focus of strategic activity here is to develop/maintain a low cost structure. This does not necessarily mean low price. This is achievable by aggressive pursuit of policies designed to obtain economies of scale, to control overhead costs and achieve experience effects. The basic drivers of cost leadership include Economies of Scale - Large volumes can drive efficiency and enhance purchasing average. - Just in time (JIT) relationships with suppliers can reduce stockholding costs and enhance quality. Industry partners can help share product development costs or activities can be outsourced to specialist operators. The introduction of new technology to replace traditional methods often allows for cost reductions. - Factors such as location, availability of skills and government support can greatly affect a firms cost base (e.g. train operators in the UK)

Linkages and Relationships

Infrastructure


a) b) c)

There are, however, problems with this strategy, in that

A high volume strategy will often incur high initial investment costs. Success can attract stronger, better resourced competitors. If market share falls, economies of scale become harder to achieve while fixed costs are difficult to adjust in the medium to short term.

d)

Such strategies are often associated with commodity type products where price discounting and price wars are common.

Differentiation - Here the strategy is to provide a product that is unique or distinctive from the competition and so commands a premium price. The focus of strategic activity is in creating reasons for purchase via innovation, quality, design, branding, flexibility of service levels etc. Remember, it is often the perception of performance as opposed to actual performance that generates differentiation.

Common sources of differentiation include

Product Performance Product Perception Product Augmentation - Quality, durability, design and capability are factors often evaluated relative to competitors products. - Values, beliefs and recognition often provide the emotional appeal that generates brand loyalty. - Additional features are often provided to add value. For example, high levels of service, after sales support, affordable finance and competitive finance.

a) b) c)

There are some downsides to this strategy. It can be costly to provide the differentiation which can affect margins and risk. Innovation and other augmented features can be copied by competitors taking away any advantages. As needs change, the basis of differentiation may become less important as customers focus on other attributes (e.g. safety becomes more important than fuel economy).

Focus - Here the strategy focuses on a narrow range of product(s)/market(s). In fact, its aim is to specialise in a specific market and so become the leader in the sector. This focus or niche strategy can also generate the benefits of cost leadership or differentiation as shown in figure 3. A focus strategy is based on factors such as Geographic Area - Using geographic segmentation allows a product to be tailored to local needs/tastes. Regional breweries often changed their beers to suit local tastes and so avoid competition. Also, local association may offer the potential to differentiate the offer (e.g. Champagne comes from a specific region in France/Becks beer comes from Germany). - It is possible to focus and specify the type of user of a product. The Ritz Hotel group provides exclusive accommodation and services in the centre of the worlds major cities to the super rich. Morgan provide hand crafted cars to people who like the look and feel of driving an antique-styled motor vehicle. Within this narrow segment the focused organisation may be able to offer choice, service and economy of scale not available to more broadly based competitors (e.g. Tie Rack).

End-user Focus

Product Line Specialist

- Improved value is derived from the specialisation in terms of skills of the engineers (Morgan); quality/freshness of the product (Lochfyne Oysters)

The biggest problem associated with the above strategy is that being narrowly focused on a selective/often extremely small market segment can mean the business becomes more susceptible to downturns in demand because of economic pressures (e.g. Sock Shop). Also, success within a specialist niche sector can attract competitors who may be better resourced.

Overview - Porter recommends that organisations need to be consistent in adopting a definite generic strategy. Attempting to mix the above strategies within a defined segment often leads to market confusion and as such the organisation fails to achieve its competitive advantage and becomes suck in the middle as shown below.

Cost Leadership

Stuck in the middle

Figure 4

Differentiation

Focus

Other commentators are not quite as uncompromising as Porter. They argue effective differentiation and absolute cost leadership is rarely achieved. That both strategies are equally concerned with differentiating themselves while controlling costs and as such strategists can follow hybrid strategies aiming to offer added value and lower cost.

SOURCES OF COMPETITIVE ADVANTAGE

Strategy formulation is about developing and reinforcing a competitive advantage that is sustainable. Competitive advantage is a position that an organisation achieves relative to its competitors by using the resources and capabilities available to it. It may consist of a large single advantage or a number of smaller advantages. If achieved, it yields a superior return on investment for the organisation.
To be significant, competitive advantage should not be susceptible to imitation by the competition or changes to the environment (i.e. the competitive advantages should be unique and sustainable). In order to be sustainable, the competitive advantage must be, Relevant - Appropriate to current and future market needs while achievable within the resource base of the organisation. Defensible There must be barriers to the advantage being replaced, otherwise success will quickly be copied by competitors It is its assets and capabilities that makes an organisation unique. By developing a bundle of assets and capabilities and reflecting these deep within its brand, and organisation can differentiate itself. (e.g. Virgin is seen as a modern brand with a dynamic leader, Sony and Nokia are technologically innovative etc). All are difficult to imitate.

 Davidson identified 10 sources of competitive advantage as shown below.

1. 2. 3. 4. 5. 6. 7. Source Low Cost Operator Example Location, scale of operations, buying power. Alliances and Relationships Networking, partnerships and joint ventures. Attitude Advantages Legal Advantages Superior Reliability Superior Assets Superior Competencies Aggressive selling, tough negotiating. Patents, contracts, copyright. Reputation, quality. Technical/Financial/Management/Physical resources. Product/Channel management, product innovation, design skills, database management. 8. 9. Superior Products Perceived Advantage Technology, quality, performance. Successful, flexible, developing customised solutions. International operations, contacts, networks and dealerships.

10. Global Skills

Clearly, competitive advantage must be appropriate to the strategic nature of the industry. The Boston Consulting Group produced a template for evaluating the strategic competitive environments based on identifying 4 types of industry. (See figure 5)

Many Fragmented Number of ways to achieve competitive advantage Stalemate Valued Specialised

Few
Small
Figure 5

Large Size of Advantage

Fragmented Industries

The market needs are less well defined and there are numerous ways to gain advantage. Commonly companies here grow and succeed by offering a range of niche products. (e.g. media, publishing) Here the potential for differentiation is considerable and so numerous ways exist to achieve competitive advantage. Such industries include those offering customised solutions or the development of products specific to particular problems (e.g. design, biomedical engineering, consultancy). Here a few but highly significant advantages exist. These industries are often capital intensive and dominated by a few big players who achieve economies of scale. (e.g. chemical production, volume car manufacturing). Little potential for competitive advantage exists here. What advantages there are, are small. Such industries tend to be mature, highly competitive and often akin to commodity type products where price is the key criterion. Any technological advances are quickly copied (e.g. manufacturing domestic appliances/ desk top computers)

Specialised Industries

Volume Industries

Stalemate Industries

 Experience Curve
a) b) c) There is a relationship between the quantity of products produced and the cost per unit which is termed economies of scale. The reason why this occurs is often to do with the fixed costs incurred remaining the same irrespective of the output of production. When linked to market share, an organisation could spread its fixed costs over many units of production and so become more profitable. High market share therefore gives cost advantages.

The experience curve take the above further. The more units over time a firm produces, the cheaper each unit will be to produce. Why? Because of Economies of scale: as shown above. Learning: the more people do a task, the more efficient they become at it and it takes them less time. Technological improvements: firms can improve their production operations and make better use of equipment. d) Simplifying products, even administration can cut costs: car manufacturers standardise the use of components in different cars to save design and production costs, but also the fitting and maintenance of the parts is easier. The experience curve is not simply related to production, but can include technological design, logistics, administration even customers. It does, however, denote a pattern of decreasing cost as a result of the cumulative experience of carrying out an activity. It demonstrates that learning effects (i.e. via reputation and accumulated knowledge) can be combined with volume effects (economy of scale) to derive optional benefits as shown in figure 6.

Unit Cost

Cumulative experience Unit Cost

Figure 6

Volume

Eventually, cost and learning effect will level out and reflect diminishing returns. However, the process never stops. The advent of new technology may mark a shift in experience and offer new challenges. For example, IBM were slow to pick up on the knowledge relevant to the personal computer market and the software systems now offered by Microsoft.
Linked to the value chain, (see figure 7) this approach provides an additional framework to analyse competitive advantage. It helps to identify key skills, processes and linkages required to generate success.

Secondary Activities
Firms Infrastructure Technology Development Human Resource Management Procurement In House Logistics Operations Outbound Logistics Marketing and Sales Service Margins

Figure 7

Primary Activities

The Value Chain (M Porter, 1980)

INDUSTRY POSITION/STRATEGIC DIRECTION

Successful strategy is all about implementing plans that meet customer requirements taking account of competitive offering. As such, strategy formulation must consider the competitive position held within a given industry and its resource base relative to competitors. Competitive marketing strategy draws heavily on marketing strategy. The marketplace has often been described as a battlefield with competitors representing the enemy. Market Position The position of the organisation (or product) within a given market will clearly influence the strategic options available. Because different competitors have different aims, capabilities and resources they are generally grouped under 4 headings Market Leaders Market Challenges Market Followers Market Niches

1. Market Leaders
This type of organisation will be dominant within its given industry or market segment often due to market share, but can also be achieved though leadership via innovation or technical expertise.
Typical strategies adopted by the market leader are shown below in figure 8. Being the market leader allows for greater economies of scale and experience effects, but in turn, they will be a constant target for aggressive competitors.

Market Leadership

Expansion of overall market Targeting groups of nonusers Identifying new uses for the product/service Increasing usage rates

Guarding the existing market share Strong market positioning Development of competitive advantage Continuous product innovation Heavy advertising Strong customer/distributor relations

Expansion of current market share Heavy advertising Improved distribution Price incentives Mergers Takeovers Geographic expansion

Figure 8

2.Market Challengers
1. 2. 3. 4. 5. 6. 7. 8. Organisations who are not market leaders, but want to be market leaders are seen as market challengers. To challenge for leadership, there are several options available. Direct attack on the current market leader. Attack upon firms of a similar size to itself but which for a variety of reasons (i.e. lack of finance or weak management) are vulnerable. Attack on smaller firms. Such attacks can adopt several possible mix strategies Price discounting Price-quality combination Product innovation Improved service levels Distribution innovation Intensive advertising Cost reduction Promotional offers

3. 4.

Market Followers The focus here is on a quiet life not upsetting the apple cart. The key to success is to continually follow the leader, whatever they do. The approach is reactive rather than proactive. If the leader increases its prices, then the follower will copy the price move shortly after. If they move into a new market sector the follower will do so. Executed carefully, a market follower strategy can prove highly profitable, since it is likely that virtually all the costs and risks of product innovation or market development are borne by the market leader or challenger, with the follower learning from their mistakes. At the same time, followers can be vulnerable from attack by challengers. Market Nichers

Niching is a strategy that enables an organisation to concentrate its efforts upon a particular segment of the market and in this way avoid competition. The criteria for niching involves The niche must be sufficiently large to be profitable. It must have growth potential. It must be of little interest to larger competitors. The firm must have the skills needed to serve the niche effectively. The biggest problem for nichers is the firm may outgrow the niche. Alternatively, the organiation may be vulnerable, if for economic reasons the niche market contacts or if a major competitor decides that the niche offers sufficient long term potential to justify attack.

 Offensive and Defensive Strategies

In a battle for market share, two fundamental objectives are paramount. 1. To gain market share 2. To retain market share To achieve one or both objectives, organisations need offensive (attacking) and defensive.strategies. Kotler identified a number of attacking and defensive strategies as shown in figure 9.

4. Bypass Attack 2. Flank Attack Attacker 1. Frontal Attack Defender

3. Encirclement Attack

5. Guerrilla Attack
Figure 9

Attacking Strategic Options (Kotler et al 1999)

Designed primarily to gain market share, each is summarised in Table 1 over.

 Table 1
Strategic Option
Frontal Attack

Comment

Attack Strategies

This is a head on attack offering the market the same product line, price, promotion and so on. It is attacking the enemys strengths rather than its weaknesses and as such the attacker must be sure they have the resources to endure a long hard struggle it needs an edge such as a cost advantage or brand which is perceived more favourably. This approach engages the competitor in those product markets where they have weaknesses. By attacking market segments that are under-served a solid market position may be achievable. Japanese car manufacturers used the upper end of the executive and coupe market to break into the volume car sector in the USA. Multi-pronged attack aimed at diluting the defenders ability to retaliate in strength. (e.g. Seiko did this with the watch market). Here a range of products are offered that effectively encircles the competitor by each offering a different attribute. Seiko produced 400 watch types out of 2300 worldwide (some based on design, others on accuracy, activity related functions or price). This approach is about avoiding confrontation by seeking new geographic market areas where the competitor is not active or applying new technologies or developing new distribution systems (e.g. Tour Operators bypass existing retail sectors by selling direct to the public via the internet). Less ambitious in scope, these harassing attacks are tactical short-term marketing initiatives used to gradually weaken the competition. Sudden price cuts, bursts of promotional activity are used to create market unrest but slowly erode market share. They can be used to soften up the opposition prior to a sustained attack.

Flanking Attack

Encirclement Attack

Bypass Attack

Guerrilla Attack

It is often said that for every offensive move a defensive counter exists. A strong defence should deter, as well as repel rivals and allow the organisation to build on its strengths. Kotler identified 6 defensive strategies as shown in figure 10 below.

2. Flank defence 1. Position defence 6. Fall back defence

3. Pre-emptive defence Attacker 4. Counter defence Defender

5. Mobile Defence
Figure 10

Defending Strategic Options (Kotler et al 1999)

Designed primarily to hold on to market share, they can be seen to be primarily (but not exclusively) strategies for market leaders. Table 2 over summarises the different options.

 Table 2
Strategic Option Position Defence Comment

Defence Strategies

Static defence is reliant on its current position to shut out the competition. It uses its distinctive competencies and assets to build an unassailable position (e.g. the French used the Magino line to keep the Germans out in the First World war). This is used to occupy a position of potential future importance in order to deny it as a possible spring board for attack by the competition. A general food retailer may see its flank as frozen products in which it competes with frozen food retailers. To protect its flank it may offer several frozen food loss leaders. Attack has often been seen as the best form of defence. Guerrilla attacks are often used routinely by market leaders to deter competitors via price cuts or increased promotional activity. This is a response to attack and by its nature is reactive. Examples relate to price wars especially where the attack is on the firms core business where response can be immediate and severe. Involves a flexible and adoptive response, allowing the defender to switch into new areas of interest by entering new markets or by diversifying into unrelated activities (e.g. an insurance company may broaden its range of financial services offered to its customers or diversify into areas such as estate agency and property management). It may not be possible to defend all market or product areas and so a selective strategic withdrawal could be the best option. By sacrificing some markets/products, resources are freed up to defend core activities. Unilever have recently withdrawn several consumer products (e.g. Birds Eye, Dove) in order to concentrate on more profitable sectors.

Flank Defence

Pre-emptive Defence Counter Defence

Mobile Defence

Fall-back Defence (Retreat)

Alternatively, a second approach is to develop a strategy appropriate to the organisations market position as a leader, challenger, follower or nicher. Much of these are based on military strategies of attack and defence, see table 3 below.

Leaders Table 3
Position defence Flanking defence Mobile defence Pre-emptive defence Counter-offence Withdrawal

Challengers
Frontal attack Flank attack Encirclement attack Bypass attack Guerrilla attack

Followers
Follow closely Follow at a distance Follow selectively

Nichers
Specialise/segment: Geographically By type of end user By product or product line On quality/price spectrum By service By size of customer By product feature

Dont feel constrained to use one or another of the strategic frameworks. You can use any approach you like to identify strategic options. Strategies for Market Position

STRATEGIC DIRECTION
1. 2. 3. Product/market strategies address the specific market impact of a product or product line. This section examines 3 concepts useful in formulating strategies The Product/Market Matrix Product Impact of Market Strategy (PIMS) Product Life Cycle Product/Market Matrix Igor Ansoff developed a growth sector matrix which provides a useful linkage between product and markets. The matrix as shown in figure 11 considers 4 combinations of product and markets in which each combination suggests a different growth strategy.

Product
Existing
Market Penetration Strategy by Getting existing customers Existing to buy more Gain customers from competitors Convert non-users 1.

New
Product Development by Product modification via new features Different quality levels New product 2. Diversification Strategy by 4. Organic growth Joint ventures Mergers Alliances

Market

Market Development Strategy by New market segments New distribution channels New geographic areas (exporting) 3.

New

Figure 11

Product/Market Growth Matrix (Ansoff, 1975)

 a) b) c) a) b)

Market Penetration The firm seeks to: Maintain or increase its market share of existing markets with existing products via competitive pricing, advertising and/or sales promotion. Restructure a mature market by driving out the competition. Increase usage by existing customers (e.g. airmiles, loyalty cards). Market development The firm here seeks new markets with its existing products. It is highly relevant where its products have significant strengths which are also sought in new markets. New geographical areas (export markets such as a radio station building a new transmitter to reach a new audience). Different package sizes or pricing policies which may appeal to different market segments (i.e. convenience food or packages for an individual or for a family, long stay winter breaks in warmer countries for older people). New distribution channels to attract new customers (e.g. Alison's wholemeal bread sold to supermarkets, not just specialist shops).

c)

Product Development Firms must update their product portfolio to remain competitive. Here we are concerned with offering new products to existing customers. This may be in the form of Product modification New use New product

Basically, this approach is about seeking to provide added volume to the product or service offering by finding a completely new solution to the customer problem/need. Ideally, a balanced product portfolio should exist, with established products generating the cash for supporting new product development. Diversification this is the riskiest strategy of all in that the firm is seeking to offer new products to new customers. The major reason for this strategy is to do with other market needs offering greater scope for growth (possibly as a means of filling a planning gap). Often referred to as related diversification, this is the development beyond the present product market, but still within the broad confines of the industry, in that it builds on the assets/activities which the firm has developed. It takes the form of backward and forward integration as well as horizontal integration as shown over.

Suppliers
Backward Integration

Competition

Company

Horizontal Integration

Agents
Forward Integration

Wholesalers

Retailers

Consumers

Figure 12

Backward Integration

e.g. a a milk producer acquires its own dairy farms.

Horizontal Integration

could mean taking over the competition via acquisition or merger. For example, Nestl purchased Rowntree. Alternatively it could mean developing activities which are competitive with or directly complimentary to a companys present activities. Sony for example, started to compete in computer games, building on its presence in consumer electronics.
e.g. Benetton developed its own retail network by opening its own shops and through franchising.

Forward Integration

PROFIT IMPACT OF MARKETING STRATEGY (PIMS)

Administered by the Strategic Planning Institute of the USA, PIMS gathers data from a Number of companies in order to establish industry-wide relationships between a variety of factors and two measures of company performance i.e. profitability/ROI and cash flow. Information is collected by SBU and aggregated by industry type often on a SIC classification. By comparing its own performance against PIMS data a company can evaluate the effects of its marketing strategies. As of 2003, around 2500 SBUs from 600 companies were participating in the PIMS programme. The marketing related factors which are assessed industry-wide to have the greatest impact on ROI (profitability) are:Market share relative to the companys 3 largest competitors. Value added to a product by a company. Industry growth. Product quality. Level of innovation/differentiation. Vertical integration (ownership of other channel members).

While the other factors are considered important, generally PIMS recognises that companies profit increases relative to market share increases, see figure 13. This relationship has and continues to influence marketing thinking, promoting actions aimed at increasing market share as a route to profitability

Profitability Profit related to market share

Figure 13

Market Share

In respect to cash flow PIMS data suggests that:Growing markets drain company cash. High relative market share improves cash flow. High levels of investment drain cash.

While the market share/profitability relationship is often true, it is not universal and some industries display a V-shaped relationship, see figure 14. Here profitability can initially fall until a critical mass in terms of market share is reached. The effect of the V-curve is polarisation industries with niche players and large dominant players. Medium sized firms see profits fall until critical mass is reached. This makes it very difficult for small/medium companies to grow.

Profitability

Figure 14

Market share

V-shaped profit/market share

PIMS information is conveyed to participating firms through several reports. These are:

1.

PAR Report

2. 3. 4.

Strategy Analysis Report Optimum Strategy Report Look-a-Likes Report

- shows average ROI and cash flow for an industry on the basis of market competition, technology and cost structure. - shows effects of strategy changes on short and long ROI and cash flow. - suggest strategy that will maximise results. - examines tactics of similar competitors both successful and unsuccessful.

PRODUCT LIFE CYCLE

The product life cycle (PLC) has been described as the most quoted but the least understood concept in marketing. Any strategy considering products and markets will be influenced by the PLC. (see figure 15) The basic concept, can be summarised as products passing though 4 phases introduction, growth, maturity and decline. Sales (and profits) will vary with each phase of the life cycle. Table 4 over summarises the sales/profit characteristics, objectives and generic strategies that can be applied to the PLC.

Introduction Sales/ profit

Growth

Maturity

Decline

Sales

Time Product Life Cycle

Figure 15

Profit

TABLE 4
CHARACTERISTICS Sales
Costs Profits Customers Competitors

Low sales
High cost per customer Negative Innovators Few

Rapidly rising sakes

Peak sales

Declining sales
Low cost per customer Declining profits Laggards Declining number

Average cost per Low cost per customer customer Rising profits Early adopters Growing number High profits Middle majority Stable number beginning to decline

MARKETING OBJECTIVES

Create product awareness and trial

Maximize market Maximize profit share while defending market share

Reduce expenditure and milk the brand

 STRATEGIES
Product Offer a basic product Offer product Diversify brands extensions, and models service, warranty Phase out weak items

Price
Distribution

Use cost-plus
Build selective distribution

Price to Price to match or Cut price penetrate market beat competitors

Build intensive distribution Build more intensive distribution Go selective: phase out unprofitable outlets

Advertising

Build product awareness among early adopters and dealers

Use heavy sales promotion to entice trial

Build awareness and interest in the mass market

Stress brand differences and benefits

Reduce to levels needed to retain hardcore loyals

Sales Promotion

Reduce to take advantage of heavy consumer demand

Increase to Reduce to encourage brand minimal levels switching

To fully understand the PLC, managers need a detailed understanding of the concept. The following points merit consideration.

Industry and product line - The PLC concept can also apply to overall industry sales. Clearly, the PLC for individual product lines needs to be considered in relation to this. If industry sales are declining it may not be wise to launch new product lines. In growth industries such as hi-tech communications, some product lines have very short PLCs as they are rapidly being replaced by more advanced technology. It is important ,therefore, to understand where the industry is in terms of overall PLC and how the organisation's portfolio of products fits into the pattern. Shape of PLC - Not all PLCs conform to the standard S shaped curve shown in figure 15. Product life cycles can take different forms as shown below in figure 16.

Cyclical PLC
Figure 16

Constant Demand PLC

Fad PLC

 Volatility - Sales levels will fluctuate over time which means plotting the rise and fall of the curve is difficult as is the knowing exactly where the product is in its life cycle (i.e. does a fall in sales mean a product is in its decline phase or is this a temporary blip? only time will tell). Duration of Phases - Many commentators argue the length of each PLC phase is closely related to marketing decisions and not simply a natural cycle of PEST events. Effective marketing should be able to sustain the growth and maturity of a product offering while ineffective marketing will hasten its decline. Difficult Market Conditions - The generic strategies provided by the PLC concept tend to work well when we are experiencing incremental growth. However, many industries (e.g. motor industry) are experiencing static or declining demand. Such markets are hostile in nature and feature factors such as volatility, over capacity, price discounting, reduced profit margins and downsizing. Given these conditions Aaker (1998) advocated a number of strategic options for declining or hostile markets. 1. Generate growth - try and revitalize the industry growth by: a. b. c. Encouraging existing users to buy more Develop new markets for products, and Find new applications for existing products.

 Survival - Try and survive by managing costs using experience effects and economies of scale. Rationalise the product portfolio and focus on larger more profitable customers. Alternatively, expand the product range aiming to cover the maximum number of customers and a wide range of price points. In these circumstances we may witness take-overs, mergers and acquisitions as organisations seek to reduce cost and generate economies of scale. This shake-out inevitably leaves the industry with fewer but larger competitors (e.g. Welsh Higher Education industry). Exit Strategy - Where business conditions are particularly unfavourable prudence may dictate leaving/withdrawing from the industry. Such action requires overcoming exit barriers, such as, costs associated with downsizing (redundancy, legal costs of breaking contracts and handling commitments to existing customers).