COMPETITIVE MARKETING STRATEGY FOR EUROPE COMPETITIVE MARKETING STRATEGY FOR EUROPE DEVELOPING, MAINTAINING AND DEFENDING COMPETITIVE ADVANTAGE Linden Brown and Malcolm H. B. McDonald M MACMILLAN © Linden Brown and Malcolm H. B. McDonald 1994 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and dvil claims for damages. First published 1994 by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world ISBN 978-0-333-61351-1 ISBN 978-1-349-23392-2 (eBook) DOI 10.1007/978-1-349-23392-2 A catalogue record for this book is available from the British Library. Typeset by Cambrian Typsetters, Frimley, Surrey II Contents List of Tables vii List of Figures ix Acknowledgements xii 1 Competitive Marketing Strategy: Concepts and Application 1 The Task of Competitive Marketing Strategy I The Strategic Planning Process 2 Strategic Analysis Concepts 7 Integration of Concepts and Models 40 Competitive Position 45 Competitive Strategies 50 Case Study I: Myson Radiator Division 53 2 Low Cost, High Differentiation Strategies 72 Introduction 72 Multibrand Strategies to Protect Dominance 76 Maximising Market Potential and Profit as the Dominant Industry Force 83 Strategic Issues in Mature and Declining Markets 88 Case Study 2: JCB Defends its Dominance in a Declining Market 97 Case Study 3: Andrex I03 Case Study 4: Glaxo I08 3 Low Cost, Low Differentiation Strategies 113 Introduction II3 Developing a Market Leadership Position in Service Industries II5 Case Study 5: The Single European Grocery Market 120 Case Study 6: Leadership Issues in the European Cellopp Market I33 Case Study 7: Gaining Leadership in an Undifferentiated Market - Ratners Group plc I40 Attacking the Market Leader I44 Case Study 8: Amstrad Learns from the Japanese Approach I 53 Repositioning the Business for Leadership I60 Case Study 9: Tesco I67 Case Study IO: Bernard Matthews I73 vi Contents 4 Strategies for Positioning as a Major Force in the Market 179 Introduction I 79 Creating a Third Force 183 Case Study II: Ballentine's (Hiram Walker/Allied-Lyons) in Spain 186 Flanking Strategy and Cost Leadership to Position as a Major Force 189 Case Study 12: Argos 208 Restructuring the Market to Break Monopolistic Competition 212 Case Study 13: Courtelle 218 Case Study 14: The European Fertiliser Industry 221 Case Study 15: Virgin Atlantic Airways 234 Case Study 16: Pretty Polly 238 Case Study 17: Selincourt 241 5 Growth Strategies for the Niche Competitor 258 Competitive Infiltration Strategies 260 Case Study 18: Europeanising a Medium-size Company 266 Expanding Regional Brands 274 Case Study 19: Firkin Pubs - A London Regional Brand 282 Case Study 20: San Serif and Trivial Pursuit 286 Case Study 21: Derwent Valley Foods Ltd-Marketing Success Story or One Product Wonder? 291 Niche Marketing Against Big Budget Competitors 294 Case Study 22: Stollwerck AG in Germany 299 Case Study 23: Next 302 Case Study 24: The Launch of The Independent Newspaper 312 Case Study 25: Thorntons plc 316 6 Competitive Marketing Strategy Experience 322 7 Uses of Case Studies to Enhance Learning 340 Notes and References 349 Bibliography 356 Index 358 II List of Tables 1.1 Evolution of management systems 3 1.2 Products at different life-cycle stages 9 1.3 Generic strategy options 23 1.4 Ansoff's growth vector matrix 26 1.5 Using the Ansoff matrix in the objective setting process 27 1.6 Some PIMS findings 31 1. 7 European chocolate confectionery market shares (per cent by sales volume) 39 1.8 Guidelines for various product life-cycle stages and competitive positions 41 1. 9 Competitive position and life-cycle stage 42 1.10 Portfolio position and life-cycle stage 42 1.11 Product-market coverage 47 1.12 Strategic positions in the market 48 1.13 Market structure and share positions 49 1.14 Market share (per cent) 56 1.15 Recent financial performance 58 1.16 Approaches to exporting 63 2.1 Advantages and limitations of branding policies 7 6 2.2 Brand strategy guidelines for a market leader in different market structures and market conditions 81 2.3 Brand strategy guidelines for non-dominant firms in different competitive conditions and market conditions 82 2.4 Product-market strategies 92 2.5 Two strategy packages 95 2.6 Andrex as market leader 106 2.7 Glaxo financial performance 109 2.8 Glaxo co-marketing agreements for Zantac 110 3.1 The marketing mix for services 118 3.2 Selected European representation of major EC grocery retailers 121 3.3 Turnover of the major European grocery retailers, 1987/88 123 3.4 Comparison of the turnover of European grocery buying groups vs. the European Retail Association 126 3.5 UK food sales by sector, 1980-8 (unit per cent value analysis) 128 3.6 Net profit as a per cent of sales of selected European grocery retailers 128 3.7 Ratners' Group pic Financial Summary, 1988-92 143 3.8 Generic strategies and market perceptions 147 3.9 Challenger strategies in rapid growth markets 149 viii List of Tables 3.10 Challenger strategies in mature markets 150 3.11 Amstrad pic financial performance, 1983-92 157 3.12 Amstrad pic results, 1991 and 1992 158 3.13 Comparison of Tesco's marketing mix before and after 1977 168 3.14 Tesco financial record, 1988-92 169 3.15 Tesco pic financial performance 170 3.16 Bernard Matthews pic financial record, 1988-92 178 4.1 Detailed profit and loss figures, 1973-83 201 4.2 Profit and loss account, 1981-3 202 4.3 Argos financial performance, 1988-92 211 5.1 Infiltration strategies and competitor types 2 79 5.2 Rapid penetration strategies and competitor types 280 5.3 Trivial Pursuit: European unit sales 290 5.4 The March of the Lilac Cow (Lila Pause): market shares of Milka and Sprengel chocolate bars (per cent) 299 5.5 Market shares of competitors in West Germany, 1989 300 5.6 The UK retail clothing market, 1976-82 302 5. 7 Hepworth Group financial performance, 1976-81 307 5.8 Hepworth Group financial performance, 1982-8 307 5.9 Next pic financial performance, 1988-92 310 5.10 Thornton's pic financial record, 1988-92 320 II List of Figures 1.1 Strategies to achieve future position 1 1.2 Strategy formulation process 4 1.3 Life-cycle of a typical product 7 1.4 Diffusion pattern and adopter categories 9 1.5 Basic product life-cycle stages 10 1.6 Alternative life-cycle shape and stages 11 1.7 Profit-volume relationship over the life-cycle ll 1.8 Generalised diffusion pattern for a fad, a fashion and a new product 11 1. 9 The commodity slide 13 1.10 Experience cost relationships 14 1.11 A typical stable pattern 15 1.12 A characteristic unstable pattern after it has become stable 15 1.13 Competitor and industry price experience 16 1.14 Unstable price gap 16 1.15 Portfolio positions and cash flows 20 1.16 Strategy direction 24 1.17 Product market directions 25 1.18 Gap analysis 25 1.19 Strategy alternatives for closing the gap 28 1.20 The five competitive forces and elements of industry structure 33 1.21 Strategic alternatives 34 1.22 Strategic directions 35 1.23 Portfolio, life-cycle and market share 43 1.24 Improving competitive position 44 1.25 The path to competitive position taken by Japanese car manufacturers 44 1.26 The path to competitive position in McDonald's 46 1.27 Improving competitive position 52 1.28 Schematic diagram of Blue Circle Industrial Group corporate structure 54 1.29 UK radiator market, 1960 to date 55 1.30 Directional policy matrix- Round Top 61 1.31 Directional policy matrix - Supaline 61 1.32 Product innovation continuum 62 1.33 Porter's strategy matrix 65 1.34 Organisational positioning of sales and radiators divisions 66 1.35 Distribution chain 67 1.36 SWOT analysis for Myson radiators 70 x List of Figures 2 .l Product/ division profit improvement options 94 2.2 A 'differentiated, plus cost advantage' strategy is best, but requires superior quality of management 96 2.3 Market size for Backhoe Loaders, 1972-81 97 2.4 Housing and construction 98 2.5 Product life-cycle 99 2.6 Sitemaster market growth, 1981-7 100 2. 7 Sitemaster sales, 1981-7 100 2.8 Market share of toilet tissue manufacturers 103 2.9 Porter's generic strategies 104 2 .l 0 Price and competition 105 2.11 Glaxo financial performance to 1992 108 2.12 Ansoff matrix of Zantac Business Development 110 2.13 Zantac market penetration by country, 1986 Ill 3.1 GDP and population of the world's leading commercial powers, 1988 120 3.2 Structure of UK grocery retailing, 1989 123 3.3 Porter's structural framework 124 3.4 The cycle of retail concentration 126 3.5 A jewellers covering all areas of the market from high price high quality to low price low quality 141 3.6 Individual coverage of the entire jewellery market 141 3.7 Price Pincer patterns 149 3.8 The Japanese strategic marketing planning model 150 3.9 Japanese automobiles 151 3.10 Japanese motorcycles 152 3.11 Amstrad's turnover in major European countries, 1984 and 1988 154 3.12 The life-cycle of Amstrad products, 1984-8 155 3.13 Amstrad's product portfolios, 1985 and 1989 156 3.14 Market map, newspapers 161 3.15 1986 market map, newspapers 162 3.16 Competitive positioning and management focus 165 3.17 Bernard Matthews Ltd, planning gap in mid-1970s 173 3.18 Bernard Matthews, SWOT analysis in mid-1970s 174 3.19 Bernard Matthews, Porter matrix 175 3.20 Bernard Matthews, Boston box 176 3.21 Bernard Matthews, sales turnover 1978-86 177 4.1 Boston matrix: Spanish spirit market from 1982 187 4.2 Spanish spirit market development, 1982- 187 4.3 Spanish whisky market share, 1982-91 188 4.4 Relative differentiation for competitive advantage 190 4.5 Examples of advertising used in Homes 1975 promotional campaign 199 4.6 Further examples of advertising used in Homes 1975 promotional campaign 200