Page 62 - Marketing Management

DEVELOPING MARKETING STRATEGIES AND PLANS | CHAPTER 2 39

TABLE 2.2 Defining Competitive Territory and Boundaries
in Mission Statements

• Industry. Some companies operate in only one industry; some only in a set of related industries;
some only in industrial goods, consumer goods, or services; and some in any industry.
• Caterpillar focuses on the industrial market; John Deere operates in the industrial and
consumer markets.
• Products and applications. Firms define the range of products and applications they will
supply.
• St. Jude Medical is “dedicated to developing medical technology and services that put more
control in the hands of physicians, and that advance the practice of medicine and contribute
to successful outcomes for every patient.”
• Competence. The firm identifies the range of technological and other core competencies it will
master and leverage.
• Japan’s NEC has built its core competencies in computing, communications, and components
to support production of laptop computers, television receivers, and handheld telephones.
• Market segment. The type of market or customers a company will serve is the market
segment.
• Aston Martin makes only high-performance sports cars. Gerber serves primarily the baby
market.
• Vertical. The vertical sphere is the number of channel levels, from raw material to final product
and distribution, in which a company will participate.
• At one extreme are companies with a large vertical scope. American Apparel dyes, designs,
sews, markets, and distributes its line of clothing apparel out of a single building in downtown
Los Angeles.
• At the other extreme are “hollow corporations,” which outsource the production of nearly
all goods and services to suppliers. Metro International prints 34 free local newspaper
editions in 16 countries. It employs few reporters and owns no printing presses; instead
it purchases its articles from other news sources and outsources all its printing and much
of its distribution to third parties. 16
• Geographical. The range of regions, countries, or country groups in which a company will
operate defines its geographical sphere.
• Some companies operate in a specific city or state. Others are multinationals like Deutsche
Post DHL and Royal Dutch/Shell, which each operate in more than 100 countries.

Establishing Strategic Business Units
Companies often define themselves in terms of products: They are in the “auto business” or the
“clothing business.” Market definitions of a business, however, describe the business as a customer-
satisfying process. Products are transient; basic needs and customer groups endure forever.
Transportation is a need: the horse and carriage, automobile, railroad, airline, ship, and truck are
products that meet that need.
Viewing businesses in terms of customer needs can suggest additional growth opportunities.
Table 2.3 lists companies that have moved from a product to a market definition of their busi-
ness. It highlights the difference between a target market definition and a strategic market definition.
A target market definition tends to focus on selling a product or service to a current market.
Pepsi could define its target market as everyone who drinks carbonated soft drinks, and competi-
tors would therefore be other carbonated soft drink companies. A strategic market definition,
however, also focuses on the potential market. If Pepsi considered everyone who might drink some-
thing to quench their thirst, its competition would include noncarbonated soft drinks, bottled
water, fruit juices, tea, and coffee. To better compete, Pepsi might decide to sell additional beverages
with promising growth rates.
A business can define itself in terms of three dimensions: customer groups, customer needs, and
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technology. Consider a small company that defines its business as designing incandescent lighting