Strategic Marketing Management – A Case Study of The Cooperative Group, UK
1.1 Role of strategic marketing in an organisation:
Strategic marketing can be defined as the process of identifying competitive advantage a firm and allocating resources for optimum utilisation of these advantages. The concept of strategic marketing has gained immense significance in recent years due to increased market competition in the UK retail industry. The current study is concerned with applying strategic marketing models on the cooperative group of UK for the achievement of organisational objectives. Cooperative group is a UK based cooperative society that is engaged in retail business. Food, electrical goods, funeral arrangements, financial services, and legal consultancy are the key business lines of the cooperative society. The membership to the society is open to all aged 16 years or above. The current study aims to identify the market opportunity of the cooperative group and devise strategic marketing options to capitalise the opportunities for the achievement of pre-determined organisational objectives. The assignment sends with a discussion on the potential strategic marketing responses for the cooperative group.
Marketing strategy has both direct and indirect impact on the other functions of a firm. As mentioned by Griffith (2012), the sales maximisation, cost reduction, profit maximisation, and enhanced competitive advantage are the basic objectives of strategic marketing. However, it is important for an organisation to create an integrated marketing strategy for effective implementation of the marketing strategy. The role of strategic marketing in the achievement of organisational objectives of the cooperative society is discussed below:
Streamlining of product development:
Identification of actual needs of customers is one of the prime concerns of strategic marketing. Strategic marketing increases the chance of success of the products of a firm through the development of products and services based on actual needs of customers. This further enhances the probability of success of a product in the market. In present scenario, the cooperative group needs to use appropriate tools and techniques to identify the marketing strategy of the competitors, market trend, and customer preferences to develop appropriate products for the customers.
Determination of optimal selling price:
Strategic marketing helps an organisation to determine the optimal selling price for its products and services based on market research and internal analysis. As mentioned by Katsikeas et al. (2008), optimal selling price is the one that allows a firm to achieve maximum profit through proper balancing of potential loss of sales and potential loss of profit. Selling price greater than the standard selling price might result in loss of customers and sales whereas selling lower than the standard selling price might result in loss of potential profits and high opportunity costs. The cooperative group needs to review its existing selling price through sound strategic marketing and determine the optimal selling price to ensure maximum profitability.
Development of effective distribution system:
In the view of Kustin (2007), point of sales is one of the crucial factors in the success of a marketing strategy. The cooperative society is currently bearing high interest payments and therefore the organisation needs to review its existing sales and distribution strategy to enhance ease and convenience of the customers in buying its products and services. The cooperative society needs to allow its customers to pay online for its products and services. Put it differently, development of a strong online shopping platform is vital for the cooperative group. In this context, Omar (2008) stated that online shopping results in reduced costs behind sales workforce.
Sound marketing communication system:
Market research can be considered as the base for the development of advertising and sales-promotional strategies of an organisation. As mentioned by Spanyi (2008), strategic marketing helps in the identification of appropriate advertising tools through in-depth analysis of the target customer group and available organisational resources. The current advertising and sales-promotional efforts of the cooperative group seems to be insufficient due to stiff competition in the UK retail sector. Thus, strategic marketing can improve the communication process between the cooperative group and its customers.
Process can be defined as the set of procedures, policies, and processes to ensure maximum satisfaction level for customers. As mentioned by Birkinshaw et al. (2006), process is concerned with the planning, development, action, documentation, and monitoring and review of procedures or systems to meet the principle aim of the marketing strategy of the organisation. The key processes of the cooperative group are discussed below:
Strategy and planning:
Marketing strategy refers to the set of tactics, mechanisms, and action plans to be undertaken in future by an organisation to meet its marketing objectives. Sound planning is inevitable for the success and growth of an organisation. Corporate strategy and planning is a prime process of the cooperative group.
System and procedures:
The next vital process of the cooperative group is the system. The organisation follows a systems approach in its management and control functions. As mentioned by Conroy (2008), well-developed system ensures greater organisational efficiency, risk elimination, cost-reduction, and consistent growth of a firm.
In the view of Min and Mentzer (2011), information is the fuel of a business which is a result of proper documentation process. Documentation provides information for future references and helps to study historic trends and results.
Quality control has become inevitable for any retail business organisation. An organisation cannot afford customer dissatisfaction and unnecessary expenses. Quality assurance is concerned with ensuring that the products conform to the pre-determined quality standards to ensure customer satisfaction. However, quality control is also concerned with the elimination or reduction of defectives or production wastages which in turn reduces the overall cost of production.
Monitoring and review:
The decisions and actions taken by an organisation need continuous monitoring and periodic review. Continuous monitoring would ensure that the actions are performed in a way to achieve organisational goals whereas periodic reviews are aimed at taking corrective actions against deviations.
The current strategic goals of the cooperative group are mentioned below:
- Increase of sales revenues
- Increase of profit margin
- Reduction of debt and interest burden
- Improvement of brand image
Cooperative group is currently paying around £100 million annually towards interest payments against debts taken by the organisation due to severe crisis in 2013. In addition, several scams of the key executives of the cooperative group badly affected the brand image of the organisation. All these have an adverse impact on the overall business functioning and performance of the organisation. However, suitable strategic marketing can help the cooperative group to overcome the current situation. Strategic marketing would result in proper identification of customer needs, sound product development, reduction of unnecessary production costs and defectives, effective advertising, and greater sales volume. All these together can help the cooperative group to repay its debts earlier than the due date to save on interest payments. In addition, advertising is a key part of the strategic marketing and thus strategic marketing can help the organisation to regain its lost brand image due to scams of its executives recently. In addition, the cash flow position of the organisation would also be improved through greater inflow of cash revenues from sales.
The popular models for strategic marketing are presented below:
- 7Ps of marketing mix
- Boston consulting group matrix
- Brand positioning map
- Customer lifetime value model
- Growth strategy matrix
- Loyalty ladder
- Porter’s five forces analysis
- Product life cycle
- Segmentation, targeting, and positioning
Among all the above mentioned marketing models, growth strategy matrix and segmentation, targeting, and positioning model seems to be appropriate for the cooperative group at present.
Market growth matrix consists of 4 different marketing strategies namely market development strategy, market penetration strategy, diversification strategy, and product development strategy. Market development refers to entering into new markets and product development refers to the creation of new products. However, the current financial position and debt burden of the cooperative group would not allow the organisation to adopt market development and product development strategies as both these strategies involve huge capital investments. In contrast, product diversification refers to focusing on related or unrelated business associated with existing product lines whereas market penetration strategy involves adoption of new strategies for maximum utilisation of existing market opportunities. However, market penetration strategy requires lower financial and other organisational resources compared to the other strategies. As mentioned by Chapman (2012), market penetration strategy aims at enhancing competitive advantage, market share, and customer loyalty. In addition, cost reduction is also one of the prime focuses of market penetration strategy. Hence, market penetration strategy seems to be suitable for the cooperative group.
The segmentation, targeting, and positioning strategy is aimed at identifying specific customer segments and offer more customised products to meet customer needs.
However, the cooperative group can focus on market penetration strategy to meet its strategic objectives. The stages of this strategy are mentioned below:
Market penetration strategy:
- Development of online shopping platform to increase competitive advantage
- Adding of new features to the existing products
- Cost reduction to increase profitability, frequency of purchase by customers, and volume of purchases by customers
Strategic positioning can be defined as the determination of strategic position or process to serve customers through enhanced competitive advantage. In this context, Shoham (2012) stated that the principle aim of strategic positioning is to strengthen customer bonding. Therefore, it would not be improper to say that teh focus of strategic positioning is on relationship marketing. Relationship marketing refers to the marketing philosophy that is focused on the long-term relationship of a firm with its customers. The key benefit of relationship marketing is the sales-promotion of a firm’s products through the word of mouth of the existing customers. As mentioned by Ryans (2011), sophisticated and flexible marketing strategy is crucial for the success of relationship marketing.
In present scenario, the strategy of the cooperative group would be to focus on customer engagement to develop long-term relationship with customers that in turn would improve both customer loyalty and brand image of the organisation. The 3 different types of strategic options available to the cooperative society are mentioned below:
Total customer satisfaction:
This strategic option is focused on reducing costs to customers or increasing profits or benefits of the customers. In other words, increased customer economics and result in strong customer bonding.
This strategy involves low cost or other differentiation tactics to enhance brand loyalty
This strategy is aimed at enhancing complementor share and locking out of competitors.
Focus on relationship marketing has become highly important for the cooperative group to regain its lost brand image and increase profitability through greater sales revenues. In this context, Schramm-Klein and Morschett (2009) stated that repeated sales, stable customer base, and ease in new product introduction are some of the key benefits of relationship marketing. The cooperative group needs to create an organisational culture in which all employees are motivated to understand the actual needs of customers and serve customers accordingly. Relationship marketing is based on long-term focus rather on short-term focus on mere profitability. Cooperative society is currently facing stiff competition from companies like Tesco, Sainsbury, and others. Therefore, the organisation can benefit from relationship marketing to meet its existing strategic objectives.
The UK economy was earlier affected by the global financial crisis but the economy is currently showing considerable recovery. High unemployment rate, high inflation rate, and exchange rate fluctuations were the key issues associated wit hthe UK economy. The sales of the retail companies were badly affected by these economic issues due to falling purchasing power of customers. However, the UK retail market offers ample of growth opportunities in the coming years. The market is expected to grow at a stable rate in the near future. In addition, there has been a sharp rise in the online retail shopping among UK customers. However, existence of stiff competition in the market can be a serious concern for the cooperative group.
The market penetration strategy can be implemented by the cooperative group through the following initiatives:
- Extensive market research
- Identification of customer needs and competitor strategy
- Development of online shopping platform for customers
- Implementation of cost reduction and cost control techniques like EOQ, JIT and others for effective cost optimisation
- Focus on relationship marketing
The market penetration technique can help the cooperative group to achieve its strategic objectives. Market research would help in the development of more customised products for customers. This along with online shopping platform would enable the organisation to increase its sales. Higher sales revenues and reduced cost of production would result in greater profitability for the cooperative society. On the other hand, relationship marketing would help the organisation to enhance its brand image.
4.1 Impact of changes in external market on marketing strategy:
PESTLE analysis has been employed for the purpose of determining the impact of external market environment on marketing strategy of the Co-operative group.
Free flow of trade both nationally and internationally facilitates businesses in building a competitive market edge (Griffith, 2012). As designed, the Co-operative group will be able to carve a widen product and service information by applying tactical marketing strategies. Although, the dominance of hypermarkets are considered to increase in the near era, the Co-operative group can develop its precedence by deploying its potential marketing strategies. The current group will also benefit from free trading blocs made by the UK government. The marketing policy will help it in earning higher revenue from product sale.
Chapman (2012) noted that although UK was initially burdened by the impact of recession, the reduction of interest rates have helped in reducing further market issues. The consumers’ spending power of the consumers is steadily on the rise thus increasing the potential of gaining faster customer access. However, there can be financial uncertainty as the co-operative group cannot be sure of the fact that the customers will be moved to purchase based on its marketing policies.
While the older people will travel less to the retail stores ot purchase materials, the younger lot is presumed to frequently gain access. The marketing policies is considered to motivate the customers to build positive brand perceptions, thereby, improving its future market share (Conroy, 2008). As consumers brand perception is increasing based on marketing strategies, the co-operative group can experience higher accessibility.
Kustin (2007) acknowledged the increasing dominance of online channels for product or service promotions. The online strategies of the co-operative group are considered to yield profitable results as several customers will prefer to shop online. However, not all customers are tech savvy instead prefer traditional promotional policies.
UK has made it clear for its business operators to introduce: Greener Living Schemes and reused bags to its customers (Omar, 2008). Although, the same might be costly, yet the co-operative group have to deploy environment friendly packaged material and practise sustainable operating policies. It should promote its greener habits
Besides maintaining the Minimum Wage Act, the co-operative group have to abide by the VAT and other tax regulations (Patel, 2008). Both the latter factors will prove to be a costly affair for the co-operative group. However, its maintenance will facilitate faster market penetration.
4.2 Internal analysis of Cooperative group:
The co-operative group have build a market base, thus helping the brand to capitalise its current goodwill. Spanyi (2008) noted that the marketing strategies help in advancing market reputation of the brand. The intended product and service customization of the co-operative group is considered to help it in its future sustainability. However, the group have not been able to function well in the last few years. The company have suffered damage to its brand image thus allowing its competitors to sideline the market placement of the co-operative group. Shoham (2012) criticised the co-operative group is concentrated mostly in the UK market thus limiting the diversification merits.
The increase in customers’ base of UK is the future market opportunities of the co-operative group. The marketing policies of the co-operative group are considered to help it in increasing product and service accessibility and knowledge. It is expected that the retail segment is considered to increase, thus building future potentiality of the co-operative group. However, Schramm-Klein and Morschett (2009) noted that rise in unemployment and market competition in UK is considered to prevent faster and effective market access. The marketing strategies must so be developed in order to enhance the market image, amidst the identified threats.
4.3 Strategic marketing responses to key emerging themes in a marketing strategy:
In place of using only online communication policy, the co-operative group should deploy traditional marketing process as well. The brand might even Segmentation, Targeting and positioning policy in order to offer customised products and services to the target mass. Future market policies could be built on the latter two strategies.
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