Chapter 17 – Marketing Strategy

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Cambridge IGCSE Business Studies

Chapter 17: Marketing Strategy

A marketing strategy combines the right elements of the marketing mix to achieve marketing objectives. This chapter also explains consumer protection laws and how businesses can enter foreign markets using methods such as joint ventures, licensing, international franchising and localisation.

Marketing strategyMarketing objectivesBalanced 4PsLife cycle decisionsConsumer protectionForeign marketsJoint venturesLocalisation

Topic 1: Building a Marketing Strategy

A marketing strategy should connect the objective, target market, marketing budget and all four parts of the marketing mix.

1. Marketing Strategy

A marketing strategy is a plan that combines the right elements of the marketing mix to achieve particular marketing objectives.

The four elements are:

ProductPricePlacePromotion

A marketing strategy should also consider:

Balanced marketing strategy using product price place and promotion

2. Marketing Objectives

A business may develop a marketing strategy to:

Exam point: The strategy chosen should depend on the objective.

3. Importance of a Balanced Marketing Mix

The four elements of the marketing mix should work together.

Example: A high-quality luxury watch might need a high-quality and attractive design, a high price, selected high-quality retailers and advertising that creates a luxury image.

If one element does not fit, the marketing strategy may fail.

Example: Even a good product at the right price may not sell if customers are not aware that it exists because promotion is poor.

4. The Four Ps in a Marketing Strategy

Product

The business should consider what customers want, product quality and design, whether the product needs changing and how the product differs from competitors.

A product that does not satisfy customer needs is unlikely to sell even if the other parts of the marketing mix are effective.

Price

The business should consider what customers are willing to pay, competitors' prices, the product's brand image and an appropriate pricing strategy.

Examples: price skimming for a new and unique product, or penetration pricing to enter a competitive market.

Place

The business needs to decide where customers want to buy, which distribution channel to use and where competitors sell their products.

The product should be available where it is convenient for the target customers.

Promotion

The business should decide which advertising methods will reach the target market, which sales promotions to use, what competitors are doing and how much the business can afford to spend.

The marketing budget limits the promotional methods available.

5. Developing a Marketing Strategy

When recommending a marketing strategy, students should consider four important areas:

  1. Marketing objective: What does the business want to achieve? Examples include increasing sales or launching a new product.
  2. Target market: Who are the customers? Examples include teenagers, high-income consumers and families with young children.
  3. Marketing budget: How much money is available? A small business may use social media instead of expensive television advertising.
  4. Balanced marketing mix: Product, price, place and promotion should all support the same product image and target market.

Topic 2: Marketing Strategy and the Product Life Cycle

The marketing strategy may need to change as the product moves from introduction to decline.

6. Marketing Strategy and the Product Life Cycle

Marketing strategy may need to change as a product moves through its product life cycle.

StagePossible marketing strategy
IntroductionInformative advertising; price skimming or penetration pricing may be used; profits may be low because development costs are high.
GrowthPersuasive advertising may encourage brand loyalty; profits begin to increase.
Maturity and SaturationCompetition becomes stronger; competitive or promotional pricing may be used; advertising aims to maintain sales.
DeclinePrices may be reduced; promotion may be reduced; the business may use an extension strategy or withdraw the product.
Product life cycle marketing strategy choices

Topic 3: Legal Controls on Marketing

Consumer protection laws affect how businesses advertise, describe and sell products.

7. Legal Controls on Marketing

Governments introduce consumer protection laws because customers may:

Businesses therefore cannot simply market products in any way they want.

8. Main Areas of Consumer Protection

Students should understand these important areas.

1. Accurate Weights and Measures

Businesses must provide customers with the correct quantity.

Example: If a customer pays for 1 kg, the business should not provide only 800 g.

2. Truthful Product Descriptions and Advertising

Businesses must not deliberately give customers false or misleading information.

Example: Advertising clothing as 100% wool when it is actually made from cotton would be misleading.

3. Safe and Satisfactory Quality

Businesses should not sell products that have serious faults, are unsafe or fail to work properly.

4. Products Must Be Fit for Purpose

The product should perform the task the customer was told it could perform.

Example: If a customer asks for a drill suitable for walls, the retailer should not sell one that can only drill wood.

Consumer protection laws for marketing

9. Impact of Consumer Protection Laws on Businesses

Benefits

  • Customers may have greater confidence in businesses.
  • Better product quality can improve the business's reputation.

Costs

Businesses may face higher costs because they must:

  • ensure product quality and safety
  • provide accurate information
  • deal with faulty products and customer complaints.

These costs may eventually lead to higher prices.

Topic 4: Entering Foreign Markets

Businesses may enter foreign markets for growth, but they must understand local customers, culture, costs and risks.

10. Why Businesses Enter Foreign Markets

Businesses increasingly sell their products internationally. Three important reasons are:

  1. Greater growth opportunities: Some countries have rapidly growing populations and rising incomes. This creates new potential customers.
  2. Home market may be saturated: If sales cannot grow much further in the domestic market, foreign markets provide opportunities for higher sales.
  3. Lower trade barriers: Reductions in trade barriers can make entering foreign markets easier and more profitable.

11. Problems of Entering Foreign Markets

Businesses may face several difficulties.

  1. Lack of market knowledge: The business may not understand local competitors, customer habits, where people shop or customer preferences.
  2. Cultural differences: Religion, traditions and tastes may mean that a product successful in one country is unsuitable in another. For example, a business may need to change food products to fit local religious or cultural requirements.
  3. Exchange rate changes: Changes in exchange rates can make imported products more expensive in the foreign market. This may reduce sales and competitiveness.
  4. Import restrictions: Governments may impose tariffs or quotas. These can increase prices or restrict the quantity that can be imported.
Other possible problems include: higher transport costs and greater risk of non-payment.
Entering foreign markets reasons problems and solutions

12. Ways to Overcome Problems in Foreign Markets

Important methods include:

13. Joint Venture

A joint venture occurs when two or more businesses work together on a business project and share capital, risk and profits.

When entering another country, working with a local business can provide valuable knowledge about customers, culture, competitors and local market conditions.

Advantages

  • Local knowledge is available.
  • Risks are shared.

Disadvantages

  • Profits have to be shared.
  • Managers from the two businesses may disagree.

14. Licensing

Licensing occurs when a business gives another business permission to produce and sell its branded or patented product.

Advantages

  • Products do not need to be transported long distances.
  • Can help overcome trade restrictions.
  • The local producer may understand the market better.

Disadvantages

  • Poor quality from the licensee could damage the brand.
  • The licensee gains knowledge about how the product is produced and could eventually become a competitor.

15. International Franchising

A business may allow local entrepreneurs in another country to operate its franchise.

Advantages

  • Local franchisees understand the local market.
  • The business can expand internationally without operating every outlet itself.

Disadvantages

  • Poor service from franchisees may damage the brand image.
  • The franchisor has to provide training and support.

16. Localising Existing Brands

Localising means adapting a global product or marketing strategy to match local tastes and culture while keeping the overall brand image.
Think global – act local.

Possible changes include:

Example: An international restaurant may change its menu to suit the religion and tastes of consumers in a particular country.

17. Choosing a Method of Entering a Foreign Market

There is no one best method. The decision depends on:

Example: If a business has little knowledge of a foreign market, a joint venture may be suitable because the local partner can provide market knowledge.
Example: If transport costs and import restrictions are high, licensing may be more suitable because the product can be manufactured inside the foreign country.

Key Definitions

TermMeaning
Marketing strategyPlan combining the marketing mix to achieve marketing objectives
Marketing objectiveTarget the marketing activities aim to achieve
Marketing budgetAmount available to spend on marketing
Target marketGroup of consumers the product is aimed at
Joint ventureBusinesses working together and sharing capital, risks and profits
LicensingGiving another business permission to produce and sell a branded or patented product
International franchisingUsing franchisees to operate the business in foreign markets
LocalisationAdapting a product or marketing strategy to local tastes and culture

What Students Must Know for the Examination

Students should be able to:

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