978-0130387752 Chapter 12 Market-Based Strategic Thinking

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CHAPTER 12

Offensive Strategies

In marketing I’ve seen only one strategy that can’t miss

—and that is to market to your best customers

first, your best prospects second, and the rest of the

world last.

— John Romero, Casion Marketing

Consultant

The above comment could be used to discuss the reasons this strategy is the only strategy that can’t miss. You

could use Apple or Starbucks as an example of a company selling more to existing customers as part of an

offensive strategy to grow sales and profits, with the company then looking to prospects who match the

company’s demographic and psychographic customer profile. Why would this be a safer offensive strategy than

initially taking on the rest of the world?

Introduction

Mercedes has expanded its product line and redesigned the company’s advertising to communicate its

expanded product line and new product positioning in the U.S. market, with a stronger focus on younger car

buyers. This is an offensive market strategy to gain a larger share of the U.S. automobile market.

Discuss the needs for an expanded product line to attract new customers (especially younger car buyers).

Discuss whether Mercedes is going after more market share in its existing markets or building share in new

market segments.

Discuss the role of advertising in positioning a company in a new market segment.

Teaching Objectives

Introduce strategic market planning and the need for a business to have both offensive and defensive market

strategies in order to achieve overall business objectives of revenue growth, financial performance, and

strategic market position.

Present and describe various growth-oriented offensive market strategies that are critical to the future of a

business.

Demonstrate the need to evaluate the short- and long-run impact of an offensive market strategy with

respect to short- and long-run revenue growth, financial performance, and strategic market position.

Harvard Business School Case Materials

Sony EyeToy (2007). HBS Case 505024 (23 pages). In early 2004, less than a year after its launch, Sony’s

EyeToy, a unique video gaming concept, became a tremendous success across Europe. Developed for use

with Sony’s PlayStation 2 console, the revolutionary technology allowed users standing in front of a small

camera to interact with game objects appearing on a TV screen, just by moving their bodies. Sales for the

first EyeToy product (“Play”), a bundle of the camera and software, exceeded all expectations. However,

sales for the second product (“Groove”) were disappointing. Was it time for the EyeToy team to rethink its

product development and market strategy? How could the team sustain EyeToy’s initial success and prove

the concept was not a fad?

Twitter (2009). HBS Case 710455-PDF-ENG. Twitter is a micro-blogging company thatenablespeople to

send short text messages to others. The site is used by celebrities, government officials, business people,

and the general public. A widely used communications platform, Twitterhas become a venue forraising

money for nonprofits, providing first-responders with information during natural disasters, and other

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purposes. Even though almost 10 million people had visited the site by early 2009, the company had no

strategy for monetizing the traffic. The case presents an opportunity for students to examine possible

monetizing strategies for Twitter.

Dell Online. HBS Case 9-598-116. This case outlines Dell’s strategy to go online in 1997 with the goal of

having online salesaccount for 50 percent of its total sales witnin 3 years. The case and teaching note do a

great job of describing the market, competitive situation, and Dell’s aspirations to grow market share by

marketing its products online. The case can easily be augmentedbecause Dell’s online sales are often in the

news. Teaching Note 5-598-146.

Microsoft Corp.: The Introduction of Microsoft Works. HBS Case 9-588-028. Microsoft must decide how

to design a new software product for global markets, identify the timing for entry into different countries, and

position the product around the world. Teaching Notes 5-589-007 and 5-590-076.

NTT DoCoMo: Marketing I-mode. HBS Case 9-502-031 (25 pages). I-mode is a wireless Internet service

offered by Japan NTT DoCoMo. Just 3 years into the product life cycle, I-mode has 30 million customers and

a 60 percent share of Japan’s mobile Internet market. This case looks at a successful new product launch

and the factors that contributed to its rapid adoption. The case presents a good way to talk about product life

cycles and why they grow at different rates.

Goodyear: The Aquatred Launch. HBS Case 9-594-106. After many years of R&D, Goodyear developed

an innovative tire and named it Aquatred. However, the tire industry has matured and evolved, raising

questions concerning the Aquatred’s ability to gain support from Goodyear’s independent tire dealers.

Students must use information on channel evolution and consumer behavior to make two decisions: whether

to launch Aquatred and whether to expand Goodyear’s distribution network. The case also explores issues in

managing a complex distribution structure during a time of rapid change. Teaching Note 5-595-016.

Market-Based Strategic Thinking

1. What would Apple’s sales and margins have looked like in 2010 if it had the same product portfolio

then as it had in 2000?

In 2000, Apple products produced $8 billion in sales with an estimated margin of 27 percent. Mac sales

2. How does the Apple product life cycle portfolio add to the strategic insight into Apple’s current and

future sales and profit performance?

In Figure 12-1 we can see Apple’s product line portfolio with products positioned at different stages of the

3. Explain why a business like Ford might shift from an offensive strategy to a defensive strategy over

the life cycle of a particular product.

As shown in Figure 12-2, the marketing of a particular Ford model in the growth stage of a product life

cycle would rely heavily on an offensive strategic market plan to grow share and contribute to market

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4. How can a business like Campbell’s Soup meet short-run growth and profit performance targets

and still invest in strategic market plans that are focused on long-run objectives with respect to

share position, sales growth, and profit performance?

For a mature company like Campbell’s Soup, defensive strategic plans play a key role in production profits

5. How has Harley-Davidson’s offensive strategy to grow revenue per customer affected its sales and

profits?

Harley-Davidson customers are loyal, and by creating more products for them to buy, the company has

6. How would a Nike offensive strategy to increase market penetration differ from a strategy to grow

customer purchases (revenue per customer) in the under-18 female athlete market?

A Nike strategy to grow share would require attracting more customers in this market segment. The

7. Why would Google use an offensive sales growth strategy to expand the Internet search engine

market rather than attempting to increase its share of this market?

For Google, as the market leader, growing market share means taking share away from a competitor,

8. How did Apple’s offensive growth strategies affect its percent profit margins?

Apple’s offensive strategies from 2000 to 2010 allowed the company’s sales to grow from $7.9 billion to

9. Why would AT&T’s efforts to improve customer retention be considered an offensive strategy to

improve margins?

Improving customer loyalty and customer retention is a proactive strategy that requires an investment in

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10. Absolut Vodka entered two new market segments as part of an offensive strategy to grow sales.

Explain the logic of this offensive strategy and why the company elected to create new brand

names for each segment shown in Figure 12-6.

Unserved segments above and below the price segment served by Absolut presented new opportunities

for profitable growth. Since Absolut was well positioned in the premium segment ($15 to $25), it did not

11. Microsoft has developed a product called Meeting Pro to help facilitate the running of small

business meetings. Although this is a value-added software product, Microsoft offers it at no cost

to Windows users. Explain why this is an offensive strategy to grow market share.

Microsoft Meeting Pro is designed to increase usage of computers and, in particular, Microsoft software. By

12. Why are offensive strategies for General Motors crucial for the long-run success of that company?

What kind of offensive strategies could GM use to ensure future growth in sales and profits?

Offensive strategic market plans are the growth engine of a business’s long-run success. Defensive

13. Microsoft has embarked on a joint venture with Sony to develop an online alternative to the

telephone. What type of offensive market strategy best describes this joint venture, and what are

the expected short- and long-run performance objectives?

This is a diversified new market strategy that involves telecommunications. Working together, Sony (a

14. How does a market penetration strategy to grow market share differ from a strategy to enter a new

segment in the same market for Mac computers?

For Apple, growing Mac sales among core-user graphic artists, professionals, and students is an ongoing

15. Why would a Starbucks market strategy to grow customer purchases (revenue per customer) be

potentially more profitable than many other offensive market strategies?

Starbucks has built a huge base of customers wholike the company’s products. A Starbucks offensive

strategy to grow revenue per customer is potentially more profitable for three reasons: (1) Growing revenue

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16. Why would a business like Marriott first pursue offensive market strategies to increase market

share or grow revenue per customer, rather than adopting other offensive market strategies?

For any company, working with familiar customers and channels is always an advantage. It is simply more

cost-efficient, and more effective in terms of customer relationship management, to focus on what a

17. What forces limit new-customer growth within the existing market for personal computers? How

could a company like Intel grow market demand by addressing these forces?

Figure 12-7 presents the generic forces that keep market demand from reaching its full market potential. If

we limit our view to the U.S. Market, it is hard to envision what more could be done to grow market demand

18. What important considerations should Starbucks evaluate between a related new market entry

strategy and an unrelated new market entry strategy?

Starbucks entry into food products is a related new market entry strategy. Starbucks has a well-known

brand name, and is well established in its distribution channels. In 2012, Starbucks entered the premium

19. When would a business like Dell pursue an unrelated new market entry strategy?

The product markets served by Dell are approaching maturity and will offer limited sales growth in the

20. What is the advantage to Apple in growing market demand for a new emerging product-market

such as the iPad?

During its first 2 years,sales of iPads reached 55 million. While it is no longer the only tablet on the market,

Apple as the pioneer in this product category hadthe “first-mover” advantage. It enablesenable Apple to

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