The ninth case study for CMA (Final) Group 3 students-

Paper 15 - Business Strategy and Strategic Cost Management

CASE STUDY ON STRATEGIC POSITION

Critics of Nike often complain that it’s shoes cost almost nothing to make, yet cost the consumer so much. Identity the strategic marketing planning steps which provide value that add to Nike’s offering and result in the high price of Nike’s shoes.

Answer :

Critics of Nike often complain that its shoes cost almost nothing to make yet cost the consumer so much.

TRUE. The raw materials and manufacturing costs involved in the marketing of a sneaker are relatively cheap, but the process of selling the product to the consumer is expensive. Materials, labour, shipping, equipment, import duties and suppliers cost generally total fewer than for a pair of shoes. Nike must compensate its sales team, its distributors, its administrators and its endorsers, as well as pay for advertising & R&D. Finally Nike sells its products to retailers to make a profit. The retailer therefore pays some amount in order to put a pair of Nikes on the shelf.

Only a handful of companies like Nike stand out as master marketers. These companies focus on the customer and are:

(1)    Organized to respond effectively to changing customer needs.

(2)    Have well-staffed marketing departments, and

(3) All their other departments- manufacturing, finance, research and development, personnel, purchasing; also accept the concept that the customer is king.

Strategic planning covers the entire activities of the organization, including all of the strategic business unit (SBUs) and each functional area. Developing functional strategies and plans is the fourth step in the strategic planning process. One technique for identifying opportunities is to seek strategic windows. A strategic window is the identification of an opportunity for a limited period in the future and managing the organization & opposes resources so that there is a fit between the key market needs and the ability of the organization to meet those needs at an optimum level. A marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at a strategic and tactical level.

Steps in planning process

To carry out their responsibilities, marketing managers- whether at the corporate, division, business or product level follow a marketing process. Working within the plans set by the levels above them, product managers come up with a marketing plan for individual products lines, brands, channels, or customer groups.

Tactical marketing - strategic marketing

The 1^st phase choosing the value represents the homework that marketing must do before any product exists. The marketing staff must segment the market and develop the offerings value positioning.

The 2^nd phase is providing the value. Marketing must determine specific product features, prices and distribution as part of tactical marketing. The task in the 3^rd phase is communicating the value. Further tactical marketing occur in utilizing the sales force, sales promotion, advertising, and other promotional tools to inform and promote the product.

                                                                                                   Source: Suggested Answers - June 2013 by ICAI