Concepts of Mega Marketing

Is it possible to gain power over producers by reducing competition and utilising the techniques of what Kotler calls “Mega Marketing”?

Is it possible to gain power over producers by reducing competition and utilising the techniques of what Kotler calls “Mega Marketing”? What forms of power might a supplier employ, and are there any risks in following this type of strategy? Suggest specific ways in which a supplier might achieve a competitive advantage through the general strategy of offering higher perceived value.

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The globalisation of trade and increasing competitiveness are issues of critical concern to businesses. The internationalisation of competition has created the reality that the competitive advantage of a wide variety of enterprises is declining. Changes in the marketing landscape have led to a concomitant re-examination and expansion of the underlying principles of marketing strategy. This essay explores some of these factors including the evolution of the marketing concept, domestic and global marketing challenges together with a discussion on generic strategies as a mechanism to achieve a sustainable competitive advantage through differentiation from a supplier perspective.

Entry into one or many of the world’s 200 country markets is a function of the marketing strategy followed by a firm, and local country conditions. Marketing aimed at a national market (ie domestic marketing) faces a single set of competitive, economic and market issues across market segments including the tailoring of products to address export markets. International marketing is the next level of complexity whereby the firm becomes more directly involved in multiple marketing environments with adjusted market strategies as to how they sell, advertise and distribute to meet local conditions. Truly global marketing is achieved when a single strategy is followed for a product, service, or company in the global market that encompasses many markets or countries simultaneously. (Jeanette and Hennessy, 1998 and Kotler, 2000)

The effects of globalisation and growth in competition may be beneficial to consumers and suppliers of goods and services given the potential for decreases in price and improvements in quality. The downside of global competition is its impact on domestic producers whose livelihood is threatened. Governments, and the local firms and constituencies that influence governments, can create barriers and uncompetitive conditions to limit foreign entrants to local markets. (Jeanette and Hennessy, 1998)

The marketing oriented view of the marketing concept is that a firm bases its activities on the needs and wants of customers in an exchange relationship in selected target markets. Constraints in terms of the environmental milieu, such as laws, industry agreements and norms, influence marketing strategy. (Gronroos, 1994) This implies a balancing act to optimise production relationships to meet the ultimate customers’ needs and wants which become more complex in a multi-national or global marketing environment. McCarthy’s (1964) seminal marketing mix concept of product, price, place and promotion (4Ps) has equally evolved as different marketing mixes have been put forward for different marketing contexts including product versus service marketing and domestic versus global marketing. Work by Kotler (2000) suggests an adaptation to the marketing mix termed mega marketing as a strategy to enter blocked markets where discriminatory legal requirements, political favouritism, and cartel agreements, social or cultural bias and unfriendly distribution channels exist. The model suggests an adversarial win-lose relationship rather than lean supply collaborative relationships in the value chain that recognise longer term interdependence. Cox (2004) argues that that win-lose relationships occur because buyers and suppliers misread circumstances and pursue inappropriate power and leverage strategies that reinforce an adversarial style. This may be especially true in a foreign marketing environment.

Mega marketing is defined as the strategic co-ordination of economic, psychological, political and public relations skills to gain the co-operation of a number of parties in order to enter or operate in a given market. (Kotler, 1986, p117) By implication therefore, power and public relations are two extra P’s added to McCarthy’s 4P marketing mix concept. Kotler argues that the traditional marketer’s use of accepted theory is in itself an impediment to successful penetration of a blocked market and that it is not only penetration, but the retention of any market share by innovative methods that will ensure a sustainable competitive advantage for the firm. (Kotler, 1986 and Kotler, 2000)

The use of power in this context is seen as a push strategy whereas public relations, is a pull strategy. Influencing public opinion has a longer lead time but its effectiveness in influencing the mindset of the constituency of the creator of the barriers to entry ensures a longer term success in the market. For example, firms may identify areas that will be positively affected by corporate social responsibility initiatives thus cultivating goodwill as part of a public relations initiative. (Zadek, 2001)

The application of mega marketing principles differs further from traditional marketing in terms of higher investment costs, a mix of specialists to support the marketer and the use of power to achieve the firm’s objectives. The notion of inducement or reward as a means to achieve an end is common practice in a marketing environment. The use of coercive, legitimate, expert or referent power in order to influence on behalf of rather than over individual or grouping in order to achieve an end is less common. The use of coercion in an adversarial arms length hostile fashion to cause harm raises ethical issues, especially important in a world where good corporate governance is a critical success factor. The use of legitimate power through political intervention in favour of a foreign entrant is more likely to succeed as is the use of expert power where an exchange of funding for political campaigns, knowledge, or technical assistance in return for co-operation is used. Referent power and association with prestige in terms of the exchange can be equally effective. (Johnson and Scholes, 2002 and Schmitter, and Streeck, 1991) It is therefore the understanding and choice of appropriate power application in a given environment that determines an effective strategy in entering the market.

The power structure of a target environment can be analysed by understanding of both the visible and invisible power actors. Power actors are agency or government and community stakeholders who have the capacity to take and effect decisions. The power actors may exercise power through pyramidal, factional, or coalitional structures. In a multilevel hierarchal or pyramidal structure, power is concentrated within a single, cohesive leadership group. In a factional structure, power is concentrated in two or more robust factions that are competing for power. In a coalitional structure, power is concentrated less strongly whereby actors and associations work together in fluid coalitions. An amorphous structure exists where power is diffuse, with little or no pattern of coalition building or centralised leadership. The inappropriate use of power or alignment with unsuitable power actors can damage the firm’s strategic outcome. (Keegan, 1999, Kotler, 1986 and Schmitter and Streeck, 1991) Understanding the power landscape in the context of the greater business and economic environment allows the marketer to plan a strategic intervention with the objective (for example) to gain power over producers and hence reduce competition.

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Kotler (1986) suggests that three broad power strategies can be followed: neutralise opponents by offering to compensate them for any losses, organise allies into a close coalition and hence reducing opposing collective power or turn neutral groups unaffected by the firm’s strategy, into allies. Licensing, joint ventures, and joint ownership represent alternative expansion strategies that depend on how the firm configures its value chain. Tactical implementation plans may be linear or multilinear depending on market requirements. The decision around the mechanism of entry into a market is an imperative that can minimise the risks associated with that entry and influence strategic advantage. (Kotler, 1986 and Kotler, 2000)

Keegan (1999) argues that strategy is integrated action in pursuit of a competitive advantage. Understanding a firm’s unique value from a consumer perspective is the basis for ensuring that the competitive advantage is sustainable. The successful application of mega marketing principles to blocked markets to enable access will allow the firm to follow one of the two generic options developed by Porter that he identified as either leading in cost, or leading in differentiation. The first option encourages continuously growing competitiveness, while the second entails continuous quality improvement. Porter highlights the role of innovation as the capacity to generate knowledge and the key to building competitive advantage. The competitive scenario comprises inter firm rivalry impacted by the influence of suppliers and buyers threatened by substitutes or by new entrants to the industry. When describing the company’s competition in relation to the competitiveness of nations, he identifies the company’s strategy, structure, and rivalry as the source of competitive advantage. (Johnson and Scholes, 2002 and Keegan, 1999)

The generic options translate into a matrix model with quadrants of cost leadership, product differentiation, focussed differentiation, and cost focus strategies. This allows strategic decision making with respect to the market scope and product mix within which a firm’s competitive advantage will be realised. For example, a policy of broad or narrow target market differentiation is appropriate if a firm’s product delivers actual or perceived uniqueness and quality in the eyes of the consumer. This may include better performance, superior design, or better fit with customer needs. Differentiation can be an effective strategy to defend market position and obtain above average returns through premium pricing. (Johnson and Scholes, 2002 and Keegan, 1999)

Firms that succeed in a product differentiation strategy typically have internal strengths that include access to superior research and development capability, a reputation for quality and innovation, a skilled and creative product development team and a talented sales and distribution capability supported by a strategic marketing process that communicates and reinforces brand loyalty and the strengths of the product. Risks associated with this strategy are imitation by competitors and changes in customer tastes. Firms that succeed in a focussed differentiation strategy build on core competencies and concentrate on a narrow market segment in order to develop a high degree of customer loyalty as a barrier to entry to competitors. Although lower volumes increase the bargaining power of suppliers, cost increases can be more easily passed onto customers because product substitutes are not readily available. Few generic competitive advantages are long lasting and Hamel and Prahalad warn that the defence of existing of advantages is as important as the creation of future advantage. (Hamel and Prahalad, 1994 and Jeannet and Hennessey, 1998)

In summary, the global marketing imperative to take advantage of opportunities for growth in an environment where protectionist policies inhibit expansion has led to an evolution of the traditional model of the marketing concept to include mega marketing as a mechanism to gain access to blocked markets. The successful entry into the market requires an understanding of the local environment and the application of power and public relations in order to gain competitive advantage throughout the value chain. Power over producers can be attained by reducing competition by means of a number of techniques by engaging the power actors through a researched power structure. At an industry level, the choice of entry mode could facilitate reduced competition based on alliances or collaborative business forms. An analysis and understanding of all risks associated with the selected strategy is essential, if a sustainable competitive advantage is to be achieved. As part of this approach, an application of a differentiated generic strategy to the market may limit risk through premium pricing and reduce dependence on supplier costs.

References

• Cox, A. (2004) The Art of the Possible: Relationship Management in Power Regimes and Supply Chains. Supply Chain Management: An International Journal. Volume 9, 5.
• Gronroos, C. (1994) Defining Marketing: A Market Oriented Approach. European Journal of Marketing, Volume 28, 10.
• Hamel, G. and Prahalad, C. K. (1994) Competing for the Future. Boston, Harvard Business Press.
• Jeannet, J. P. and Hennessey, H. D. (1998) Global Marketing Strategies Fourth Edition. Boston, Houghton Mifflin.
• Johnson, G. and Scholes, K. (2002) Exploring Corporate Strategy Sixth Edition. Harlow, Pearson Education.
• Keegan, W. J. (1999) Global Marketing Management. New Jersey, Simon and Schuster.
• Kotler P. (2000) Marketing Management, Millennium Edition. New Jersey, Prentice Hall.
• Kotler P. (1986) Megamarketing. Harvard Business Review Volume 81, 3.
• McCarthy, E. J. (1964) Basic Marketing. Homewood, Richard D Irwin.
• Schmitter, P. C. and Streeck, W. (1991) From National Corporatism to Transnational Pluralism. Politics and Society. Volume 19, 2.
• Zadek, S. (2001) The Civil Corporation. Sterling, Earthscan Publications.