Marketing Strategy (MKG 4080)

Spring 2005

Instructor: Kerimcan Ozcan

Office: 207
Phone: 512
E-mail: ozcan@iuj.ac.jp
Folder: \\iuj-home\IM materials\2004-2005\MBA 2nd\2005 Spring\Marketing Strategy

Course Objectives: Effective strategy is a necessity whenever there is competition.

Strategy has been a topic of study for centuries, and the basic principles remain
essentially unchanged. This course examines the basics of classic military and other
strategies and applies the concepts in cases of marketing problems companies are facing
today. Cases focus on some of the world's biggest companies facing some of the world's
biggest competitive opportunities and threats. We also examine problems of small
companies that are fighting for supremacy in a world where suppliers are under ever-
intensifying pressure to cut costs while increasing product quality and service. In addition
to case study, students compete with each other managing simulated global companies,
focusing on finding and keeping competitive advantage in a changing world.

Course Materials:
• Papers: as cited in the detailed schedule below.
• Cases: Swatch, UNICEF, Toys “R” Us, IKEA, Aqualisa Quartz, Virgin Mobile USA,
Merrill Lynch.
• Simulation game: MarkStrat.

Grading: Class Participation (30%), Case Write-ups (30%), Simulation Game (40%).

Class Participation: Students are expected to actively participate in class and case
discussions. Class discussions will be based on papers marked as “Required Readings”
for any given week (see detailed schedule below). Students with further interest in a
particular topic are encouraged, but not required, to explore the papers marked
“Suggested Readings.” Case discussions, on the other hand, might start with and grow
out of the questions provided in the detailed schedule. I will evaluate class participation
of each student after every session according to the following scheme: outstanding
contribution (2 points), adequate contribution (1 point), unsatisfactory contribution or
non-attendance (0 points). There will be a total of 15 sessions (#3-#17) to earn a
maximum of 30 class participation points.

Case Write-ups: A total of 7 cases will be discussed during the term. For 4 of these
cases, students who are in the same team for the simulation game (see next section), will
submit a case write-up on the day of the case discussion. Questions to be addressed in
each write-up are provided in the detailed schedule below. Please try to make your write-
ups concise, crisp, and well-organized. Each write-up will be worth 7.5 points.

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MarkStrat: The simulation game allows students to make decisions in a competitive
environment and receive feedback about the financial consequences of those decisions.
Each group will assume responsibility for a MarkStrat company and make decisions
about which models (i.e., products) to market and how to market (e.g., price and
promote) them. Decision inputs for each simulated period (7 in total) must be submitted
by the beginning of normal class time on the dates indicated on the syllabus. Every team
will be evaluated according to their final performance relative to their team’s starting
situation (more about this will be explained in session #2). This aspect of the game will
be worth 10 points. In addition, each group will turn in biweekly reports (4 in total).
These reports should document your assessment of the current situation (incl. which past
strategies and tactics worked and didn’t work, and why), your objectives for the coming
periods, and your strategies and tactics to achieve those objectives. As in case write-ups,
concise, crisp, and well-organized reports will be duly recognized. Each report will be
worth 7.5 points.

Brief Schedule:

Week Date # Class Decision Report Write-up

1 4/12 1 Introduction to Strategy
4/14 2 Overview of MarkStrat
2 4/19 3 Strategy: Content
4/21 4 Case 1: Swatch #1 #1
3 4/26 5 Strategy: Process
4/28 6 Case 2: UNICEF #2 #1
4 5/3 NATIONAL HOLIDAY
5/5 NATIONAL HOLIDAY
5 5/10 7 Theories of Firm & Competition
5/12 8 Case 3: Toys R Us #3 #2
6 5/17 9 Comp.Adv.&Market Orientation
5/19 10 Case 4: IKEA #4 #2
7 5/24 11 Product Strategy
5/26 12 Case 5: Aqualisa Quartz #5 #3
8 5/31 13 Price & Promotion Strategy
6/2 14 Case 6:Virgin Mobile USA #6 #3
9 6/7 15 Channel Strategy
6/9 16 Case 7: Merrill Lynch #7 #4
10 6/14 17 Emerging Ideas on Strategy
6/16 18 Debriefing and Wrap-up #4

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Detailed Schedule

Week 1: Introduction to Strategy – Overview of MarkStrat

Required Readings:
Clemons, E. K. and J. A. Santamaria (2002), "Maneuver warfare: Can modern military
strategy lead you to victory?," Harvard Business Review, 80 (4), 56-+.
Hoskisson, Robert E., et. al. (1999). ”Theory and Research in Strategic Management:
Swings of a Pendulum,” Journal of Management, 25 (3), 417-456.
Lengnick-Hall, CA, and JA Wolff (1999). “Similarities and contradictions in the core
logic of three strategy research streams,” Strategic Management Journal, 20 (12),
1109-1132.

Suggested Readings:
Bartholomees, Jr., J. Boone (2004). “A Survey of Strategic Thought,” in U.S. Army War
College Guide to National Security Policy and Strategy.
Ghemawat, Pankaj (2002). “Competition and Business Strategy in Historical
Perspective,” Business History Review, 76 (1), 37-74.
Porter, M. E. (1996), "What is strategy?," Harvard Business Review, 74 (6), 61-&.

Week 2: Marketing Strategy: Content – Case 1: Swatch

Required Readings:
Treacy, M. and F. Wiersema (1993), "Customer Intimacy and Other Value Disciplines,"
Harvard Business Review, 71 (1), 84-93.
Varadarajan and Clark (1994), “Delineating the Scope of Corporate, Business, and
Marketing Strategy,” Journal of Business Research, 31 (January-February), 93-
105.
Varadarajan, P. Rajan, and Satish Jayachandran (1999), “Marketing Strategy: An
Assessment of the State of the Field and Outlook,” Journal of the Academy of
Marketing Science, 27 (Spring), 120-143.

Suggested Readings:
Slater, Stanley F. and Eric M. Olson (2001), “Marketing’s Contribution to the
Implementation of Business Strategy: An Empirical Analysis,” Strategic
Management Journal, 22 (11), 1055-1067.
Srivastava, R. K., Shervani, T. A., & Fahey, L. (1999). ”Marketing, business processes,
and shareholder value: An organizationally embedded view of marketing
activities and the discipline of marketing,” Journal of Marketing, 63, 168-179.
Slywotzky, A. J. and B. P. Shapiro (1993), "Leveraging to Beat the Odds - the New
Marketing Mind-Set," Harvard Business Review, 71 (5), 97-107.

Questions for Case 1

1. Why was the Swatch so successful? In what ways was the Swatch different than any
watch the industry had ever seen?

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2. What elements of the original Swatch marketing plan were most critical to the
brand’s success? Do you agree withthe original product strategy? the channel
strategy? the promotional strategy? What about the pricing strategy -- what does
Franco Bosisio mean when he says that the Swatch is sold at a “clean price”? Given
the huge demand for Swatches (particularly for certain models), did the company
make a mistake in not raising the price for some of its styles?
3. Prior to the introduction of the Swatch, what kinds of watches were popular among
consumers? What position didSwiss watches occupy in the watch market? In the
minds of consumers, in what ways was a Rolex different from aTimex, or from a
gold-plated Seiko? How did consumers make buying decisions?
4. In many ways, the Swatch forced people to think about watches in a way they had
never thought of before. Can you think of other products in other product categories
that have done the same thing? Have at least one example in mind when you come to
class. The example can be from any product category? the more broadly you think
about thisquestion, the better. What do these examples have in common?
5. More than 10 years have gone by since the times of the case (1993). How has the
watch category changed since 1993? Are there any new types of watches in the
category? How many different sub-categories of watches are there? What are they?
6. Today, if you had to create a new sub-category of watch, what would it be? Would it
be possible for this new kind of watch to take the industry by storm, just like the
Swatch did in 1983? Why or why not?
7. What does it take for the Swatch brand to compete successfully in the watch category
today, compared to in 1983?

Week 3: Marketing Strategy: Process – Case 2: UNICEF

Required Readings:
McGovern, G. J., D. Court, J. A. Quelch, and B. Crawford (2004), "Bringing customers
into the boardroom," Harvard Business Review, 82 (11), 70-+.
Anil Menon et al (1999), ”Antecedents and Consequences of Marketing Strategy
Making: A Model and A Test,” Journal of Marketing, 62(April), 19-41.
Noble, Charles and Michael P. Mokwa (1999), “Implementing Marketing Strategies:
Developing and Testing a Managerial Theory,” Journal of Marketing, 63 (Oct.),
57-73.

Suggested Readings:
Anderson, P.F. (1982), “Marketing, Strategic Planning and the Theory of the Firm,”
Journal of Marketing, 46 (Spring), 15-26.
Miller, C. Chet and Laura B. Cardinal (1994), “Strategic Planning and Firm Performance:
A Synthesis of More Than Two Decades of Research,” Academy of Management
Journal, 37 (December), 1649-1665.
Kaplan, R. S. and D. P. Norton (2000), "Having trouble with your strategy? Then map it,"
Harvard Business Review, 78 (5), 167-+.

Questions for Case 2

1. What is UNICEF? How is it unique?

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2. Why is UNICEF rebranding?
3. Evaluate the revised “brand essence” and the “brand toolkit”.
4. What should Newman-Williams do next?

Week 5: Theories of Firm and Competition – Case 3: Toys “R” Us

Required Readings:
Kim, W. C. and R. Mauborgne (2004), "Blue ocean strategy," Harvard Business Review,
82 (10), 76-+.
Rindfleisch, Aric and Jan B. Heide (1997), “Transaction Cost Analysis: Past, Present, and
Future Applications,” Journal of Marketing, 61 (October), 30-54.
Varadarajan, P. Rajan and Margaret H. Cunningham (1995), “Strategic Alliances: A
Synthesis of Conceptual Foundations,” Journal of the Academy of Marketing
Science, 23 (Fall), 282-296.

Suggested Readings:
Barney, Jay (1991), “Firm Resources and Sustained Competitive Advantage,” Journal of
Management, 17 (1), 99-120.
Teece, David J., Pisano, Gary, and Amy Shuen (1997), “Dynamic Capabilities and
Strategic Management,” Strategic Management Journal, 18 (7), 509-533.
Lambkin, Mary and George Day S. (1989), “Evolutionary Processes in Competitive
Markets: Beyond the Product Life Cycle,” Journal of Marketing, 53 (July), 4-20.

Questions for Case 3

1. Why has Toys “R” Us been successful?
2. How sustainable is Toys “R” Us success? Why?
3. Which of the options being considered by Toys “R” Us in January 1992 would you
recommend? Why?
4. How would you implement your recommendations? Keep in mind the time frame for
implementation.

Week 6: Competitive Advantage and Market Orientation – Case 4: IKEA

Required Readings:
Prahalad, C. K. and V. Ramaswamy (2000), "Co-opting customer competence," Harvard
Business Review, 78 (1), 79-+.
Jaworski, Bernard J. and Ajay K. Kohli (1993), “Market Orientation: Antecedents and
Consequences,” Journal of Marketing, 57 (July), 53-70.
Hunt, Shelby D. and Robert M. Morgan (1995), “The Comparative Advantage Theory of
Competition,” Journal of Marketing, 59 (April), 1-15.

Suggested Readings:
Peteraf, Margaret A. (1993), “The Cornerstones of Competitive Advantage: A Resource-
Based View,” Strategic Management Journal, 14 (March), 179-91.
Day, George S. (1994), “The Capabilities of Market-Driven Organizations,” Journal of
Marketing, 58 (October), 37-52.

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MacMillan, I. C. and R. G. McGrath (1997), "Discovering new points of differentiation,"
Harvard Business Review, 75 (4), 133-&.

Questions for Case 4

1. What factors account for the success of IKEA?
2. What do you think of the companys product strategy and product range? Do you
agree with the matrix approach described in Figure B of the case?
3. Despite its success, there are many downsides to shopping at IKEA. What are some
of these downsides? IKEA’s Vision Statement (in Figure C of the case) describes
how the company seeks to build a “partnership” with its customers. What do you
think of this vision statement?
4. The fact that IKEA hopes to have fifty stores in operation in the Unites States by
2013 is an indication of how optimistic the company is about the viability of its value
proposition in this country. Do you think IKEA is being overly optimistic in its
growth plans? How would you improve IKEAs value proposition to make it even
more attractive to American consumers?
5. To achieve the kind of growth that IKEA is hoping for, should the company change
its product strategy? If so, in what way(s)? What about its product rangeare there
limitations to the matrix approach? Should the company expand its product lineup to
include a greater number of styles and price points? In what other ways should the
company consider changing its product lineup?
6. Some industry observers have suggested that IKEA should open a number of smaller,
satellite stores across the United States (e.g., in shopping malls, strip malls, etc.). By
offering a limited range of IKEA products, these IKEA Lite shops would presumably
give consumers who do not otherwise have access to a full-size IKEA the opportunity
to experience the brand. In addition, consumers who do live near a full-size IKEA
would be able to use these mini-outlets to make minor purchases (e.g., purchase a set
of mugs, as opposed to an entire living room set). Do you agree with this idea? Why
or why not?

Week 7: Product Strategy – Case 5: Aqualisa Quartz

Required Readings:
Chakravorti, B. (2004), "The new rules for bringing innovations to market," Harvard
Business Review, 82 (3), 58-+.
Keller, Kevin Lane (1993), “Conceptualizing, Measuring, and Managing Customer-
Based Brand Equity,” Journal of Marketing, 57 (January), 1-22.
Kerin, Roger A., P. Rajan Varadarajan, and Robert A. Peterson (1992), “First-Mover
Advantage: A Synthesis, Conceptual Framework, and Research Propositions,”
Journal of Marketing, 56 (October), 33-52.

Suggested Readings:
Gatignon, Hubert and Jean-Marc Xuereb (1997), “Strategic Orientation of the Firm and
New Product Performance,” Journal of Marketing Research, 34 (February), 77-90.

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John, Deborah Roedder, Barbara Loken, and Christopher Joiner (1998), “The Negative
Impact of Extensions: Can Flagship Products Be Diluted,” Journal of Marketing,
62 (January), 19-32.
Hamel, G. and C. K. Prahalad (1991), "Corporate Imagination and Expeditionary
Marketing," Harvard Business Review, 69 (4), 81-92.

Questions for Case 5

1. What is the Quartz value proposition to plumbers? To consumers?
2. Why is the Quartz shower not selling?
3. Aqualisa spent three years and €5.8 million developing the Quartz. Was the product
worth the investment? Is Quartz a niche product or a mainstream product?
4. Aqualisa currently has three brands: Aqualisa, Gainsborough, and ShowerMax. What
is the rationale behind this multiple brand strategy? Does it make sense?
5. What should Rawlinson do to generate sales momentum for the Quartz product?
Should he change his marketing strategy to target consumers directly, target the DIY
market, or target developers? Should he lower the price of the Quartz? Or should he
do something different altogether?

Week 8: Price and Promotion Strategy – Case 6: Virgin Mobile USA

Required Readings:
Rao, A. R., M. E. Bergen, and S. Davis (2000), "How to fight a price war," Harvard
Business Review, 78 (2), 107-+.
Tellis, Gerard (1986), “Beyond the Many Faces of Price: An Integration of Pricing
Strategies,” Journal of Marketing, 50 (October), 146-60.
Boulding, William, Eunkyu Lee, and Richard Staelin (1994), “Mastering the Mix: Do
Advertising, Promotion, and Sales Force Activities Lead to Differentiation?”
Journal of Marketing Research, 31 (May), 159-72.

Suggested Readings:
John, George and Barton Weitz (1989), "Salesforce Compensation: An Empirical
Investigation of the Use of Salary Versus Incentives," Journal of Marketing
Research, 26 (February), 1-14.
Noble, Peter and Thomas Gruca (1999), "Industrial Pricing: Theory and Managerial
Practice," Marketing Science, 18 (3), pp. 435-454.
Keller, K. L. (2000), "The brand report card," Harvard Business Review, 78 (1), 147-+.

Questions for Case 6

1. Given Virgin Mobile’s target market (14 to 24-year-olds), how should it structure its
pricing? The case lays out three pricing options. Which option would you choose and
why? In designing your pricing plan, be as specific as possible with respect to the
various elements under considerations (e.g. contracts, the size of subsidies, hidden
fees, average per minute charges, etc.).
2. How confident are you that the plan you have designed will be profitable? Provide
evidence of the financial viability of your pricing strategy.

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3. The cellular industry is notorious for high customer dissatisfaction. Despite the
existence of service contracts, the big carriers churn roughly 24% of their customers
each year. Clearly, there is very little loyalty in this market. What is the source of all
of this dissatisfaction? How have the various pricing variables contracts, pricing
buckets, hidden fees, offpeak hours, etc.) affected the consumer experience? Why
haven’t the big carriers responded more aggressively to customer dissatisfaction?
4. How do the major carriers make money in this industry? What is the marketing logic
underlying their pricing approach?
5. What do you think of Virgin Mobile’s value proposition (the VirginXtras, etc.)? What
do you think of its channel and merchandising strategy?
6. Do you agree with Virgin Mobile’s target market selection? What are the risks
associated with targeting this segment? Why have the major carriers been slow to
target this segment?

Week 9: Channel Strategy – Case 7: Merrill Lynch

Required Readings:
Nunes, P. F. and F. V. Cespedes (2003), "The customer has escaped," Harvard Business
Review, 81 (11), 96-+.
Heide, Jan (1994). "Interorganizational Governance in Marketing Channels”, Journal of
Marketing, 58 (January), 71-85.
Varadarajan, P. Rajan, and Manjit S. Yadav (2002), "Marketing Strategy and the Internet:
An Organizing Framework," Journal of the Academy of Marketing Science, 30 (4),
296-312.

Suggested Readings:
Kalwani, Manohar and Narayandas (1995), "Long-Term Manufacturer and Supplier
Relationships," Journal of Marketing, (January).
Brown, James, Chekitan Dev, and Hong-Jin Lee (2000), "Managing Marketing Channel
Opportunism: The Efficacy of Alternative Governance Mechanisms”, Journal of
Marketing, 64 (April 2000), 51-65.
Zettelmeyer, Florian (2000), “Expanding to the Internet: Pricing and Communications
Strategies When Firms Compete on Multiple Channels,” Journal of Marketing
Research, 37 (August), 292-308.

Questions for Case 7

1. Do you believe it was a timely and appropriate response?
2. What are the key differences between Merrill Lynch’s approach and Schwab’s?
3. What is Integrated Choice? What are Merill’s assumptions underlying the
strategy?
4. What are the implications of Integrated Choice? For Clients? For financial
consultants? And for the organization?
5. Which firm do you believe will be more successful two years from now? Why?

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Week 10: Emerging Ideas on Strategy

Required Readings:
Brandenburger, A. M. and B. J. Nalebuff (1995), "The Right Game - Use Game-Theory
to Shape Strategy," Harvard Business Review, 73 (4), 57-71.
Dyer, J. H. and H. Singh (1998), "The relational view: Cooperative strategy and sources
of interorganizational competitive advantage," Academy of Management Review,
23 (4), 660-79.
Dickson, Peter, and Paul Farris, and Willem Verbeke (2001). “Dynamic Strategic
Thinking,” Journal of the Academy of Marketing Science, 29 (3), 216-237.

Suggested Readings:
Lowendahl, Bente, and Oivind Revang (1998). “Challenges to Existing Strategy Theory
in a Postindustrial Society,” Strategic Management Journal, 19, 755-773.
Lovas, B. and S. Ghoshal (2000), "Strategy as guided evolution," Strategic Management
Journal, 21 (9), 875-96.
Farjoun, Moshe (2002). “Towards an Organic Perspective on Strategy,” Strategic
Management Journal, 23, 561-594.