Kotler and Keller call marketing management “the art and science of choosing target markets and getting,

keeping and growing customers through creating, delivering and communicating superior customer
value.” (Kotler et al. 2012, 27) In the modern world of business, companies have to become more and
more customer-centered, because competition is high and consumers have multiple options to choose
from. Therefore the importance of proper marketing management is high. According to Kotler and Keller
(2012, 48-49) the main tasks in successful marketing management are the following:
 Developing marketing strategies and plans.
 Capturing marketing insights.
 Connecting with customers.
 Building strong brands.
 Shaping the market offerings.
 Delivering and communicating value.
 Creating successful long term-growth.

Marketing Environment

1. Five Force Model of Competition

Porter has identified five competitive forces that shape every industry, and every market. These forces
determined the intensity of competition, and hence the profitability, and attractiveness of an industry.
The objective of corporate strategy should be to modify these competitive forces in a way that
improves the position of the organization. Porter’s model supported analysis of the driving forces in
an industry. Based on the information derived from the Porter’s Five Forces Analysis, management
could decide how to influence or to exploit particular characteristics of their industry. The five factors
that would be discussed are:
a. Threat of new entrants
Profitable markets that yield high returns will attract new firms. This results in many new entrants,
which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms
can be blocked by incumbents (which in business refers to the largest company in a certain industry,
for instance, in telecommunications, the traditional phone company, typically called the “incumbent
operator”), the abnormal profit rate will trend towards zero (perfect competition). The following
factors can have an effect on how much of a threat new entrants may pose:
 The existence of barriers to entry (patents, rights, etc.). The most attractive segment is one in
which entry barriers are high and exit barriers are low. Few new firms can enter and non-
performing firms can exit easily.
 Government policy
 Capital requirements
 Absolute cost
 Cost disadvantages independent of size
 Economies of scale
 Economies of product differences
 Product differentiation
 Brand equity
 Switching costs or sunk costs
 Expected retaliation
  Access to distribution
 Customer loyalty to established brands
 Industry profitability (the more profitable the industry the more attractive it will be to new
competitors)

b. The threat of substitutes

The existence of products outside of the realm of the common product boundaries increases the
propensity of customers to switch to alternatives. Potential factors:
 Buyer propensity to substitute
 Relative price performance of substitute
 Buyer switching costs
 Perceived level of product differentiation
 Number of substitute products available in the market
 Ease of substitution
 Substandard product
 Quality depreciation
 Availability of close substitute

c. The bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw
materials, components, labor, and services (such as expertise) to the firm can be a source of power
over the firm when there are few substitutes. If you are making biscuits and there is only one
person who sells flour, you have no alternative but to buy it from them. Suppliers may refuse to
work with the firm or charge excessively high prices for unique resources. Potential factors are:
 Supplier switching costs relative to firm switching costs
 Degree of differentiation of inputs
 Impact of inputs on cost or differentiation
 Presence of substitute inputs
 Strength of distribution channel
 Supplier concentration to firm concentration ratio
 Employee solidarity (e.g. labor unions)
 Supplier competition: the ability to forward vertically
 integrate and cut out the buyer.

d. The bargaining power of buyers (Customers)

The bargaining power of buyers is also described as the market of outputs: the ability of customers
to put the firm under pressure, which also affects the customer’s sensitivity to price changes.
Firms can take measures to reduce buyer power, such as implementing a loyalty program. The
buyer power is high if the buyer has many alternatives. The buyer power is low if they act
independently e.g. If a large number of customers will act with each other and ask to make prices
low the company will have no other choice because of large number of customers pressure.
Potential factors:
 Buyer concentration to firm concentration ratio
 Degree of dependency upon existing channels of distribution
  Bargaining leverage, particularly in industries with high fixed costs
 Buyer switching costs relative to firm switching costs
 Buyer information availability
 Force down prices
 Availability of existing substitute products
 Buyer price sensitivity
 Differential advantage (uniqueness) of industry products
 RFM (customer value) Analysis
 The total amount of trading

e. The degree of rivalry toward competitor

For most industries the intensity of competitive rivalry is the major determinant of the
competitiveness of the industry. Potential factors:
 Sustainable competitive advantage through innovation
 Competition between online and offline companies
 Level of advertising expense
 Powerful competitive strategy
 Firm concentration ratio
 Degree of transparency

2. SWOT analysis
SWOT refers to strengths, weaknesses, opportunities and threats. SWOT can be divided into two
different categories, internal environment analysis and external environment analysis. The internal
environment analysis focuses on the strengths and weaknesses of the company and external on the
possible opportunities and threats. (Kotler et al. 2012, 70-72.)
SWOT can be further explained as follows :
 Strengths are factors that can help the company to achieve certain goals and objectives.
 Weaknesses are factors that can hinder the company from achieving their goals or objectives.
 Opportunities are situations or conditions that the company could use for its benefit.
 Threats are circumstances that might hinder the company performance.
SWOT is a tool that can be used to analyze the performance and position of the compa-ny or a product
and to identify possible shortcomings. SWOT serves a purpose in vari-ous areas, such as business plans,
marketing plans and product development. As men-tioned before, it can also be used in order to assess
the competing companies

3. PEST

The use of PEST analysis can be effective for business and strategic planning, marketing planning, business
and product development and research reports. PEST also ensures that company’s performance is aligned
positively with the powerful forces of change that are affecting business environment (Porter, 1985).
According to to Wheelen and Hunger, (2012 p. 94) external factors were formed by the society, physical
resources, environment, and climate that could influence industries life, and its company that compete
inside. Each company business would be affected by this external condition so it was important to
understand the all factor, and its influence, they are:
 a. Political This factor consisted of the political situation of a country, and the world in relation to
the country. For example, what sort of government leadership was affecting what decisions of a
country. All the policies, all the taxes laws, and every tariff that a government levies over a trade
falls under this category of factors.
b. Economic factors were affecting all businesses, nationally, and globally. Economic factors affect
the purchasing power of the customers, and the firms cost of capital. It includes areas like the
exchange rates, the inflation rate the economic growth, the interest rate, the monetary or fiscal
policies, the foreign exchange rate that affect imports, and exports, all these would determine the
direction in which an economy might move.
c. Social and Demographic, Social factors affected the demand for a company's products, and how
that company operates. Furthermore, companies might change various management strategies
to adapt to the social situation, and condition that occurred.
d. Technology, was driving the businesses, and reduces time to market. Some technological factors
were consisted of research, and development activity, automation, and stakeholder expectation.
The direct impact usually had impact in productivity aspect. It could lead to more result produced
because the capability that had improved, reduce the cost by increasing efficiency or even create
something new to differentiate with other product that already circulated in market

Segmentation, Targeting, Positioning

1. Segmentation

Market segmentation is a way of dividing markets into defined sections such as geo-graphic, demographic,
psycho-graphic or behavioral. Geographic segmentation consid-ers countries, regions, municipalities,
cities and neighborhoods. Companies can consid-er all of these segments or just some of them and direct
their marketing to suit their are-as of interest. This makes marketing more personal and targets individuals
and groups better than marketing aimed at a wide general audience. (Kotler et al. 2012, 236.)

Demographic segmentation considers consumer age, gender, income, occupation, edu-cation, family,
religion, race, nationality and social-class. Demographic segmentation is often used for marketing
purposes because it is easy to use and measure. (Kotler et al. 2012, 238.) Psycho-graphic segmentation
divides consumers into groups by their psy-chological profiles. This profile is made up from personality,
values and lifestyle choic-es. People in the same demographic or geographic segments can also have very
different profiles. (Kotler at al. 2012, 247.)

Behavioral segmentation considers consumers according to their attitude, knowledge, usage or response
to a product. Behavioral segments can be divided into lower segments such as occasion, benefits, user,
loyalty and usage status. Occasion means the time and situation when people buy a product. This kind of
segmentation is useful for marketers when trying to create more demand for a product. Some products,
such as cake candles are often bought for birthdays, but when colored orange, can also be marketed for
Hal-loween. Benefit segment groups of consumers are formed according to the benefits they seek in a
product. Consumers can also be divided into different user groups for market-ing purposes, such as ex-
user, potential or first time users, loyal customers, heavy or light users. (Kotler and Armstrong 2008, 220-
221.)
2. Targeting
By identifying the market segments, marketers need to decide which market place they intend to serve
or offer their products. Upon deciding on or identifying the target group the company may select to apply
a single or a combination of marketing strategies; such as mass marketing (undifferentiated marketing) ,
single segment (differentiated marketing) or multi-segment (concentrated marketing) (Simkin,1998). The
factors are the following: existing market/share market homogeneity, product homogeneity, nature of
competitive environment, market trends and the marketing environment, customer needs, segment size
and company resources. By considering the above, targeting specific population becomes more organized,
to ensure cost efficiency, and effectiveness of resources in the marketing efforts, instead of offering it to
a mass market (Kotler et al, 2012).

3. Positioning
Once the company identifies the segments and chosen which segment or segments to target the final step
is to decide on precisely, on how and where in targeted segments to pitch a product or a brand. Brand
positioning “is the act of designing the company’s offering and image to occupy a distinctive place in the
mind of the target market. The end result of positioning is the successful creation of a customer-focused
value proposition, a cogent reason why the target market should buy the product” (Kotler, 2003)
Positioning is concerned with how the customers perceive the products, and how it is defined by the
customers in order to maximize the potential benefit to the company. The end-result is presenting the
target market with an appealing justification on why they would take the purchasing decision of the
product (Kotler and Keller, 2009)
In this process marketers are recommended to consider what makes the product different, or what are
the product unique selling propostion in comparison to other products available. As Describes by (Aaker,
2003) what differentiates a product is not just calling a feature unique, it must mean something to
customers in the manner of being relevant and important. Upon definition of the same then draw a clear
image on what perception each market segment has about the products, enabling marketers to position
their product in a more competitive angle, assisting in devising an effective market campaign appreciated
in the minds of customers.

1. Kotler, P. and Keller, K.L. (2012) Marketing Management. 14th Edition, Pearson
2. Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance.
New York.: Simon and Schuster.
3. Hunger, J.D. dan Wheelen, T.L. (2012). Strategic Management and Bussiness Policy: Toward Global
Sustainability (13th Edition). New York: Pearson.
4. Kotler, Philip, Gary Armstrong, 2008. Principle of Marketing, Pearson/Prentice Hall. Kotler
5. Kotler,Philip.2003.Marketing Management, 11th Edition.Prentice. Hall.Inc.New Jersey.