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296 PART 3 Marketing

When companies develop strategies, they often realize that their firm does not
have the required experience or skills. Then, they may decide to either outsource or
partner with another firm to form a strategic alliance. Outsourcing occurs when a
company has another company perform an activity that it used to perform itself.
Frequently, companies will turn over marketing research or advertising to special-
ized marketing research or advertising agencies. A recent trend is the outsourcing
of distribution operations, which Sun Microsystems did, achieving seven-day-a-
week, round-the-clock parts supply. 38 The potential benefits from outsourcing
include lowering costs and being able to better concentrate on core competencies.
Strategic alliances are formal or informal agreements among two or more com-
panies to pursue a common objective. They can involve domestic or foreign com-
panies, but they are companies at the same level of the value chain, for example,
manufacturers. Examples of strategic alliances include Pepsico and Lipton jointly
selling canned iced tea beverages, American Express and Toys ‘R’ Us developing
cooperative advertising and promotion, and Ford and Nissan designing and pro-
ducing small cars.
Developing strategies for international markets contains some special consid-
erations. The greater level of risk for companies than the risk in domestic markets
must be kept in mind. Risk is increased because of the differences in markets and
culture that exist between the domestic and international markets and the longer
distances involved. Another factor is the need for international strategies to recog-
nize a longer time horizon. DaimlerChrysler chairperson Jurgen Schrempp devel-
ops long-term global strategies; he has a time horizon of ten years. 39 It has been
estimated that it took forty years for Campbell Soup to develop successful strategies
40
for the Japanese market. One expert suggests a D.U.M.B. strategy for international
markets: Is the product Demonstrable, is it Unique, is it Meaningful, is it Believable?
BMW cars illustrate the D.U.M.B. principle. Their ride can be demonstrated, their
Bavarian engineering and styling are unique, they are meaningful to discriminating
buyers, and they do what they claim and so are believable. 41

LEARNING OBJECTIVE 7
Describe the concept of niche marketing and explain the advantages
of employing a niche marketing strategy.
A major strategic consideration for companies is which target markets they
undifferentiated strategy The plan of a should enter. The options available are shown in Exhibit 8.7. When an undifferen-
company to make the same product and tiated strategy is used, a firm will go after the entire market with the same product
service available to all segments of a
market or service. When Henry Ford, developer of the Ford automobile, said “They can
have any color they want as long as it’s black,” he was essentially pursuing an undif-
niche marketing strategy The plan of a ferentiated strategy. On the other hand, a niche marketing strategy involves differ-
company to direct different products ent products or services being directed to various market segments. In a multiple
and services to different market segment approach, the marketer divides the entire market into various segments
segments
and develops an offering for each one. A one-segment strategy develops and mar-
kets a product or service to only one segment of the market. An undifferentiated
strategy assumes, for the most part, that all segments of the market have similar
needs and desires. A niche marketing strategy is based on the belief that various
segments have different needs and desires and that these can be identified and
effectively served.
Many companies have pursued niche marketing strategies and benefited
significantly.
• Kiwi, a small airline with only two planes flying between Chicago, Atlanta, and
Orlando, made $10 million in profits in its first year of operation. 42

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