Slide 1-1© 2013 Pearson Education, Inc. publishing as Prentice Hall CHAPTER 1 Foundations of Strategic Marketing Management

Slide 1-2© 2013 Pearson Education, Inc. publishing as Prentice Hall 1.Define an organization’s business, mission, and goals. 2.Identify and frame organization growth opportunities. 3.Formulate product-market strategies. 4.Budget marketing, financial, and production resources. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

Slide 1-3© 2013 Pearson Education, Inc. publishing as Prentice Hall 5.Develop reformulation and recovery strategies. 6.Draft a marketing plan. 7.Emphasize marketing ethics and social responsibility. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

Slide 1-4© 2013 Pearson Education, Inc. publishing as Prentice Hall To create long-term and mutually beneficial exchange relationships between an entity and the publics (individuals and organizations) with which it interacts. PURPOSE OF MARKETING

Slide 1-5© 2013 Pearson Education, Inc. publishing as Prentice Hall RESULTS OF THE EVOLUTION OF THE MARKETING MANAGER  Created the Chief Marketing Officer (CMO) position  Increased popularity of strategic marketing management  Half of Fortune 1000 have CMOs

Slide 1-6© 2013 Pearson Education, Inc. publishing as Prentice Hall  Define business, mission, and goals  Identify/frame growth opportunities  Formulate product-market strategies  Budget resources  Develop reformulation and recovery strategies STRATEGIC MARKETING MANAGEMENT PROCESSES

Slide 1-7© 2013 Pearson Education, Inc. publishing as Prentice Hall  An firm defines its business by: The customers served and their needs The means or technology used to satisfy needs BUSINESS DEFINITION  Is neither obvious nor easy to define  Outlines the scope of operations  What “business” is the Encyclopedia Britannica in?

Slide 1-8© 2013 Pearson Education, Inc. publishing as Prentice Hall  Underscores the scope of an organization’s operations  Reflects management’s vision of the organization  Describes an organization’s purpose  Crystallizes the organization’s long-term direction and character BUSINESS MISSION Consists of a written statement that:

Slide 1-9© 2013 Pearson Education, Inc. publishing as Prentice Hall  Helps identify and evaluate product-market opportunities  Inspires employees  Provides direction for goal-setting  Applies to not-for-profit organizations as well BUSINESS MISSION Consists of a written statement that:

Slide 1-10© 2013 Pearson Education, Inc. publishing as Prentice Hall BUSINESS MISSION XEROX American Red Cross “Do great work” “Provide for victims of disaster”

Slide 1-11© 2013 Pearson Education, Inc. publishing as Prentice Hall Production Objectives  Convert the mission into tangible actions and results to be achieved by a specified time frame  Are divided into three categories: Financial Objectives Marketing Objectives BUSINESS GOALS OR OBJECTIVES

Slide 1-12© 2013 Pearson Education, Inc. publishing as Prentice Hall BUSINESS GOALS OR OBJECTIVES Manufacturing and service capacity Product and service quality Production Objectives Return on investment Return on sales Shareholder wealth Profit Cash flow Financial Objectives Market share Sales volume Marketing productivity Customer satisfaction Customer value creation ProfitCustomer lifetime value Marketing Objectives

Slide 1-13© 2013 Pearson Education, Inc. publishing as Prentice Hall A situation analysis is an appraisal of operations to determine reasons for the gap between what was or is expected and what has happened or will happen. BUSINESS GOALS OR OBJECTIVES

Slide 1-14© 2013 Pearson Education, Inc. publishing as Prentice Hall Companywide Strategic Planning

Slide 1-15© 2013 Pearson Education, Inc. publishing as Prentice Hall CONVERTING ENVIRONMENTAL OPPORTUNITIES INTO ORGANIZATIONAL OPPORTUNITIES  What might we do? Ask three questions:  What do we do best?  What must we do? Environmental Opportunities Distinctive Competencies Success Requirements

Slide 1-16© 2013 Pearson Education, Inc. publishing as Prentice Hall  Unmet or changing consumer needs  Unsatisfied buyer groups  New means or technologies for delivering value to prospective buyers WHAT MIGHT WE DO? Environmental Opportunities

Slide 1-17© 2013 Pearson Education, Inc. publishing as Prentice Hall Describes an organization’s unique strengths or qualities, including skills, technologies, or resources, that distinguish it from other organizations. WHAT DO WE DO BEST? Distinctive Competency

Slide 1-18© 2013 Pearson Education, Inc. publishing as Prentice Hall Two criteria must be satisfied:  Competitors cannot imitate it  Provide customers with superior value WHAT DO WE DO BEST? Distinctive Competency

Slide 1-19© 2013 Pearson Education, Inc. publishing as Prentice Hall SWOT analysis is a formal framework for identifying and framing organizational growth opportunities. StrengthsWeaknesses Internal Capabilities Opportunities External Environment Threats OrganizationFavorableUnfavorable - Type of Factor - SWOT ANALYSIS

Slide 1-20© 2013 Pearson Education, Inc. publishing as Prentice Hall Strengths Weaknesses Opportunities Threats What the organization is good at doing or some characteristic that gives it an important capability What an organization lacks or does poorly relative to other organizations Developments or conditions in the environment that have favorable implications for the organization Pose dangers to the welfare of the organization SWOT ANALYSIS

Slide 1-21© 2013 Pearson Education, Inc. publishing as Prentice Hall EXHIBIT 1.1: SAMPLE SWOT ANALYSIS FRAMEWORK StrengthsWeaknesses Internal Factors Opportunities External Factors Threats  Management  Marketing  Manufacturing  R&D  Finance  Offerings  Economic  Competition  Consumer  Technology  Legal/Regulatory  Industry/Market Structure

Slide 1-22© 2013 Pearson Education, Inc. publishing as Prentice Hall  Which strengths represent distinctive competencies?  Does a pattern emerge from the SWOT?  Which weaknesses disqualify the organization from pursuing certain opportunities? Questions to ask after a SWOT analysis: SWOT ANALYSIS

Slide 1-23© 2013 Pearson Education, Inc. publishing as Prentice Hall FORMULATING PRODUCT-MARKET STRATEGIES CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

Slide 1-24© 2013 Pearson Education, Inc. publishing as Prentice Hall A product-market strategy involves selecting specific markets and profitably reaching them through an integrated program called a marketing mix. PRODUCT-MARKET STRATEGY

Slide 1-25© 2013 Pearson Education, Inc. publishing as Prentice Hall EXHIBIT 1.2: PRODUCT-MARKET STRATEGIES Market Development New Offering Development Market Penetration Diversification New Existing Existing New Markets Offerings

Slide 1-26© 2013 Pearson Education, Inc. publishing as Prentice Hall A market-penetration strategy dictates that an organization seeks to gain greater dominance in a market in which it already has an offering (existing offerings → existing markets). PRODUCT-MARKET STRATEGIES I. Market Penetration Strategy

Slide 1-27© 2013 Pearson Education, Inc. publishing as Prentice Hall  Increasing present buyers’ usage or consumption rates of the offering  Attracting buyers of competing offerings  Stimulating product trial among potential customers PRODUCT-MARKET STRATEGIES Market Penetration Strategy Involves

Slide 1-28© 2013 Pearson Education, Inc. publishing as Prentice Hall A market-development strategy dictates that an organization introduce its existing offerings to markets other than those it is currently serving (existing offerings → new markets). PRODUCT-MARKET STRATEGIES II. Market Development Strategy

Slide 1-29© 2013 Pearson Education, Inc. publishing as Prentice Hall  Adjusting the marketing mix, such as:  Analyzing competitors’ strengths, weaknesses, and potential for retaliation Modifying the basic product offering Using different distribution outlets Changing the sales effort or advertising Find new country markets PRODUCT-MARKET STRATEGIES Market Development Strategy Involves

Slide 1-30© 2013 Pearson Education, Inc. publishing as Prentice Hall A product- (new offering-) development strategy dictates that an organization create new offerings → existing markets. PRODUCT-MARKET STRATEGIES III. New Offering Development Strategy

Slide 1-31© 2013 Pearson Education, Inc. publishing as Prentice Hall PRODUCT-MARKET STRATEGIES Enhancing the value to customers of existing offerings through bundling or improving functional performance Product Augmentation Developing totally new offerings Product Innovation Adding different features, sizes, etc. to broaden the existing line Product Line Extension New Offering Development Strategy Involves

Slide 1-32© 2013 Pearson Education, Inc. publishing as Prentice Hall  The market size and volume needed for profitability  The magnitude and timing of competitors’ responses  The impact of the new product on the sales of existing offerings (cannibalism) The impact of the new product on the sales of existing offerings (cannibalism)  The capacity of the organization to deliver the offerings to the market(s) PRODUCT-MARKET STRATEGIES New Offering Development Strategy Factors  The presence of significant points of difference

Slide 1-33© 2013 Pearson Education, Inc. publishing as Prentice Hall  Occurs when sales of a new offering come at the expense of sales of existing offerings the firm already markets PRODUCT-MARKET STRATEGIES Cannibalism  Is common in product development programs  Key issue: Does the new offering detract from the overall profitability of the firm’s total offering mix

Slide 1-34© 2013 Pearson Education, Inc. publishing as Prentice Hall A diversification strategy involves the development or acquisition of offerings new to the organization and the introduction of those offerings to publics not previously served by the organization (new offerings → new markets). PRODUCT-MARKET STRATEGIES Diversification Strategy

Slide 1-35© 2013 Pearson Education, Inc. publishing as Prentice Hall  Many firms have adopted this strategy to take advantage of growth opportunities  Is very risky because both the offerings and markets served are new to the organization  Can be successful if the organization applies its distinctive competencies to reaching new markets with new offerings PRODUCT-MARKET STRATEGIES Diversification Strategy Considerations

Slide 1-36© 2013 Pearson Education, Inc. publishing as Prentice Hall Strategies are evaluated based on:  The organization’s business definition, mission, and capabilities  Market capacity and behavior  Environmental forces  Competitive activities PRODUCT-MARKET STRATEGIES

Slide 1-37© 2013 Pearson Education, Inc. publishing as Prentice Hall Aggressive competition Passive competition Aggressive competition Price Strategy Communication Strategy Product Strategy Channel Strategy Customer THE MARKETING MIX

Slide 1-38© 2013 Pearson Education, Inc. publishing as Prentice Hall Developing an Integrated Marketing Mix

Slide 1-39© 2013 Pearson Education, Inc. publishing as Prentice Hall Estimated profit of $4 million Estimated profit of$3 million Aggressive competition  Depends on the success requirements of the market  Must be consistent with: FORMULATING THE MARKETING MIX The needs of the markets served The organization’s capacity The marketing mix activities

Slide 1-40© 2013 Pearson Education, Inc. publishing as Prentice Hall Estimated profit of $4 million Estimated profit of$3 million Aggressive competition  Requires an understanding of:  Is an art and a science IMPLEMENTING THE MARKETING MIX Markets Environmental forces Organizational capacity Marketing mix activities Competitor reactions

Slide 1-41© 2013 Pearson Education, Inc. publishing as Prentice Hall A budget is a formal, quantitative expression of an organization’s planning and strategy initiatives expressed in financial terms. BUDGETING

Slide 1-42© 2013 Pearson Education, Inc. publishing as Prentice Hall A marketing audit is a comprehensive, systematic, and periodic examination of a firm’s or business unit’s marketing environment, objectives, strategies, and activities to determine problem areas and opportunities and recommend a plan of action to improve the firm’s marketing performance. MARKETING AUDIT

Slide 1-43© 2013 Pearson Education, Inc. publishing as Prentice Hall Addresses the following questions: MARKETING AUDIT Are we doing the right things? Strategic Are we doing things right? Operational

Slide 1-44© 2013 Pearson Education, Inc. publishing as Prentice Hall A marketing plan is a formal, written document that describes the context and scope of an organization’s marketing effort to achieve defined goals or objectives within a specific future time period. MARKETING PLAN

Slide 1-45© 2013 Pearson Education, Inc. publishing as Prentice Hall  Consists of: Consists of:  Each has these time dimensions: Focus: 1-year period Focus: 3- to 5-year period MARKETING PLAN Product Plan Business Plan Marketing Plan Short-term Long-term

Slide 1-46© 2013 Pearson Education, Inc. publishing as Prentice Hall Elements of a Marketing Plan Executive summaryCurrent marketing situationThreats and opportunity analysisObjectives and issuesMarketing strategyAction programsBudgetsControls

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