Strategic Market Planning: Take the Big Picture Chapter Two © 2012 Pearson Education, Inc. publishing as Prentice-Hall

2-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives  Explain business planning and its three levels  Describe the steps in strategic planning  Describe the steps in marketing planning

2-3 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Time at First Flavor  Should Jay diversify into new product categories or focus on gaining market acceptance for Peel ‘n Taste? Option 1: Investigate all three new business ideas Option 1: Investigate all three new business ideas Option 2: Focus on Peel ‘n Taste only until it gains market acceptance Option 2: Focus on Peel ‘n Taste only until it gains market acceptance Option 3: Focus on Peel ‘n Taste but investigate limited investment in launching one of the new products Option 3: Focus on Peel ‘n Taste but investigate limited investment in launching one of the new products

2-4 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Business Planning: Compose the Big Picture  Business Planning: Ongoing process of making decisions that guides the firm both in the short term and for the long term Identifies and builds on firm’s strengths Identifies and builds on firm’s strengths Helps managers make informed decisions Helps managers make informed decisions Develops objectives before action is taken Develops objectives before action is taken

2-5 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Ethics Is Up Front in Marketing Planning  Unethical marketing decisions damage the firm, society, and stakeholders  Business ethics Basic values that guide a firm’s behavior Basic values that guide a firm’s behavior  Code of ethics Written standards of behavior, which everyone in the organization must subscribe Written standards of behavior, which everyone in the organization must subscribe

2-6 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Three Levels of Business Planning  Strategic planning Undertaken by top-level corporate management Undertaken by top-level corporate management  Functional planning Conducted by top functional-level managers such as the chief marketing officer Conducted by top functional-level managers such as the chief marketing officer  Operational planning Done by supervisory managers Done by supervisory managers

2-7 © 2012 Pearson Education, Inc. publishing as Prentice-Hall.  Managerial decision process that matches firm’s resources and capabilities to its market opportunities for long-term growth and survival: Top management defines firm’s purpose and objectives Top management defines firm’s purpose and objectives Strategic business units (SBUs) are common in large firms Strategic business units (SBUs) are common in large firms Strategic Planning

2-8 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Functional Planning  Accomplished by various functional areas of firm, such as marketing  Typically includes: A broad three-to-five year-plan to support the strategic plan A broad three-to-five year-plan to support the strategic plan A detailed annual plan A detailed annual plan

2-9 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Operational Planning  First-line managers focus on day-to- day execution of functional plans  Typically includes one or more of the following: Detailed annual plans Detailed annual plans Semiannual plans Semiannual plans Quarterly plans Quarterly plans

2-10 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. All Business Planning Is an Integrated Activity  Strategic, functional, and operational plans must work together to benefit the whole firm Plans are guided by firm’s mission Plans are guided by firm’s mission  Planners at all levels must keep the “big picture” in mind when planning

2-11 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Strategic Planning: Frame the Picture  Very large multiproduct firms may have divisions called strategic business units (SBUs): SBUs operate like separate businesses with their own mission, business objectives, resources, managers, and competitors SBUs operate like separate businesses with their own mission, business objectives, resources, managers, and competitors  Strategic planning is done at both the corporate and SBU levels

2-12 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Strategic Planning Step 1: Define the Mission  Key questions in determining the mission: What is our type of business? What is our type of business? What customers should we serve? What customers should we serve? How do we develop firm’s capabilities and focus its efforts? How do we develop firm’s capabilities and focus its efforts?  Mission statement A formal document that describes the firm’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources A formal document that describes the firm’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources

2-13 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 1: Define the Mission  Examples of mission statements include: MADD: “to stop drunk driving, support the victims of this violent crime, and prevent underage drinking.” MADD: “to stop drunk driving, support the victims of this violent crime, and prevent underage drinking.” National Book Swap: “to become the nation’s largest book club and in the process bring a lifetime of reading material to every American.” National Book Swap: “to become the nation’s largest book club and in the process bring a lifetime of reading material to every American.”

2-14 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 2: Evaluate the Internal and External Environments  Situational analysis: An assessment of a firm’s internal and external environments An assessment of a firm’s internal and external environments  Internal environmental assessment: Identifies the firm’s strengths and weaknesses  External environmental assessment: Identifies opportunities and threats

2-15 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Internal Environment  Controllable elements inside a firm that influence how well the firm operates include: Technologies, physical facilities, financial stability, corporate reputation, quality products, strong brands, technologies, human and intellectual capital, etc. Technologies, physical facilities, financial stability, corporate reputation, quality products, strong brands, technologies, human and intellectual capital, etc.

2-16 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. External Environment  Elements outside the firm that may affect it either positively or negatively  The external environment is global and requires consideration of: Economic trends Economic trends Competitive trends Competitive trends Technological trends Technological trends Legal/political/ethical trends Legal/political/ethical trends Sociocultural trends Sociocultural trends

2-17 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. SWOT Analysis  An analysis of an organization’s strengths (S) and weaknesses (W) and the opportunities (O) and threats (T) in the external environment  SWOT enables the firm to develop strategies that maximize strengths and capitalize upon opportunities

2-18 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 3: Set Organizational or SBU Objectives  Organizational/SBU Objectives What the firm hopes to accomplish with long-range business plan What the firm hopes to accomplish with long-range business plan  Need to be specific, measurable, attainable and sustainable: May relate to sales, profitability, product development, market share, productivity, ROI, customer satisfaction, or social responsibility May relate to sales, profitability, product development, market share, productivity, ROI, customer satisfaction, or social responsibility

2-19 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 4: Establish the Business Portfolio  Business portfolio The group of different products or brands owned by a firm and having different income-generating and growth capabilities The group of different products or brands owned by a firm and having different income-generating and growth capabilities  Portfolio analysis: Assesses the potential of a firm’s SBUs Assesses the potential of a firm’s SBUs BCG growth-market share matrix BCG growth-market share matrix

2-20 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 5: Develop Growth Strategies  Product-market growth matrix: Characterizes different growth strategies according to type of market and type of product Characterizes different growth strategies according to type of market and type of product Matrix yields four potential strategies: Matrix yields four potential strategies:  Market penetration  Product development  Market development  Diversification

2-21 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Planning  Step 1: Perform a situation analysis: Builds on SWOT; and identifies how environmental trends affect the marketing plan Builds on SWOT; and identifies how environmental trends affect the marketing plan  Step 2: Set marketing objectives: Specific to the firm’s brands and other marketing mix-related elements Specific to the firm’s brands and other marketing mix-related elements States what the marketing function must accomplish if the firm is to achieve its overall business objectives States what the marketing function must accomplish if the firm is to achieve its overall business objectives

2-22 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Planning  Step 3: Develop marketing strategies to achieve marketing objectives: Select target market(s) where the firm’s offerings are best suited Select target market(s) where the firm’s offerings are best suited Develop marketing mix strategies: Develop marketing mix strategies:  Product strategies  Price strategies  Promotion strategies  Distribution (place) strategies

2-23 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Planning  Step 4: Implement and control the marketing plan : Measure actual performance Measure actual performance Compare performance to the objectives Compare performance to the objectives Make adjustments Make adjustments  Marketing metrics Return on marketing investment (ROMI) Return on marketing investment (ROMI)  Create action plans Support plans that guide implementation and control of marketing strategies Support plans that guide implementation and control of marketing strategies

2-24 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Operational Planning: Day-to-Day Execution of Plans  Marketing planning occurs at the functional level.  At the operational level, plans focus on the day-to-day execution of the marketing plan: Created by first-line managers Created by first-line managers Cover short time frames Cover short time frames Marketing metrics gauge success Marketing metrics gauge success

2-25 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Real People, Real Choices: Decision Made at First Flavor  Jay chose option 3 Why do you think Jay chose to focus on Peel ‘n Taste until it gained market acceptance, while also investigating the opportunity to launch one of the new products with limited resources? Why do you think Jay chose to focus on Peel ‘n Taste until it gained market acceptance, while also investigating the opportunity to launch one of the new products with limited resources?

2-26 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Keep It Real: Fast-Forward to Next Class Decision Time at eBay  Meet Robert Chatwani, General Business Manager of eBay  eBay is developing a new online marketplace to help small producers and artisans gain global access  The decision to be made includes: How to create a marketplace for small producers and artisans that would maximize long-term revenue and social impact

2-27 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America