Chapter 2 Strategic Planning in Contemporary Marketing

Chapter Objectives Distinguish between strategic planning and tactical planning. Explain how marketing plans differ at various levels in an organization. Identify the steps in the marketing planning process. Describe successful planning tools and techniques, including Porter’s Five Forces model, first and second mover strategies, SWOT analysis, and the strategic window. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Chapter Objectives Identify the basic elements of a marketing strategy. Describe the environmental characteristics that influence strategic decisions. Describe the methods for marketing planning, including business portfolio analysis and the BCG matrix. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Marketing Planning: The Basis for Strategy and Tactics Planning - Anticipating future events and conditions and determining the best way to achieve organizational objectives Continuous process; creates a blueprint for everyone in the organization Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Marketing Planning: The Basis for Strategy and Tactics Marketing planning - Implementing planning activities devoted to achieving marketing objectives Many planning activities take place over the Internet with virtual conferences An important trend in marketing planning centers on relationship marketing Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Strategic Planning Versus Tactical Planning Determining an organization’s primary objectives Adopting courses of action that will achieve these objectives Addresses long-term actions Tactical Planning Guides the implementation of activities specified in the strategic plan Addresses shorter-term actions Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Copyright © 2012 by South Western, a division of Cengage Learning Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Copyright © 2012 by South Western, a division of Cengage Learning Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Steps in the Marketing Planning Process Defining the organization’s mission Mission - Essential purpose that differentiates one company from another Examples: Microsoft Office: “Real life tools” Sephora: “The beauty authority” IBM: “Welcome to the decade of smart” Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Steps in the Marketing Planning Process Defining the organization’s objectives Objectives - Guide the development of marketing objectives and plans Examples: Generate a 15 percent profit over the next 24 months Add 25 new outlets within the next year Cut manufacturing costs by 10 percent Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Assessing Organizational Resources and Evaluating Environmental Risks and Opportunities Resources include: Production Marketing Finance Technology Employees Strengths help planners: Set objectives Develop plans Take advantage of marketing opportunities Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Formulating, Implementing, and Monitoring a Marketing Strategy Marketing strategy - Selecting and satisfying target consumers through the marketing mix elements The final steps of the planning process: Marketers put the marketing strategy into action Marketers monitor performance to ensure that objectives are achieved Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Successful Strategies: Tools and Techniques Porter’s Five Forces Model The threat of new entrants The bargaining power of buyers The bargaining power of suppliers The threat of substitute products Rivalry among competitors Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Source: Adapted with permission of The Free Press, a division of Simon and Schuster Adult Publishing Group. From Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright ©1980, 1998 by The Free Press. All rights reserved. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

First Mover and Second Mover Strategies First mover strategy – The company first to offer a product in a marketplace will be the long-term market winner Second mover strategy – Observing the innovations of first movers and then improving on them to gain advantage in the marketplace Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

SWOT Analysis Helps planners compare internal organizational strengths and weaknesses with external opportunities and threats Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

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The Strategic Window Limited periods when key requirements of a market and a firm’s particular competencies best fit together Requires a thorough analysis of: Current and projected external environmental conditions Current and projected internal company capabilities How, whether, and when the firm can reconcile environmental conditions and company capabilities Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Elements of a Marketing Strategy The target market Marketing mix variables Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

The Target Market The group of people toward whom the firm directs its marketing efforts and merchandise Example: Boeing markets most of their products to business buyers Diversity plays a critical role Example: Growing Hispanic population in United States Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

The Target Market Targeting consumers in specific global markets represents a challenge and an opportunity Example: In India, Walmart has made a successful entry into retailing with smaller shops in urban areas and low prices Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Marketing Mix Variables Marketing mix - Blending of the four strategy elements to fit the needs and preferences of a specific target market Product Distribution Promotion Pricing Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

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Product Strategy Deciding what goods or services the firm should offer to a group of consumers Customer service Package design Brand names, trademarks, patents, and warranties Lifecycle of a product Product positioning New-product development Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Distribution Strategy Consumers find their products in the proper quantities at the right times and places Involves modes of transportation, warehousing, inventory control, order processing, and selection of marketing channels Technology has opened new channels of distribution in many industries Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Promotion Strategy Communication link between sellers and buyers Firms may communicate messages: Directly through salespeople Indirectly through advertisements and promotions Many companies use integrated marketing communications (IMC) Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Pricing Strategy Methods of setting profitable and justifiable prices Subject to regulation and public scrutiny A good pricing strategy: Creates value for customers Builds and strengthens customer relationships with a firm and its products Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

The Marketing Environment Five external dimensions that affect the marketing mix variables: Competitive Political-legal Economic Technological Social-cultural Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

The Marketing Environment Technology continually changes the marketing environment Rule of three – The three strongest, most efficient companies dominate 70 and 90 percent of a market Example: Cereal manufacturers - General Mills, Kellogg’s, and Post Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Methods for Marketing Planning Business portfolio analysis An evaluation of a company’s products and divisions to determine the strongest and weakest Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Strategic Business Units Key business units within diversified firms Each strategic business unit (SBU): Has its own managers, resources, objectives, and competitors Pursues its own distinct mission and develops its own plans independently SBUs help focus the attention of company managers Companies may have to redefine their SBUs as market conditions dictate Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

BCG ANALYSIS Developed by the Boston Consulting Group A market share/market growth matrix that plots market share against market growth potential Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

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Video Watch Strategic Planning and the Marketing Process at Preserve Do you consider Preserve’s strategy for the Preserve brand a first mover or second mover strategy? Explain. Perform a SWOT analysis on Preserve. Identify their core competency and their weaknesses in the marketplace. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.