McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 2, YOU SHOULD BE ABLE TO: Describe the kinds of organizations that exist and the three levels of strategy in them. LO1 Describe how core values, mission, organizational culture, business, and goals are important to organizations. LO2 Explain how organizations set strategic directions by assessing where they are now and seek to be in the future. LO3 2-2

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 2, YOU SHOULD BE ABLE TO: Describe the strategic marketing process and its three key phases: planning, implementation, and evaluation. Explain how the marketing mix elements are blended into a cohesive marketing program. LO5 2-3

AN “A” IN AN ICE CREAM MAKING COURSE! CAN THIS REALLY BECOME A BUSINESS? 2-4

TODAY’S ORGANIZATIONS KINDS OF ORGANIZATIONS LO1 Organization Offerings Business Firm Profit Nonprofit Organization Industry 2-5

TODAY’S ORGANIZATIONS WHAT IS STRATEGY? LO1 Can’t Be “All Things to All People” Strategy Marketing’s Role 2-6

TODAY’S ORGANIZATIONS STRUCTURE—CORPORATE LO1 Corporate Level Chief Marketing Officer (CMO) Cammie Dunaway Yahoo! Eduardo Conrado Motorola Networks Leslie Short FUBU 2-7

TODAY’S ORGANIZATIONS STRUCTURE—SBU LO1 Strategic Business Unit (SBU) Strategic Business Unit (SBU) Level GE Commercial Finance (business loans, leases) GE Industrial (appliances, lighting, factory automation) GE Money (consumer home loans, credit cards) GE Healthcare (imaging, diagnostics, life-support systems) GE Infrastructure (aircraft engines, energy, transportation) GE NBC Universal (television, music, film) 2-8

TODAY’S ORGANIZATIONS STRUCTURE—FUNCTIONAL LO1 Functional Level Department Cross-Functional Teams 2-9

FIGURE 2-1 The board of directors oversees the three levels of strategy in organizations: corporate, business unit, and functional 2-10

FIGURE 2-2 Visionary organizations: (1) establish a foundation, (2) set a direction, and (3) create strategies 2-11

STRATEGY IN VISIONARY ORGANIZATIONS FOUNDATION (WHY) LO2 Core Values Stakeholders Mission or Vision Organizational Culture 2-12

Star Trek Enterprise Why is a mission statement important? 2-13

Medtronic’s “Rising Figure” Mural What does it signify to stakeholders? 2-14

STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) LO2 Business What do we do? What business are we really in? 2-15

STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) LO2 Goals or Objectives: S.M.A.R.T Specific Measurable Attainable Relevant Time-based 2-16

STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) LO2 Goals or Objectives: Types Profit Customer Satisfaction Sales ($ or #) Employee Welfare Market Share Social Responsibility Quality Efficiency 2-17

SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? LO3 Competencies Competitive Advantage Fast Cycle Time Quality Benchmarking 2-18

SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? LO3 Customers What is the Strategic Focus of Lands’ End? 2-19

SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? LO3 Competitors Who are the Competitors of Lands’ End? 2-20

SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? LO3 Business Portfolio Analysis (BCG) Market Growth Rate Stars Cash Cows Dogs Question Marks Relative Market Share High Low 2-21

Kodak digital photo printer Kodak self-service kiosk Kodak Consumer-Related Products What SBU type in the BCG growth-share matrix? Kodak digital camera Kodak digital photo printer Kodak film Kodak self-service kiosk 2-22

FIGURE 2-3 BCG business portfolio analysis for Kodak’s consumer SBUs for 2003 (solid circle) and 2010 (hollow circle) ② ③ Kodak digital camera Kodak digital photo printer ① ④ Kodak film sales: US, Canada, & W. Europe Kodak self- service kiosk 2-23

SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? LO3 Hedgehog Analysis Illustration courtesy of Jon Keegan What Can We Be the Best At in the World? What Drives Our Economic Engine? What Are We Deeply Passionate About? 2-24

SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? LO3 Blue Ocean Analysis Copyright 2005 W. Chan Kim and Renée Mauborgne Red Oceans Blue Oceans 2-25 Copyright 2005 W. Chan Kim and Renée Mauborgne

SETTING STRATEGIC DIRECTIONS TRACKING WITH MARKETING DASHBOARDS LO3 Car Dashboards and Marketing Dashboards Marketing Metrics and Graphics in Designing Marketing Dashboards Marketing Plan 2-26

FIGURE 2-4 An effective marketing dashboard like Oracle’s helps managers assess a business situation at a glance 2-27

USING MARKETING DASHBOARDS Which States are Underperforming? Annual Percent Change in Unit Volume by State Change in Growth > 10% 0 – 10% < 0% 2-28

FIGURE 2-5 (Condensed) The strategic marketing process has three phases: planning, implementation, and evaluation 2-29

THE STRATEGIC MARKETING PROCESS LO4 Strategic Marketing Process How Do We Allocate Our Resources to Get Where We Want to Go? How Do We Convert Our Plans to Actions? How Do Our Results Compare With Our Plans, and Do Deviations Require New Plans? 2-30

THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO4 Step 1: Situation (SWOT) Analysis Situation Analysis SWOT Analysis Strengths Weaknesses Opportunities Threats 2-31

THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO4 Step 1: Situation (SWOT) Analysis SWOT Analysis Study Identify Industry Trends Analyze Competitors Assess the Organization Research Present and Prospective Customers 2-32

FIGURE 2-6 Ben & Jerry’s SWOT analysis that serves as the basis for management actions regarding growth 2-33

THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO4 Step 1: Situation (SWOT) Analysis SWOT Analysis Study Build on a Strength Correct a Weakness Exploit an Opportunity Avoid a Disaster- Laden Threat 2-34

THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO4 Step 2: Market-Product Focus and Goal Setting Market Segmentation Points of Difference 2-35

THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO4 Example: Medtronic’s Pacemaker Set Marketing & Product Goals Select Target Markets Find Points of Difference Position the Product 2-36

THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO5 Step 3: Marketing Program Product Strategy Price Strategy Promotion Strategy Place (Distribution) Strategy 2-37

FIGURE 2-7 The elements of the marketing mix must be blended to produce a cohesive marketing program 2-38

THE STRATEGIC MARKETING PROCESS THE IMPLEMENTATION PHASE LO5 Obtaining Resources Designing the Marketing Organization Developing Schedules Executing the Marketing Program Marketing Strategy Marketing Tactics 2-39

FIGURE 2-8 Organization of a typical manufacturing firm, showing a breakdown of the marketing department 2-40

THE STRATEGIC MARKETING PROCESS THE EVALUATION PHASE LO5 Comparing Results with Plans to Identify Deviations Planning Gap Acting on Deviations Exploiting a Positive Deviation Correcting a Negative Deviation 2-41

FIGURE 2-9 The evaluation phase of the strategic marketing process that compares actual results with goals to identify and act on deviations to fill in the “planning gap” 2-42

BP: TRANSFORMING ITS STRATEGY “BEYOND PETROLEUM” VIDEO CASE 2 2-43

VIDEO CASE 2 BP 1. (a) What is BP’s “Helios” strategy? (b) How does this strategy relate to BP’s mission and values? 2-44

VIDEO CASE 2 BP 2. Conduct a SWOT (strengths, weaknesses, opportunities, and threats) analysis for BP’s “Helios” initiative—looking forward globally to the next three years. 2-45

VIDEO CASE 2 BP 3. What are some ways BP could use to effectively communicate its “Helios” strategy to consumers? 2-46

VIDEO CASE 2 BP 4. What are the long-term benefits to (a) society and (b) BP of its “Helios” initiative? 2-47

VIDEO CASE 2 BP 5. Looking at BP’s Helios Power marketing strategy and its “street team” marketing tactic: (a) What objectives would you set for this tactic? (b) How would you propose BP measure the results? 2-48

GENERAL ELECTRIC’S BUSINESS SCREEN SUPPLEMENTAL LECTURE NOTE 2-1 2-49

FIGURE 2-A General Electric’s spotlight strategy chart 2-50

MARKETING VS. BUSINESS PLANS SUPPLEMENTAL LECTURE NOTE 2-2 2-51

FIGURE 2-B Elements in typical marketing and business plans targeted at different audiences 2-52

MARKETING YOURSELF IN-CLASS ACTIVITY 2-1 2-53

Yahoo!/Hot Jobs TV Ad 2-54

Sample Cover Letter 2-55

Sample Résumé 2-56

Profit Profit is the reward to a business firm for the risk it undertakes in offering a product for sale. It is also the money left over after a firm’s total expenses are subtracted from its total sales. 2-57

Strategy Strategy is an organization’s long-term course of action designed to deliver a unique customer experience while achieving its goals. 2-58

Corporate Level The corporate level is the level in an organization where top management directs overall strategy for the entire organization. 2-59

Strategic Business Unit (SBU) A strategic business unit (SBU) is a subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly-defined group of customers. 2-60

Strategic Business Unit (SBU) Level The strategic business unit (SBU) level is the level in an organization where managers set a more specific strategic direction for their businesses to exploit value creating opportunities. 2-61

Functional Level The functional level is the level in an organization where groups of specialists actually create value for the organization. 2-62

Cross-Functional Teams Cross-functional teams consist of a small number of people from different departments in an organization who are mutually accountable to accomplish a task or common set of performance goals. 2-63

Core Values Core values are the fundamental, passionate, and enduring principles of an organization that guide its conduct over time. 2-64

Mission A mission is a statement of the organization’s function in society, often identifying its customers, markets, products, and technologies. The term is often used interchangeably with vision. 2-65

Organizational Culture An organizational culture consists of a set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization. 2-66

Business A business is the clear, broad, underlying industry category or market sector of an organization’s offering. 2-67

Goals or Objectives Goals or objectives are the statements of an accomplishment of a task to be achieved, often by a specific time. 2-68

Market Share Market share is the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself. 2-69

Competencies Competencies consist of an organization’s special capabilities, including skills, technologies, and resources, which distinguish it from other organizations and provide value to its customers. 2-70

Competitive Advantage A competitive advantage is an unique strength relative to competitors, often based on quality, time, cost, or innovation. 2-71

Marketing Dashboard A marketing dashboard is the visual display on a single computer screen of the essential information related to achieving a marketing objective. 2-72

Marketing Metric A marketing metric is a measure of the quantitative value or trend of a marketing activity or result. 2-73

Marketing Plan A marketing plan is a road map for the marketing activities of an organization for a specified future period of time, such as one year or five years. 2-74

Strategic Marketing Process The strategic marketing process is the approach whereby an organization allocates its marketing mix resources to reach its target markets. 2-75

Situation Analysis A situation analysis involves taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization’s plans and the external factors and trends affecting it. 2-76

SWOT Analysis A SWOT analysis is an acronym describing an organization’s appraisal of its internal Strengths and Weaknesses and its external Opportunities and Threats. 2-77

Market Segmentation Market segmentation involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. 2-78

Points of Difference Points of difference are those characteristics of a product that make it superior to competitive substitutes. 2-79

Marketing Strategy Marketing strategy is the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. 2-80

Marketing Tactics Marketing tactics are the detailed day-to-day operational decisions essential to the overall success of marketing strategies. 2-81