1. Chapter 2 - Strategic Planning for Competitive Advantage
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2. Learning Outcomes Understand the importance of strategic planning
Define strategic business units (SBUs)
Identify strategic alternatives and know a basic outline for a marketing plan
Develop an appropriate business mission statement
Describe the components of a situation analysis
Identify sources of competitive advantage

3. Learning Outcomes (continued)
Explain the criteria for stating good marketing objectives
Discuss target market strategies
Describe the elements of the marketing mix
Explain why implementation, evaluation, and control of the marketing plan are necessary
Identify several techniques that help make strategic planning effective

4. Characteristics of strategic business units
Strategic Planning
Chapter 2 Strategic Planning for Competitive Advantage
LO 1
Creating and maintaining a fit between the organization’s objectives and resources and the evolving market opportunities
Characteristics of strategic business units
Distinct mission and specific target market
Control over its resources and has own competitors
Single business or a collection of related businesses
Plans independent of other SBUs in the total organization
The goal of strategic planning is long-run profitability and growth. Strategic decisions require long-term commitments of resources.
Strategic errors can threaten a firm’s survival, but a good plan can help protect and grow the firm's resources.
Examples of strategic decisions • McDonald’s has unveiled plans to allow customers to customize their orders. • Walmart decides to close its small-format Walmart Express locations. • Starbucks opened the Starbucks Reserve Roastery and Tasting Room in Seattle.
A strategic business unit (SBU) is a subgroup of a single business or a collection of related businesses within the larger organization.
Discussion/Team Activity
Have students come up with strategic planning decisions of other companies.
Discuss why strategic planning is important for these companies.

5. 2.1 Ansoff’s Opportunity Matrix
Chapter 2 Strategic Planning for Competitive Advantage
LO 3
2.1 Ansoff’s Opportunity Matrix
Ansoff’s Opportunity Matrix is one of the most commonly used tools to determine a company’s strategic direction. It matches products with markets.
Examples
Market Penetration - McDonald’s introduced all day Breakfast.
Market Development - McDonald’s has opened in various countries.
Product development - Abbott laboratories introduced a new line of healthy snacks called Curate Bars.
Diversification - Harley-Davidson recently launched two new motorcycle models for women.

6. LO 3
2.2 Innovation Matrix

7. 2.3 Portfolio Matrix for a Large Computer Manufacturer
Chapter 2 Strategic Planning for Competitive Advantage
LO 3
2.3 Portfolio Matrix for a Large Computer Manufacturer
A star is a fast-growing market leader. Stars usually have large profits but need cash to finance growth. A marketing tactic is to protect market share by reinvesting earnings in product improvement, better distribution, more promotion, and production efficiency. They strive to capture new users as they enter the market.
A cash cow generates more cash than it needs to maintain its market share. It is in a low-growth market, but the product has a dominant market share. The marketing strategy is to maintain market dominance by being the price leader and making technological improvements in the product. It allocates excess cash to products with high-growth prospects.
A problem child shows rapid growth but poor profit margins. It has a low market share in a high-growth industry. It needs a great deal of cash to prevent conversion to the status of dogs. The strategies are to invest heavily to gain better market share, acquire competitors to get the necessary market share, or drop the SBU.
A dog has low growth potential and a small market share. Most dogs leave the market. The strategy options are to divest or harvest.

8. Strategies Used to Allocate Future Resources
Chapter 2 Strategic Planning for Competitive Advantage
LO 3
Build
Hold
Harvest
Divest
After classifying the SBUs, a company must determine how to allocate resources to each SBU.
Build - If an SBU has the potential to be a star, building would be an appropriate goal.
Hold - If an SBU is a successful cash cow, a key goal would be to hold or preserve market share.
Harvest - This is an appropriate strategy for all SBUs except stars. The basic goal is to increase short-term cash return without much concern for the long-run impact.
Divest - Getting rid of SBUs with low shares of low-growth markets is often appropriate. Problem children and dogs are suitable for this strategy.

9. Marketing Plan Planning Marketing planning Marketing plan
Chapter 2 Strategic Planning for Competitive Advantage
LO 3
Process of anticipating future events and determining strategies to achieve organizational objectives in the future
Planning
Designing activities relating to marketing objectives and the changing marketing environment
Marketing planning
Marketing planning is the basis for all marketing strategies and decisions. Issues such as product lines, distribution channels, marketing communications, and pricing are all delineated in the marketing plan.
Written document that acts as a guidebook of marketing activities for the marketing manager
Marketing plan

10. 2.5 Elements of a Marketing Plan
Chapter 2 Strategic Planning for Competitive Advantage
LO 3
2.5 Elements of a Marketing Plan
Some elements are common to all marketing plans. These include the business mission and objectives, performing a SWOT analysis, determining a target market, and establishing a marketing mix.
Other elements that may be included are budgets, implementation timetables, required marketing research efforts, or elements of advanced strategic planning.

11. Statement of a firm's business based on the analysis of:
Mission Statement
Chapter 2 Strategic Planning for Competitive Advantage
LO 4
Statement of a firm's business based on the analysis of:
Benefits sought by present and potential customers
Existing and anticipated environmental conditions
Suffers from marketing myopia if stated narrowly
Marketing myopia: Defining a business in terms of goods and services rather than the benefits customers seek
The foundation of any marketing plan is the firm’s mission statement. It establishes boundaries for all subsequent decisions, objectives, and strategies.
The mission statement affects the firm’s long-run resource allocation, profitability, and survival.
Discussion/Team Activity
Find the mission statements for various organizations. Compare the mission statements with the markets served and the products sold by these organizations.

12. Situational analysis by which firms should:
SWOT Analysis
Chapter 2 Strategic Planning for Competitive Advantage
LO 5
Situational analysis by which firms should:
Identify their internal strengths and weaknesses
Done by focusing on organizational resources
Examine their external opportunities and threats
Done via environmental scanning, which involves analyzing aspects of the marketing environment
Performance of a situation (SWOT) analysis helps firms identify their competitive advantage.
Strengths - Things the company does well
Weaknesses - Things the company does not do well
Opportunities - Conditions in the external environment that favor strengths
Threats - Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness
Environmental scanning: Collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan
Discussion/Team Activity
Perform a SWOT analysis for companies within the same industry. How could you use this information if you worked for a particular company or for a competitive company?

13. Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
LO 6
Factor or factors that cause customers to patronize a firm and not the competition
Types
Cost
Product/service differentiation
Niche
Sustainable competitive advantage: Cannot be copied by the competition
A competitive advantage is a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition.
A sustainable competitive advantage lasts only as long as the time it takes a competitor to imitate the strategy and plans.
Marketing managers should continually look for skills and assets that create and sustain competitive advantage.
A sustainable competitive advantage is a function of the speed with which competitors can imitate a company’s strategy and plans. Imitation requires a competitor to identify the leader’s competitive advantage, determine how it is achieved, and learn how to duplicate it.
Discussion/Team Activity
Discuss examples of firms that have sustainable competitive advantage in each skill and asset source listed.

14. Statement of what is to be accomplished through marketing activities
Marketing Objective
LO 7
Statement of what is to be accomplished through marketing activities
Setting effective marketing objectives
Communicate marketing management philosophy
Provide directions for lower-level marketing managers
Motivate employees
Force executives to clarify their thinking
Form a basis for control

15. Target Market Strategy
Chapter 2 Strategic Planning for Competitive Advantage
LO 8
Segments based on groups with similar characteristics through market opportunity analysis
Strategies for selecting target markets
Appeal to the entire market with one marketing mix
Concentrate on one marketing segment
Appeal to multiple market segments with multiple marketing mixes
Marketing strategy: Produces mutually satisfying exchanges with target markets by selecting and describing one or more target markets and developing and maintaining a marketing mix
Market opportunity analysis (MOA): Describes and estimates of the size and sales potential of market segments that are of interest to the firm and assesses key competitors in these market segments
Selects one or more target markets
Discussion/Team Activity
Discuss the differences in the target markets for McDonald’s, Burger King, and Wendy’s.

16. Marketing Mix: The “Four Ps”
Chapter 2 Strategic Planning for Competitive Advantage
LO 9
Product involves tangible goods, ideas, or services
Place involves physical distribution that includes storage and transportation
Promotion includes advertising, public relations, sales promotion, and personal selling
Price is what a buyer must give up to obtain a product
The product is the starting point of the marketing mix. It is difficult to decide on a promotion campaign, determine a price, or design a distribution strategy until the product offering and product strategy are defined.
The product is not only the physical unit but also its package, warranty, after-sale service, brand name, company image, value, and other factors.
Place involves making product available where and when customers want them and ensuring that products arrive in usable condition at designated places when needed
Promotion brings about mutually satisfying exchanges by informing, educating, persuading, and reminding buyers about the product
A good promotion strategy can increase sales
Price is the most flexible of the ‘Four Ps’
Price is an important competitive weapon. When multiplied by the number of units sold equals total revenue for the firm.

17. Steps Involved in Following up on the Marketing Plan
Chapter 2 Strategic Planning for Competitive Advantage
LO 10
Implementation
Turns a marketing plan into action assignments
Ensures these assignments are executed in a way that accomplishes the plan's objectives
Evaluation
Gauges the extent to which the marketing objectives have been achieved during the specified time period
Implementation is the process that turns a marketing plan into action assignments. These activities may involve detailed job assignments, activity descriptions, time lines, budgets, and lots of communication.
Implementation is essentially “doing what you said you were going to do.” However, many organizations repeatedly experience failures in strategy implementation.

18. Steps Involved in Following up on the Marketing Plan (continued)
Chapter 2 Strategic Planning for Competitive Advantage
LO 10
Control
Provides the mechanisms for:
Evaluating marketing results in light of the plan's objectives
Correcting actions that do not help the organization reach those objectives within budget guidelines
Exerted through marketing audit
Helps management allocate marketing resources efficiently
Marketing audit: Thorough, systematic, periodic evaluation of the objectives, strategies, structure, and performance of the marketing organization
Characteristics - Comprehensive, systematic, independent, and periodic
Online
Youngbiz.com
Visit the YoungBiz Web site’s list of Top 100 entrepreneurs. Select one of the entrepreneurial ventures listed and create a marketing plan for it using the concepts and strategies discussed in this chapter. How would you implement, evaluate, and control the plan?

19. Techniques for Effective Strategic Planning
LO 11
Continual attention
Creativity
Management commitment

20. Key Terms Strategic planning Star Strategic business unit (SBU)
Chapter 2 Strategic Planning for Competitive Advantage
Strategic planning
Strategic business unit (SBU)
Market penetration
Market development
Product development
Diversification
Portfolio matrix
Star
Cash cow
Problem child (Question mark)
Dog
Planning
Marketing planning
Marketing plan
Mission statement
Marketing myopia

21. Key Terms (continued) SWOT analysis Niche competitive advantage
Environmental scanning
Competitive advantage
Cost competitive advantage
Experience curves
Product/service differentiation competitive advantage
Niche competitive advantage
Sustainable competitive advantage
Marketing objective
Marketing strategy
Market opportunity analysis (MOA)
Marketing mix (four Ps)

22. Key terms (continued 3) Implementation Evaluation Control
Chapter 2 Strategic Planning for Competitive Advantage
Implementation
Evaluation
Control
Marketing audit

23. Summary
Good strategic plans can help protect and grow a firm’s resources
Large companies manage a number of very different businesses called strategic business units (SBUs)
Marketing plan serves as a reference point for future success and its foundation is the firm's mission statement

24. Summary (continued 1)
Performing SWOT analysis allows firms to identify their competitive advantage
Objectives of a marketing plan must be stated before the details can be developed
Marketing mixes are designed after identifying the target markets
Effective strategic planning requires follow up, continual attention, creativity, and management commitment