for Competitive Advantage

for Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Chapter 2 Strategic Planning for Competitive Advantage MKTG9 Lamb, Hair, and McDaniel © 2016 Cengage Learning. All Rights Reserved.

© 2016 Cengage Learning. All Rights Reserved.
Chapter 2 Strategic Planning for Competitive Advantage LEARNING OUTCOMES 2-1 Understand the importance of strategic planning 2-2 Define strategic business units (SBUs) 2-3 Identify strategic alternatives and know a basic outline for a marketing plan 2-4 Develop an appropriate business mission statement © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage LEARNING OUTCOMES 2-5 Describe the components of a situation analysis 2-6 Identify sources of competitive advantage 2-7 Explain the criteria for stating good marketing objectives 2-8 Discuss target market strategies © 2016 Cengage Learning. All Rights Reserved.

LEARNING OUTCOMES 2-9 Describe the elements of the marketing mix 2-10 Explain why implementation, evaluation, and control of the marketing plan are necessary 2-11 Identify several techniques that help make strategic planning effective © 2016 Cengage Learning. All Rights Reserved.

The Nature of Strategic Planning
Chapter 2 Strategic Planning for Competitive Advantage The Nature of Strategic Planning 2-1 Understand the importance of strategic marketing and know a basic outline for a marketing plan © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Strategic Planning is… the managerial process of creating and maintaining a fit between the organization’s objectives and resources and the evolving market opportunities. Strategic marketing management addresses two questions: What is the organization’s main activity at a particular time? How will it reach its goals? Notes: Strategic planning creates and maintains a fit between the organization’s resources and objectives and the evolving market opportunities. The goal is to sustain and increase 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. Examples of strategic decisions: • Macy’s implements an additional beauty sales approach • General Motors sells the Saab nameplate • PepsiCo’s decision to focus on “Healthy Fare” and the recent backlash/financial struggle from decreased Pepsi sales. Discussion/Team Activity: Have students come up with strategic planning decisions of other companies. Discuss why strategic planning is important for these companies. © 2016 Cengage Learning. All Rights Reserved.

Strategic Business Units
Chapter 2 Strategic Planning for Competitive Advantage Strategic Business Units 2-2 Define Strategic Business Units (SBUs) © 2016 Cengage Learning. All Rights Reserved. 7

Characteristics of Strategic Business Units (SBUs)
Chapter 2 Strategic Planning for Competitive Advantage Characteristics of Strategic Business Units (SBUs) An SBU has… A distinct mission and specific target market Control over its resources Its own competitors A single business or a collection of related businesses Plans independent of other SBUs Notes: A Strategic Business Unit (SBU) is a subgroup of a single business or a collection of related businesses within the larger organization, and has the listed characteristics. © 2016 Cengage Learning. All Rights Reserved.

Strategic Alternatives
Chapter 2 Strategic Planning for Competitive Advantage Strategic Alternatives 2-3 Identify strategic alternatives © 2016 Cengage Learning. All Rights Reserved.

Ansoff’s Opportunity Matrix
Chapter 2 Strategic Planning for Competitive Advantage Ansoff’s Opportunity Matrix Market Penetration Market Development Product Development Diversification Increase market share among existing customers Attract new customers to existing products Introduce new products into new markets Create new products for present markets Notes: Ansoff’s Opportunity Matrix is one of the most commonly used tools to determine a company’s strategic direction. It matches products with markets. The four options are listed above. Market Penetration: Manufacturer cents-off coupons Market Development: Expansion into global markets by companies such as McDonald’s, Coca-Cola, and Pepsi Product development: McDonald’s introduces yogurt parfaits, salads, and fruit to offer customers more healthy options. Diversification: CVS, Avon, Coca-Cola © 2016 Cengage Learning. All Rights Reserved.

2.1 Ansoff’s Opportunity Matrix Chapter 2 Strategic Planning for Competitive Advantage Present Market New Market Present Product New Product Product Development Starbucks develops powdered instant coffee called Via. Market Penetration Starbucks sells more coffee to customers who register their reloadable Starbucks cards. Market Development Starbucks opens stores in Brazil and Chile Diversification Starbucks launches Hear Music and buys Ethos Water. © 2016 Cengage Learning. All Rights Reserved.

Boston Consulting Group
Chapter 2 Strategic Planning for Competitive Advantage Boston Consulting Group Portfolio Matrix Dog Question Mark Star Cash Cow Portfolio Matrix Notes: The second model for selecting strategic alternatives is the Portfolio Matrix from Boston Consulting Group. The Portfolio Matrix classifies each SBU by its present or forecast growth and market share. The assumption is that market share and profitability are strongly linked. The four classifications are Stars, Problem Child (Question Mark), Cash Cows, and Dogs. © 2016 Cengage Learning. All Rights Reserved. 13

2.3 Portfolio Matrix for a Large Computer Manufacturer
Chapter 2 Strategic Planning for Competitive Advantage Portfolio Matrix for a Large Computer Manufacturer Notes: 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, distribution, promotion, and production efficiency. Strive to capture new users as they enter the market. A cash cow generates more cash than it needs to maintain market share. It is in a low-growth market, but the product has dominant market share. The marketing strategy is to maintain market dominance by being the price leader and by making technological improvements. Allocate excess cash to 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 dog status. Strategies are to invest to gain better market share, acquire competitors, 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. © 2016 Cengage Learning. All Rights Reserved.

Portfolio Matrix Strategies
Chapter 2 Strategic Planning for Competitive Advantage Portfolio Matrix Strategies Divest Harvest Build Hold Note: After classifying the SBUs, a company must determine how to allocate resources to each SBU. The four basic strategies are: 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 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. © 2016 Cengage Learning. All Rights Reserved.

Market attractiveness
2.4 General Electric Model Cautiously Invest Invest/Grow Harvest/Divest High Market attractiveness Medium Notes: The third model for selecting strategic alternatives is the General electric model. The GE model determines resources allocation to SBUs by determining market attractiveness and company strength. In the graphic, business position (horizontal axis) measures if the company is well positioned to take advantage of opportunities in the taret market. Market attractiveness (vertical axis) measures how attractive a market is for a company to enter. Some measurements are profitability, competition, customer price sensitivity, and rapid growth. Low Low Medium High Business Position © 2016 Cengage Learning. All Rights Reserved.

What Is a Marketing Plan?
Chapter 2 Strategic Planning for Competitive Advantage What Is a Marketing Plan? Planning – the process of anticipating future events and determining strategies to achieve organizational objectives in the future. Marketing Planning – designing activities relating to marketing objectives and the changing marketing environment. Marketing Plan – a written document that acts as a guidebook of marketing activities for the marketing manager. Notes: 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. © 2016 Cengage Learning. All Rights Reserved.

Why Write a Marketing Plan?
Chapter 2 Strategic Planning for Competitive Advantage Why Write a Marketing Plan? The creation and implementation of a complete marketing plan will allow the organization to achieve marketing objectives and succeed. However, the marketing plan is only as good as the information it contains and the effort, creativity, and thought that went into its creation. Notes: Writing a marketing plan allows the examination of the marketing environment in conjunction with the inner workings of the businesses. Once written it serves as a reference point for future activities, and allows the marketing manager to enter the marketplace with an awareness of problems and opportunities. © 2016 Cengage Learning. All Rights Reserved.

2.5 Elements of a Marketing Plan Marketing Mix Marketing Strategy
Chapter 2 Strategic Planning for Competitive Advantage Marketing Strategy Product Distribution Price Marketing Mix Business Mission Statement Situation or SWOT Analysis Objectives Target Market Strategy Implementation Evaluation Control Promotion Notes: 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.

Develop an appropriate business mission statement
Chapter 2 Strategic Planning for Competitive Advantage Defining the Business Mission 2-4 Develop an appropriate business mission statement © 2016 Cengage Learning. All Rights Reserved.

Defining the Business Mission
Chapter 2 Strategic Planning for Competitive Advantage Defining the Business Mission Answers the question, “What business are we in?” The business mission profoundly affects the firm’s long-run resource allocation, profitability, and survival Business mission statements that are stated too narrowly suffer from marketing myopia Notes: The foundation of any marketing plan is the firm’s mission statement. The mission statement is based on an analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions. The mission statement establishes boundaries for all subsequent decisions, objectives, and strategies. 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. © 2016 Cengage Learning. All Rights Reserved.

Describe the components of a situation analysis
Chapter 2 Strategic Planning for Competitive Advantage Conducting a Situation Analysis 2-5 Describe the components of a situation analysis © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage SWOT Analysis ©South-Western College Publishing S W O T 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. Internal External Notes: Performance of a situation (SWOT) analysis helps firms identify their competitive advantage. Strengths and Weaknesses are an internal assessment. Opportunities and Threats are an external environment assessment. 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? © 2016 Cengage Learning. All Rights Reserved.

Components of a SWOT Analysis
Chapter 2 Strategic Planning for Competitive Advantage Components of a SWOT Analysis Examining internal strengths and weaknesses. Focus on organizational resources: Production costs Marketing skills Financial resources Company or brand image Employee capabilities Technology © 2016 Cengage Learning. All Rights Reserved.

Environmental Scanning
Chapter 2 Strategic Planning for Competitive Advantage Environmental Scanning Helps identify opportunities and threats. Designing a marketing strategy is based on six major environmental forces: Social Demographic Economic Technological Political/Legal Competitive Notes: Environmental scanning is the 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. © 2016 Cengage Learning. All Rights Reserved.

of competitive advantage
Chapter 2 Strategic Planning for Competitive Advantage Competitive Advantage 2-6 Identify sources of competitive advantage © 2016 Cengage Learning. All Rights Reserved.

Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Competitive Advantage Niche Cost Product/Service Differentiation Types of Competitive Advantage Notes: A competitive advantage is the set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition. A firm’s competitive advantage is the reason or reasons that cause customers to patronize that firm and not the competition. © 2016 Cengage Learning. All Rights Reserved.

Cost Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Cost Competitive Advantage 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. Having a cost competitive advantage means being the low-cost competitor in an industry while maintaining satisfactory profit margins. Notes: Having a cost competitive advantage means being the low-cost competitor in an industry while maintaining satisfactory profit margins. This enables a firm to deliver superior customer value. Cost leadership can result from the reasons listed on this slide. Cost competitive advantages are subject to continual erosion. Discussion/Team Activity: Identify firms that have a cost competitive advantage and describe how they deliver superior value. Examples: DuPont Dell Computers Wal-Mart Corporation Southwest Airlines Nike General Electric © 2016 Cengage Learning. All Rights Reserved.

Sources of Cost Reduction
Chapter 2 Strategic Planning for Competitive Advantage Sources of Cost Reduction Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design Reengineering Production Innovations New Service Delivery Methods Notes: Sources of Cost Reduction Experience Curves: Costs decline as experience with a product increases, and encompasses marketing, manufacturing, and administration costs. Efficient Labor: Labor costs in low-skill, labor-intensive industries can be reduced by going offshore or by outsourcing. No-frills Products: Removing frills and options can reduce costs. Government subsidies: Governments may provide grants and interest-free loans for target industries. Product design: Cutting-edge design and reverse engineering can offset costs. Reengineering: Reengineering in the form of pruning product lines, closing obsolete factories, or renegotiating supplier contracts can make firms more efficient. Product innovations: New technology and simplified production techniques can reduce production costs. New methods of service delivery: Examples include: * Outpatient surgery and walk-in clinics in the medical industry * Online-only magazines can help save on material and shipping costs. © 2016 Cengage Learning. All Rights Reserved.

Examples of Product/Service Differentiators
Chapter 2 Strategic Planning for Competitive Advantage Examples of Product/Service Differentiators A product/service differentiation competitive advantage exists when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition. Examples include: Brand names Strong dealer network Product reliability Image Service Notes: A product/service differentiation competitive advantage is the provision of something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition. Product/Service Differentiation tends to provide a longer lasting competitive advantage than does cost competitive advantage. As a result, this strategy is more attractive to many top managers. Discussion/Team Activity: Discuss companies that have a product/service differentiation for: Brand name: Lexus Strong dealer network: Caterpillar Product reliability: Maytag Image: Neiman Marcus Service: FedEx © 2016 Cengage Learning. All Rights Reserved.

Niche Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Niche Competitive Advantage A niche competitive advantage seeks to target and effectively serve a single segment of the market. A nice competitive advantage: Is used by small companies with limited resources May be used in a limited geographic market Discussion/Team Activity: Discuss how a small firm serving a particular niche market can successfully compete against larger, global firms with greater resources. (For example, how might a small bookstore owner compete with Barnes & Noble and Amazon.com?) © 2016 Cengage Learning. All Rights Reserved.

Building Sustainable Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Building Sustainable Competitive Advantage Sustainable competitive advantage is an advantage that cannot be copied by the competition. A firm that has successfully achieved a competitive advantage will stake out a position unique in some manner from its rivals. © 2016 Cengage Learning. All Rights Reserved.

Sources of Sustainable Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Patents Copyrights Locations Equipment Technology Customer Service Promotion Skills and Assets of an Organization Notes: 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. © 2016 Cengage Learning. All Rights Reserved.

Explain the criteria for stating good marketing objectives
Chapter 2 Strategic Planning for Competitive Advantage Setting Marketing Plan Objectives 2-7 Explain the criteria for stating good marketing objectives © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Marketing Objectives A marketing objective is a statement of what is to be accomplished through marketing activities. To be useful, stated objectives should be: Realistic Measurable Time specific Compared to a benchmark “Our objective is to achieve 10 percent dollar market share in the cat food market within 12 months of product introduction.” © 2016 Cengage Learning. All Rights Reserved.

Criteria for Good Marketing Objectives
Chapter 2 Strategic Planning for Competitive Advantage Criteria for Good Marketing Objectives Carefully specified objectives serve several functions: 1. Communicate marketing management philosophy 2. Provide management direction 3. Motivate employees 4. Force executives to clarify their thinking 5. Form a basis for control © 2016 Cengage Learning. All Rights Reserved.

Discuss target market strategies
Chapter 2 Strategic Planning for Competitive Advantage Describing the Target Market 2-8 Discuss target market strategies © 2016 Cengage Learning. All Rights Reserved.

Describing the Target Market
Chapter 2 Strategic Planning for Competitive Advantage Describing the Target Market Marketing Strategy involves… the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets. Marketing Opportunity Analysis (MOA) involves… the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments. © 2016 Cengage Learning. All Rights Reserved.

Target Market Strategy
Chapter 2 Strategic Planning for Competitive Advantage Target Market Strategy Segment the market based on groups with similar characteristics Analyze the market based on attractiveness of market segments Select one or more target markets © 2016 Cengage Learning. All Rights Reserved.

Target Market Strategy
Chapter 2 Strategic Planning for Competitive Advantage Target Market Strategy Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes Notes: Three strategies for selecting target markets are shown here. These strategies are discussed in detail in Chapter 8. Discussion/Team Activity: Discuss the differences in the target markets for McDonald’s, Burger King’s, and Wendy’s. © 2016 Cengage Learning. All Rights Reserved.

Describe the elements of the marketing mix
Chapter 2 Strategic Planning for Competitive Advantage The Marketing Mix 2-9 Describe the elements of the marketing mix © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage The Marketing Mix is… a unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market. The elements of the marketing mix are often referred to as the “Four Ps” Notes: The marketing manager can control each component of the marketing mix, but the strategies for all four components must be blended to achieve optimal results. Discussion/Team Activity: The best promotion and lowest price cannot save a poor product. Similarly, excellent products with poor placing, pricing, or promotion will likely fail. Identify several firms that might have used a marketing mix in which some components were particularly strong but others were particularly weak. © 2016 Cengage Learning. All Rights Reserved.

Marketing Mix: The “Four Ps”
Chapter 2 Strategic Planning for Competitive Advantage Marketing Mix: The “Four Ps” The starting point of the “4 Ps” Includes: Physical unit Package Warranty Service Brand Image Value Product Products can be… Tangible goods Ideas Services Notes: 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 the packaging, warranty, after-sale service, brand name, company image, value, and other factors. Products may be tangible goods, services, and ideas. Product decisions are discussed in Chapter 10 and 11, services marketing in Chapter 12. © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Marketing Mix: The “Four Ps” Place Product availability where and when customers want them All activities from raw materials to finished products Ensure products arrive in usable condition at designated places when needed Notes: The goal of distribution is to ensure products arrive in usable condition at the right place when customers need them. Place strategies are covered in Chapter 14. © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Marketing Mix: The “Four Ps” Promotion Role is to bring about exchanges with target markets by: Informing Educating Persuading Reminding Includes integration of: Advertising Public relations Sales promotion Personal selling Notes: Promotion includes personal selling, advertising, sales promotion, and public relations. Each element of the promotion mix is coordinated with the others to create a promotional blend. Integrated Marketing Communications is discussed in Chapters 15, 16, and 17. Social Media and marketing are covered in chapter 18. A good promotion strategy can increase sales, but does not guarantee success. © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Price Marketing Mix: The “Four Ps” Price is what a buyer must give up to obtain a product. The most flexible of the “4 Ps”—quickest to change Competitive weapon Price x Units Sold = Total Revenue Notes: Price is an important competitive weapon and is often the most flexible of the marketing mix. Of the four Ps, it can be changed most quickly. Price multiplied by the number of units sold equals total revenue for the firm. Pricing decisions are discussed in Chapters 19 and 20. © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Following Up on the Marketing Plan 2-10 Explain why implementation, evaluation, and control of the marketing plan are necessary © 2016 Cengage Learning. All Rights Reserved.

Following Up on the Marketing Plan
Chapter 2 Strategic Planning for Competitive Advantage Following Up on the Marketing Plan Implementation Evaluation and Control A marketing audit is… Comprehensive Systematic Independent Periodic Notes: Implementation is the process that turns marketing plans into action assignments. These activities may involve job assignments, activity descriptions, timelines, 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. The marketing audit provides the mechanisms for evaluating marketing results compared to the plan’s goals. 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? © 2016 Cengage Learning. All Rights Reserved.

Post-audit Tasks After the audit, three tasks remain: Profile and make recommendations about weaknesses and inhibiting factors as well as strengths and new opportunities. Ensure that the role of the audit has been clearly communicated. Make someone accountable for implementing recommendations. © 2016 Cengage Learning. All Rights Reserved.

Chapter 2 Strategic Planning for Competitive Advantage Effective Strategic Planning 2-11 Identify several techniques that help make strategic planning effective © 2016 Cengage Learning. All Rights Reserved.

Techniques for Effective Strategic Planning
Chapter 2 Strategic Planning for Competitive Advantage Effective Strategic Planning Continual attention Creativity Management commitment Notes: Strategic planning is not an annual event, but an ongoing process. The environment is continually changing, and the firm’s internal resources and capabilities are continually evolving. Strategic planning is based on creativity. Assumptions about the firm and the environment should be challenged and new strategies established to sustain competitive advantage. Management support and participation are critical to the success of strategic planning. Discussion/Team Activity: Discuss strategic planning decisions of other companies. Discuss why strategic planning is important for these companies. © 2016 Cengage Learning. All Rights Reserved.

The Nederlander Organization
Chapter 2 Strategic Planning for Competitive Advantage Chapter 2 Video The Nederlander Organization The Nederlander Organization is a global theatre management company that backs productions, rents, and manages Broadway style theatres. In this video, major managers discuss the strategic decisions behind the development of a separate company to manage Audience Rewards, a loyalty program for theatre-goers. CLICK TO PLAY VIDEO © 2016 Cengage Learning. All Rights Reserved. 52

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