1. Strategic Market Planning: Take the Big Picture Chapter Two

2. 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

3. 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

4. 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/builds on firm’s strengths Identifies/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

5. 2-5 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Ethics Is Up Front in Marketing Planning  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 to which everyone in the organization must subscribe Written standards of behavior to which everyone in the organization must subscribe How to Write a Code of Ethics

6. 2-6 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. It’s Debatable Class Discussion Question Reverse mortgages (also called lifetime mortgages) are available to individuals 62 or older. Reverse mortgages release the equity in the home BACK to the property owner in either monthly payments or one lump sum, and defer the loan repayment until the owner dies, the home is sold, or the owner leaves the property for at least 365 days (for example, goes into a nursing home or moves to a second home during the winter months). Is it ethical for mortgage bankers to offer such products to consumers? Where do you stand?

7. 2-7 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 2.1 Three Levels of Business Planning

8. 2-8 © 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

9. 2-9 © 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

10. 2-10 © 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

11. 2-11 © 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

12. 2-12 © 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 SBUs operate like separate businesses  Strategic planning is done at both the corporate and SBU levels

13. 2-13 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 2.2 Steps in Strategic Planning

14. 2-14 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Strategic Planning Step 1: Define the Mission  Key questions in determining the mission: What business are we in? What business are we in? 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

15. 2-15 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 1: Define the Mission  Examples of mission statements 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.”

16. 2-16 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. More on Mission Statements Had Xerox continued to define their mission in terms of producing copy machines instead of providing “document solutions”, today’s digital age would have made their product and firm obsolete.

17. 2-17 © 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

18. 2-18 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Internal Environment  Controllable elements inside a firm that influence how well the firm operates  Name some examples Southwest Airlines’ employees reflect the “Southwest Spirit” and are considered a key strength of the firm.

19. 2-19 © 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: Legal/political/ethical trends Legal/political/ethical trends Economic trends Economic trends Competitive trends Competitive trends Technological trends Technological trends Sociocultural trends Sociocultural trends Visit Trendwatching.com Trendwatching.com

20. 2-20 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Trends Present Opportunities Recent sociocultural trends influencing food marketing stem from an obesity epidemic in the U.S. and consumer desires for low fat, and organic foods

21. 2-21 © 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

22. 2-22 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Table 2.2 Part A Example of a Partial SWOT Analysis for McDonald’s

23. 2-23 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Table 2.2 Part B Example of a Partial SWOT Analysis for McDonald’s

24. 2-24 © 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 be financially focused, or focused on other factors such as satisfaction May be financially focused, or focused on other factors such as satisfaction

25. 2-25 © 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

26. 2-26 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 2-3 Boston Consulting Group (BCG) Matrix

27. 2-27 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Stars Can Be Grown or Acquired The recent acquisition of Marvel Comics will most likely add to the entertainment company’s stable of stars

28. 2-28 © 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 Jeep’s product development strategy offers different vehicles for different needs

29. 2-29 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Figure 2-4 Product-Market Growth Matrix

30. 2-30 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Planning  Step 1: Perform a situation analysis Builds on SWOT; identifies how environmental trends affect the marketing plan Builds on SWOT; 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 firm is to achieve its overall business objectives States what the marketing function must accomplish if firm is to achieve its overall business objectives

31. 2-31 © 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

32. 2-32 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Mix Strategies  Product strategies: Include product design, packaging, branding, support services, and product variations and features Include product design, packaging, branding, support services, and product variations and features  Pricing strategies: Include setting prices for final consumers, wholesalers, and retailers based on costs, demand, or competitors’ prices Include setting prices for final consumers, wholesalers, and retailers based on costs, demand, or competitors’ prices First Flavor Video

33. 2-33 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Marketing Mix Strategies  Promotion strategies: Advertising, sales promotion, public relations, direct marketing, personal selling Advertising, sales promotion, public relations, direct marketing, personal selling  Distribution (place) strategies: How, when, and where the product is available to targeted customers How, when, and where the product is available to targeted customers

34. 2-34 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Step 4: Implement and Control the Marketing Plan  Control: Measuring actual performance, comparing performance to the objectives, making adjustments Measuring actual performance, comparing performance to the objectives, making adjustments  Marketing metrics: Return on marketing investment (ROMI) Return on marketing investment (ROMI)  Action plans: Support plans that guide the execution and control of marketing strategies at the operational level Support plans that guide the execution and control of marketing strategies at the operational level

35. 2-35 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Metrics Moment  ROMI is the revenue or profit margin generated by investment in a specific marketing program divided by the cost of that program (expenditure) at a given risk level, as determined by management $

36. 2-36 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Table 2.4 Template for an Action Plan

37. 2-37 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Operational Planning: Day-to-Day Execution of Plans  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

38. 2-38 © 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?

39. 2-39 © 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: How to create a marketplace for small producers and artisans that would maximize long-term revenue and social impact

40. 2-40 © 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