1. Strategic Planning for Competitive Advantage
Lamb, Hair, McDaniel
Chapter 2 Strategic Planning for Competitive Advantage
CHAPTER 2
Strategic Planning for Competitive Advantage
Marketing cannot be accomplished in isolation. Even though the marketing function resides with marketers, the concept of marketing must permeate the entire organization.

2. Chapter 2 Strategic Planning for Competitive Advantage
Learning Outcomes
LO 1 Understand the importance of strategic marketing
and know a basic outline for a marketing plan
LO 2 Develop an appropriate business mission statement LO 3 Explain the components of a situation analysis
LO 4 Describe the criteria for stating good marketing
objectives
LO 5 Identify sources of competitive advantage

3. Learning Outcomes LO 6 Identify strategic alternatives
Chapter 2 Strategic Planning for Competitive Advantage
Learning Outcomes
LO 6 Identify strategic alternatives
LO 7 Discuss target market strategies
LO 8 Describe the elements of the marketing mix
LO 9 Explain why implementation, evaluation, and control
of the marketing plan are necessary
LO 10 Identify several techniques that help make
strategic planning effective

4. The Nature of Strategic Planning
Chapter 2 Strategic Planning for Competitive Advantage
The Nature of Strategic Planning
Understand the importance of strategic marketing and know a basic outline for a marketing plan
LO1

5. The goal is long-term profitability and growth.
Chapter 2 Strategic Planning for Competitive Advantage
Strategic Planning
The goal is long-term profitability and growth.
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: * Sears purchase of Lands’ End * Reebok’s decision to stop competing with Nike in the hard-core sports market and instead focus on being the top shoe brand for fashion-forward consumers. * McDonald’s decision to offer more healthful foods * S.C. Johnson’s introduction of Shout Color Catchers
Discussion/Team Activity:
Discuss strategic planning decisions of other companies.
Discuss why strategic planning is important for these companies.
LO1

6. Strategic Marketing Management
Chapter 2 Strategic Planning for Competitive Advantage
Strategic Marketing Management
What is the organization’s main activity?
How will it reach its goals?
Notes:
How do companies go about strategic marketing planning? How do employees know how to implement the long-term goals of the firm?
The answer is a marketing plan.
THE ANSWER IS A MARKETING PLAN.
LO1

7. Why Write a Marketing Plan?
Chapter 2 Strategic Planning for Competitive Advantage
Why Write a Marketing Plan?
Provides a basis for comparison of actual and expected performance
Provides clearly stated activities to work toward common goals
Serves as a reference for the success of future activities
Provides an examination of the marketing environment
Allows entry into the marketplace with awareness
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.
LO1

8. Marketing Plan Elements
Chapter 2 Strategic Planning for Competitive Advantage
Marketing Strategy
Product
Distribution
Price
Marketing Mix
Business Mission Statement
Objectives
Situation & SWOT Analysis
Target Market Strategy
Implementation Evaluation Control
Promotion
Marketing Plan Elements
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.
Exhibit 2.1: Example of marketing plan sketch
The Marketing Plan Appendix contains a Marketing Plan Outline.
LO1

9. The Importance of Strategic Marketing
Chapter 2 Strategic Planning for Competitive Advantage
The Importance of Strategic Marketing
What
Why
How
Strategic Planning
Long-term profitability and growth
Write a marketing plan
Online
Dmusic
Use Exhibit 2.1 to create a sample summary marketing plan for Dmusic.com, an Internet start-up created by a teenage entrepreneur.
LO1

10. Marketing Decisions LO1
McDonald’s past ad campaigns focused on children, often using characters and/or talking food
Current campaigns focus on healthy ingredients
McDonald’s past ad campaigns focused on children, often using characters and/or talking food
Current campaigns focus on healthy ingredients
LO1

11. Defining the Business Mission
Chapter 2 Strategic Planning for Competitive Advantage
Defining the Business Mission
Develop an appropriate business mission statement
LO2

12. Defining the Business Mission
Chapter 2 Strategic Planning for Competitive Advantage
Defining the Business Mission
Answers the question, “What business are we in?”
Focuses on the market(s) rather than the good or service
Strategic Business Units (SBUs) may also have a mission statement
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.
LO2

13. AMA’s Mission Statement
Chapter 2 Strategic Planning for Competitive Advantage
AMA’s Mission Statement
Notes:
The AMA’s mission statement is shown here.
LO2

14. Strategic Business Units (SBUs)
Chapter 2 Strategic Planning for Competitive Advantage
Strategic Business Units (SBUs)
Characteristics: [SBU HAS…]
A distinct mission and specific target market
Control over its resources
Its own competitors
Plans independent of other SBUs
Notes: An organization may need to define a mission statement and objectives for a Strategic Business Unit (SBU), which is a subgroup of a single business or a collection of related businesses within the larger organization
LO2

15. Conducting a Situation Analysis
Chapter 2 Strategic Planning for Competitive Advantage
Conducting a Situation Analysis
Explain the components of a situation analysis
LO3

16. S W O T SWOT Analysis LO3 Internal External
Chapter 2 Strategic Planning for Competitive Advantage
SWOT Analysis
©South-Western College Publishing S W O T
Things the company does well.
Things the company does not do well.
Conditions in the external environment that favor strengths.
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?
LO3

17. Environmental Scanning
Chapter 2 Strategic Planning for Competitive Advantage
Environmental Scanning
Helps Identify opportunities and threats
Guidelines for Designing Marketing Strategy Based on six forces:
Social
Demographic
Economic
Technological
Political/Legal
Competitive
NOTES:
LO3

18. Components of a Situation Analysis
Chapter 2 Strategic Planning for Competitive Advantage
Components of a Situation Analysis
production costs
marketing skills
financial resources
image
technology
Strengths
Weaknesses
INTERNAL
ENVIRONMENT
Notes:
Additional strengths include superiority in manufacturing, service, quality and value perception, as well as employee capabilities.
LO3

19. Setting Marketing Plan Objectives
Chapter 2 Strategic Planning for Competitive Advantage
Setting Marketing Plan Objectives
Describe the criteria for stating good marketing objectives
LO4

20. Marketing Objectives LO4 Realistic Measurable Time specific
Chapter 2 Strategic Planning for Competitive Advantage
Marketing Objectives
Realistic
Measurable
Time specific
Consistent with and indicating the priorities of the organization
“Our objective is to achieve 10 percent dollar market share in the cat food market within 12 months of product introduction.”
LO4

21. Criteria for Good Marketing Objectives
Chapter 2 Strategic Planning for Competitive Advantage
Criteria for Good Marketing Objectives
Realistic, measurable, and time-specific objectives consistent with the firm’s objectives:
1. Communicate marketing management philosophy
2. Provide management direction
3. Motivate employees
4. Force executives to think clearly
5. Allow for better evaluation of results
LO4

22. Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Competitive Advantage
Identify sources
of competitive advantage
LO5

23. Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Competitive Advantage
Competitive Advantage
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.
LO5

24. Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Competitive Advantage
Niche Strategies
Cost
Product/Service Differentiation
Types of Competitive Advantage
Notes:
A firm’s competitive advantage is the reason or reasons that cause customers to patronize that firm and not the competition.
LO5

25. Cost Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Cost Competitive Advantage
Obtain inexpensive raw materials
Create efficient plant operations
Design products for ease of manufacture
Control overhead costs
Avoid marginal customers
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
LO5

26. 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 * Internet ticket booking and self-check-in kiosks in the airline industry
LO5

27. Examples of Product/Service Differentiators
Chapter 2 Strategic Planning for Competitive Advantage
Examples of Product/Service Differentiators
Brand names
Strong dealer network
Product
reliability
Image
Service
Notes:
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 Tractor
Product reliability: Maytag
Image: Ritz Carlton Hotels Rolex BMW Neiman Marcus Johnson & Johnson
Service: FedEx Nordstrom
Innovation: Nike
LO5

28. Elements of Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Elements of Competitive Advantage
Access to unique talent and skills
Cost savings because of higher productivity or low overhead
Existing relationships (switching costs working in your favor)
Virally organized product and organization
Large network of users
Speed
Monopoly power
Story that resonates with your target audience
Large media budget
Insight into worldview of prospects (you make what they care about)
Emotionally intelligent sales force or customer service people
Access to capital and willingness to lose money to build share
Connection to community
Notes:
According to best-selling author and marketing guru Seth Godin, the elements listed here (see slide above) are key ways to build or maintain competitive advantage. These can also serve as interesting discussion starters.
Not a competitive advantage in most settings? Cheerleading skills ["we are #1!" "we are better!" and "we try harder“…and even “we are new!”]
Here’s what your shareholders will want to know:
What's your competitive advantage?
Is it really, or are you dreaming it up?
How long will it last?
Can your competition copy it?
Does it resonate with the part of the market that is looking to buy?
Is the advantage big enough to overcome the “switching” cost?
Beyond the Book
SOURCE: Adapted from “Seth’s Blog: Your Competitive Advantage,” accessed on November 7, 2008 at
LO5

29. Niche Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Niche Competitive Advantage
Used by small companies with limited resources
May be used in a limited geographic market
Product line may be focused on a specific product category
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?)
LO5

30. Sources of Sustainable Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage
Sources of Sustainable 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.
LO5

31. Identify strategic alternatives
Chapter 2 Strategic Planning for Competitive Advantage
Strategic Directions
Identify strategic alternatives
LO6

32. Strategic Alternatives
LO6
Chapter 2 Strategic Planning for Competitive Advantage
Strategic Alternatives
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:
Examples of Strategic Alternatives
Market Penetration: Manufacturer cents-off coupons McDonald’s Happy Meals with Ty’s Teeny Beanie Babies
Market Development: Expansion into global markets by companies such as McDonald’s, Coca-Cola, and Pepsi
Product development: Brooks Brothers Joseph A. Bank Clothiers
Diversification: LTV Corporation, a steel producer, diversified into the monorail business Coca-Cola’s water-treatment and water-conditioning equipment

33. Portfolio Matrix LO6 Stars Cash Cows Problem Children Dogs
Chapter 2 Strategic Planning for Competitive Advantage
Portfolio Matrix
Stars
Cash Cows
Problem Children
Dogs
Notes:
The Portfolio Matrix from Boston Consulting Group classifies each SBU by its present or forecast growth and market share. The assumption is that market share and profitability are strongly linked.
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.
LO6

34. LO6 Stars: Large Profits Need cash for growth
Cash Cows: Dominant market share
Technological development
Allocate excess cash to categories with growth potential
Problem Children: Need Cash
Invest heavily or drop
Dogs: Low growth and small market share
Drop
LO6

35. Portfolio Matrix Strategies
Chapter 2 Strategic Planning for Competitive Advantage
Portfolio Matrix Strategies
Build
Hold
Harvest
Divest
Note:
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.
LO6

36. Describing the Target Market
Chapter 2 Strategic Planning for Competitive Advantage
Describing the Target Market
Discuss target market strategies
LO7

37. 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
LO7

38. 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 7.
Discussion/Team Activity:
1. Discuss the differences in the target markets for McDonald’s, Burger King’s, and Wendy’s.
LO7

39. Target Market Strategies
Chapter 2 Strategic Planning for Competitive Advantage
Target Market Strategies
Entire Market
Multiple Markets
Single Market
Target Market Options
LO7

40. Describe the elements of the marketing mix
Chapter 2 Strategic Planning for Competitive Advantage
The Marketing Mix
Describe the elements of the marketing mix
LO8

41. The Marketing Mix Place Promotion Product Price LO8 Marketing Mix
Chapter 2 Strategic Planning for Competitive Advantage
The Marketing Mix
Place
Marketing Mix
A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market.
Promotion
Product
Price
LO8

42. Marketing Mix: The “Four Ps”
Chapter 2 Strategic Planning for Competitive Advantage
Marketing Mix: The “Four Ps”
Price
Promotion
Place
Product
LO8

43. 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 9 and 10, services marketing in Chapter 11.
LO8

44. Marketing Mix: The “Four Ps”
Chapter 2 Strategic Planning for Competitive Advantage
Place
Marketing Mix: The “Four Ps”
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.
Distribution is covered in Chapters 12 and 13.
LO8

45. Marketing Mix: The “Four Ps”
Chapter 2 Strategic Planning for Competitive Advantage
Promotion
Marketing Mix: The “Four Ps”
Includes integration of:
Personal selling
Advertising
Sales promotion
Public relations
Role is to bring about exchanges with target markets by:
Informing
Educating
Persuading
Reminding
Online
Paramount
Warner Brothers
Universal Studios
How do movie companies use their Web sites as part of their promotion strategies? Visit the sites for the movie studios listed to see what films they are promoting heavily. Also look at movie-specific sites. Are there differences how the movie-specific site promotes the film and how the studio’s umbrella site promotes the film? Explain what you find.
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 14, 15, and 16. Technology-driven aspects of promotional marketing are covered in Chapter 19.
A good promotion strategy can increase sales, but does not guarantee success.
Sony Vaio Advertisement
Reebok EasyTone Shoe Advertisement
Online
LO8

46. Marketing Mix: The “Four Ps”
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 17 and 18.
LO8

47. Beyond the Book Anatomy of a Promotion Campaign LO8
Chapter 2 Strategic Planning for Competitive Advantage
Anatomy of a Promotion Campaign
The role of promotion is to inform, persuade, and remind. Chick-Fil-A’s popular “Eat Mor Chikin” cows have the been the subject of outdoor advertising, television advertising, and even a yearly calendar that contains over $20 worth of coupons for free food.
Beyond the Book
Notes:
Since the “Eat Mor Chikin” campaign debuted in 1995, Chick-fil-A's brand awareness has grown 44 percent in its top markets and sales have more than quadrupled, from just over $500 million in 1995 to more than $2.64 billion in In that same year, the Chick-fil-A "Eat Mor Chikin" Cows were recognized as one of America's most popular advertising icons in a public vote sponsored by Advertising Week, becoming the newest members of New York's Madison Avenue Advertising Walk of Fame.
LO8

48. Following Up on the Marketing Plan
Chapter 2 Strategic Planning for Competitive Advantage
Following Up on the Marketing Plan
Explain why implementation, evaluation, and control of the marketing plan are necessary
LO9

49. Following Up on the Marketing Plan
Chapter 2 Strategic Planning for Competitive Advantage
Following Up on the Marketing Plan
Implementation
Evaluation
Control
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?
LO9

50. Effective Strategic Planning
Chapter 2 Strategic Planning for Competitive Advantage
Effective Strategic Planning
Identify several techniques that help make strategic planning effective
LO10

51. Techniques for Effective Strategic Planning
Chapter 2 Strategic Planning for Competitive Advantage
Techniques for Effective Strategic Planning
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.
LO10