1. ©2002 South-Western Chapter 2 Version 6e1 chapter Strategic Planning for Competitive Advantage 2 2 Prepared by Deborah Baker Texas Christian University

2. ©2002 South-Western Chapter 2 Version 6e2 chapter Learning Objectives 2 2 1.Understand the importance of strategic marketing and know a basic outline for a marketing plan. 2. Develop an appropriate business mission statement. 3. Describe the criteria for stating good marketing objectives.

3. ©2002 South-Western Chapter 2 Version 6e3 chapter Learning Objectives (continued) 2 2 4. Explain the components of a situation analysis. 5. Identify sources of competitive advantage. 6. Identify strategic alternatives and describe tools used to help select alternatives. 7. Discuss target market strategies.

4. ©2002 South-Western Chapter 2 Version 6e4 chapter Learning Objectives (continued) 2 2 8. Describe elements of the marketing mix. 9. Explain why implementation, evaluation, and control of the marketing plan are necessary. 10. Identify several techniques that help make strategic planning possible.

5. ©2002 South-Western Chapter 2 Version 6e5 Learning Objective 1 1 Understand the importance of strategic marketing and know a basic outline for a marketing plan.

6. ©2002 South-Western Chapter 2 Version 6e6 Strategic Planning The managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities. 1 1

7. ©2002 South-Western Chapter 2 Version 6e7 Strategic Planning 1 1 RESOURCES & OBJECTIVES EVOLVING MARKET OPPORUNITIES LONG RUN PROFITABILITY AND GROWTH

8. ©2002 South-Western Chapter 2 Version 6e8 Strategic Marketing Planning  What is the organization’s main activity?  How will it reach its goals? 1 1 The Marketing Plan

9. ©2002 South-Western Chapter 2 Version 6e9 Planning The process of anticipating future events and determining strategies to achieve organizational objectives in the future. 1 1

10. ©2002 South-Western Chapter 2 Version 6e10 The Marketing Plan A written document that acts as a guidebook of marketing activities for the marketing manager. 1 1

11. ©2002 South-Western Chapter 2 Version 6e11 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 1 1 Marketing Plan

12. ©2002 South-Western Chapter 2 Version 6e12 Marketing Plan Elements 1 1 Marketing Strategy Product Promotion Distribution Price Marketing Mix Business Mission Statement Objectives Situation or SWOT Analysis Target Market Strategy Implementation Evaluation Control

13. ©2002 South-Western Chapter 2 Version 6e13 Learning Objective 2 2 Develop an appropriate business mission statement.

14. ©2002 South-Western Chapter 2 Version 6e14 Defining the Business Mission  Answers the question:  What business are we in and where are we going?  Focuses on the market(s) rather than the good or service  Strategic Business Units may also have a mission statement 2 2

15. ©2002 South-Western Chapter 2 Version 6e15 PepsiCo’s Mission Statement “PepsiCo’s overall mission is to increase the value of our shareholders’ investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.” http:\\www.pepsico.com 2 2

16. ©2002 South-Western Chapter 2 Version 6e16 Strategic Business Units (SBUs) 1.A distinct mission and specific target market 2.Control over their resources 3.Their own competitors 4.Plans independent of other SBUs Characteristics 2 2

17. ©2002 South-Western Chapter 2 Version 6e17 Learning Objective Describe the criteria for stating good marketing objectives. 3 3

18. ©2002 South-Western Chapter 2 Version 6e18 Marketing Objective A statement of what is to be accomplished through marketing activities. 3 3

19. ©2002 South-Western Chapter 2 Version 6e19 Marketing Objectives 3 3 Marketing Objectives Must Be:  Realistic  Measurable  Time specific  Consistent with Organization’s Priorities “Our objective is to increase market share by 40% and to obtain customer satisfaction ratings of at least 90% in 2001.”

20. ©2002 South-Western Chapter 2 Version 6e20 Marketing Plan Objectives  Communicate marketing management philosophies  Provide direction  Serve as motivators  Clarify thinking  Provide basis for control 3 3

21. ©2002 South-Western Chapter 2 Version 6e21 Learning Objective Explain the components of a situation analysis. 4 4

22. ©2002 South-Western Chapter 2 Version 6e22 SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) 4 4

23. ©2002 South-Western Chapter 2 Version 6e23 SWOT Analysis ©South-Western College Publishing S S W W O O T 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 4 4

24. ©2002 South-Western Chapter 2 Version 6e24 SWOT Analysis  Production Costs  Marketing Skills  Employee Capabilities  Financial Resources  Available Technology  Company/Brand Image Strengths and Weaknesses INTERNAL INTERNAL 4 4

25. ©2002 South-Western Chapter 2 Version 6e25 SWOT Analysis 4 4 Opportunities and Threats EXTERNAL EXTERNAL  Social  Demographic  Economic  Technological  Political/Legal  Competitive

26. ©2002 South-Western Chapter 2 Version 6e26 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 marketing plan implementation. 4 4

27. ©2002 South-Western Chapter 2 Version 6e27 Environmental Scanning  Examination of macroenvironmental forces  Social  Demographic  Economic  Technological  Political / Legal  Competitive  Helps identify market opportunities  Provides guidelines for design of marketing strategy 4 4

28. ©2002 South-Western Chapter 2 Version 6e28 Learning Objective Identify sources of competitive advantage 5 5

29. ©2002 South-Western Chapter 2 Version 6e29 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. 5 5

30. ©2002 South-Western Chapter 2 Version 6e30 Competitive Advantage Niche Strategies Cost Product/Service Differentiation Types of Competitive Advantage 5 5

31. ©2002 South-Western Chapter 2 Version 6e31 Cost Leadership  Obtain inexpensive raw materials  Create efficient operations  Design products for manufacture  Control overhead costs  Avoid marginal customers 5 5

32. ©2002 South-Western Chapter 2 Version 6e32 Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins. 5 5

33. ©2002 South-Western Chapter 2 Version 6e33 Sources of Cost Reduction Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design Reengineering Production Innovations New Delivery Methods 5 5

34. ©2002 South-Western Chapter 2 Version 6e34 Differentiation Competitive Advantage Advantage achieved when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price than the competition. 5 5

35. ©2002 South-Western Chapter 2 Version 6e35 Common Differential Advantages  Brand names  Strong dealer network  Product reliability  Image  Service 5 5

36. ©2002 South-Western Chapter 2 Version 6e36 Sources of Differential Competitive Advantage Value impressions  Features of a product that signal value Augmented products  Features of a product that are not expected by the customer 5 5

37. ©2002 South-Western Chapter 2 Version 6e37 Niche Competitive Advantage Advantage achieved when a firm seeks to target and effectively serve a small segment of the market. 5 5

38. ©2002 South-Western Chapter 2 Version 6e38 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 line 5 5

39. ©2002 South-Western Chapter 2 Version 6e39 Sustainable Competitive Advantage A differential advantage that cannot be copied by the competition. 5 5

40. ©2002 South-Western Chapter 2 Version 6e40 Sources of Sustainable Competitive Advantage 5 5 Patents Copyrights Locations Equipment Technology Customer Service Promotion Organization’s Skills and Assets Skills and AssetsOrganization’s

41. ©2002 South-Western Chapter 2 Version 6e41 Strategic Windows The limited period during which the “fit” between the key requirements of a market and the particular competencies of a firm are at an optimum. 5 5

42. ©2002 South-Western Chapter 2 Version 6e42 Learning Objective 6 6 Identify strategic alternatives and describe tools used to help select alternatives.

43. ©2002 South-Western Chapter 2 Version 6e43 Strategic Windows 6 6 Market Penetration Market Development 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

44. ©2002 South-Western Chapter 2 Version 6e44 Strategic Alternatives Market Penetration Market Penetration Increase market share among existing customers. Market Development Attract new customers to existing products Diversification Introduce new products into new markets. Product Development Product Development Create new products for present markets 6 6

45. ©2002 South-Western Chapter 2 Version 6e45 Strategic Opportunity Matrix 6 6 Present ProductNew Product New Market Market Penetration Market Development Product Development Diversification Present Market

46. ©2002 South-Western Chapter 2 Version 6e46 Selecting a Strategic Alternative Common ToolsPhilosophy Market Share Profitability 6 6 Portfolio Matrix $$

47. ©2002 South-Western Chapter 2 Version 6e47 Portfolio Matrix Tools for allocating resources among products or strategic business units on the basis of relative market share and market growth rate. 6 6

48. ©2002 South-Western Chapter 2 Version 6e48 BCG Portfolio Matrix MARKET GROWTH RATE MARKET SHARE DOMINANCE HIGH LOW LOW HIGH ? $$ 6 6

49. ©2002 South-Western Chapter 2 Version 6e49 BCG Portfolio Matrix MARKET SHARE DOMINANCE HIGH LOW MARKET GROWTH RATE LOW HIGH High growth Market leaders Require cash Low growth High market share High cash flow Low growth Low market share Minimal cash flow High growth Low market share Need cash Poor profit margins $$ 6 6

50. ©2002 South-Western Chapter 2 Version 6e50 Portfolio Matrix Example 6 6 Notebook Computer (STAR) Palmtop (PROBLEM CHILD) Personal Computer (CASH COW) Mainframe Computer (DOG) MARKET GROWTH RATE LOW HIGH MARKET SHARE DOMINANCE HIGH LOW

51. ©2002 South-Western Chapter 2 Version 6e51 Strategies for Resource Allocation Build Hold Harvest Divest Provide financial resources if SBU (Problem Child) has potential to be a Star. Preserve market share if SBU is a successful Cash Cow. Use cash flow for other SBUs. Increase short-term cash return. Appropriate for all SBUs except Stars. Get rid of SBUs with low shares in low-growth markets. 6 6

52. ©2002 South-Western Chapter 2 Version 6e52 Tool for allocating resources among strategic business units on the basis of market attractiveness and firm’s positioning. 6 6 Market Attractiveness Matrix

53. ©2002 South-Western Chapter 2 Version 6e53 Market Attractiveness Matrix (GE) BUSINESS POSITON STRONG MARKET ATTRACTIVENESS LOW MEDIUM HIGH MEDIUMWEAK Low Attractiveness Medium Attractiveness High Attractiveness 6 6

54. ©2002 South-Western Chapter 2 Version 6e54 Market Attractiveness Attributes of an Attractive Market Attractive Market  High profitability  Rapid growth  Lack of government regulation  Insensitivity to price increase  Lack of competition  Availability of technology 6 6

55. ©2002 South-Western Chapter 2 Version 6e55 Learning Objective Discuss target market strategies. 7 7

56. ©2002 South-Western Chapter 2 Version 6e56 The activities of selecting and describing one or more target markets and developing and maintaining a market mix that will produce mutually satisfying exchanges with target markets. Marketing Strategy 7 7

57. ©2002 South-Western Chapter 2 Version 6e57 Target Market Strategy 7 7  Segment the market based on groups with similar characteristics  Analyze the market based on attractiveness of market segments  Select one or more target markets

58. ©2002 South-Western Chapter 2 Version 6e58 Target Market Strategy 7 7  Develop a marketing mix that will produce satisfying exchanges with target markets

59. ©2002 South-Western Chapter 2 Version 6e59 Learning Objective Describe elements of the marketing mix. 8 8

60. ©2002 South-Western Chapter 2 Version 6e60 A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market. The Marketing Mix 8 8

61. ©2002 South-Western Chapter 2 Version 6e61 Price Marketing Mix: The “Four Ps” 8 8 Promotion Place Product

62. ©2002 South-Western Chapter 2 Version 6e62 Product Strategies Product 8 8  The starting point of the “4 Ps”  Includes physical unit, package, warranty, service, brand, image, and value

63. ©2002 South-Western Chapter 2 Version 6e63 Distribution (Place) Strategies 8 8 Place  Product availability where and when customers want them.  Involves all activities from raw materials to finished products

64. ©2002 South-Western Chapter 2 Version 6e64 Promotion Strategies 8 8 Promotion  Role is to bring about exchanges with target markets  Includes integration of personal selling, advertising, sales promotion, and public relations

65. ©2002 South-Western Chapter 2 Version 6e65 Pricing Strategies 8 8 Price  The most flexible of the “4 Ps”  Price X Units Sold = Total Revenue

66. ©2002 South-Western Chapter 2 Version 6e66 Learning Objective Explain why implementation, evaluation, and control of the marketing plan are necessary. 9 9

67. ©2002 South-Western Chapter 2 Version 6e67 Following Up the Marketing Plan  Implementation  Evaluation  Control  Marketing Audit  Comprehensive  Systematic  Independent  Periodic 9 9

68. ©2002 South-Western Chapter 2 Version 6e68 The Marketing Audit 9 9 A thorough, systematic, periodic evaluation of the goals, strategies, structure, and performance of the marketing organization.

69. ©2002 South-Western Chapter 2 Version 6e69 Learning Objective Identify several techniques that help make strategic planning effective. 10

70. ©2002 South-Western Chapter 2 Version 6e70 Effective Strategic Planning Management Support Ongoing Process Creativity Requirements 10