Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Copyright 2010 by Cengage Learning Inc. All Rights Reserved
Learning Outcomes LO1 Define the term marketing LO2 Describe four marketing management philosophies LO3 Discuss the differences between sales and market orientations LO4 Describe several reasons for studying marketing Copyright 2010 by Cengage Learning Inc. All Rights Reserved

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. Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Chapter 2 Strategic Planning for Competitive Advantage
Learning Outcomes Understand the importance of strategic marketing and know a basic outline for a marketing plan Develop an appropriate business mission statement Explain the components of a situation analysis LO1 LO2 LO3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Learning Outcomes Explain the criteria for stating good marketing objectives Identify sources of competitive advantage Identify strategic alternatives Discuss target market strategies LO4 LO5 LO6 LO7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

The Importance of Strategic Marketing
Chapter 2 Strategic Planning for Competitive Advantage The Importance of Strategic Marketing LO1 What Why How Strategic Planning Long-term profitability and growth Write a marketing plan GE, Toys R Us, McDonalds Copyright 2010 by Cengage Learning Inc. All Rights Reserved

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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Marketing Planning Marketing Plan- A written document that acts as a guidebook for the marketing manager. Notes: Marketing planning involves the design of activities related to marketing objectives and the changing marketing environment. Marketing planning is the basis for all marketing strategies and decisions. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Building a marketing plan is more than just meeting and knocking around ideas haphazardly…

And it’s DEFINITELY more than adopting a strategy just because “all of a sudden” you decided it seemed like a good idea…

A Marketing Plan is a Roadmap for All of a Company’s Business Efforts
Marketing Plans are: Strategic and extensive Organized and analytical Either short or long range (depending on the company)

Marketing Plan Elements
Chapter 2 Strategic Planning for Competitive Advantage Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution 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: Elements of a marketing plan The Marketing Plan Appendix contains a Marketing Plan Outline. Promotion Price Implementation Evaluation Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Business Mission Statement
Chapter 2 Strategic Planning for Competitive Advantage Business Mission Statement LO2 marketing myopia no direction focus on markets served and benefits customers seek Q: What business are we in? A: Business mission statement Too narrow Too broad Just right marketing myopia no direction focus on markets served and benefits customers seek Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Star Trek Enterprise Why is a mission statement important?
LO1

Southwest Airlines Mission Statement
Chapter 2 Strategic Planning for Competitive Advantage Southwest Airlines Mission Statement Notes: The Southwest Airlines mission statement is shown here and in Exhibit 2.2. SOURCE: Copyright 2010 by Cengage Learning Inc. All Rights Reserved

AMA’s Mission Statement
Chapter 2 Strategic Planning for Competitive Advantage AMA’s Mission Statement Samples Notes: The AMA’s mission statement is show here and in Exhibit 2.2. Find a sample to share Parkway Mission statement 15 15

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. 16 16

TODAY’S ORGANIZATIONS ORGANIZATIONAL STRUCTURE AND STRATEGIES
LO2 Strategic Business Unit (SBU) GE Capital (Commercial Finance, GE Money) GE Technology Infrastructure (healthcare, aviation, transportation) GE Energy (energy, oil & gas, water) NBC Universal (television, music, film)

Chapter 2 Strategic Planning for Competitive Advantage Marketing Plan Elements Business Mission Statement Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution 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: Elements of a marketing plan The Marketing Plan Appendix contains a Marketing Plan Outline. Promotion Price Implementation Evaluation Control 18 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 18

Conducting a Situation Analysis
Chapter 2 Strategic Planning for Competitive Advantage Conducting a Situation Analysis SWOT Analysis- Identifying internal strengths and weaknesses and also examining external opportunities and threats. LO3 Notes: When examining internal strengths and weaknesses, the marketing manager should focus on organizational resources such as production costs, marketing skills, financial resources, company or brand image, employee capabilities, and available technology. When examining external opportunities and threats, marketing managers must analyze aspects of the marketing environment. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

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? Copyright 2010 by Cengage Learning Inc. All Rights Reserved

THE STRATEGIC MARKETING PROCESS
THE PLANNING PHASE LO4 Step 1: Situation (SWOT) Analysis Situation Analysis SWOT Analysis Strengths Weaknesses Opportunities Threats

THE STRATEGIC MARKETING PROCESS
THE PLANNING PHASE LO4 Step 1: Situation (SWOT) Analysis SWOT Analysis Study Identify Industry Trends Analyze Competitors Assess the Organization Research Present and Prospective Customers

Ben & Jerry’s SWOT analysis serves as the basis for management actions regarding growth

Components of a Situation Analysis
Chapter 2 Strategic Planning for Competitive Advantage Components of a Situation Analysis LO3 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Marketing Objectives Realistic Measurable Time specific Compared to a benchmark “Our objective is to increase sales of Purina brand cat food by 15 percent over 2009 sales of $300 million.” Notes: Objectives must also be consistent with and indicate the priorities of the organization Objectives should flow from the business mission statement to the rest of the marketing plan Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Criteria for Good Marketing Objectives
Chapter 2 Strategic Planning for Competitive Advantage Criteria for Good Marketing Objectives LO4 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Describing the Target Market
Chapter 2 Strategic Planning for Competitive Advantage Describing the Target Market Discuss target market strategies. LO7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Marketing Strategy Marketing Strategy- 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. Copyright 2010 by Cengage Learning Inc. 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Cost Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Cost Competitive Advantage Cost Competitive Advantage- Being the low-cost competitor in an industry while maintaining satisfactory profit margins. Notes: A cost competitive advantage enables a firm to deliver superior customer value Examples: Obtain inexpensive raw materials Design products for ease of manufacture Control overhead costs Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Niche Competitive Advantage
Chapter 2 Strategic Planning for Competitive Advantage Niche Competitive Advantage Niche Competitive Advantage The advantage achieved when a firm seeks to target and effectively serve a small segment of the market. Example: Sensodyne/Polident/Poligrip Orvis—fishing company Notes: A niche competitive advantage targets and serves a single segment. This allows small companies with limited resources to market against giant competitors. An example of a successful niche marketer is The Orvis Company, a specialist in fly fishing manufacturing and sales. 35 35

Product differentiation
Brand Names –Lexus Product Reliability -Maytag Strong Dealer Network -Caterpillar tractor Service Fed Ex Image –Neiman Marcus Nike---Product Innovation -Nike Air and Nike Shox 36

Strategic Alternatives
Chapter 2 Strategic Planning for Competitive Advantage Strategic Alternatives Market Penetration Market Development Product Development Diversification Increase market share among existing customers McDonalds: Beanie Babies Attract new customers to existing products Coke in India 850/350 Introduce new products into new markets Sony-Columbia pictures Create new products for present markets Joseph A. Banks Suits 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 37 37

Ansoff’s Strategic Opportunity Matrix
Chapter 2 Strategic Planning for Competitive Advantage Ansoff’s Strategic Opportunity Matrix Present Product New Product New Market Market Penetration McDonalds sells More happy meals With Disney promo Development McDonalds opens Restaurants in China Product McDonalds introduces Salads and premium water Diversification Line of children’s clothing Present Market Online Procter & Gamble Explore Procter & Gamble’s Web site and identify how it uses each of the four strategic alternatives. Does one seem to be predominant? Which one? Can you find common threads among products, categories, and geographic locations that might affect P&G’s approach? Notes: Exhibit 2.4 is an example of Ansoff’s Strategic Opportunity Matrix for McDonald’s. Discussion/Team Activity: Select various companies and complete the Ansoff Strategic Opportunity Matrix. Online 38 38

Four alternative market-product strategies for Ben & Jerry’s to expand sales revenues using diversification analysis

Strategic Alternatives
Chapter 2 Strategic Planning for Competitive Advantage Strategic Alternatives LO6 Identify strategic alternatives Diversification = Product development = products Market development = customers Market penetration = share new products + new markets Copyright 2010 by Cengage Learning Inc. All Rights Reserved

SETTING STRATEGIC DIRECTIONS
WHERE DO WE WANT TO GO? LO3 Business Portfolio Analysis (BCG) Market Growth Rate Stars Cash Cows Dogs Question Marks Relative Market Share High Low

BCG business portfolio analysis for Kodak’s consumer SBUs for 2003 (solid circle) and 2011 (hollow circle) ③ ② Kodak digital picture frame Kodak digital photo printer ① ④ Kodak digital camera Kodak film sales: US, Canada, & W. Europe

Problem Children/Question
Chapter 2 Strategic Planning for Competitive Advantage BCG Portfolio Matrix Stars Handheld/ Computers Cash Cows Laptops/ Personal computer Problem Children/Question Marks Palm Pilots Dogs Mainframe computer 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. 43 43

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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

7 How do we Understand the Pet Owner’s Attitudes? 45
There are distinct segments of pet owners and they all shop in your stores: Segmentation study tells us how pet owners feel about their pets and the role food plays in that relationship. Their attitudes influence the brands they purchase and their sensitivity to price, promotion, and assortment. Practical Providers They like pets, but are not goo-goo about them. Look for convenient, practical, affordable food High price sensitivity Will switch for a good deal Uninvolved Owners Food must be: - Affordable - Quick - Easy to feed Very high price sensitivity Expert Driven Providers Expert advice – from veterinarian, breeder or other perceived expert – is very important. Information seekers Nutrition focused Primarily feed dry food Very low price sensitivity Healthy Habitualists Look for something easy and nutritious. Very brand loyal Not as worried about taste Basic Food Feeders Pet most likely belongs to the children, but needs to be fed. Food that looks like human food is more appealing High price sensitivity-look for sales Indulgent Nutritionists Still searching for right balance of taste and nutrition. Try new products Mix wet and dry Like variety Below average price sensitivity Pampering Preparers Homemade food is used to show love. Store-bought food alone does not suffice Nutrition is important, but taste is paramount Food = Love Average price sensitivity 45

Segmentation Example Female Department Shoppers classified into five groups based upon demographics, values, and attitudes. For Example: Fashion Statement-most affluent and educated, use credit cards, expect to be treated well by retail personnel. Wanna-Buys –similar to a fashion statement but with less income. Enjoy buying on impulse. 46

Segmentation Example Family Values – represent large families,
often are professionals, buying focuses on children or the home Down to Basics – Most likely to have children, not college educated, careful spenders, prefer not to use credit, like coupons. Matriarchs- older often retired, they like department stores but are risk adverse and have few purchase plans. 47

Who’s Who? 1.Fashion Statement, 2.Family Values, 3. Wanna Buy’s,
4. Matriach 5.Down-to-Basics 48

Who’s Who? Family Values Down-to-Basics Matriach Wanna Buy’s
Fashion Statement 49

Marketing Mix: The “Four Ps”
Chapter 2 Strategic Planning for Competitive Advantage Marketing Mix: The “Four Ps” Price Promotion Place Product 51 51

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. 52 52

Chapter 2 Strategic Planning for Competitive Advantage 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 Place 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. 53 53

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: Personal selling Advertising Sales promotion Public relations 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. 54 54

Chapter 2 Strategic Planning for Competitive Advantage 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 Price 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. 55 55

The elements of the marketing mix must be blended to produce a cohesive marketing program

LO10 Techniques for Effective Strategic Planning Effective Strategic Planning Continual attention Creativity Management commitment Notes: Effective strategic planning requires continual attention, creativity, and management commitment. 2. 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. 3. Strategic planning is based on creativity. Assumptions about the firm and the environment should be challenged and new strategies established to sustain competitive advantage. 4. Management support and participation are critical to the success of strategic planning. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Following Up the Marketing Plan
Chapter 2 Strategic Planning for Competitive Advantage Following Up 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 and ensures that these assignments are executed in a way that accomplishes the plan’s objectives. 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. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

LO9 Implementation, Evaluation, and Control Product Place Promotion Price Met objectives? Implementation Evaluation Audits comprehensive systematic independent periodic Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Copyright 2010 by Cengage Learning Inc. All Rights Reserved

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