1. Chapter 1 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 1 Lamb, Hair, McDaniel CHAPTER 2 Strategic Planning for Competitive Advantage 2012-2013 © AP IMAGES/JENNIFER GRAYLOCK © iStockphoto.com/Dem10

2. 2 Learning Outcomes 12 3 456 Understand the importance of strategic planning Define strategic business units (SBUs) Identify strategic alternatives and know a basic outline for a marketing plan Develop an appropriate business mission statement Describe the components of a situation analysis Identify sources of competitive advantage

3. 3 Learning Outcomes 78 9 1011 Explain the criteria for stating good marketing objectives Discuss target market strategies Describe the elements of the marketing mix Explain why implementation, evaluation, and control of the marketing plan are necessary Identify several techniques that help make strategic planning effective

4. © 2013 by Cengage Learning Inc. All Rights Reserved. 4 Understand the importance of strategic marketing and know a basic outline for a marketing plan 1 The Nature of Strategic Planning

5. © 2013 by Cengage Learning Inc. All Rights Reserved. 5 Strategic Marketing Management What is the organization’s main activity? How will it reach its goals? 1 The answer is by examining: SBUs Marketing Plan Strategic Alternatives

6. © 2013 by Cengage Learning Inc. All Rights Reserved. 6 The GOAL of strategic planning is long-term profitability and growth. the managerial process of creating and maintaining a fit between the organization’s objectives and resources and the evolving market opportunities. 1 Strategic Planning is…

7. © 2013 by Cengage Learning Inc. All Rights Reserved. 7 Define Strategic Business Units (SBUs) Strategic Business Units 2

8. © 2013 by Cengage Learning Inc. All Rights Reserved. 8 Characteristics of Strategic Business Units (SBUs) An SBU HAS…  A distinct mission and specific target market  Control over its resources  Its own competitors  Plans independent of other SBUs 2

9. © 2013 by Cengage Learning Inc. All Rights Reserved. 9 Identify strategic alternatives and know a basic outline for a marketing plan Strategic Alternatives 3

10. © 2013 by Cengage Learning Inc. All Rights Reserved. 10 Ansoff’s Opportunity Matrix 3 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

11. © 2013 by Cengage Learning Inc. All Rights Reserved. 11 Exhibit 2.1 Ansoff’s Strategic Opportunity Matrix Present Market New Market Present ProductNew Product Product Development Starbucks develops powdered instant coffee 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. 3

12. © 2013 by Cengage Learning Inc. All Rights Reserved. 12 Boston Consulting Group Portfolio Matrix Dog Question Mark Star Cash Cow Portfolio Matrix 3

13. © 2013 by Cengage Learning Inc. All Rights Reserved. 13 Exhibit 2.2 Portfolio Matrix for a Large Computer Manufacturer 3

14. © 2013 by Cengage Learning Inc. All Rights Reserved. 14 Portfolio Matrix Strategies 3 Divest Harvest Build Hold

15. © 2013 by Cengage Learning Inc. All Rights Reserved. 15 Exhibit 2.3 Portfolio Matrix for a Large Computer Manufacturer Cautiously InvestInvest/Grow Harvest/DivestCautiously InvestInvest/Grow Harvest/Divest Cautiously Invest 3 Low Medium High LowMediumHigh Market attractiveness Business Position

16. © 2013 by Cengage Learning Inc. All Rights Reserved. 16 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. 3

17. © 2013 by Cengage Learning Inc. All Rights Reserved. 17 Why Write a Marketing Plan?  Provides a basis for comparison of actual and expected performance  Provides clearly stated activities to work toward common goals  Provides an examination of the marketing environment  Serves as a reference for the success of future activities  Allows entry into the marketplace with awareness 3

18. © 2013 by Cengage Learning Inc. All Rights Reserved. 18 Exhibit 2.4 Elements of a Marketing Mix Marketing Strategy ProductDistribution Price Marketing Mix Business Mission Statement Situation or SWOT Analysis Objectives Target Market Strategy Implementation Evaluation Control Promotion

19. © 2013 by Cengage Learning Inc. All Rights Reserved. 19 Marketing Plan Elements Selecting which alternative to pursue depends on: 1.Philosophy and culture 2.Decision making tools The most common decision making tool is the matrix form. 3

20. © 2013 by Cengage Learning Inc. All Rights Reserved. 20 Writing the Marketing Plan A complete marketing plan can allow an organization to achieve marketing objectives… HOWEVER the marketing plan is only as good as the information, effort, creativity and thought put into it. 3

21. © 2013 by Cengage Learning Inc. All Rights Reserved. 21 Develop an appropriate business mission statement Defining the Business Mission 4

22. © 2013 by Cengage Learning Inc. All Rights Reserved. 22 Defining the Business Mission  Answers the question, “What business are we in?”  Focuses on the market(s) rather than the good or service  SBUs may also have a mission statement 4

23. © 2013 by Cengage Learning Inc. All Rights Reserved. 23 Describe the components of a situation analysis LO 3 5 Conducting a Situation Analysis

24. © 2013 by Cengage Learning Inc. All Rights Reserved. 24 SWOT Analysis ©South-Western College Publishing S S W W O O T 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 5

25. © 2013 by Cengage Learning Inc. All Rights Reserved. 25 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 5

26. © 2013 by Cengage Learning Inc. All Rights Reserved. 26 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 © AP IMAGES/PRNEWSFOTO/PEPSICO 5

27. © Cengage Learning Inc. 2013. All Rights Reserved. 27 Opportunities in Education Grockit and DreamBox develop integrated web-based educational tools. Technology-based education solutions offer interactive instruction for less than a private tutor. Companies like these can use their technological expertise to create and take advantage of opportunities in the recession environment. Source: Joseph De Avila, "Pursuing an Academic Edge at Home," The Wall Street Journal, July 23, 2009, D1-D2.

28. © 2013 by Cengage Learning Inc. All Rights Reserved. 28 Identify sources of competitive advantage Competitive Advantage 6

29. © 2013 by Cengage Learning Inc. All Rights Reserved. 29 Competitive Advantage Niche Cost Product/Service Differentiation Types of Competitive Advantage 6

30. © 2013 by Cengage Learning Inc. All Rights Reserved. 30 Cost Competitive Advantage  Obtain inexpensive raw materials  Create efficient scale of plant operations  Design products for ease of manufacture  Control overhead costs  Avoid marginal customers 6

31. © 2013 by Cengage Learning Inc. All Rights Reserved. 31 Sources of Cost Reduction Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design Reengineering Production Innovations New Service Delivery Methods 6

32. © 2013 by Cengage Learning Inc. All Rights Reserved. 32 Examples of Product/Service Differentiators  Brand names  Strong dealer network  Product reliability  Image  Service 6

33. © 2013 by Cengage Learning Inc. All Rights Reserved. 33 Niche Competitive Advantage  Used by small companies with limited resources  May be used in a limited geographic market 6

34. © 2013 by Cengage Learning Inc. All Rights Reserved. 34 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. 6

35. © 2013 by Cengage Learning Inc. All Rights Reserved. 35 Sources of Sustainable Competitive Advantage Patents Copyrights Locations Equipment Technology Customer Service Promotion Skills and Assets of an Organization Skills and Assets of an Organization 6

36. © 2013 by Cengage Learning Inc. All Rights Reserved. 36 Explain the criteria for stating good marketing objectives 7 Setting Marketing Plan Objectives

37. © 2013 by Cengage Learning Inc. All Rights Reserved. 37 Marketing Objectives  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.” 7

38. © 2013 by Cengage Learning Inc. All Rights Reserved. 38 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 7

39. © 2013 by Cengage Learning Inc. All Rights Reserved. 39 Discuss target market strategies Describing the Target Market 8

40. © 2013 by Cengage Learning Inc. All Rights Reserved. 40 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 Strategy involves… Describing the Target Market 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. Marketing Opportunity Analysis (MOA) involves… 8

41. © 2013 by Cengage Learning Inc. All Rights Reserved. 41  Segment the market based on groups with similar characteristics  Analyze the market based on attractiveness of market segments  Select one or more target markets Target Market Strategy 8

42. © 2013 by Cengage Learning Inc. All Rights Reserved. 42 Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes Target Market Strategy 8

43. © 2013 by Cengage Learning Inc. All Rights Reserved. 43 Describe the elements of the marketing mix 9 The Marketing Mix

44. © 2013 by Cengage Learning Inc. All Rights Reserved. 44 a unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market. The Marketing Mix is… “Four Ps” The elements of the marketing mix are often referred to as the “Four Ps” 9

45. © 2013 by Cengage Learning Inc. All Rights Reserved. 45 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 9

46. © 2013 by Cengage Learning Inc. All Rights Reserved. 46 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 9

47. © 2013 by Cengage Learning Inc. All Rights Reserved. 47 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 9

48. © 2013 by Cengage Learning Inc. All Rights Reserved. 48 Marketing Mix: The “Four Ps” Price  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 9

49. © 2013 by Cengage Learning Inc. All Rights Reserved. 49 Whole Foods Changes Its Pricing Strategy As customers face financial struggles, Whole Foods is changing its pricing strategy by: –highlighting deals and sales –pricing items individually instead of per pound –bundle items in bulk discounts Source: Katy McLaughlin and Timothy Martin, "As Sales Slip, Whole Foods Tries Health Push," Wall Street Journal, August 5, 2009, B1 9

50. © 2013 by Cengage Learning Inc. All Rights Reserved. 50 Explain why implementation, evaluation, and control of the marketing plan are necessary 10 Following Up on the Marketing Plan

51. © 2013 by Cengage Learning Inc. All Rights Reserved. 51 Following Up on the Marketing Plan  Implementation  Evaluation and Control  Marketing audit is…  Comprehensive  Systematic  Independent  Periodic 10

52. © 2013 by Cengage Learning Inc. All Rights Reserved. 52 Identify several techniques that help make strategic planning effective 11 Effective Strategic Planning

53. © 2013 by Cengage Learning Inc. All Rights Reserved. 53 Techniques for Effective Strategic Planning Effective Strategic Planning Continual attention Creativity Management commitment Management commitment 11

54. © Cengage Learning Inc. 2013. All Rights Reserved. 54 Chapter 2 Video Recycline CA Webb discusses Recycline’s strategic decisions that help the company have a sustainable competitive advantage— giving customers sustainable, environmentally friendly products without sacrificing any features of the traditional product. CA Webb also discusses her use of SWOT, and how it helps Recycline make strong choices for the new brand.