1. 1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 2 Strategic Planning for Competitive Advantage Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10

2. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 2 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 LO I LO 2 LO 3

3. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 3 Explain the criteria for stating good marketing objectives Identify sources of competitive advantage Identify strategic alternatives Discuss target market strategies LO 5 LO 6 LO 7 LO 4

4. Copyright ©2009 by Cengage Learning Inc. All rights reserved Learning Outcomes 4 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 LO 9 LO IO LO 8

5. Copyright ©2009 by Cengage Learning Inc. All rights reserved The Nature of Strategic Planning 5 Understand the importance of strategic marketing and know a basic outline for a marketing plan LO I

6. Copyright ©2009 by Cengage Learning Inc. All rights reserved Strategic Planning 6 LO I The managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities. The goal is long-term profitability and growth.

7. Copyright ©2009 by Cengage Learning Inc. All rights reserved Strategic Marketing Management 7 LO I What is the organization’s main activity? How will it reach its goals? THE ANSWER IS A MARKETING PLAN.

8. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Planning 8 LO I Marketing Plan A written document that acts as a guidebook of marketing activities for the marketing manager.

9. Copyright ©2009 by Cengage Learning Inc. All rights reserved Why Write a Marketing Plan? 9 LO I  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

10. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Plan Elements 10 LO I Marketing Strategy ProductDistribution Price Marketing Mix Business Mission Statement Objectives Situation or SWOT Analysis Target Market Strategy Implementation Evaluation Control Promotion

11. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME The Importance of Strategic Marketing 11 LO IWhatWhatWhyWhy HowHow Strategic Planning Long-term profitability and growth Long-term profitability and growth Write a marketing plan

12. Copyright ©2009 by Cengage Learning Inc. All rights reserved Defining the Business Mission 12 Develop an appropriate business mission statement LO 2

13. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 13 LO 2

14. Copyright ©2009 by Cengage Learning Inc. All rights reserved Southwest Airlines Mission Statement 14 LO 2 SOURCE: http://www.southwestairlines.com/about_swa/mission

15. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 15 LO 2

16. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Business Mission Statement 16 LO 2 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

17. Copyright ©2009 by Cengage Learning Inc. All rights reserved Conducting a Situation Analysis 17 Explain the components of a situation analysis LO 3

18. Copyright ©2009 by Cengage Learning Inc. All rights reserved Conducting a Situation Analysis 18 LO 3 SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)

19. Copyright ©2009 by Cengage Learning Inc. All rights reserved SWOT Analysis 19 LO 3 ©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

20. Copyright ©2009 by Cengage Learning Inc. All rights reserved Environmental Scanning 20 LO 3 Environmental Scanning The collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan.

21. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Components of a Situation Analysis 21 LO 3  production costs  marketing skills  financial resources  image  technology Strengths Weaknesses INTERNAL ENVIRONMENT

22. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Components of a Situation Analysis 22 LO 3  social  demographic  economic  technological  political / legal  competitive Opportunities Threats EXTERNAL ENVIRONMENT

23. Copyright ©2009 by Cengage Learning Inc. All rights reserved Setting Marketing Plan Objectives 23 Explain the criteria for stating good marketing objectives LO 4

24. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Objective 24 LO 4 A statement of what is to be accomplished through marketing activities. Marketing Objective

25. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Objectives 25 LO 4  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.”

26. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Criteria for Good Marketing Objectives 26 LO 4 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

27. Copyright ©2009 by Cengage Learning Inc. All rights reserved Competitive Advantage 27 Identify sources of competitive advantage LO 5

28. Copyright ©2009 by Cengage Learning Inc. All rights reserved Competitive Advantage 28 Competitive Advantage LO 5 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.

29. Copyright ©2009 by Cengage Learning Inc. All rights reserved Competitive Advantage 29 LO 5 Niche Strategies Cost Product/Service Differentiation Types of Competitive Advantage

30. Copyright ©2009 by Cengage Learning Inc. All rights reserved Cost Competitive Advantage 30 Cost Competitive Advantage LO 5 Being the low-cost competitor in an industry while maintaining satisfactory profit margins.

31. Copyright ©2009 by Cengage Learning Inc. All rights reserved Cost Competitive Advantage 31 LO 5  Obtain inexpensive raw materials  Create efficient plant operations  Design products for ease of manufacture  Control overhead costs  Avoid marginal customers

32. Copyright ©2009 by Cengage Learning Inc. All rights reserved Sources of Cost Reduction 32 LO 5 Experience Curves Efficient Labor No-frills Goods and Services No-frills Goods and Services Government Subsidies Product Design Reengineering Production Innovations New Service Delivery Methods

33. Copyright ©2009 by Cengage Learning Inc. All rights reserved Product/Service Differentiation 33 Product / Service Differentiation Competitive Advantage LO 5 The provision of something that is unique and valuable to buyers beyond simply offering a lower price than the competition’s.

34. Copyright ©2009 by Cengage Learning Inc. All rights reserved Examples of Product/Service Differentiation 34 LO 5  Brand names  Strong dealer network  Product reliability  Image  Service

35. Copyright ©2009 by Cengage Learning Inc. All rights reserved Niche Competitive Advantage 35 Niche Competitive Advantage LO 5 The advantage achieved when a firm seeks to target and effectively serve a single segment of the market.

36. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 36 LO 5

37. Copyright ©2009 by Cengage Learning Inc. All rights reserved Sources of Sustainable Competitive Advantage 37 LO 5 Patents Copyrights Locations Equipment Technology Customer Service Promotion Skills and Assets of an Organization Skills and Assets of an Organization

38. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Sources of Competitive Advantage 38 LO 5 Sources of Competitive Advantage Cost $ Product/Service Differentiation A vs. B vs. C Niche Strategies

39. Copyright ©2009 by Cengage Learning Inc. All rights reserved Strategic Directions 39 Identify strategic alternatives LO 6

40. Copyright ©2009 by Cengage Learning Inc. All rights reserved Strategic Alternatives 40 LO 6 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

41. Copyright ©2009 by Cengage Learning Inc. All rights reserved Ansoff’s Strategic Opportunity Matrix 41 LO 6 Present ProductNew Product New Market Market Penetration Market Development Product Development Diversification Present Market

42. Copyright ©2009 by Cengage Learning Inc. All rights reserved Portfolio Matrix 42 LO 6 Stars Cash Cows Problem Children Dogs

43. Copyright ©2009 by Cengage Learning Inc. All rights reserved Portfolio Matrix Strategies 43 LO 6 Build Hold Harvest Divest

44. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Strategic Alternatives 44 LO 6 Identify strategic alternatives Diversification = Product development = products Market development = customers Market penetration = share new products + new markets

45. Copyright ©2009 by Cengage Learning Inc. All rights reserved Describing the Target Market 45 Discuss target market strategies LO 7

46. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Strategy 46 LO 7 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.

47. Copyright ©2009 by Cengage Learning Inc. All rights reserved 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 47 LO 7

48. Copyright ©2009 by Cengage Learning Inc. All rights reserved Target Market Strategy 48 LO 7 Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes

49. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Target Market Strategies 49 LO 7 Entire MarketMultiple MarketsSingle Market Target Market Options

50. Copyright ©2009 by Cengage Learning Inc. All rights reserved The Marketing Mix 50 Describe the elements of the marketing mix LO 8

51. Copyright ©2009 by Cengage Learning Inc. All rights reserved The Marketing Mix 51 Marketing Mix LO 8 A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market.

52. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Mix: The “Four Ps” 52 Price Promotion Place Product LO 8

53. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Mix: The “Four Ps” 53  The starting point of the “4 Ps”  Includes  Physical unit  Package  Warranty  Service  Brand  Image  Value Product  Products can be…  Tangible goods  Ideas  Services LO 8

54. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Mix: The “Four Ps” 54  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 LO 8 Place

55. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Mix: The “Four Ps” 55 LO 8 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

56. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Mix: The “Four Ps” 56 LO 8 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

57. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME Elements of the Marketing Mix 57 LO 8

58. Copyright ©2009 by Cengage Learning Inc. All rights reserved Following Up on the Marketing Plan 58 Explain why implementation, evaluation, and control of the marketing plan are necessary LO 9

59. Copyright ©2009 by Cengage Learning Inc. All rights reserved Following Up the Marketing Plan Implementation Evaluation Control Marketing audit is… Comprehensive Systematic Independent Periodic 59 LO 9

60. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 60 LO 9 Product Place Promotion Price Product Place Promotion Price Met objectives? ImplementationEvaluation Audits comprehensive systematic independent periodic Audits comprehensive systematic independent periodic Implementation, Evaluation, and Control

61. Copyright ©2009 by Cengage Learning Inc. All rights reserved Effective Strategic Planning 61 Identify several techniques that help make strategic planning effective LO IO

62. Copyright ©2009 by Cengage Learning Inc. All rights reserved REVIEW LEARNING OUTCOME 62 LO IO Techniques for Effective Strategic Planning Effective Strategic Planning Continual attention Creativity Management commitment Management commitment