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.
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.
Notes: Marketing planning involves the design of activities related to marketing objectives and the changing marketing environment. Planning is the basis for all marketing strategies and decisions.
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.
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.
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.
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.
Notes: The AMA’s mission statement is show here and in Exhibit 2.2.
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.
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?
Notes: Additional strengths include superiority in manufacturing, service, quality and value perception, as well as employee capabilities.
Notes: A firm’s competitive advantage is the reason or reasons that cause customers to patronize that firm and not the competition.
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
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
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
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.
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?)
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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?
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.
Designed by Eric Brengle B-books, Ltd
CHAPTER 2 Strategic Planning for Competitive Advantage Designed by Eric Brengle B-books, Ltd Prepared by Deborah Baker Texas Christian University Marketing Lamb, Hair, McDaniel 9
Learning Outcomes Understand the importance of strategic marketing and know a basic outline for a marketing plan Develop an appropriate business mission statement Describe the criteria for stating good marketing objectives LO I LO 2 LO 3
Learning Outcomes Explain the components of a situation analysis Identify sources of competitive advantage Identify strategic alternatives Discuss target market strategies LO 5 LO 6 LO 7 LO 4
Learning Outcomes 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
The Nature of Strategic Planning Understand the importance of strategic marketing and know a basic outline for a marketing plan LO I
Strategic Planning 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. Strategic Planning
Strategic Marketing Management LO I What is the organization’s main activity? How will it reach its goals? THE ANSWER IS A MARKETING PLAN.
Strategic Planning LO I Marketing Plan A written document that acts as a guidebook of marketing activities for the marketing manager.
Why Write a Marketing Plan? LO I <ul><li>Provides a basis for comparison of actual and expected performance </li></ul><ul><li>Provides clearly stated activities to work toward common goals </li></ul><ul><li>Serves as a reference for the success of future activities </li></ul><ul><li>Provides an examination of the marketing environment </li></ul><ul><li>Allows entry into the marketplace with awareness </li></ul>
Marketing Plan Elements LO I Implementation Evaluation Control Promotion Marketing Strategy Product Distribution Price Marketing Mix Business Mission Statement Objectives Situation or SWOT Analysis Target Market Strategy
REVIEW LEARNING OUTCOME The Importance of Strategic Marketing LO I What Why How Strategic Planning Long-term profitability and growth Write a marketing plan Online http://www.dmusic.com
Defining the Business Mission Develop an appropriate business mission statement LO 2
<ul><li>Answers the question, “What business are we in?” </li></ul><ul><li>Focuses on the market(s) rather than the good or service </li></ul><ul><li>Strategic Business Units (SBUs) may also have a mission statement </li></ul>Defining the Business Mission LO 2
Strategic Business Units (SBUs) <ul><li>Characteristics: [SBU HAS…] </li></ul><ul><li>A distinct mission and specific target market </li></ul><ul><li>Control over its resources </li></ul><ul><li>Its own competitors </li></ul><ul><li>Plans independent of other SBUs </li></ul>LO 2
REVIEW LEARNING OUTCOME Business Mission Statement 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
Setting Marketing Plan Objectives Describe the criteria for stating good marketing objectives LO 3
Marketing Objective LO 3 A statement of what is to be accomplished through marketing activities. Marketing Objective
Marketing Objectives LO 3 <ul><li>Realistic </li></ul><ul><li>Measurable </li></ul><ul><li>Time specific </li></ul><ul><li>Consistent with and indicate the organization’s priorities </li></ul>“ Our objective is to achieve 10 percent dollar market share in the cat food market within 12 months of product introduction.”
REVIEW LEARNING OUTCOME Criteria for Good Marketing Objectives LO 3 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
Conducting a Situation Analysis Explain the components of a situation analysis LO 4
SWOT Analysis LO 4 Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) SWOT Analysis
Environmental Scanning LO 4 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. Environmental Scanning
REVIEW LEARNING OUTCOME Components of a Situation Analysis LO 4 <ul><li>production costs </li></ul><ul><li>marketing skills </li></ul><ul><li>financial resources </li></ul><ul><li>image </li></ul><ul><li>technology </li></ul>Strengths Weaknesses INTERNAL ENVIRONMENT
REVIEW LEARNING OUTCOME Components of a Situation Analysis LO 4 <ul><li>social </li></ul><ul><li>demographic </li></ul><ul><li>economic </li></ul><ul><li>technological </li></ul><ul><li>political / legal </li></ul><ul><li>competitive </li></ul>Opportunities Threats EXTERNAL ENVIRONMENT
Competitive Advantage Identify sources of competitive advantage LO 5
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. Competitive Advantage
Competitive Advantage LO 5 Niche Strategies Cost Product/Service Differentiation Types of Competitive Advantage
Cost Competitive Advantage LO 5 Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins.
Cost Competitive Advantage LO 5 <ul><li>Obtain inexpensive raw materials </li></ul><ul><li>Create efficient plant operations </li></ul><ul><li>Design products for ease of manufacture </li></ul><ul><li>Control overhead costs </li></ul><ul><li>Avoid marginal customers </li></ul>
Sources of Cost Reduction LO 5 Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design Reengineering Production Innovations New Service Delivery Methods
Product/Service Differentiation LO 5 Product / Service Differentiation Competitive Advantage The provision of something that is unique and valuable to buyers beyond simply offering a lower price than the competition’s.
Examples of Product/Service Differentiation LO 5 <ul><li>Brand names </li></ul><ul><li>Strong dealer network </li></ul><ul><li>Product reliability </li></ul><ul><li>Image </li></ul><ul><li>Service </li></ul>
Niche Competitive Advantage LO 5 Niche Competitive Advantage The advantage achieved when a firm seeks to target and effectively serve a small segment of the market.
Niche Competitive Advantage <ul><li>Used by small companies with limited resources </li></ul><ul><li>May be used in a limited geographic market </li></ul><ul><li>Product line may be focused on a specific product category </li></ul>LO 5
Sources of Sustainable Competitive Advantage LO 5 Patents Copyrights Locations Equipment Technology Customer Service Promotion Skills and Assets of an Organization
REVIEW LEARNING OUTCOME Sources of Competitive Advantage LO 5 Sources of Competitive Advantage Cost $ Product/Service Differentiation A vs. B vs. C Niche Strategies
Strategic Directions Identify strategic alternatives LO 6
Strategic Alternatives 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
Ansoff’s Strategic Opportunity Matrix LO 6 Present Product New Product New Market Market Penetration Market Development Product Development Diversification Present Market http://www.pg.com Online
Portfolio Matrix LO 6 Stars Cash Cows Problem Children Dogs
Portfolio Matrix Strategies LO 6 Build Hold Harvest Divest
REVIEW LEARNING OUTCOME Strategic Alternatives LO 6 Identify strategic alternatives Diversification = Product development = products Market development = customers Market penetration = share new products + new markets
Describing the Target Market Discuss target market strategies LO 7
Marketing Strategy LO 7 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.
Target Market Strategy <ul><li>Segment the market based on groups with similar characteristics </li></ul><ul><li>Analyze the market based on attractiveness of market segments </li></ul><ul><li>Select one or more target markets </li></ul>LO 7
Target Market Strategy LO 7 Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes
REVIEW LEARNING OUTCOME Target Market Strategies LO 7 Entire Market Multiple Markets Single Market Target Market Options
The Marketing Mix Describe the elements of the marketing mix LO 8
The Marketing Mix LO 8 Marketing Mix A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market.
Marketing Mix: The “Four Ps” LO 8 Price Promotion Place Product
Marketing Mix: The “Four Ps” <ul><li>The starting point of the “4 Ps” </li></ul><ul><li>Includes </li></ul><ul><ul><li>Physical unit </li></ul></ul><ul><ul><li>Package </li></ul></ul><ul><ul><li>Warranty </li></ul></ul><ul><ul><li>Service </li></ul></ul><ul><ul><li>Brand </li></ul></ul><ul><ul><li>Image </li></ul></ul><ul><ul><li>Value </li></ul></ul>Product <ul><li>Products can be… </li></ul><ul><ul><li>Tangible goods </li></ul></ul><ul><ul><li>Ideas </li></ul></ul><ul><ul><li>Services </li></ul></ul>LO 8
Marketing Mix: The “Four Ps” <ul><li>Product availability where and when customers want them </li></ul><ul><li>All activities from raw materials to finished products </li></ul><ul><li>Ensure products arrive in usable condition at designated places when needed </li></ul>LO 8 Place
Marketing Mix: The “Four Ps” LO 8 Promotion <ul><li>Role is to bring about exchanges with target markets by: </li></ul><ul><ul><li>Informing </li></ul></ul><ul><ul><li>Educating </li></ul></ul><ul><ul><li>Persuading </li></ul></ul><ul><ul><li>Reminding </li></ul></ul><ul><li>Includes integration of: </li></ul><ul><ul><li>Personal selling </li></ul></ul><ul><ul><li>Advertising </li></ul></ul><ul><ul><li>Sales promotion </li></ul></ul><ul><ul><li>Public relations </li></ul></ul>http://www.paramount.com http://www.warnerbros.com http://www.universalstudios.com Online
Marketing Mix: The “Four Ps” LO 8 Price <ul><li>Price is what a buyer must give up to obtain a product. </li></ul><ul><li>The most flexible of the “4 Ps”-- quickest to change </li></ul><ul><li>Competitive weapon </li></ul><ul><li>Price x Units Sold = Total Revenue </li></ul>
REVIEW LEARNING OUTCOME Elements of the Marketing Mix LO 8
Following Up on the Marketing Plan Explain why implementation, evaluation, and control of the marketing plan are necessary LO 9
<ul><li>Implementation </li></ul><ul><li>Evaluation </li></ul><ul><li>Control </li></ul><ul><li>Marketing audit is… </li></ul><ul><ul><ul><li>Comprehensive </li></ul></ul></ul><ul><ul><ul><li>Systematic </li></ul></ul></ul><ul><ul><ul><li>Independent </li></ul></ul></ul><ul><ul><ul><li>Periodic </li></ul></ul></ul>Following Up the Marketing Plan LO 9 http://www.youngbiz.com Online
REVIEW LEARNING OUTCOME LO 9 Implementation, Evaluation, and Control Product Place Promotion Price Met objectives? Implementation Evaluation <ul><li>Audits </li></ul><ul><li>comprehensive </li></ul><ul><li>systematic </li></ul><ul><li>independent </li></ul><ul><li>periodic </li></ul>
Effective Strategic Planning Identify several techniques that help make strategic planning effective LO IO
REVIEW LEARNING OUTCOME LO IO Techniques for Effective Strategic Planning Effective Strategic Planning Continual attention Creativity Management commitment
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