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1. 2.1.2. Organizational Mission versus Organizational
Vision
 To adequately address the role of the organizational mission
in strategic planning, we must first understand the
differences between the organization’s mission and its
vision.
 A mission, or mission statement, seeks to answer the
question ‘‘what business are we in?’’
 It is a clear and concise statement (a paragraph or two at
most) that explains the organization’s reason for existence.
 By contrast, a vision or vision statement seeks to answer the
question ‘‘What do we want to become?’’

2. Organizational Mission versus Organizational Vision…
 For example, Texas Instruments—one of the world’s largest
technology companies—defines its mission this way:
 ‘‘Texas Instruments Incorporated provides innovative
semiconductor technologies to help our customers create the
world’s most advanced electronics.’’
 Compare this to the company’s vision: ‘‘. . . to use the
company’s unique technical skills to fundamentally change
markets and create entirely new ones.
 Similarly, Google’s mission is ‘‘to organize the world’s
information and make it universally accessible and useful.’’
 Google’s vision is ‘‘Never settle for the best.’’
 Note that an organization’s vision tends to be future oriented,
in that it represents where the organization is headed and
where it wants to go.

3. Organizational Mission versus Organizational Vision…
 If you ask many business people, ‘‘What is your reason for
existence?’’ their response is likely to be ‘‘To make money.’’
 Although that may be their ultimate objective, it is not their
reason of existence.
 Profit has a role in this process, of course, but it is a goal or
objective of the firm, not its mission or vision.
 The mission statement identifies what the firm stands for and
its basic operating philosophy.
 Profit and other performance outcomes are ends, and thus
are out of place and confuse the mission of the firm.
Elements of the Mission Statement
 A well-devised mission statement for any organization, unit
within an organization, or single-owner business should
answer the same five basic questions.

4. Elements of the Mission Statement…
 These questions should clarify for the firm’s stakeholders
(especially employees):
 Who are we?
 Who are our customers?
 What is our operating philosophy (basic beliefs, values,
ethics, etc.)?
 What are our core competencies or competitive advantages?
 What are our responsibilities with respect to being a good
steward of our human, financial, and environmental
resources?
 A mission statement that delivers a clear answer to each of
these questions installs the cornerstone for the development
of the marketing plan.

5. Elements of the Mission Statement…
 If the cornerstone is weak, or not in line with the foundation laid in
the preliminary steps, the entire plan will have no real chance of
long-term success.
 The mission statement is the one portion of the strategic plan that
should not be kept confidential.
 It should tell everyone—customers, employees, investors,
competitors, regulators, and society in general—what the firm
stands for and why it exists.
 Mission statements facilitate public relations activities and
communicate to customers and others important information that
can be used to build trust and long-term relationships.
 The mission statement should be included in annual reports and
major press releases, framed on the wall in every office, and
personally owned by every employee of the organization.
 Goals, objectives, strategies, tactics, and budgets are not for public
viewing. A mission statement kept secret, however, is of little value
to the organization.

6. Mission Width and Stability
 In crafting a mission statement, management should be
concerned about the statement’s width.
 If the mission is too broad, it will be meaningless to those who
read and build upon it.
 A mission to ‘‘make all people happy around the world by
providing them with entertaining products’’ sounds splendid
but provides no useful information.
 Overly broad missions can lead companies to establish plans
and strategies in areas where their strengths are limited. Such
endeavors almost always result in failure.
 Although a well-designed mission statement should not stifle
an organization’s creativity, it must help keep the firm from
moving too far from its core competencies.

7. Mission Width and Stability…
 Overly narrow mission statements that constrain the vision of
the organization can prove just as costly. For example, in US
early in this century, the railroads defined their business as
owning and operating trains.
 Consequently, the railroad industry had no concerns about
the invention of the airplane. After all, they thought, the
ability to fly had nothing to do with trains or the railroad
business.
 Today, firms such as American Airlines, Southwest Airlines,
and Federal Express dominate the passenger and time-
sensitive freight business. The railroads missed this major
opportunity because their missions were too narrowly tied to
railroads, as opposed to a more appropriate definition
encompassing the transportation business.

8. Mission Width and Stability…
 Mission stability refers to the frequency of modifications in an
organization’s mission statement.
 Of all the components of the strategic plan, the mission
should change the least frequently. It is the one element that
will likely remain constant through multiple rounds of
strategic planning.
 Goals, objectives, and marketing plan elements will change
over time, usually as an annual or quarterly event. When the
mission changes, however, the cornerstone has been moved
and everything else must change as well.
 The mission should change only when it is no longer in sync
with the firm’s capabilities, when competitors drive the firm
from certain markets, when new technology changes the
delivery of customer benefits, or when the firm identifies a
new opportunity that matches its strengths and expertise.

9. Customer-Focused Mission Statements
 In recent years, firms have realized the role that mission
statements can play in their marketing efforts.
 Consequently, mission statements have become much more
customer oriented. People’s lives and businesses should be
enriched because they have dealt with the organization.
 A focus on profit in the mission statement means that
something positive happens for the owners and managers of
the organization, not necessarily for the customers or other
stakeholders.
 See the word

10. 2.1.3. Corporate or Business-Unit Strategy…
 All organizations need a corporate strategy, the central
scheme or means for utilizing and integrating resources in the
areas of production, finance, research and development,
human resources, and marketing, to carry out the
organization’s mission and achieve the desired goals and
objectives.
 In the strategic planning process, issues such as competition,
differentiation, diversification, coordination of business units,
and environmental issues all tend to emerge as corporate
strategy concerns.
 In small businesses, corporate strategy and business-unit
strategy are essentially the same. Although we use both
terms, corporate and business-unit strategy apply to all
organizations, from large corporations to small businesses and
nonprofit organizations.

11. Corporate or Business-Unit Strategy…
 Larger firms often find it beneficial to devise separate strategies for
each strategic business unit (SBU), subsidiary, division, product line,
or other profit center within the parent firm.
 Business-unit strategy determines the nature and future direction
of each business unit, including its competitive advantages, the
allocation of its resources, and the coordination of the functional
business areas (marketing, production, finance, human resources,
etc.).
 Many organizations manage their differing SBUs in ways that create
synergies by providing customers a single-branded solution across
multiple markets.
 An important consideration for a firm determining its corporate or
business-unit strategy is the firm’s capabilities. When a firm
possesses capabilities that allow it to serve customers’ needs better
than the competition, it is said to have a competitive, or
differential, advantage.

12. Corporate or Business-Unit Strategy…
 Although a number of advantages come from functions other
than marketing—such as human resources, research and
development, or production—these functions often create
important competitive advantages that can be exploited
through marketing activities.
 For example, Walmart’s long-running strategic investments in
logistics allow the retailer to operate with lower inventory
costs than its competitors—an advantage that translates into
lower prices at retail.
 Competitive advantages cannot be fully realized unless
targeted customers see them as valuable. The key issue is the
organization’s ability to convince customers that its
advantages are superior to those of the competition.

13. 2.1.4. Functional Goals and Objectives
 Marketing and all other business functions must support the
organization’s mission and goals, translating these into
objectives with specific quantitative measurements.
 For example, a corporate or business unit goal to increase
return on investment might translate into a marketing
objective to increase sales, a production objective to reduce
the cost of raw materials, a financial objective to rebalance
the firm’s portfolio of investments, or a human resources
objective to increase employee training and productivity.
 All functional objectives should be expressed in clear, simple
terms so that all personnel understand what type and level of
performance the organization desires.
 In other words, objectives should be written so that their
accomplishment can be measured accurately.

14. Functional Goals and Objectives
 In the case of marketing objectives, units of measure might include sales
volume (in dollars or units), profitability per unit, percentage gain in
market share, sales per square foot, average customer purchase,
percentage of customers in the firm’s target market who prefer its
products, or some other measurable achievements.
2.1.5. Functional strategy
 Organizations design functional strategies to provide a total
integration of efforts that focus on achieving the area’s stated
objectives.
 In production, this might involve strategies for procurement, just-in-
time inventory control, or warehousing.
 In human resources, strategies dealing with employee
recruitment, selection, retention, training, evaluation, and
compensation are often at the forefront of the decision-
making process.
 In marketing strategy, the process focuses on selecting one or more target
markets and developing a marketing program that satisfies the needs and
wants of members of that target market.

15. Functional strategy
 Functional strategy decisions do not develop in a vacuum.
 The strategy must(1) fit the needs and purposes of the functional
area with respect to meeting its goals and objectives, (2) be realistic
given the organization’s available resources and environment, and
(3) be consistent with the organization’s mission, goals, and
objectives.
 Within the context of the overall strategic planning process, each
functional strategy must be evaluated to determine its effect on the
organization’s sales, costs, image, and profitability.
2.1.6. Implementation
Implementation involves activities that actually execute the
functional area strategy. One of the more interesting aspects of
implementation is that all functional plans have at least two target
markets: an external market (i.e., customers, suppliers, investors,
potential employees, the society at large) and an internal market
(i.e., employees, managers, executives).

16. Implementation…
 This occurs because functional plans, when executed,
have repercussions both inside and outside the firm.
• Even seemingly disconnected events in finance or human
resources can have an effect on the firm’s ultimate
customers—the individuals and businesses that buy the
firm’s products.
• In order for a functional strategy to be implemented
successfully, the organization must rely on the
commitment and knowledge of its employees—its
internal target market. After all, employees have a
responsibility to perform the activities that will
implement the strategy. For this reason, organizations
often execute internal marketing activities designed to
gain employee commitment and motivation to
implement functional plans.

17. 2.1.7. Evaluation and Control…
 Organizations design the evaluation and control phase of
strategic planning to keep planned activities on target with
goals and objectives. In the big picture, the critical issue in this
phase is coordination among functional areas.
 For example, timely distribution and product availability
almost always depend on accurate and timely production.
 By maintaining contact with the production manager, the
marketing manager helps to ensure effective marketing
strategy implementation (by ensuring timely production) and,
in the long run, increased customer satisfaction.
 The need for coordination is especially keen in marketing
where the fulfillment of marketing strategy always depends
on coordinated execution with other functional strategies.

18. Evaluation and Control…
 The key to coordination is to ensure that functional areas
maintain open lines of communication at all times. Although
this can be quite a challenge, it is helpful if the organizational
culture is both internally and externally customer oriented.
 Maintaining a customer focus is extremely important
throughout the strategic planning process, but especially so
during the implementation, evaluation, and control phases of
the process.
 Functional managers should have the ability to see the
interconnectedness of all business decisions and act in the
best interests of the organization and its customers.
 In some ways, the evaluation and control phase of the
planning process is an ending and a beginning.
 On one hand, evaluation and control occur after a strategy
has been implemented.

19. Evaluation and Control…
 In fact, the implementation of any strategy would be
incomplete without an assessment of its success and the
creation of control mechanisms to provide and revise the
strategy or its implementation—or both if necessary.
 On the other hand, evaluation and control serve as the
beginning point for the planning process in the next planning
cycle.
 Because strategic planning is a never-ending process,
managers should have a system for monitoring and evaluating
implementation outcomes on an ongoing basis.

20. 2.2. Marketing Analysis
 The goal of market analysis is to determine the attractiveness of a
market and to understand its evolving opportunities and threats as
they relate to the strengths and weaknesses of the firm. David
A.Aeker outlined the following dimensions of a market analysis:
a. Market Size- the size of the market can be evaluated based on
present sales and potential sales if the use of the product is
expanded. The following are some information sources for
determining market size:
• Government data
• Trade associations
• Financial data from major players
• Customer surveys
b. Market Growth Rate- a simple means of forecasting the market
growth rate is to extrapolate historical data into the future.

21. Market Growth Rate
 While this method may provide a first-order estimate, it does
not predict important turning points.
 A better method is to study growth drivers such as
demographic information and sales growth in complementary
products.
 Such drivers serve as leading indicators that are more
accurate than simply extrapolating historical data.
 Important inflection points in the market growth rate
sometimes can be practiced by constructing a product
diffusion curve. The shape of the curve can be estimated by
studying the characteristics of the adoption rate of similar
product in the past.
 Ultimately, the maturity and decline stages of the product life
cycle will be reached.

22. Market Growth Rate…
 Some leading indicators of the decline phase include price
pressure caused by competition, a decrease in brand loyalty,
the emergence of substitute products, market saturation and
the lack of growth drivers.
c. Market Profitability- while different firms in a market will
have different levels of profitability, the average profit
potential for a market can be used as a guideline for knowing
how difficult it is to make money in the market.
 Michael Porter devised a useful framework for evaluating the
attractiveness of an industry or market. This framework,
known as Porter’s five forces (as we will see in chapter 3),
identifies five factors that influence the market profitability:
 Buyer power
 Supplier power

23. Market Profitability
 Barriers to entry
 Threat of substitute products
 Rivalry among firms in the industry
d. Industry Cost Structure- the cost structure is important for
identifying key factors for success.
 To this end Porter’s value chain model is useful for
determining where value is added and for isolating the costs.
 The cost structure also is helpful for formulating strategies to
develop a competitive advantage. For example in some
environments the experience curve effect can be used to
develop a cost advantage over competitors.
e. Distribution Channels- the following aspects of the
distribution system are useful in a market analysis:

24. Distribution Channels…
 Existing distribution channels- can be described by how direct
they are to the customer
 Trends and emerging channels-new channels can offer the
opportunity to develop a competitive advantage
 Channel power structure-for example, in the case of a product
having little brand equity, retailers have negotiating power
over manufacturers and can capture more margins.
f. Market Trends- changes in the market are important because
they often are the source of new opportunities and threats.
 The relevant trends are industry-dependent, but some
examples include changes in price sensitivity, demand for
variety, and level of emphasis on service and support.
Regional trends also may be relevant.

25. Key Success Factors
 the key success factors are those elements that are necessary
in order for the firm to achieve its marketing objectives. A few
examples of such factors include:
 Access to essential unique resources
 Ability to achieve economies of scale
 Access to distribution channels
 Technological progress
2.3. Market Auditing
 Although the process of marketing auditing is a fundamental
underpinning for the marketing planning process, it is for
many organizations still a relatively new and under-utilized
activity.

26. Market Auditing…
 An organization’s performance in the marketplace is directly
influenced by the marketing planner’s perception of three
factors:
 The organization’s current market position
 The nature of environmental opportunities and threats
 The organization’s ability to cope with environmental demands.
 Given this, the marketing audit is designed to provide the
strategist with a clear understanding of these three
dimensions and in this way provide a firm foundation for the
development of strategy, something that is reflected in a
comment by McDonald (1995): Expressed in its simplest form,
if the purpose of a corporate plan is to answer three central
questions:

27. Market Auditing…
 Where is the company now?
 Where does the company want to go?
 How should the company organize its resources to get there?
 Then the audit is the means by which the first of these
questions is answered.
 An audit is a systematic, critical and unbiased review and
appraisal of the environment and of the company’s
operations.
 A marketing audit is part of the larger management audit and
is concerned (specifically) with the marketing environment
and marketing operations.

28. What is marketing audit?
 The marketing audit is in a number of ways the true starting
point for the strategic marketing planning process, since it is
through the audit that the strategist arrives at a measure both
of environmental opportunities and threats and of the
organization’s marketing capability.
 The audit is, therefore, as McDonald (1995) has suggested:
“The means by which a company can identify its own
strengths and weaknesses as they relate to external
opportunities and threats.
 It is thus a way of helping management to select a position in
that environment based on known factors.”

29. What is marketing audit?...
 In essence, the audit must embrace the marketing environment in
which the organization – or the business unit – is operating in,
together with the objectives, strategies and activities being
pursued.
 In doing this, the planner needs to take an objective view of the
organization and its market and not be affected by preconceived
beliefs.
 It follows from this that the audit must be comprehensive,
systematic, independent and conducted on a regular basis.
 Given this, the three major elements and potential benefits of the
marketing audit can be seen to be:
 The detailed analysis of the external environment and internal
situation
 The objective evaluation of past performance and present activities
 The clearer identification of future opportunities and threats.

30. The Structure and Focus of Marketing Audit
 In terms of its structure, the marketing audit consists of three
major and detailed diagnostic steps. These involve a review
of:
 The organization’s environment (opportunities and threats)
 Its marketing systems (strengths and weaknesses)
 Its marketing activities.
 The first of these is designed to establish the various
dimensions of the marketing environment, the ways in which
it is likely to change and the probable impact of these changes
upon the organization.
 The second stage is concerned with an assessment of the
extent to which the organization’s marketing systems are
capable of dealing with the demands of the environment.

31. The Structure and Focus of Marketing Audit…
 The final stage involves a review of the individual components of
the marketing mix.
 It should be apparent from this that, in conducting an audit, the
strategist is concerned with two types of variables. First, there are
the environmental or market variables, over which the strategist
has little or no direct control.
 Second, there are the operational variables, which can be
controlled to a greater or lesser extent.
 This distinction can also be expressed in terms of the macro-
environmental forces (political/legal, economic/demographic,
social/cultural, and technological) that affect the business, and
micro-environmental actors (customers, competitors, distributors
and suppliers) who subsequently influence the organization’s ability
to operate profitably in the marketplace.

32. The Structure and Focus of Marketing Audit…
 The process and purpose of the audit begins with an external
audit covering the macro-environmental forces referred to
above and the markets and competitors that are of particular
interest to the company.
 The internal audit then builds upon this by assessing the
extent to which the organization, its structure and resources
relate to the environment and have the capability of operating
effectively within the constraints that the environment
imposes.
 With regard to the question of how frequently the audit
should be conducted, this is typically influenced by several
factors, the most important of which are the nature of the
business, the rate of environmental change and the planning
cycle (annual, bi-annual).

33. The Structure and Focus of Marketing Audit…
 In so far as it is possible to provide a reasonably definitive
guideline, it is that the organization should undertake a full
audit at the beginning of each major planning cycle,
supplemented by less intensive but more frequent reviews of
specific or key areas as conditions change.
The Stages of Marketing Audit
 In conducting a marketing audit, the majority of planners
adopt a stepwise procedure.
 In this way, it is argued; the approach ensures a degree of
consistency that allows for a comparison from one period to
another.
 In discussing this, Grashof (1975) advocated the following
steps:

34. The Stages of Marketing Audit…
 Pre-audit activities in which the auditor decides upon the
precise breadth and focus of the audit
 The assembly of information on the areas which affect the
organization’s marketing performance – these would typically
include the industry, the market, the firm and each of the
elements of the marketing mix
 Information analysis
 The formulation of recommendations
 The development of an implementation programme.
2.3.1. Environmental Analysis
“When the rate of change inside the company is exceeded by the
rate of change outside the company, the end is near.” Jack
Welch, former Chief Executive Officer, General Electric.

35. Environmental Analysis
 No organization exists in a vacuum. Marketing strategy must
therefore develop out of a detailed understanding of the
environment.
Given this, the planner must:
➡ Know what to look for
➡ Know how to look
➡ Understand what he or she sees
➡ Develop the strategy and plan that takes account of this
knowledge and understanding.
 In analyzing the environment, Johnson and Scholes (1988)
argue for a stepwise approach.

36. Environmental Analysis…
 This involves an initial audit of general environmental
influences, followed by a series of increasingly tightly-focused
stages that are designed to provide the planner with an
understanding of the key opportunities and threats as a
prelude to identifying the organization’s strategic position.
This process, which is illustrated in Figure 2.3, consists of five
stages:
• See the word
 The starting point in this process is the general audit of
environmental influences. The purpose of this is to identify
the types of environmental factors that have influenced the
organization’s development and previous performance, and to
arrive at an initial conclusion of the likely important influences
in the future.

37. Environmental Analysis
 From here the strategist moves to an assessment of the
nature of the environment and the degree of uncertainty and
change that is likely to exist.
 If, from this, the strategist concludes that the environment is
relatively static, then historical analysis is likely to prove
useful.
 If, by contrast, the environment shows signs of instability, then
a stronger emphasis upon the future is needed.
 The third phase then involves focusing upon specific
environmental factors such as the nature and structure of the
market.
 This in turn leads to an analysis of the firm’s competitive
position.

38. Environmental Analysis…
 This involves a combination of strategic group analysis in
which competitors are mapped in terms of their similarities,
dissimilarities, their capabilities and the strategies they follow,
and market share analysis to highlight their relative degrees
of market power.
 This information is then used as the basis for identifying in
detail how environmental forces are likely to affect the
organization and, in particular, the opportunities and threats
that are likely to exist.
 This in turn provides the basis for a detailed understanding of
the organization’s strategic position and the degree to which
there is match between strategy, structure and environment.
 Referring back to Figure 2.3, it can be seen that the first step
in the process involves the general audit of environmental
influences.

39. Environmental Analysis…
 The starting point for this involves the strategist in developing
a list of those factors which are likely to have an impact on the
organization and which will therefore need further analysis.
 In doing this, the purpose is to develop a detailed
understanding of what environmental factors have influenced
the organization in the past, and the degree to which any
changes that are taking place are likely to increase or reduce
in impact.
 Against this background, the strategist can then move to an
assessment of the nature of the environment. In essence, this
is concerned with answering three questions:
 How uncertain is the environment?
 What are the sources of this uncertainty?
 How should this uncertainty be dealt with?

40. Environmental Analysis
• Levels of uncertainty are directly attributable to the extent to
which environmental conditions are dynamic or complex.
 Dynamism is due largely to the rates and frequency of change,
while complexity is the result either of the diversity of
environmental influences, the amount of knowledge required
to cope with them, or the extent to which environmental
factors are interconnected.
 The implications for environmental analysis of these different
types of environmental condition are illustrated in Figure 2.4.
See the word

41. Static, Dynamic and Complex Environments
 With regard to the question of how the organization monitors
the environment, evidence suggests that, in broadly static
conditions, straightforward environmental scanning is likely to
be a useful and generally adequate process.
 In a dynamic environment, however, the organization is
typically faced with major change in the areas of technology
and markets, with the result that decisions can no longer be
based upon the assumption that what broadly has happened
in the past will continue in the future.
 As a consequence of this, the focus needs to be upon the
future with a far greater degree of inspirational
interpretation.
 Among the techniques that have been used to do this is
Delphic forecasting (forecasting based on expert opinion). The
results are then used as the basis for building alternative
scenarios.

42. Static, Dynamic and Complex Environments
 For organizations faced with a complex environment, many of
the issues and problems to which reference has been made
are exacerbated.
 Regardless, however, of the degree of complexity in the
environment, there appear to be certain common strands in
the ways in which managers cope with their environments.
 The most significant of these is that managers develop over
time what can loosely be referred to as the accepted wisdom
of the industry and the workable solutions to the various
situations that are likely to emerge.
 One consequence of this is that the major competitive threats
to organizations often come from companies outside the
industry, which, on entering the market, adopt a strategy that
falls outside this area of standardized expectation, allowing
for the conventional wisdom of response to change to be
adopted.

43. Static, Dynamic and Complex Environments
 A framework for analyzing the environment is shown in Figure
2.5. Here, the planner begins by identifying a series of basic
beliefs (these are the environmental changes and conditions
that the planner believes fundamentally will characterize the
market over the next 12, 24 and 36 months).
 Having identified these, the planner then takes each in turn
and identifies the implications for the business as a whole
and/or the brand.
 The final stage involves taking each of the implications and
deciding how best they can be managed; the test here is that,
if action is not taken, then either a significant opportunity will
be missed or the organization will be hit hard by something
within the environment.
 See the word

44. Responding to the changing market by coming to terms with the future
 One of the principal themes is that the marketing
environment is changing ever more dramatically and, for
many organizations, ever more unpredictably.
 Faced with this, the marketing planner can take one of three
approaches:
 To ignore what is happening and accept the consequences of
strategic drift and wear-out
 To respond quickly or slowly, but largely reactively
 To try to predict the nature of the changes and then manage
them proactively.
 The implications of the first of these in fast-moving markets
are in most cases far too significant for this to be a realistic
option for the majority of organizations, and so it is really only
the second and third with which we need to be concerned
here.

45. Responding to the changing market…
 In deciding whether to respond quickly or slowly, the planner
needs to think about the opportunities or threats posed by
the changes taking place, the time for which any window of
opportunity is likely to be open, and the organization’s ability
to respond.
 Thus, the third option is in many ways the most desirable, but
is typically dependent upon the quality of the environmental
monitoring system that exists and the planner’s ability to
identify how to respond.
 Although this third option is potentially the most difficult, it
highlights a key issue for the marketing strategist: recognizing
that an important part of planning and strategy is about the
future; how can the organization get to the future first?

46. Responding to the changing market…
 It is the failure to do this and for external change to move
ahead faster than management learning that typically creates
significant problems for the marketing planner.
2.3.2. Customer Analysis
 A customer analysis (sometimes called a customer profile or
target market analysis) is a critical selection of a company’s
marketing plan.
 In customer analysis, the marketing manager must examine
the current and future situation with respect to customers in
the firm’s target markets.
 During this analysis, information should be collected that
identifies: (1) the firm’s current and potential customers,

47. Customer Analysis…
(2) the prevailing needs of current and potential customers, (3) the
basic features of the firm’s and competitors’ products perceived by
customers as meeting their needs, and (4) anticipated changes in
customers’ needs.
 In assessing the firm’s target markets, the marketing manager
must attempt to understand all relevant buyer behavior and
product usage characteristics.
 One method that the manager can use to collect this
information is the 5W Model: Who, What, Where, When, and
Why.
 Organizations that are truly market- or customer-oriented
should know their customers well enough that they have easy
access to the types of information that answer these
questions.
 If not, the organization may need to conduct primary
marketing research to fully understand its target markets.

48. 1. Who Are Our Current and Potential Customers?
 Answering the “who” question requires an examination of the
relevant characteristics that define target markets.
 This includes demographic characteristics (gender, age,
income, etc.), geographic characteristics (where customers
live, density of the target market, etc.), and psychographic
characteristics (attitudes, opinions, interests, etc.).
 Depending on the types of products sold by the firm,
purchase influencers or users, rather than actual purchasers,
may be important as well.
 For example, in consumer markets it is well known that the
influence of children is critical for purchases such as cars,
homes, meals, toys, and vacations.

49. 1. Who Are Our Current and Potential Customers?...
 In business markets, the analysis typically focuses on the
buying center. Is the buying decision made by an individual or
by a committee? Who has the greatest influence on the
purchase decision?
 The analysis must also assess the viability of potential
customers or markets that may be acquired in the future. This
involves looking ahead to situations that may increase the
firm’s ability to gain new customers.
 For example, firms around the world are particularly excited
about the further opening of the Chinese market and its 1.3
billion potential consumers.
 Many firms, including Procter & Gamble, Walmart, Starbucks,
and Pepsi have established a presence in China that they hope
to leverage for future growth opportunities.
 The excitement about the Chinese market stems from its
strong middle-class of over 250 million consumers.

50. 2. What Do Customers Do with Our Products?...
 The “what” question entails an assessment of how customers
consume and dispose of the firm’s products.
 Here the marketing manager might be interested in identifying the
rate of product consumption (also called the usage rate),
differences between heavy and light users of products, whether
customers use complementary products during consumption, and
what customers do with the firm’s products after consumption.
 In business markets, customers typically use the firm’s products in
the creation of their own products. As a result, business customers
tend to pay very close attention to product specifications and
quality.
 In some cases, marketers cannot fully understand how customers
use their products without looking at the complementary products
that go with them.

51. 2. What Do Customers Do with Our Products?...
 In these cases of derived demand—where the demand for
one product depends on (is derived from) the demand of
another product—the marketer must also examine the
consumption and usage of the complementary product.
 For example, tire manufacturers concern themselves with the
demand for automobiles, and makers of computer accessories
closely watch the demand for desktop and laptop computers.
 By following the demand for and consumption of
complementary products, marketers are in a much better
position to understand how customers use their own
products.
 Before customers and marketers became more concerned
about the natural environment, many firms looked only at
how their customers used products.

52. 2. What Do Customers Do with Our Products?...
 Today, marketers have become increasingly interested in how
customers dispose of products, such as whether customers
recycle the product or its packaging.
 Another postconsumption issue deals with the need for
reverse channels of distribution to handle product repairs.
 Car manufacturers, for example, must maintain an elaborate
network of certified repair facilities (typically through dealers)
to handle maintenance and repairs under warranty.
Sometimes recycling and repair issues come into conflict.
 The relatively low cost of today’s home electronics leads many
customers to buy new televisions, computers, or cell phones
rather than have old ones repaired.

53. 3. Where Do Customers Purchase Our Products?
 The “where” question is associated mainly with distribution
and customer convenience.
 Until recently, most firms looked solely at traditional channels
of distribution, such as brokers, wholesalers, and retailers.
 Thus, the marketing manager would have concerns about the
intensity of the distribution effort and the types of retailers
that the firm’s customers patronized.
 Today, however, many other forms of distribution are
available. The fastest growing form of distribution today is
nonstore retailing—which includes vending machines; direct
marketing through catalogs, home sales, or infomercials; and
electronic retailing through the Internet, interactive
television, and video kiosks.

54. Where Do Customers Purchase Our Products?...
 Business markets have also begun to capitalize on the lower
costs of procurement via the Internet.
 Likewise, many manufacturers have bypassed traditional
distribution channels in favor of selling through their own
outlet stores or websites.
 For example, there are so now many different avenues for
downloading or streaming movies, either online or via cable,
that the traditional movie rental business is in jeopardy.
4. When Do Customers Purchase Our Products
 The “when” question refers to any situational influences that
may cause customer purchasing activity to vary over time.
 This includes broad issues, such as the seasonality of the
firm’s products and the variability in purchasing activity
caused by promotional events or budgetary constraints.

55. 4. When Do Customers Purchase Our Products…
 Everyone knows that consumer purchasing activity increases
just after payday.
 In business markets, budgetary constraints and the timing of
a firm’s fiscal year often dictate the “when” question.
 For example, many schools and universities buy large
quantities of supplies just before the end of their fiscal years.
 The “when” question also includes more subtle influences
that can affect purchasing behavior, such as physical and
social surroundings, time perceptions, and the purchase task.
 For example, a consumer may purchase a domestic brand of
product for regular home consumption, but purchase an
imported product when visiting a bar (physical surroundings),
going out with friends (social surroundings), or hosting a
party.

56. 4. When Do Customers Purchase Our Products…
 Customers can also vary their purchasing behavior based on
the time of day or how much time they have to search for
alternatives.
 Variation by purchase task depends on what the customer
intends to accomplish with the purchase.
 For example, a customer may purchase brand A for her own
use, brand B for her children, and brand C for her coworker as
a gift.
5. Why (and How) Do Customers Select Our Products?

57. Competitor Analysis
 In most industries, customers have preferences and choices in
terms of the goods and services they can purchase. Thus,
when a firm defines the target markets it will serve, it
simultaneously selects a set of competing firms.
 The current and future actions of these competitors must be
constantly monitored, and hopefully even anticipated. One of
the major problems in analyzing competition is the question
of identification.
 That is, how does the manager answer the question “Who
are our current and future competitors?” To arrive at an
answer, the manager must look beyond the obvious examples
of competition.
 Most firms face four basic types of competition:

58. Competitor Analysis
 Brand competitors, which market products with similar
features and benefits to the same customers at similar prices.
 Product competitors, which compete in the same product
class, but with products that are different in features,
benefits, and price.
 Generic competitors, which market very different products
that solve the same problem or satisfy the same basic
customer need.
 Total budget competitors, which compete for the limited
financial resources of the same customers.
All four types of competition are important, but brand
competitors rightfully receive the greatest attention as
customers see different brands as direct substitutes for each
other.

59. Competitor Analysis
 For this reason, strategies aimed at getting customers to
switch brands are a major focus in any effort to beat brand
competitors.
 For example, Gatorade, far and away the dominant sports
drink, has lost market share in recent years to competitors
such as Vitamin Water, Propel, and Powerade.
 To refresh the Gatorade brand, Pepsi plans to expand its reach
from sports drinks (a $7 billion industry) to sports nutrition (a
$20 billion industry).
 Using research from its Florida-based Sports Science Institute,
Pepsi plans to expand its Gatorade line to include energy bars,
gels, protein shakes, and any other nutrition-related products
that athletes use to boost energy, performance, endurance,
and recovery.

60. Competitor Analysis
 The first outward sign of the shift came in the repackaging of
its core G-series lines into 01 Prime (pre-workout products),
02 Perform (during workout products), and 03 Recover (post-
workout products).
 The second launch was a line of energy chews designed to
boost athletic performance. The new strategy is challenging in
that Gatorade must shift its distribution system from one that
is solely focused on beverages, to one that can handle the
assortments and sizes of new product lines.
 Competitive analysis has received greater attention
recently for several reasons: more intense competition
from sophisticated competitors, increased competition
from foreign firms, shorter product life cycles, and
dynamic environments, particularly in the area of
technological innovation.

61. Competitor Analysis
 A growing number of companies have adopted formalized
methods of identifying competitors, tracking their activities,
and assessing their strengths and weaknesses—a process
referred to as competitive intelligence.
 Competitive intelligence involves the legal and ethical
observation, tracking, and analysis of the total range of
competitive activity; including competitors’ capabilities and
vulnerabilities with respect to sources of supply, technology,
marketing, financial strength, manufacturing capacities and
qualities, and target markets.
 It also attempts to predict and anticipate competitive actions
and reactions in the marketplace.

62. Competitor Analysis
 Competitive analysis should progress through the following
stages:
 Identification. Identify all current and potential brand, product,
generic, and total budget competitors.
 Characteristics. Focus on key competitors by assessing the size,
growth, profitability, objectives, strategies, and target markets of each
one.
 Assessment. Assess each key competitor’s strengths and weaknesses,
including the major capabilities and vulnerabilities that each possesses
within its functional areas (marketing, research and development,
production, human resources, etc.).
 Capabilities. Focus the analysis on each key competitor’s marketing
capabilities in terms of its products, distribution, promotion, and
pricing.
 Response. Estimate each key competitor’s most likely strategies and
responses under different environmental situations, as well as its
reactions to the firm’s own marketing efforts.

63. Chapter Three: Formulation of Strategy
3.1. Introduction
 At a fundamental level marketing strategy is about markets and
products. Organizations are primarily making decisions about which
markets to operate in and which products/services to offer to those
markets.
 Once those essential decisions have been taken the company then
has to decide on what basis it is going to compete in that chosen
market. Segmentation is therefore at the heart of strategic
marketing decision making.
 In essence it is a strategic rather than an operational issue and has
to be treated as such.
3.2. Porters Generic Competitive Strategies
 Marketing strategy aims to generate sustainable competitive
advantage. The process is influenced by industry position,
experience curves, value effects and other factors such as
product life cycle.

64. 3.2. Porters Generic Competitive Strategies
 In any given market place, businesses must adopt defensive
and attacking strategies. Such actions aim to maintain and/or
increase market share.
 Organizations need to ensure their strategic position is
relevant to current/future market conditions. The notions of
competitive advantage and marketing strategy are intrinsically
linked.
 Competitive advantage is the process of identifying a
fundamental and sustainable basis from which to compete.
Ultimately, marketing strategy aims to deliver this advantage
in the market place.
 Porter (1980) has, however, pulled them together and
identified three generic types of strategy – overall cost
leadership, differentiation and focus – that provide a
meaningful basis for strategic thinking.

65. Porters Generic Competitive Strategies…
 In doing this, he gives emphasis to the need for the strategist
to identify a clear and meaningful selling proposition for the
organization.
 In other words, what is our competitive position, and what do
we stand for in the eyes of our customers?
 Any failure on the part of the strategist to identify and
communicate the selling proposition and strategy is, he
suggests, likely to lead to a dilution of the offer and to the
company ending up as trapped in the middle-of-the-roader
heading into the marketing wilderness.
 Porter’s thesis is therefore straightforward: to compete
successfully the strategist needs to select a generic strategy
and pursue it consistently.

66. 3.2. Porters Generic Competitive Strategies…
 The ways in which this might be done and the benefits and
the problems that might possibly be encountered should be
identified.
 Obviously, there is no single ‘best’ strategy even within a
given industry, and the task faced by the strategist involves
selecting the strategic approach that will best allow it to
maximize its strengths vis-à-vis its competitors.
 The ways in which this might be done and the benefits and
the problems that might possibly be encountered should be
identified.
 Obviously, there is no single ‘best’ strategy even within a
given industry, and the task faced by the strategist involves
selecting the strategic approach that will best allow it to
maximize its strengths vis-à-vis its competitors.

95. Competitor Analysis
 Many sources are available for gathering information on
current or potential competitors. Company annual reports are
useful for determining a firm’s current performance and
future direction.
 An examination of a competitor’s mission statement can also
provide information, particularly with respect to how the
company defines itself.
 A thorough scan of a competitor’s website can also uncover
information—such as product specifications and prices—that
can greatly improve the competitive analysis.