A good strategic plan can help protect and grow the firm’s resources.
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 through SBUs, developing a marketing plan, and examining strategic alternatives, which are covered in the following learning outcome sections.
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:* Macy’s implements an additional beauty sales approach* General Motors sells the Saab nameplate* PepsiCo’s decision to focus on “Healthy Fare” and the recent backlash/financial struggle from decreased Pepsi sales. Discussion/Team Activity: Have students come up with strategic planning decisions of other companies. Discuss why strategic planning is important for these companies.
Notes:A Strategic Business Unit (SBU) is a subgroup of a single business or a collection of related businesses within the larger organization, and has the listed characteristics.
Notes: Ansoff’s Opportunity Matrix is one of the most commonly used tools to determine a company’s strategic direction. It matches products with markets. The four options are listed above. Examples of Strategic Alternatives Market Penetration:Manufacturer cents-off coupons Market Development:Expansion into global markets by companies such as McDonald’s, Coca-Cola, and Pepsi Product development:McDonald’s introduces yogurt parfaits, salads, and fruit to offer customers more healthy options. Diversification:CVS, Avon, Coca-Cola
Notes: The second model for selecting strategic alternatives is the Portfolio Matrix from Boston Consulting Group. The Portfolio Matrix classifies each SBU by its present or forecast growth and market share. The assumption is that market share and profitability are strongly linked. The four classifications are Stars, Problem Child (Question Mark), Cash Cows, and Dogs.
Notes: 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: After classifying the SBUs, a company must determine how to allocate resources to each SBU. The four basic strategies are: 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.
The third model for selecting strategic alternatives is the General electric model. The GE model determines resources allocation to SBUs by determining market attractiveness and company strength. In the graphic, business position (horizontal axis) measures if the company is well positioned to take advantage of opportunities in the taret market. Market attractiveness (vertical axis) measures how attractive a market is for a company to enter. Some measurements are profitability, competition, customer price sensitivity, and rapid growth.
Notes:Marketing planning is the basis for all marketing strategies and decisions. Issues such as product lines, distribution channels, marketing communications, and pricing are all delineated in the marketing plan.
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 Have students visit Dmusic.com, an Internet start-up created by a teenage entrepreneur which offers various professional services for independent musicians. Use Exhibit 2.1 to create a sample summary marketing plan for Dmusic.com.
Note that the overall structure of the marketing plan should not be viewed a s a series of sequential planning steps. Many of the marketing plan elements are decided on simultaneously.
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: 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: A competitive advantage is 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. 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:DuPontDell ComputersWal-Mart CorporationSouthwest AirlinesNikeGeneral 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* Online-only magazines can help save on material and shipping costs.
Notes: A product/service differentiation competitive advantage is the provision of something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition. 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 Product reliability:Maytag Image:Neiman Marcus Service:FedEx
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: Three strategies for selecting target markets are shown here. These strategies are discussed in detail in Chapter 8. Discussion/Team Activity: 1. Discuss the differences in the target markets for McDonald’s, Burger King’s, and Wendy’s.
Notes: The marketing manager can control each component of the marketing mix, but the strategies for all four components must be blended to achieve optimal results. Discussion/Team Activity: The best promotion and lowest price cannot save a poor product. Similarly, excellent products with poor placing, pricing, or promotion will likely fail. Identify several firms that might have used a marketing mix in which some components were particularly strong but others were particularly weak.
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 10 and 11, services marketing in Chapter 12.
Notes: The goal of distribution is to ensure products arrive in usable condition at the right place when customers need them. Place strategies are covered in Chapters 13 and 15.
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 16, 17, and 18. Technology-driven aspects of promotional marketing are covered in Chapter 21. Social Media and marketing are covered in chapter 22. 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 19 and 20.
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. Discussion/Team Activity: Discuss strategic planning decisions of other companies. Discuss why strategic planning is important for these companies.
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
Explain the criteria for stating good marketing
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