Evaluating marketing opportunites @ bec doms
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Evaluating marketing opportunites @ bec doms
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Evaluating marketing opportunites @ bec doms
- 1. Chapter 4: Evaluating Opportunities in the Changing Marketing Environment
- 3. The Importance of Objectives 4-3 Setting Company Objectives Provide Guidelines Coordinate Effort Lead to Marketing Objectives Be Explicit
- 4. A Hierarchy of Objectives Exhibit 4-1 4-4 R&D Objectives HR Objectives Marketing Objectives Finance Objectives Production Objectives Company Objectives Sales Promotion Objectives Mass Selling Objectives Personal Selling Objectives Price Objectives Promotion Objectives Place Objectives Product Objectives
- 5. Limits on Opportunity Search 4-5 Marketing Strengths Producing Capability and Flexibility Financial Strength ????? ????? ????? ????? ?????
- 6. The Competitive Environment Information on Competitors Competitive Barriers Competitive Rivals Competitor Analysis Kinds of Markets Key Concepts in the Competitive Environment 4-6
- 7. The Economic and Technological Environment 4-7 Interest Rates Global Economy Rapid Change Key Economic Forces
- 9. The Political and Legal Environment 4-9 Regional Groupings Nationalism Consumerism Characteristics of the Political Environment
- 11. The Cultural and Social Environment 4-11 Cultural Trend: The Changing Roles of Women Time Poverty Economic Power Career Opportunity
- 12. Sales and Cost Curves of Two Strategies Exhibit 4-6 In this graphic, a too-narrow focus on the first year’s results might cause the marketing manager to abandon this product as too costly. 4-12 Dollars Total cost Years Sales 0 1 2 3 4 5 Product A
- 13. Sales and Cost Curves of Two Strategies In this graphic, a too-narrow focus on the first year’s results might cause the marketing manager to adopt the product prematurely, since its performance in year one is misleading. Exhibit 4-6 4-13 Total cost Years Sales 0 1 2 3 4 5 Product B
- 14. Sales and Cost Curves of Two Strategies Exhibit 4-6 4-14 Dollars Total cost Years Sales 0 1 2 3 4 5 Product A Total cost Years Sales 0 1 2 3 4 5 Product B Seen together, it is easy to see that Product A offers a vastly better overall return than does Product B
- 15. Evaluating Opportunities Exhibit 4-7 4-15 Business Strength Industry Attractiveness High Medium Low High Medium Low No Growth Borderline Growth
- 16. Continuum of Environmental Sensitivity Basic commodity-type consumer products Industrial products Consumer products that are linked to cultural variables Exhibit 4-8 4-16 Insensitive Sensitive
- 17. Key Terms Technology Nationalism NAFTA Consumerism Cultural and Social Environment Strategic Business Unit (SBU) Portfolio Management Mission Statement Competitive Environment Competitor Analysis Competitive Rivals Competitive Barriers Economic and Technological Environment 4-17
Editor's Notes
- Summary Overview The five basic areas of the marketing environment were first introduced in Chapter 2. Marketing strategy should be planned while considering each area and how each area interacts with and is in turn affected by each other area. This is especially true when top management sets objectives for the company. Setting Objectives Objectives Provide Guidelines . A company’s objectives should accomplish the following: 1. Engage in specific activities that will perform a socially and economically useful function. 2. Develop an organization to carry on the business and implement its strategies. 3. Earn enough profit to survive. Social good and economic viability are inter-related. A firm’s organization -- its infrastructure, the way it is set up, must be created and coordinated to support the firm’s strategies. Profit, as noted earlier, is necessary for continued operation. Objectives Should Be Explicit . A firm must develop its own specific objectives. Whenever possible, objectives should be quantified and related to time deadlines. Coordinated Effort . The whole firm should work toward the same objectives. Top management is responsible for choosing objectives that are compatible, or frustrations and failures are likely to occur as separate areas work at cross purposes. Lead to Marketing Objectives . Company objectives provide the larger framework for setting marketing objectives. Because marketing activities produce sales and revenue, it is very useful to have marketing managers involved in objective setting at as many levels as is appropriate. Additionally, marketing objectives should be set for each marketing strategy and should be as detailed as possible through each area of the marketing mix and their respective sub-areas. Note: See following slide of Exhibit 4-1. This slide relates to the material on pp. 93-96 and Transparency 34.
- This slide relates to the material on pp. 95-96. Instructor’s Note: This slide corresponds to Exhibit 4-1 on p. 95 and Transparency 33. See also Overhead 36. Summary Overview A Mission Statement The three general objectives (stated on the previous page) provide guidelines. But a firm should develop its own objectives. A mission statement helps set the course. It sets out the organization’s basic purpose for being. A mission statement is important, but it is not a substitute for more specific objectives that provide guidance in screening opportunities. A Hierarchy of Objectives Firms need a hierarchy of objectives--moving from company objectives to marketing department objectives. For each marketing strategy, firms also need objectives for each of the four Ps--as well s more detailed objectives. For example, in the Promotion area, we need objectives for advertising, sales promotion, and personal selling.
- This slide relates to the material on pp. 96-97 and Overhead 37. Summary Overview It is important to evaluate how realistic each opportunity is in relation to the specific capabilities of the company. Key areas that limit the search for opportunities are financial strength, producing capability and flexibility, and marketing strengths. Setting Objectives Financial Strength . Some opportunities are very expensive and require the kind of capital available only to the very largest companies. Discussion Note: Most new companies fail or fail in new markets because of a lack of financial resources. For example, Apple Mountain Software, an innovator in presentation software design for institutional and business customers, failed in reaching end-user consumers due to a lack of financial resources. Producing Capability and Flexibility . As production increases, the cost of producing each unit decreases. But the other side of most economies of scale is that making changes can be very costly and take a great deal of time. Discussion Note: In the mid-1980’s the development time for U.S. auto makers to implement a new care model was five years and existing production lines could almost never be adapted to new models. Now lead times are between two and two and a half years at industry leader Ford, and production lines can be altered much more quickly to meet new consumer demands. Marketing Strengths . Companies that market well have competitive advantages. Strong channel relations, creative brand advertising, and industry-leading salesforces are just a few of the ways a company can leverage new opportunities.
- Summary Overview The competitive environment affects the number and types of competitors the marketing manager must face -- and how they may behave. Prudent managers choose strategies that avoid head-on competition and/or plan for competition when it is inevitable. Key Concepts of the Competitive Environment Kinds of Markets . Economists identify four basic kinds of market situations. Understanding the differences among each type of market situation is helpful for planning: Monopoly. In a monopoly, one company serves the entire customer base. Such circumstances are rare, and in the US, often subject to government regulation. Monopolistic Competition. Here a number of different firms offer marketing mixes that at least some customers see as different. Each firm attempts to “monopolize” its own target market but competition still exists. Changing customer tastes may affect how different consumers see each offering and various alternatives may be considered substitutes. Oligopoly. Here a small number of firms control the market. Their marketing mixes may overlap but demand is sufficient to sustain them. Barriers to competitive entry are high. Pure Competition. Here a large number of firms compete with essentially similar (commodity) products. Price is typically the determining factor in making a purchase. Competitor Analysis . This is an organized approach for evaluating the strengths and weaknesses of current or potential competitors’ marketing strategies. Competitive Rivals . Most marketing managers narrow competitor analysis to concentrate on a few rivals -- the firms that will be the closest competitors. A key concern for marketing managers is to anticipate future competition. Competitive Barriers . Competitor analysis also considers barriers -- the conditions that make it difficult or impossible for a firm to compete in a given market. Information on Competitors . Marketing managers should seek out information on competitive practices. Although competitors’ marketing plans are typically secret, publicly available news stories and events coverage may provide clues to new strategic moves by competitors. This slide relates to the material on pp. 98-102 and Overhead 38.
- Summary Overview The economic and technological environment affects the way firmsand the whole economy use resources. The economic environment is affected by the way all the elements of the macro-economic system interact. The technological environment is singled-out to underscore the ever-increasing importance of technology on how business is conducted. Economic Environment The complex web of economic forces affecting business must be taken into consideration by marketing managers. Key areas of consideration include: Rapid Change. The economic environment can change very rapidly. In periods of rapid business decline, even a well-planned marketing strategy may fail. Interest Rates . Interest rates are the charge for borrowing money lenders use to make a profit. Interest rates can go up sharply in times of high inflation, which makes the cost of all goods more expensive. Even “cash purchases” are affected because the worth of cash in terms of buying power declines during high inflation. Global Economy . The economies of the world are increasingly connected. Whereas managers traditionally looked to their home countries for key competitors, now competition can come from almost anywhere. Further, global trade is affected by exchange rates -- how much one country’s currency is worth in another country’s money. These rates change daily and their relative levels have implications for planning strategy in relation to profit, countertrade, and even barter. This slide relates to the material on pp. 102-103.
- Summary Overview The economic and technological environment affects the way firmsand the whole economy use resources. The economic environment is affected by the way all the elements of the macro-economic system interact. The technological environment is singled-out to underscore the ever-increasing importance of technology on how business is conducted. The Technological Environment Technology is the application of science to convert an economy’s resources to output. Technology affects marketing in two basic ways: with new products and with new processes. In modern economies, the rate of technological change is very rapid. Discussion Note: It would be hard to over-estimate the importance of the Internet here. Ask students to identify Internet-related topics, from sky-high stock prices to better customer service via web site connections and company intranets based on HTML. Of increasing importance in the technological environment is the role of intellectual capital, such as a software programmer’s skill, in developing successful new products. This slide relates to the material on pp. 103-105.
- Summary Overview The political environment refers to the way societies order their governments and the attitudes of the government and people toward business. The legal environment refers to the rules and laws that set standards for conduct that are enforced by legal power. The Political Environment Nationalism . Nationalism is an emphasis on a country’s interests before anything else. Nationalism can reduce sales and block marketing activity. Nationalism is a complex factor in international business because strong feeling of identity can obscure a larger picture of more products at lower prices for consumers. Regional Economic Groupings . Economic communities, like the EU and NAFTA, bind together several countries in the same geographic area under (ideally) a single set of laws and regulations regarding trade. This practice effectively increases the size of a given market, lowers costs within the community while raising costs for those outside the boundary trying to gain access to the larger markets. Consumerism . Consumerism is a social movement that seeks to increase the rights and powers of consumers. Companies that practice the marketing concept are increasingly sensitive to the rights of consumers and see this movement as an ally for better products and higher customer satisfaction. The Legal Environment While related, the legal environment is distinguishable from the political environment. Marketing managers need to know the relevant laws affecting business but also need to be aware of the policies toward enforcement of those laws. Of particular importance are: Encouraging Competition . In the US, laws are designed to increase competition. Product Safety . The Consumer Product Safety Act of 1972 empowers its commission to remove unsafe products from the market. This slide relates to the material on pp. 105-111. See also Overheads 40-43.
- Instructor’s Note: This slide corresponds to Exhibit 4-4 on p. 111 and Overhead 44. Federal Regulatory Agencies This slide provides a description of some important federal regulatory agencies. Because legislation must be interpreted by federal agencies and the courts, marketing managers need to study both legislative developments and the thinking of the courts and agencies. Often laws are vaguely phrased--to convey intent but not specific detail. Then it’s up to the courts and government agencies (like those listed here) to spell out the details. As a result, a law may be interpreted and enforced differently over time.
- Summary Overview The cultural and social environment affects how and why people live and behave as they do. A key consideration for marketing managers is recognizing that cultures are based upon different assumptions about the way societies should do things. In international settings, it is important to recognize that perfectly acceptable marketing practices in one culture may be extremely offensive in another. The Cultural Environment The changing role of women illustrates the importance of the cultural environment: In the US, the roles of women have changed (and are changing) from a traditional focus as wife and mother to a more independent person with different consumer needs. Key considerations include: Greater Career Opportunities. More women are in the workforce and for longer tenures. Time Poverty. With increased time demands from jobs and careers, women and their families are in the market for new services and goods that save time. Economic Power. Although women still earn considerably less than men (often for the same jobs), their economic power and independence is increasing. More firms are recognizing this fact and designing unique marketing mixes for this target market. Discussion Note: Some Saturn car ads play up this trend by contrasting traditional car salespeople as not taking women seriously while Saturn treats women with the respect that every customer deserves. This slide relates to the material on pp. 111-113 and Overhead 45.
- Summary Overview Successful, innovative firms have strong programs for evaluating identified opportunities to help them select those most appropriate for the firm’s particular competitive position. Evaluating Opportunities Screening Criteria . Opportunities are evaluated in relation to the firm’s strengths and weaknesses, objectives of top management, and environmental trends. Quantitative criteria include sales, profit, and return on investment goals. Qualitative criteria summarize what businesses to be in, which to exclude, which weaknesses to avoid, and what strengths and trends to build on. Whole Plan Evaluation . Marketers must forecast the probable results of implementing the entire marketing strategy. Only an analysis of how the whole plan is likely to work out can provide an effective basis for comparing alternative opportunities. Return on Investment (ROI) . ROI provides a measure for comparing sales and profits against the cost of the resources the company must use to generate revenues. Some opportunities are more costly than others, a fact that can be overlooked if managers focus only on the plans and likely outcomes alone. Planning Grids . Graphical planning grids help managers summarize the interaction of several key factors identified by the company to be important to successful business ventures. In the GE Planning Grid, the interaction of factors in the three green boxes provides the kind of fit the company desires between its resources and environmental trends. Strategic Business Units (SBU) . A strategic business unit is an organizational sub-unit of a larger company that focuses on some product-markets and is treated as a separate profit center. Portfolio Management . This approach to managing multiproduct firms treats each product, division, or SBU like stock in an investor’s portfolio. The main weakness of this approach is that it encourages management to take a short run view of financial returns, often at the expense of long run commitment to the marketing concept. Evaluating Risk . Risk assessment varies from market to market. International markets may be evaluated according to the likelihood of drastic changes in the political environment. Also, risk is increasingly calculated on an “environmental sensitivity continuum” for all relevant environments. This slide relates to the material on pp. 113-115. Instructor’s Note: This slide corresponds to Exhibit 4-6 on p. 115 and Transparency 35. See also Overhead 46.
- Summary Overview Successful, innovative firms have strong programs for evaluating identified opportunities to help them select those most appropriate for the firm’s particular competitive position. Evaluating Opportunities Screening Criteria . Opportunities are evaluated in relation to the firm’s strengths and weaknesses, objectives of top management, and environmental trends. Quantitative criteria include sales, profit, and return on investment goals. Qualitative criteria summarize what businesses to be in, which to exclude, which weaknesses to avoid, and what strengths and trends to build on. Whole Plan Evaluation . Marketers must forecast the probable results of implementing the entire marketing strategy. Only an analysis of how the whole plan is likely to work out can provide an effective basis for comparing alternative opportunities. Return on Investment (ROI) . ROI provides a measure for comparing sales and profits against the cost of the resources the company must use to generate revenues. Some opportunities are more costly than others, a fact that can be overlooked if managers focus only on the plans and likely outcomes alone. Planning Grids . Graphical planning grids help managers summarize the interaction of several key factors identified by the company to be important to successful business ventures. In the GE Planning Grid, the interaction of factors in the three green boxes provides the kind of fit the company desires between its resources and environmental trends. Strategic Business Units (SBU) . A strategic business unit is an organizational sub-unit of a larger company that focuses on some product-markets and is treated as a separate profit center. Portfolio Management . This approach to managing multiproduct firms treats each product, division, or SBU like stock in an investor’s portfolio. The main weakness of this approach is that it encourages management to take a short run view of financial returns, often at the expense of long run commitment to the marketing concept. Evaluating Risk . Risk assessment varies from market to market. International markets may be evaluated according to the likelihood of drastic changes in the political environment. Also, risk is increasingly calculated on an “environmental sensitivity continuum” for all relevant environments. This slide relates to the material on pp. 113-115. Instructor’s Note: This slide corresponds to Exhibit 4-6 on p. 115 and Transparency 35. See also Overhead 46.
- Summary Overview Successful, innovative firms have strong programs for evaluating identified opportunities to help them select those most appropriate for the firm’s particular competitive position. Evaluating Opportunities Screening Criteria . Opportunities are evaluated in relation to the firm’s strengths and weaknesses, objectives of top management, and environmental trends. Quantitative criteria include sales, profit, and return on investment goals. Qualitative criteria summarize what businesses to be in, which to exclude, which weaknesses to avoid, and what strengths and trends to build on. Whole Plan Evaluation . Marketers must forecast the probable results of implementing the entire marketing strategy. Only an analysis of how the whole plan is likely to work out can provide an effective basis for comparing alternative opportunities. Return on Investment (ROI) . ROI provides a measure for comparing sales and profits against the cost of the resources the company must use to generate revenues. Some opportunities are more costly than others, a fact that can be overlooked if managers focus only on the plans and likely outcomes alone. Planning Grids . Graphical planning grids help managers summarize the interaction of several key factors identified by the company to be important to successful business ventures. In the GE Planning Grid, the interaction of factors in the three green boxes provides the kind of fit the company desires between its resources and environmental trends. Strategic Business Units (SBU) . A strategic business unit is an organizational sub-unit of a larger company that focuses on some product-markets and is treated as a separate profit center. Portfolio Management . This approach to managing multiproduct firms treats each product, division, or SBU like stock in an investor’s portfolio. The main weakness of this approach is that it encourages management to take a short run view of financial returns, often at the expense of long run commitment to the marketing concept. Evaluating Risk . Risk assessment varies from market to market. International markets may be evaluated according to the likelihood of drastic changes in the political environment. Also, risk is increasingly calculated on an “environmental sensitivity continuum” for all relevant environments. This slide relates to the material on pp. 113-115. Instructor’s Note: This slide corresponds to Exhibit 4-6 on p. 115 and Transparency 35. See also Overhead 46. There are several slides in this series. Please see student handout pages.
- Summary Overview Graphical planning grids help managers summarize the interaction of several key factors identified by the company to be important to successful business ventures. In the GE Planning Grid shown here, the interaction of factors in the three green boxes provides the kind of fit the company desires between its resources and environmental trends. GE uses this grid to evaluate its SBUs for expansion, maintenance, and elimination decisions. CEO Jack Welsh is considered one of the best in the business, with 10 year ROI the second best of all major companies (1986-1996). Discussion Note: Ask students to guess who number one was in that period. Nope, not Bill Gates. Roberto Guiezeta and Coca-Cola. The former Coke CEO recently died of cancer. This slide relates to the material on pp. 115-116. Instructor’s Note: This slide corresponds to Exhibit 4-7 on p. 116 and Transparency 36. See also Overhead 47. The GE Planning Grid shown is one graphical model for showing how opportunity factors interact. You may wish to discuss other such models if time allows.
- This slide relates to the material on pp. 118-119. Instructor’s Note: This slide corresponds to Exhibit 4-8 on p. 119 and Transparency 37. Evaluating Risk Risk assessment varies from market to market. And the farther you go from familiar territory, the greater the risk of making big mistakes. But not all products--or marketing mixes--involve the same risk. Think of the risks as running along a continuum of environmental sensitivity. Some products are relatively insensitive to the economic and cultural environment they’re placed in. Most industrial products are relatively insensitive. At the other end of the continuum we find highly sensitive products that may be difficult or impossible to adapt to all international situations. Consumer products closely linked to other social or cultural variables are at this end of the continuum.