slides of strategic marketing

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CHAPTER 1 Foundations of Strategic Marketing Management


1. Define an organization’s business, mission, and goals.

2. Identify and frame organization growth opportunities.

3. Formulate product-market strategies.

4. Budget marketing, financial, and production resources.

AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:


5. Develop reformulation and recovery strategies.

6. Draft a marketing plan.

7. Emphasize marketing ethics and social responsibility.

AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:


INTRODUCTION

CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT


To create long-term and mutually beneficial exchange relationships between an entity and the publics (individuals and organizations) with which it interacts.

PURPOSE OF MARKETING


RESPONSIBILITIES OF MARKETING MANAGERS

Direct day-to-day operations

Make strategic decisions

Create and sustain a competitive advantage

Affect the organization’s long-term performance

Chart the organization’s direction


RESULTS OF THE EVOLUTION OF THE MARKETING MANAGER

Created the Chief Marketing Officer (CMO) position

Increased popularity of strategic marketing management

Half of Fortune 1000 have CMOs


Analyze environmental, competitive, and business situations

Develop business objectives and goals

Define customer value propositions and their marketing strategies

RESPONSIBILITIES OF CMOs

Define the business mission


Analytic abilities

Intuitive sense

Creativity

SKILL SET OF CMOs


Define business, mission, and goals

Identify/frame growth opportunities

Formulate product-market strategies

Budget resources

Develop reformulation and recovery strategies

STRATEGIC MARKETING MANAGEMENT PROCESSES


DEFINING THE ORGANIZATION’S

BUSINESS, MISSION,AND GOALS



An firm defines its business by:

• The customers served and their needs

• The means or technology used to satisfy needs

BUSINESS DEFINITION

Is neither obvious nor easy to define

Outlines the scope of operations

What “business” is the Encyclopedia Britannica in?


Underscores the scope of an organization’s operations

Reflects management’s vision ofthe organization

Describes an organization’s purpose

Crystallizes the organization’slong-term direction and character

BUSINESS MISSION

Consists of a written statement that:


Helps identify and evaluateproduct-market opportunities

Inspires employees

Provides direction for goal-setting

Applies to not-for-profit organizations as well

BUSINESS MISSION

Consists of a written statement that:


BUSINESS MISSION

XEROXAmericanRed Cross

“Do great work” “Provide for victims of disaster”


ProductionObjectives

Convert the mission into tangible actions and results to be achieved by a specified time frame

Are divided into three categories:

FinancialObjectives

MarketingObjectives

BUSINESS GOALS OR OBJECTIVES



• Manufacturing and service capacity

• Product and service quality

ProductionObjectives

• Return on investment

• Return on sales

• Shareholder wealth

• Profit

• Cash flowFinancial

Objectives

• Market share

• Sales volume

• Marketing productivity

• Customer satisfaction

• Customer value creation

• Profit • Customer lifetime value

MarketingObjectives


A situation analysis is an appraisal of operations to determine reasons for thegap between what was oris expected and what has happened or will happen.



IDENTIFYING AND FRAMING

ORGANIZATIONAL GROWTH

OPPORTUNITIES



CONVERTING ENVIRONMENTAL OPPORTUNITIES INTO ORGANIZATIONAL OPPORTUNITIES

What might we do?

Ask three questions:

What do we do best?

What must we do?

EnvironmentalOpportunities

DistinctiveCompetencies

SuccessRequirements


Unmet or changing consumer needs

Unsatisfied buyer groups

New means or technologies for delivering value to prospective buyers

WHAT MIGHT WE DO?

Environmental Opportunities


Describes an organization’s unique strengths or qualities, including skills, technologies, or resources, that distinguish it from other organizations.

WHAT DO WE DO BEST?

Distinctive Competency


Two criteria must be satisfied:

Competitors cannot imitate it

Provide customers with superior value

WHAT DO WE DO BEST?

Distinctive Competency


Basic tasks that an organization must perform in a market or industry to compete successfully.

WHAT DO WE DO BEST?

Success Requirements


SWOT analysis is a formal frameworkfor identifying and framing organizational growth opportunities.

Strengths WeaknessesInternal

Capabilities

OpportunitiesExternal

EnvironmentThreats

Organization Favorable Unfavorable

- Type of Factor -

SWOT ANALYSIS


Strengths

Weaknesses

Opportunities

Threats

What the organization is good at doing or some characteristic that gives it an important capability

What an organization lacks ordoes poorly relative to other organizations

Developments or conditions in the environment that have favorable implications for the organization

Pose dangers to the welfare of the organization

SWOT ANALYSIS


EXHIBIT 1.1: SAMPLE SWOT ANALYSIS FRAMEWORK

Strengths WeaknessesInternalFactors

OpportunitiesExternalFactors

Threats

Management

Marketing

Manufacturing

R&D

Finance

Offerings

Economic

Competition

Consumer

Technology

Legal/Regulatory

Industry/MarketStructure


Which strengths represent distinctive competencies?

Does a pattern emerge from the SWOT?

Which weaknesses disqualify the organization from pursuing certain opportunities?

Questions to ask after a SWOT analysis:

SWOT ANALYSIS


FORMULATINGPRODUCT-MARKET

STRATEGIES



A product-market strategy involves selecting specific markets and profitably reaching them through an integrated program calleda marketing mix.

PRODUCT-MARKET STRATEGY


EXHIBIT 1.2: PRODUCT-MARKET STRATEGIES

MarketDevelopment

New Offering Development

MarketPenetration

Diversification

NewExisting

Existing

New

Markets

Offerings


A market-penetration strategy dictates that an organization seeks to gain greater dominance in a market in which it already has an offering (existing offerings → existing markets).

PRODUCT-MARKET STRATEGIES

Market Penetration Strategy


Increasing present buyers’ usage or consumption rates of the offering

Attracting buyers of competing offerings

Stimulating product trial among potential customers


Market Penetration Strategy Involves


Examine market growth

Assess competitive reaction

Analyze the capacity of the market to increase usage or consumption rates and the availability of new buyers


Market Penetration Strategy Considerations


A market-development strategydictates that an organization introduce its existing offerings to markets other than those it is currently serving (existing offerings → new markets).


Market Development Strategy


Adjusting the marketing mix, such as:

Analyzing competitors’ strengths, weaknesses, and potential for retaliation

• Modifying the basic product offering

• Using different distribution outlets

• Changing the sales effort or advertising


Market Development Strategy Involves


Identifying the number, motivation, and buying patterns of new buyers

Determining the organization’s ability to adapt to new markets to evaluate success


Market Development Strategy Involves


Licensing

Joint Venture/Strategic Alliance

Exporting

DirectInvestment


Market Development Strategy International Forms



Exporting

Involves marketing the same offering in another country through sales offices or intermediaries

Is a popular option for entering foreign markets because it:

• Easy to initiate

• Requires minimal capital investment



Licensing

Is a contract where a firm (licensee) is given the rights to patents, trademarks, etc. by the owner (licensor) in turn for a royalty or fee

Is a low-risk, quick, and capital-free entry into a foreign market

Limits the control of the licensor over production and marketing by the licensee



Joint Venture/Strategic Alliance

Creates a new entity in the host country from an investment by both a foreign and a local company

Allows the two firms share ownership, control, and profits of the entity

Is popular because one firm may not have the required resources to enter a market

Ensures against trade barriers

May cause disagreements between the partners regarding how the new entity should be run



Direct Investment

Involves investing in a manufacturing and/or assembly facility in a foreign market

Is the most risky and requires the most commitment

Brings the firm closer to its customers

May be the most profitable market-entry option

Often follows the other three options


A product- (new offering-) development strategy dictatesthat an organization create new offerings → existing markets.


New Offering Development Strategy



Enhancing the value to customers of existing offerings through bundling or improving functional performance

ProductAugmentation

Developing totally new offeringsProduct

Innovation

Adding different features, sizes, etc. to broaden the existing line

ProductLine Extension

New Offering Development Strategy Involves


The market size and volume needed for profitability

The magnitude and timing of competitors’ responses

The impact of the new product on the sales of existing offerings (cannibalism)

The capacity of the organization to deliver the offerings to the market(s)


New Offering Development Strategy Factors

The presence of significant points of difference


Occurs when sales of a new offering come at the expense of sales of existing offerings the firm already markets


Cannibalism

Is common in product development programs

Key issue: Does the new offering detract from the overall profitability of the firm’s total offering mix


A diversification strategy involves the development or acquisition of offerings new to the organization and the introduction of those offerings to publics not previously served by the organization(new offerings → new markets).


Diversification Strategy


Many firms have adopted this strategy to take advantage of growth opportunities

Is very risky because both the offerings and markets served are new to the organization

Can be successful if the organization applies its distinctive competencies to reaching new markets with new offerings


Diversification Strategy Considerations


Strategies are evaluated based on:

The organization’s business definition, mission, and capabilities

Market capacity and behavior

Environmental forces

Competitive activities



Strategy analysis depends on:

Availability and evaluation of relevant market information

Data collected should include :


• Market size

• Consumer buying behavior and requirements

• Environmental forces


Costs and benefits of a strategy

Competitive structure, market dynamics, and opportunity costs

Probabilities of success for a strategy

The offering itself

STRATEGY SELECTION

Strategies are chosen based on:


EXHIBIT 1.3: DECISION-TREE FORMAT

Action Response Outcome

A2

A1

R1

R2

R1

R2

O1

O2

O3

O4


Estimated profit of $1 million


Action Response Outcome



Market-development

strategy

Aggressive competition

Passivecompetition


Passivecompetition

Market-penetration

strategy

EXHIBIT 1.4: SAMPLE DECISION-TREE



Passivecompetition


PriceStrategy

Communication Strategy

ProductStrategy

ChannelStrategy

Customer

THE MARKETING MIX



Passivecompetition


CUSTOMER VALUE PROPOSITION

A cluster of benefits that an organization promises customers to satisfy their needs.

Wal-Mart Michelin



Estimated profit of$3 million


Depends on the success requirements of the market

Must be consistent with:

FORMULATING THE MARKETING MIX

• The needs of the markets served

• The organization’s capacity

• The marketing mix activities



Estimated profit of$3 million


Requires an understanding of:

Is an art and a science

IMPLEMENTING THE MARKETING MIX

• Markets

• Environmental forces

• Organizational capacity

• Marketing mix activities

• Competitor reactions


BUDGETING MARKETING, FINANCIAL, AND

PRODUCTION RESOURCES



A budget is a formal, quantitative expression of an organization’s planning and strategy initiatives expressed in financial terms.

BUDGETING


A master budget consists of:

Focuses on the income statement.Also referred to as a pro forma income statement or profit plan.

Focuses on the effect the operating budget has on the organization’s cash position.

BUDGETING

OperatingBudget

FinancialBudget

SpecialBudgets

Focuses on developing advertising,sales, and other budgets that support the master budget.


DEVELOPING REFORMULATION AND

RECOVERY STRATEGIES



A marketing audit is a comprehensive, systematic, and periodic examination of a firm’s or business unit’s marketing environment, objectives, strategies, and activities to determine problem areas and opportunities and recommend a plan of action to improve the firm’s marketing performance.

MARKETING AUDIT


Addresses the following questions:

MARKETING AUDIT

Are we doing the right things?Strategic

Are we doing things right?Operational


Have the following purposes:

Forces marketing managers to ask“What if…?” questions

Allows for contingency plans, preplanning of reformulation and recovery strategies that lead tofaster reaction time in implementing remedial action

REFORMULATION AND RECOVERY STRATEGIES


DRAFTING AMARKETING PLAN



A marketing plan is a formal, written document that describes the context and scope of an organization’s marketing effort to achieve defined goals or objectives within a specific future time period.

MARKETING PLAN


Consists of:

Each has these time dimensions:

Focus: 1-year period

Focus: 3- to 5-year period

MARKETING PLAN

ProductPlan

BusinessPlan

MarketingPlan

Short-term

Long-term


MARKETING ETHICS AND SOCIAL RESPONSIBILITY



Most marketing decisions involve some degree of moral judgment

Marketers should take actions that are legal, ethical, and socially responsible

ETHICS AND SOCIAL RESPONSIBILITY


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