Marketing Real People Real Decisions Strategic Planning Chapter

Marketing: Real People, Real Decisions Strategic Planning Chapter 2 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number Date ©Copyright 2003 Pearson Education Canada Inc.

Marketing: Real People, Real Decisions Chapter Learning Objectives When you have completed your study of this chapter, you should be able to: • Explain the strategic planning process • Tell how firms gain a competitive advantage and describe the factors that influence marketing objectives • Describe the steps in the marketing planning process • Explain the factors involved in the implementation and control of the marketing plan ©Copyright 2003 Pearson Education Canada Inc. 2

Marketing: Real People, Real Decisions Introduction to the Topic “Organizations rarely plan to fail, but they often fail to plan” -famous quote, origin unknown. • The above quotation speaks to the importance of strategic planning and the potential consequences of doing a poor job at it. • Planning helps organizations: – To cope with rapidly changing factors within their environment. – Control its destiny through the setting of objectives and taking actions to achieve them. – To ensure coordination of all decision making within it by providing a common vision ©Copyright 2003 Pearson Education Canada Inc. 3

Marketing: Real People, Real Decisions Types of Planning • Strategic planning: a managerial decision process that matches an organization’s resources and capabilities to its market opportunities for long term growth and survival • Tactical planning: a decision process that concentrates on developing detailed plans for strategies and tactics for the short term that support an organization’s long-term strategic plan. Figure 2. 1 ©Copyright 2003 Pearson Education Canada Inc. 4

Marketing: Real People, Real Decisions Types of Planning (continued) • Operational planning: a decision process that concentrates on developing detailed plans for day-to-day activities that carry out an organization’s tactical plans. • Cross-functional planning: an approach to tactical planning in which managers work together in developing tactical plans for each functional area in the firm, so that each plan considers objectives of the other areas. Figure 2. 1 ©Copyright 2003 Pearson Education Canada Inc. 5

Marketing: Real People, Real Decisions Strategic Planning: First Stage • Mission statement: a formal statement in an organization’s strategic plan that describes the overall purpose of the organization and what it intends to achieve in terms of its customers, products, and resources. • A mission statement should: – provide direction to all stakeholders as to why the organization exists. – be framed in terms that are neither too narrow or too broad – relate to a higher purpose other than just providing a return to shareholders(? ) – match objectives to capabilities. – be revisited and updated as the organization changes ©Copyright 2003 Pearson Education Canada Inc. 6

Marketing: Real People, Real Decisions Strategic Planning: Second Stage • SWOT analysis: an analysis of an organization’s strengths and • weaknesses and the opportunities and threats in its external environment. Internal environment: the controllable elements inside an organizations, including its Strength Weakness people, its facilities, and how it Internal factors does things that influence the Positive Negative operations of the organization. • External environment: the uncontrollable elements outside of the organization that may affect its performance either positively or negatively. Opportunity Threat External factors Positive External factors Negative ©Copyright 2003 Pearson Education Canada Inc. 7

Marketing: Real People, Real Decisions Strategic Planning: Third Stage • Objectives: specific accomplishments or outcomes that an organization hopes to achieve by a specific time. • Objectives are developed from the mission statement • Can be expressed in terms of: – Performance measures such as sales revenue, profitability (ROI), market share – Product terms such as innovation, industry leadership, quality – Customer terms such as satisfaction – Social responsibility • To be effective, an objective needs to pass the SMART test. Specific Measurable Attainable Realistic Time-bounded ©Copyright 2003 Pearson Education Canada Inc. 8

Marketing: Real People, Real Decisions The Business Portfolio • Strategic business units (SBU): individual units within the firm that operate like separate businesses, with each having its own mission, business objectives, resources, managers, and competitors. • Business portfolio: the group of different products or brands owned by an organization and characterized by different income-generating and growth capabilities. • Portfolio analysis: a management tool for evaluating a firm’s business mix and assessing the potential of an organization’s strategic business units. Figure 2. 3 (enlarged on next slide) ©Copyright 2003 Pearson Education Canada Inc. 9

Marketing: Real People, Real Decisions The Business Portfolio (Figure 2. 3) ©Copyright 2003 Pearson Education Canada Inc. 10

Marketing: Real People, Real Decisions The BCG Growth-Market Share Matrix • Question marks: business units with low market shares in high growth industries. Also known as problem children, these business units can be relatively new to the market and grow to become stars or dogs, depending on their success in achieving market share. • Question marks need cash to fuel their growth. • Stars: business units with dominant market share in high growth industries. • These business units generate large revenues, but still need lots of cash to fuel their growth and maintain share. They become cash cows when the market eventually slows down. Figure 2. 4 ©Copyright 2003 Pearson Education Canada Inc. 11

Marketing: Real People, Real Decisions The BCG Growth-Market Share Matrix • Cash cows: business units with high market shares in low growth industries. These business units generate the cash needed to fund new product development and feed the question marks and stars. • Cash cows are profitable because they have been around long enough for the company to recover its development costs. • Dogs: business units with low market share in low growth industries. • These business units are those question marks that did not achieve significant market share before the market slowed down. They are targets for divestiture as they just cost money to maintain. ©Copyright 2003 Pearson Education Canada Inc. Figure 2. 4 12

Marketing: Real People, Real Decisions The Product-Market Growth Matrix • Market penetration: growth strategies designed to increase sales of existing products to current customers, non-users, and users of competitive brands in served markets. • Also known as the “work harder” strategy. • Market development: growth strategies that introduce existing products to new markets. • This can include exporting, or finding new uses for existing products. • The baking soda people are very good at this strategy. Figure 2. 5 ©Copyright 2003 Pearson Education Canada Inc. 13

Marketing: Real People, Real Decisions The Product-Market Growth Matrix • Product development: growth strategies that focus on selling new products in served markets. This strategy is in keeping with the marketing concept because it can be as simple as asking existing customers what else they would like to buy from the company. • Diversification: growth strategies that emphasize both new products and new markets. • Large companies such as General Electric have the resources to do this. • Smaller companies may take their focus away from their core business, which can prove to be fatal. Figure 2. 5 ©Copyright 2003 Pearson Education Canada Inc. 14

Marketing: Real People, Real Decisions The Marketing Planning Process • Competitive advantage: the ability of a firm to outperform the competition, providing the customers with a benefit the competition cannot. • Distinctive competency: a Marketing Planning Process • Analyze the marketing environment • Set marketing objectives • Develop marketing strategies • Prepare a marketing plan • Organize for implementation • Establish the control process capability of a firm that is superior to that of its direct competitors. Implement the Plan • Differential benefits: properties of products that set them apart from competitors’ products by providing unique customer benefits. Control and Evaluate the Plan Figure 2. 6 ©Copyright 2003 Pearson Education Canada Inc. 15

Marketing: Real People, Real Decisions Developing Marketing Strategies • Marketing objectives will be based on the organization’s distinctive competencies and resources and can be expressed in terms of sales revenues or profits, product terms, or in markets served. • Selecting the target market(s) to be served is a process that matches what the company has to offer to those groups who are most likely to respond favourably. • The marketing mix follows from this selection. Setting Marketing Objectives • Sales objectives • Product-oriented objectives • Market objectives Selecting a Target Market(s) Marketing Mix Programs • Product strategies • Pricing strategies • Communication strategies • Distribution strategies ©Copyright 2003 Pearson Education Canada Inc. 16

Marketing: Real People, Real Decisions Preparing a Marketing Plan • Marketing plan: a document that describes the marketing environment, outlines the marketing objectives ad strategy, and identifies who will be responsible for carrying out each part of the marketing strategy. • Situation analysis: the first part of a marketing plan, which provides a thorough description of the firm’s current situation including its internal and external environments; also called a business review. • May also include the SWOT analysis discussed previously. ©Copyright 2003 Pearson Education Canada Inc. 17

Marketing: Real People, Real Decisions Implementation and Control • Implementation: the stage of the strategic management process in which strategies are put into action on a day-to-day basis. • Marketing budget: a statements of the total amount to be spent on marketing and the allocation of money for each activity under the marketer’s control. • Trend analysis: an analysis of past industry or company sales data to determine patterns of change that may continue into the future. • Marketing audit: a comprehensive review of a firm’s marketing function. See Table 2. 1 for a detailed listing of elements in a marketing audit. ©Copyright 2003 Pearson Education Canada Inc. 18

Marketing: Real People, Real Decisions Famous Last Words… • Strategic planning is important for helping organizations to cope with rapidly changing factors within their environment. • Effective marketing strategies rarely happen by accident, they are the result of planning. • I am planning on being spontaneous now. ©Copyright 2003 Pearson Education Canada Inc. 19